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 June 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, 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 August 12, 2002 was 4,349,788.
<PAGE>
                             VODAVI TECHNOLOGY, INC.
                          QUARTERLY REPORT ON FORM 10-Q
                       FOR THE QUARTER ENDED JUNE 30, 2002

                                TABLE OF CONTENTS

                                                                            Page
PART I.  FINANCIAL INFORMATION

Item 1.  Unaudited Financial Statements

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

         Consolidated Statements of Operations - Three and Six
         Months Ended June 30, 2002 and 2001                                   4

         Consolidated Statements of Cash Flows - Six Months
         Ended June 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           15

PART II. OTHER INFORMATION                                                    16

         SIGNATURES                                                           17

                                       2
<PAGE>
                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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

                                                    June 30, 2002   December 31,
                                                     (Unaudited)       2001
                                                       --------      --------
CURRENT ASSETS:
  Cash                                                 $    652      $    340
  Accounts receivable, net of reserves for doubtful
    accounts and sales returns of $950 and
    $730, respectively                                    7,263         6,996
  Inventory                                               3,669         5,331
  Income tax receivable                                      --           839
  Prepaids and other current assets                         668           574
                                                       --------      --------
    Total current assets                                 12,252        14,080

PROPERTY AND EQUIPMENT, net                               1,767         1,581

GOODWILL                                                    734         1,638

DEFERRED TAXES                                              994           622

OTHER LONG-TERM ASSETS                                      103           193
                                                       --------      --------
                                                       $ 15,850      $ 18,114
                                                       ========      ========
CURRENT LIABILITIES:
  Accounts payable                                     $  2,962      $  2,438
  Accrued liabilities                                     1,654         2,014
  Revolving credit facility                                 825         2,593
                                                       --------      --------
    Total current liabilities                             5,441         7,045
                                                       --------      --------

OTHER LONG-TERM OBLIGATIONS                                  25            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                                    (2,375)       (1,581)
  Treasury stock, 318,700 shares at cost                   (759)         (759)
                                                       --------      --------
                                                         10,384        11,028
                                                       --------      --------
                                                       $ 15,850      $ 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        Six Months Ended
                                                               June 30,                June 30,
                                                          -------------------     --------------------
                                                            2002       2001         2002        2001
                                                          --------   --------     --------    --------
<S>                                                       <C>        <C>          <C>         <C>
REVENUE, net                                              $  9,459   $  9,603     $ 18,249    $ 15,663

COST OF GOODS SOLD                                           5,996      6,161       11,634      11,069
                                                          --------   --------     --------    --------
GROSS MARGIN                                                 3,463      3,442        6,615       4,594
                                                          --------   --------     --------    --------
OPERATING EXPENSES:
  Engineering and product development                          569        495        1,059         991
  Selling, general and administrative                        2,367      2,580        4,719       6,366
                                                          --------   --------     --------    --------
                                                             2,936      3,075        5,778       7,357
                                                          --------   --------     --------    --------
OPERATING INCOME (LOSS)                                        527        367          837      (2,763)

INTEREST EXPENSE                                                28        109           59         270
                                                          --------   --------     --------    --------
INCOME (LOSS) BEFORE INCOME TAXES AND
  CHANGE IN ACCOUNTING PRINCIPLE                               499        258          778      (3,033)

INCOME TAX PROVISION (BENEFIT)                                 197         99          309      (1,108)
                                                          --------   --------     --------    --------
INCOME (LOSS) BEFORE CHANGE IN ACCOUNTING PRINCIPLE            302        159          469      (1,925)

CHANGE IN ACCOUNTING PRINCIPLE, net of income taxes             --         --       (1,263)         --
                                                          --------   --------     --------    --------
NET INCOME (LOSS)                                         $    302   $    159     $   (794)   $ (1,925)
                                                          ========   ========     ========    ========
EARNINGS (LOSS) PER COMMON SHARE:
Basic and Diluted -
  Income (loss) before change in accounting principle     $   0.07   $   0.04     $   0.11    $  (0.45)
  Change in accounting principle                                --         --        (0.29)         --
                                                          --------   --------     --------    --------
  Net income (loss)                                       $   0.07   $   0.04     $  (0.18)   $  (0.45)
                                                          ========   ========     ========    ========
WEIGHTED AVERAGE SHARES OUTSTANDING:
  Basic                                                      4,350      4,235        4,311       4,235
                                                          ========   ========     ========    ========
  Diluted                                                    4,462      4,235        4,391       4,235
                                                          ========   ========     ========    ========
</TABLE>

              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)

