SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-K/A
                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 1997       Commission File Number 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                                  Identification No.)
             organization)

        8300 EAST RAINTREE DRIVE
           SCOTTSDALE, ARIZONA                                     85260
----------------------------------------                         ----------
(Address of principal executive offices)                         (Zip Code)

                                 (602) 443-6000
               --------------------------------------------------
               Registrant's telephone number, including area code

           Securities registered pursuant to Section 12(b) of the Act:
                                      None

           Securities registered pursuant to Section 12(g) of the Act:
                          Common Stock, $.001 par value

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 if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]

Issuer's revenue for its most recent fiscal year:  $47,674,751

At March 23, 1998, there were  outstanding  4,342,238 shares of the registrant's
Common Stock,  $.001 par value.  The aggregate market value of Common Stock held
by nonaffiliates of the registrant (2,740,208 shares) based on the closing price
of the Common Stock as reported on the Nasdaq National Market on March 23, 1998,
was $10,618,306.  For purposes of this computation,  all officers, directors and
10%  beneficial  owners of the  registrant  are  deemed to be  affiliates.  Such
determination should not be deemed an admission that such officers, directors or
10% beneficial owners are, in fact, affiliates of the registrant.

Documents incorporated by reference:  None.
<PAGE>
                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Directors and Executive Officers

         The  following  table  sets forth  certain  information  regarding  the
directors and executive officers of the Company:

<TABLE>
<CAPTION>
         Name                                  Age                  Position
         ----                                  ---                  --------

<S>                                             <C>        <C>
William J. Hinz........................         52         Chairman of the Board
Glenn R. Fitchet.......................         50         President, Chief Executive Officer, and Director
Gregory K. Roeper......................         37         Executive Vice President - Finance, Administration, and
                                                             Operations; Chief Financial Officer; Secretary; and Treasurer
Mark D. Fife...........................         30         Executive Vice President - Sales, Marketing, and Support
Gilbert H. Engels......................         69         Director
Stephen A McConnell....................         45         Director
Steven A. Sherman......................         52         Director
Nam K. Woo.............................         48         Director
</TABLE>

         William  J. Hinz has  served as  Chairman  of the Board of the  Company
since October 1997 and as a director of the Company  since April 1997.  Mr. Hinz
has served as President and Chief Executive Officer of Stolper-Fabralloy Company
("Stolper-Fabralloy"),  a precision  aerospace  engine  component  manufacturer,
since October 1997 and as a director of Stolper-Fabralloy  since March 1996. Mr.
Hinz served as Executive Vice President - Operations of  Stolper-Fabralloy  from
March 1996 to October  1997.  Mr. Hinz was Vice  President of Global  Repair and
Overhaul  Operations  for  AlliedSignal  Aerospace  Company from June 1994 until
March 1996.  During this period,  Mr. Hinz also was  responsible  for  aerospace
aftermarket  merger and  acquisition  activity.  Mr. Hinz served as President of
European Operations for AlliedSignal  Aerospace Company from December 1991 until
June 1994 and served in various other executive management positions with Allied
Signal Aerospace Company from 1968 to 1991.

         Glenn R. Fitchet has served as President  and a director of the Company
since April 1994 and as Chief  Executive  Officer of the Company since May 1996.
Mr.  Fitchet was Vice  President and General  Manager of the Vodavi  Division of
Executone  from  January  1990 until  April  1994.  Mr.  Fitchet  served as Vice
President  Marketing and Manufacturing of Executone from July 1988 until January
1990 and as Vice President of Vodavi Technology  Corporation from September 1984
to July 1988.  Mr.  Fitchet also served as Vice  President - Sales and Marketing
for Valcom, Inc. from December 1981 to August 1984 and as National Sales Manager
for Siemens Information Systems from July 1976 until December 1981.

         Gregory K. Roeper has served as the Company's  Executive Vice President
- Finance, Administration,  and Operations, since December 1997; as Secretary of
the Company since October 1997; and as Chief Financial  Officer and Treasurer of
the Company  since  November  1994.  Mr.  Roeper  served as the  Company's  Vice
President - Finance from November 1994 until December  1997.  From 1982 to 1994,
Mr.  Roeper was  employed  by Arthur  Andersen  LLP,  most  recently as a Senior
Manager. Mr. Roeper is a Certified Public Accountant in the state of Arizona.