                                                            Six Months Ended
                                                                 June 30,
                                                           ------------------
                                                             2002       2001
                                                           -------    -------
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                 $  (794)   $(1,925)
  Adjustments to reconcile net loss to net cash
    flows provided by operating activities:
      Depreciation and amortization                            352        510
      Rent levelization                                        (16)       (44)
      Change in accounting principle                         1,263         --
  Changes in working capital:
    Accounts receivable, net                                  (267)     4,657
    Inventory                                                1,682        517
    Income tax receivable                                      839     (1,116)
    Prepaids and other current assets                          (85)       303
    Other long-term assets and deferred taxes                   (9)        40
    Accounts payable                                           523     (1,468)
    Accrued liabilities                                       (398)      (326)
                                                           -------    -------
      Net cash flows provided by operating activities        3,090      1,148
                                                           -------    -------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Cash paid to acquire property and equipment                 (386)       (59)
  Cash paid to acquire DataSpeak Systems, Inc.                (624)        --
                                                           -------    -------
      Net cash flows used in investing activities           (1,010)       (59)
                                                           -------    -------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net payments on revolving credit facility                 (1,768)    (1,595)
                                                           -------    -------
      Net cash flows used in financing activities           (1,768)    (1,595)
                                                           -------    -------
INCREASE (DECREASE) IN CASH                                    312       (506)

CASH, beginning of period                                      340        564
                                                           -------    -------
CASH, end of period                                        $   652    $    58
                                                           =======    =======
SUPPLEMENTAL CASH FLOW INFORMATION:
  Cash paid for interest                                   $    59    $   270
                                                           =======    =======
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
                                  JUNE 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  six  months  ended  June  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 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
112,000 and 80,000 dilutive  securities in the three and six-month periods ended
June 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  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
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      Six Months Ended
                                                    June 30,               June 30,
                                               ------------------     ------------------
                                                 2002       2001        2002       2001
                                               -------    -------     -------    -------
<S>                                            <C>        <C>         <C>        <C>
Income (loss) before change in
  accounting principle, as reported            $   302    $   159     $   469    $(1,925)
Add back goodwill amortization, net of taxes        --         25          --         50
                                               -------    -------     -------    -------
Adjusted net  income (loss)                    $   302    $   184     $   469    $(1,875)
                                               =======    =======     =======    =======
</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.

(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.

                                       7
<PAGE>
(g)  COMMITMENTS AND CONTINGENCIES

The  Company is a  defendant  in various  lawsuits.  See Part II, Item 1, "Legal
Proceedings"  included  elsewhere in this quarterly report for more information.
The Company has not made any  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  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
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 June 30, 2002,
Graybar  accounted  for 30.1% 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.

                                       8
<PAGE>
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  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
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.

                                      Three Months Ended      Six Months Ended
                                           June 30,               June 30,
                                       ----------------      -----------------
                                        2002      2001        2002       2001
                                       ------    ------      ------     ------
Revenue, net                            100.0%    100.0%      100.0%     100.0%
Cost of goods sold                       63.4      64.2        63.8       70.7
                                       ------    ------      ------     ------
  Gross margin                           36.6      35.8        36.2       29.3
Operating expenses:
Engineering and product development       6.0       5.1         5.8        6.3
Selling, general and administrative      25.0      26.9        25.8       40.6
                                       ------    ------      ------     ------
                                         31.0      32.0        31.6       46.9
                                       ------    ------      ------     ------
Operating income (loss)                   5.6       3.8         4.6      (17.6)
Interest expense                          0.3       1.1         0.3        1.7
                                       ------    ------      ------     ------
Income (loss) before income tax and
  change in accounting principle          5.3       2.7         4.3      (19.3)
Income tax provision (benefit)            2.1       1.0         1.7       (7.0)
Income (loss) before change in
  accounting principle                    3.2       1.7         2.6      (12.3)
Change in accounting principle             --        --        (6.9)        --
                                       ------    ------      ------     ------
Net income (loss)                         3.2%      1.7%       (4.3)%    (12.3)%
                                       ======    ======      ======     ======

                                       9
<PAGE>
THREE MONTHS ENDED JUNE 30, 2002 COMPARED WITH THE THREE MONTHS ENDED
JUNE 30, 2001

REVENUE

     Revenue  totaled  $9.5  million in the second  quarter of 2002  compared to
revenue of $9.6 million in the second quarter of 2001. Sales to our supply house
customers  accounted  for  approximately  $5.6  million,  or 59.0% of our  total
revenue during the second  quarter of 2002 compared with $5.8 million,  or 60.0%
of our total  revenue in the same period of 2001.  Sales  through  our  INFINITE
direct dealer  program  totaled $3.6 million,  or 38.0% of our total revenue for
the second  quarter of 2002 compared  with $3.8  million,  or 39.8% of our total
revenue for the same period a year ago. Sales through our newly acquired  direct
sales office  totaled  $466,000,  or 5.0% of our total revenue during the second
quarter of 2002 compared to zero in the same period in 2001.