         Mark D.  Fife has  served  as a Vice  President  of the  Company  since
February 1998 and as Executive  Vice President - Sales,  Marketing,  and Support
since March 1998. From February 1997 to June 1997, Mr. Fife served as President,
Chief Executive Officer, and a director of Evergreen Internet,  Inc., a provider
of turnkey  Internet  electronic  commerce  applications  for  businesses.  From
February 1991 to January 1997, Mr. Fife served in various  executive  capacities
with  Insight  Enterprise,  Inc.,  most  recently  as Senior  Vice  President  -
Strategic Alliances.
                                       1
<PAGE>
         Gilbert H. Engels has served as a director of the Company since January
1996.  Mr. Engels  currently is involved in commercial  real estate  development
activities.  From 1991 to 1993, Mr. Engels served as President of the Government
and Institutional  Systems Division of WilTel  Communications  Systems, Inc. Mr.
Engels served as a Senior Vice President of TIE Communications,  Inc., from 1971
to  1992,  and  served  as  President  and  Chief   Executive   Officer  of  TIE
International, a division of TIE Communications,  Inc., from 1971 to 1991 and as
President  and Chief  Executive  Officer  of TIE Canada  from 1990 to 1992.  Mr.
Engels was involved in sales and marketing activities in the  telecommunications
industry from 1957 to 1993.

         Stephen A  McConnell  has served as a  director  of the  Company  since
January  1996.  Mr.  McConnell  currently  serves  as the  principal  of  Solano
Ventures,  an  investment  fund  devoted to small- to mid-sized  companies.  Mr.
McConnell served as Chairman of the Board of Mallco Lumber & Building  Materials
from  1991 to 1997.  Mr.  McConnell  also  served  as  President  of Belt  Perry
Associates,  Inc. from 1991 to 1995 and as President and Chief Executive Officer
of N-W Group,  Inc., a publicly held company,  from 1985 to 1991. Mr.  McConnell
currently serves as a director of Express America Holdings Corp.,  Capital Title
Group,  Inc.,  and Unitech  Industries,  Inc.,  all of which are  publicly  held
companies.  In addition, Mr. McConnell currently serves as a director of several
privately held companies.

         Steven A.  Sherman has served as a director of the Company  since March
1994. Mr. Sherman served as the Company's  Chairman of the Board from March 1994
to October  1997.  Mr.  Sherman was a founder and served as the  Chairman of the
Board of Vodavi Technology Corporation,  a predecessor of the Company, from 1983
until July 1988 and served as a director of Executone  Information Systems, Inc.
("Executone")  from July 1988 until  January  1990.  Mr.  Sherman  has served as
Chairman  of the Board and Chief  Executive  Officer of Novatel  Wireless,  Inc.
since August 1996.  Mr. Sherman also has served as a director of Main Street and
Main  Incorporated  ("Main  Street"),  the  world's  largest  franchisee  of TGI
Friday's  restaurants,  since June 1990 and served as  Chairman  of the Board of
Main Street from June 1990 to August 1996 and as the Chief Executive  Officer of
Main Street from June 1990 until  January  1996.  Mr.  Sherman is a principal of
Sherman  Restaurants,  Inc.,  which he founded during 1997, and Sherman  Capital
Group, L.L.C., a merchant banking organization which he founded in 1988.

         Nam K. Woo has served as a director  of the  Company  since March 1998.
Mr. Woo also  served as a director of the Company  from  February  1995 to April
1997.  Mr. Woo  currently  is  President  of North  American  Operations  for LG
Electronics U.S.A.,  Inc., an affiliate of LG Electronics Inc. ("LGE").  Mr. Woo
also  currently  serves  as a  director  of  LG  Electronics  U.S.A.,  Inc.,  LG
Electronics Canada, Inc., and LG Electronics  Alabama,  Inc. Mr. Woo also served
as a director of LGE until  March 1998.  Mr. Woo joined LGE in July 1974 and has
served in a number of  capacities  with LGE,  including  president  of  European
Operations  from January 1991 to December  1994. LGE designated Mr. Woo to serve
as a director of the Company and its subsidiary,  Vodavi Communications Systems,
Inc.,  pursuant to its rights under a stockholders'  agreement among the Company
and various stockholders. See Item 12, "Security Ownership of Certain Beneficial
Owners and Management - Stockholders' Agreement."