     Revenue  for the second  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
second  quarter of quarter of 2002  compared  to revenue of $310,000 in the same
period of 2001.  Revenue  during the 2002  second  quarter  was also  negatively
impacted by our inability to fulfill  approximately  $400,000 of orders due to a
shortage of certain inventory items. These orders will be fulfilled in the third
quarter when our inventory is replenished.

GROSS MARGIN

     Our gross  margin  was $3.5  million  during  the  second  quarter  of 2002
compared with $3.4 million during the same period of 2001. Our gross margin as a
percentage of total  revenue  increased to 36.6% during 2002 compared with 35.8%
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.

ENGINEERING AND PRODUCT DEVELOPMENT

     Engineering and product development  expenditures  increased  approximately
$75,000 to $0.6  million  from $0.5 million 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.

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES

     Selling,  general, and administrative expenses were $2.4 million during the
second  quarter of 2002 compared with $2.6 million in the same period in 2001, a
reduction of approximately $200,000. This decrease is the net effect of a number
of factors,  including  (a)  decreased  sales and  marketing  expenses;  (b) the
discontinuance  of  our  IVR  business;   and  (c)  strict  cost  controls  over
discretionary  spending.  These expense  reductions  were slightly offset by the
additional  operating  expenses  associated with our newly acquired direct sales
office and higher provisions for bad debts.

INTEREST EXPENSE

     Interest  expense  decreased to $28,000 for the second quarter of 2002 from
$109,000 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
39.5% for the 2002  second  quarter  compared  with an  effective  rate of 38.4%
during 2001. The change in effective rates between  periods  reflects the impact
of permanent book/tax differences.

                                       10
<PAGE>
SIX MONTHS ENDED JUNE 30, 2002 COMPARED WITH SIX MONTHS ENDED JUNE 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  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 six
months ended June 30, 2001:

<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 as of June
30, 2002: (IN THOUSANDS)

                                         Balance                       Balance
                                         Dec. 31,                      Jun. 30,
                                           2001         Payments         2002
                                         --------       --------       -------
     Distributor price protection         $  86          $ (86)         $  --
     Severance-related costs                 54            (54)            --
     Other shut-down costs                  144           (121)            23
                                          -----          -----          -----
                                          $ 284          $(261)         $  23
                                          =====          =====          =====

REVENUE

     Revenue for the six-month period ended June 30, 2002 totaled $18.3 million,
an increase of $2.6  million,  or 16.5%,  from revenue of $15.7  million for the
same  period  of  2001.  Sales  to our  supply  house  customers  accounted  for
approximately  $10.4 million, or 57.0% of our total revenue during the first six
months of 2002 compared with $8.1 million,  or 52.0% of our total revenue in the
same period of 2001,  representing a year-to-date increase of $2.3 million, from
the same period in 2001. The increase in sales to our supply house  customers in
the first two quarters of 2002 is principally related to inventory reductions at
the supply houses in the first six months of 2001, the magnitude of which we did
not experience in the first half of 2002.

     Sales through our INFINITE direct dealer program  totaled $7.1 million,  or
39.0% of our total  revenue for the first six months of 2002  compared with $7.3
million,  or 46.5% 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  $610,000 or 3.3% of our total revenue  during the first half of
2002 compared to zero in the same period of 2001.

                                       11
<PAGE>
     Revenue in first six months of 2002 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 first
six months of 2002 compared  with $671,000  during the first six months of 2001.
Revenue  during  the  first  half of 2002 was also  negatively  impacted  by our
inability to fulfill approximately $400,000 of orders on June 30, 2002, due to a
shortage of certain inventory items. These orders will be fulfilled in the third
quarter when our inventory is replenished.

GROSS MARGIN

     Our gross  margin  was $6.6  million  during  the first six  months of 2002
compared with $4.6 million during the same period of 2001. Our gross margin as a
percentage of total  revenue  increased to 36.2% during 2002 compared with 29.3%
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 six 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;  and (d) higher gross
margins generated by our direct sales office.

ENGINEERING AND PRODUCT DEVELOPMENT

     Engineering and product development  expenditures  increased  approximately
$67,000 to $1.1 million from $1.0 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 $4.7 million during the
first six months of 2002  compared with $6.4 million in the same period in 2001,
a reduction of $1.7 million. Excluding special charges of approximately $760,000
recorded in the first  quarter of 2001,  selling,  general,  and  administrative
expenses in the first half of 2002 declined by $887,000, or 15.8%, 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 cost controls
over  discretionary   spending;   and  (e)  approximately  $66,000  of  goodwill
amortization  during the first half of 2001,  which was  eliminated in 2002 upon
our adoption of FASB No. 142.