Section 16(A) Beneficial Ownership Reporting Compliance

         Section  16(a) of the Exchange Act  requires the  Company's  directors,
officers,  and persons who own more than 10 percent of a registered class of the
Company's  equity  securities  to file  reports  of  ownership  and  changes  in
ownership  with the Securities and Exchange  Commission  (the "SEC").  Officers,
directors,  and  greater  than  10  percent  stockholders  are  required  by SEC
regulations  to furnish the Company with copies of all Section  16(a) forms they
file.  Based  solely  upon the  Company's  review of the  copies  of such  forms
received  by it during the fiscal  year ended  December  31,  1997,  and written
representations  that no other reports were required,  the Company believes that
each person who, at any time during such fiscal year,  was a director,  officer,
or  beneficial  owner of more than 10  percent  of the  Company's  Common  Stock
complied with all Section 16(a) filing requirements during such fiscal year.
                                       2
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION

Summary of Cash and Other Compensation

         The following table sets forth certain  information with respect to the
compensation  received by the Company's Chief  Executive  Officer for the fiscal
year ended December 31, 1997, and for the Company's other executive officers who
received cash  compensation in excess of $100,000 during fiscal 1997 (the "Named
Officers").

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                              Long Term
                                                                            Compensation
                                                                            ------------
                                                                               Awards
                                                                               ------
                                               Annual Compensation           Securities
                                               -------------------           Underlying         All Other
  Name and Principal Position             Year      Salary($)   Bonus ($)   Options(#)(1)   Compensation($)(2)
  ---------------------------             ----      ---------   ---------   -------------   ------------------
<S>                                       <C>       <C>          <C>           <C>               <C>   
Glenn R. Fitchet, President and           1997      $163,934        --         100,000            $5,750
  Chief Executive Officer                 1996       157,476        --            --               5,000
                                          1995       176,000        --            --               6,563

Steven A. Sherman,                        1997      $114,224        --          75,000              $750
  Chairman of the Board(3)                1996       135,000        --            --                --
                                          1995       150,000        --            --                --

Kent R. Burgess, Senior Vice              1997      $101,458        --            --             $48,250
  President - Operations and              1996       121,492        --          15,000              --
  Secretary; President of                 1995       135,000        --            --                --
  Enhanced Systems, Inc.(4)

Gregory K. Roeper, Vice                   1997      $121,224        --          50,000            $1,750
  President - Finance, Administration,    1996       121,492     $35,000        25,000               988 
  and Operations; Chief Financial         1995       135,000        --            --                 880 
  Officer; Secretary; and Treasurer

Larry L. Steinmetz, Executive             1997      $124,449     $20,600        50,000              $750
  Vice President - Sales and              1996        80,995      56,434          --                --
  Marketing (5)                           1995        82,510      51,146          --                --
</TABLE>
-----------------
(1)      The exercise price of all stock options  granted were equal to the fair
         market value of the Company's Common Stock on the date of grant.
(2)      Amounts for 1997  represent (i) 401(k) plan matching  contributions  in
         the  amount  of $750  for each of the  Named  Officers  accrued  by the
         Company in 1997 and paid during  1998;  (ii)  payments  related to life
         insurance  policies  of $5,000 and $1,000 paid by the Company on behalf
         of Messrs.  Fitchet  and  Roeper,  respectively;  and (iii)  relocation
         expenses in the amount of $47,500 paid by the Company to Mr. Burgess.
(3)      Mr.  Sherman  served as the Company's  Chairman of the Board from April
         1994 to October 1997.
(4)      Mr.  Burgess  served as an executive  officer of the Company from April
         1994 to September 1997.
(5)      Mr. Steinmetz served as an executive  officer of the Company from April
         1994 to February 1998.
                                       3
<PAGE>
Options Grants

         The  following  table sets forth  certain  information  with respect to
stock  options  granted  to the Named  Officers  during  the  fiscal  year ended
December 31, 1997.

                        OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
                                                                                                     Potential   
                                                        Individual Grants                           Realizable   
                                     --------------------------------------------------------    Value at Assumed
                                                     Percentage                                    Annual Rates  
                                       Number of      of Total                                    of Stock Price 
                                      Securities       Options                                   Appreciation for
                                      Underlying     Granted to       Exercise                    Option Term(2) 
                                        Options     Employees in        Price     Expiration   -------------------
         Name                         Granted (#)    Fiscal Year      ($/Sh)(1)      Date        5%          10%
         ----                        ------------    -----------      ---------      ----        --          ---

<S>                                    <C>              <C>             <C>         <C>        <C>        <C>     
Glenn R. Fitchet....................   100,000          27.7%           $4.00       2/27/2007  $251,558   $637,497
Steven A. Sherman(3)................    75,000          20.8%           $5.50       12/5/2007  $259,419   $657,419
Kent R. Burgess(4)..................      --             --              --           --          --         --
Gregory K. Roeper...................    50,000          13.9%           $4.25       6/23/2007  $133,640   $338,670
Larry L. Steinmetz(5)...............    50,000          13.9%           $4.00       2/27/2007  $125,779   $318,748
</TABLE>
---------------------
(1)      The options were granted at the fair value of the shares on the date of
         grant.  Except as  otherwise  indicated,  the  options  vest and become
         exercisable  in four equal annual  installments  beginning on the first
         anniversary of the date of grant, and have a ten-year term.
(2)      Potential  gains  are  net of the  exercise  price,  but  before  taxes
         associated with the exercise. Amounts represent hypothetical gains that
         could be achieved for the respective options if exercised at the end of
         the  option  term.  The  assumed  5%  and  10%  rates  of  stock  price
         appreciation   are  provided  in  accordance  with  the  rules  of  the
         Securities  and Exchange  Commission and do not represent the Company's
         estimate or  projection  of the future  price of the  Company's  Common
         Stock. Actual gains, if any, on stock option exercises will depend upon
         the future market prices of the Company's Common Stock.
(3)      Such options will vest on May 30, 1998 and will become  exercisable  on
         October 20, 1998.
(4)      Mr.  Burgess  served as an executive  officer of the Company from April
         1994 to September 1997.
(5)      Mr. Steinmetz served as an executive  officer of the Company from April
         1994 to February 1998.  Such options were cancelled in connection  with
         Mr. Steinmetz' departure from the Company.

Recent Grants of Stock Options

         On February 2, 1998,  the Company  granted  options to acquire  100,000
shares of Common Stock at an exercise  price of $4.00 per share to Mark D. Fife,
the Company's Executive Vice President - Sales, Marketing, and Support.
                                       4
<PAGE>
Option Holdings

         The following  table  provides  information  on the value of each Named
Officer's unexercised options as of December 31, 1997.

                             YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
                                                  Number of Securities
                                                       Underlying                   Value of Unexercised In-the-
                                              Unexercised Options at Fiscal            Money Options at Fiscal
                 Name                                 Year-End (#)                         Year-End ($)(1)
                 ----                       ---------------------------------     ---------------------------------
                                              Exercisable     Unexercisable         Exercisable     Unexercisable
                                              -----------     -------------         -----------     -------------
<S>                                              <C>            <C>                   <C>              <C>    
Glenn R. Fitchet.......................            0            100,000                  $0            $50,000
Steven A. Sherman......................            0             75,000                  $0              $0
Kent R. Burgess(2).....................            0                0                    --              --
Gregory K. Roeper......................          25,000          75,000                $9,375          $15,625
Larry L. Steinmetz(3)..................          33,750          61,250               $16,875          $30,625
</TABLE>
------------------
(1)      Calculated  based on the Nasdaq  National  Market  closing price of the
         Company's  Common Stock of $4.50 per share on December  31, 1997,  less
         the exercise  price of such  options.  The  exercise  prices of certain
         options held by the Named Officers are greater than $4.50 per share.
(2)      Mr.  Burgess  served as an executive  officer of the Company from April
         1994 to September 1997. All options  previously  granted to Mr. Burgess
         expired in accordance with their terms prior to December 31, 1997.
(3)      Mr. Steinmetz served as an executive  officer of the Company from April
         1994 to February 1998. Such options were cancelled upon the termination
         of Mr. Steinmetz' employment with the Company.