INTEREST EXPENSE

     Interest expense decreased to $59,000 for the first six months of 2002 from
$270,000 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
39.7% for the first six months of 2002 compared with an effective  rate of 36.5%
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 $6.8 million at June 30, 2002 compared
with $7.0  million at December  31,  2001.  We had a cash balance of $652,000 at
June 30, 2002.  Changes in working  capital  that  increased  our cash  position
during the first six months of 2002  included a reduction  in  inventory of $1.7
million  and the  receipt  of an income  tax refund of  $843,000.  Factors  that

                                       12
<PAGE>
reduced  our cash  balance  during  the first six months of 2002  included  cash
payments  of  $1.8  million  on our  revolving  credit  facility,  $386,000  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  69 days as of June 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 42% of our total accounts receivable as of June
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 55 days as of June 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 slow moving inventory.

     Trade payables and accrued  liabilities,  including payables to third-party
and related-party manufacturers,  were approximately $4.6 million as of June 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.  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 4.27% as of June 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 June 30, 2002,
we were in compliance with all of the covenants.

     We had total borrowing  capacity of  approximately  $8.0 million,  based on
eligible  accounts  receivable and inventory,  under the credit facility at June
30, 2002, of which $0.8 million was  outstanding and $7.2 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 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.

                                       13
<PAGE>
     The following  table sets forth all known  commitments  as of June 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               $   517      $    --      $ 4,945       $ 4,616     $10,078
2003                 1,008          825           --            --       1,833
2004                 1,009           --           --            --       1,009
2005                   831           --           --            --         831
2006                   814           --           --            --         814
Thereafter           3,927           --           --            --       3,927
                   -------      -------      -------       -------     -------
Total              $ 8,106      $   825      $ 4,945       $ 4,616     $18,492
                   =======      =======      =======       =======     =======

     We are a  defendant  in  various  lawsuits.  See  Part II,  Item 1,  "Legal
Proceedings".  We have not made any  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 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. All
unloading of these containers  involves union workers and the current West Coast
union  agreement  expired on July 1, 2002.  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.

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

                                       14
<PAGE>
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    Six Months Ended
                                                    June 30,             June 30,
                                               ------------------   ------------------
                                                 2002       2001      2002       2001
                                               -------    -------   -------    -------
<S>                                            <C>        <C>       <C>        <C>
Income (loss) before change in accounting
  principle, as reported                       $   302    $   159   $   469    $(1,925)
Add back goodwill amortization, net of taxes        --         25        --         50
                                               -------    -------   -------    -------
Adjusted net income (loss)                     $   302    $   184   $   469    $(1,875)
                                               =======    =======   =======    =======
</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.

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.

     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 4.27% at June 30, 2002. The principal of loans
under  this  line of  credit  is due in  April  2003.  At June  30,  2002 we had
outstanding borrowings on the line of credit of approximately $0.8 million.

                                       15
<PAGE>
                           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  alleges that VCS (i)
breached its strategic alliance agreement with Paradygm, as well as its warranty
of product  fitness  under the  strategic  alliance  agreement;  (ii)  failed to
provide  reasonable  technical  and  sales  training  assistance  to  Paradygm's
employees  to  support  Paradygm  in its  efforts  to sell  products  under  the
agreement;  and  (iii)  engaged  in  conduct  that  constitutes  intentional  or
negligent  misrepresentation.  The complaint  requests  compensatory,  punitive,
incidental,  and  consequential  damages,  attorneys'  fees, plus any additional
relief. VCS answered the complaint denying the foregoing allegations,  asserting
that the complaint fails to state a claim and, for various  reasons,  the relief
sought by  Paradygm  and  Patel is  barred.  VCS also has  filed a  counterclaim
against Paradygm  alleging that Paradygm  breached the agreement  because of its
failure  to meet its  payment  obligations  to VCS.  The  counterclaim  requests
amounts  due  pursuant  to  the  strategic  alliance  agreement,  the  costs  of
litigation,  and reasonable attorneys' fees. Since filing the initial complaint,
Paradygm has been permitted to add Vodavi-CT, Inc., an affiliate of our company,
alleging that Vodavi-CT participated in the alleged fraudulent inducement of Mr.
Patel. On March 24, 1999, the plaintiffs  filed an amended  complaint to add our
subsidiary Vodavi-CT as an additional  defendant.  The amended complaint alleges
claims against Vodavi-CT similar to those alleged in the original complaint.  On
July 28, 1999,  Vodavi-CT  filed an answer and denied those  allegations  on the
same basis as VCS' original answer. The parties have completed discovery and are
currently  waiting for the court to schedule a trial date,  which we  anticipate
will be during the third or fourth quarter of 2002. We are vigorously  defending
this lawsuit.

Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

     Not applicable

Item 3. DEFAULTS UPON SENIOR SECURITIES

     Not applicable

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     Not applicable

Item 5. OTHER INFORMATION

     Not applicable

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

     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

                                       16
<PAGE>
                                   SIGNATURES

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

                                        VODAVI TECHNOLOGY, INC.


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

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

                                       17