Employment and Consulting Agreements

         On December 5, 1997,  the Company  entered into a consulting  agreement
(the "Consulting  Agreement") with Steven A. Sherman, a director of the Company,
pursuant to which Mr. Sherman will render such advice and recommendations to the
Company as may be  requested  by the  Chairman  of the Board of  Directors.  The
Company will pay Mr.  Sherman a  consulting  fee of $10,000 per month during the
term of the  Consulting  Agreement,  which expires on May 30, 1998. In addition,
pursuant to the Consulting Agreement, the Company granted to Mr. Sherman options
to  acquire  75,000  shares of Common  Stock at an  exercise  price of $5.50 per
share. See Item 11, "Executive Compensation - Option Grants."

         The Company has no written employment or consulting  contracts with any
of its other officers,  directors, or employees. The Company, however, maintains
agreements  with each of its officers and  employees  that prohibit such persons
from  disclosing  confidential  information  obtained  while  employed  with the
Company.  The  Company  offers  its  employees  medical,  life,  and  disability
insurance  benefits.  The  executive  officers  and other key  personnel  of the
Company (including directors who also are employees of the Company) are eligible
to receive stock options  under the  Company's  Stock Option Plan.  See Item 11,
"Executive Compensation - Stock Option Plan."

401(k) Profit Sharing Plan

         In April 1994,  the Company  adopted a profit  sharing plan pursuant to
Section  401(k) (the  "401(k)  Plan") of the Internal  Revenue Code of 1986,  as
amended (the "Internal Revenue Code"). Pursuant to the 401(k) Plan, all eligible
employees  may  make  elective  contributions  through  payroll  deductions.  In
addition,  the 401(k)  Plan  provides  that the Company  may make  matching  and
discretionary contributions in such amounts as may be determined by the Board of
Directors.  During  fiscal 1997,  the Company  expensed  matching  contributions
pursuant to the 401(k) Plan to all  executive  officers as a group in the amount
of $3,750.
                                       5
<PAGE>
Stock Option Plan

         The  Vodavi  Technology,  Inc.  Stock  Option  Plan was  adopted by the
Company's  Board  of  Directors  in  December  1994  and  was  approved  by  the
stockholders  of the Company in July 1995.  The Board of  Directors  amended and
restated the Stock Option Plan in February 1996, and the  stockholders  approved
the amended and restated  plan (the "Plan") on May 24, 1996.  The Plan  provides
for (i) the  granting of  incentive  stock  options or  nonqualified  options to
acquire  Common  Stock of the Company  ("Options");  (ii) the  granting of stock
appreciation rights ("SARs");  (iii) the direct granting of the Company's Common
Stock  ("Stock  Awards");  and (iv) the  granting  of other cash  awards  ("Cash
Awards")  (SARS,  Stock  Awards,  and Cash Awards are  collectively  referred to
herein as "Awards") to key employees of the Company or its  subsidiaries  and to
consultants  or independent  contractors  who provide  valuable  services to the
Company or its subsidiaries  ("Eligible Persons") under a Discretionary Program.
The Plan also  provides for automatic  grants of stock  options to  non-employee
directors  of the Company  under an Automatic  Program.  The Plan is intended to
comply with Rule 16b-3 as  promulgated  under the  Exchange  Act with respect to
persons subject to Section 16 of the Exchange Act. The Company believes that the
Plan is important in attracting and retaining executives and other key employees
and  constitutes a  significant  part of the  compensation  program for Eligible
Persons  and  non-employee  directors,  providing  them with an  opportunity  to
acquire a  proprietary  interest in the  Company  and giving them an  additional
incentive  to use their best efforts for the  long-term  success of the Company.
The Plan will remain in force until December 29, 2004.

         A maximum  of  850,000  shares of Common  Stock of the  Company  may be
issued under the Plan. If any Option or SAR terminates or expires without having
been exercised in full,  stock not issued under such Option or SAR will again be
available  for the  purposes  of the Plan.  There  were  outstanding  Options to
acquire 772,800 shares of the Company's  Common Stock under the Plan as of April
30, 1998.

         Options  that are  incentive  stock  options may only be granted to key
personnel  of the Company (or its  subsidiaries)  who are also  employees of the
Company (or its subsidiaries).  To the extent that granted Options are incentive
stock options,  the terms and conditions of those  Options,  including  exercise
price  and  expiration   date,  must  be  consistent   with  the   qualification
requirements  set forth in the  Internal  Revenue  Code.  The maximum  number of
shares  with  respect  to which  Options  or Awards  may be  granted  to any one
employee (including  officers) during the term of the Plan may not exceed 50% of
the shares of Common Stock authorized for issuance under the Plan.

         Under the Automatic Program,  each non-employee director serving on the
Board of Directors on the date the  amendments  to and  restatement  of the Plan
were  approved by the  Company's  stockholders  received an  automatic  grant of
Options  ("Automatic  Options") to acquire  5,000 shares of Common Stock on that
date (an "Initial Grant").  Each subsequent newly elected non-employee member of
the Board of  Directors  will receive an Initial  Grant of Automatic  Options to
acquire 5,000 shares of Common Stock on the date of his or her first appointment
or election to the Board of Directors. In addition, Automatic Options to acquire
5,000 shares of Common Stock will be automatically  granted to each non-employee
director at the meeting of the Board of Directors  held  immediately  after each
annual meeting of stockholders (an "Annual Grant"). A non-employee member of the
Board of  Directors  will not be eligible  to receive  the Annual  Grant if that
option grant date is within 90 days of such non-employee member receiving his or
her Initial Grant.

         To exercise an Option, the option holder will be required to deliver to
the Company full  payment of the  exercise  price for the shares as to which the
Option is being  exercised.  Generally,  Options may be exercised by delivery of
cash, bank cashier's check, or shares of Common Stock of the Company.

Director Compensation and Other Information

         Employees  of the  Company do not receive  compensation  for serving as
members of the Company's Board of Directors.  Each independent director receives
an annual retainer fee of $10,000,  plus a $500 fee for each meeting attended in
person and  reimbursement  for expenses  incurred in  attending  meetings of the
Board. In 1997, the Board of Directors formed an Executive Committee to evaluate
various business opportunities and to 
                                       6
<PAGE>
advise the Board of  Directors  with  respect  to  strategic  planning,  product
development,  and  management  issues.  Mr. Hinz  serves as the  Chairman of the
Executive Committee and Messrs.  Engels and McConnell serve as the other members
of the Executive  Committee.  During 1997,  Messrs.  Hinz, Engels, and McConnell
received a fee of $1,000, $500, and $500, respectively,  for each meeting of the
Executive Committee that they attended.  Non-employees who serve as directors of
the Company also receive  automatic  grants of stock options under the Company's
Amended  and  Restated  1994  Stock  Option  Plan.   See  Item  11,   "Executive
Compensation - Stock Option Plan."

Compensation Committee Interlocks and Insider Participation

         Performance evaluation and compensation decisions relating to 1997 were
made by the Compensation Committee of the Board of Directors, which consisted of
Messrs.  Engels,  McConnell,  Nam K. Woo (from January 1997 to April 1997),  and
Ki-Song Cho (from April 1997 to March 1998).  In connection with the acquisition
of the  Company's  business  operations  in  April  1994,  the  Company,  Vodavi
Communications  Systems, Inc. ("VCS"), LGE, Steven A. Sherman, Glenn R. Fitchet,
and certain  other  stockholders  of the Company  entered  into a  stockholders'
agreement (the "Stockholders'  Agreement").  See Item 12, "Security Ownership of
Certain  Beneficial  Owners and Management - Stockholders'  Agreement."  Each of
Messrs.  Woo and Cho  served as LGE's  designee  as a  director  of the  Company
pursuant to LGE's rights under the Stockholders'  Agreement.  Under the terms of
its agreements with LGE and LGST, the Company purchased a total of approximately
$18.8 million of key telephone  systems and commercial grade telephones from LGE
and LGST during 1997.

Limitation of Director's Liability and Indemnification

         The  Company's  Amended  Certificate  of  Incorporation  (the  "Amended
Certificate") provides that no director of the Company will be personally liable
to the Company or its  stockholders for monetary damages for breach of fiduciary
duty as a  director,  except to the  extent  such  exemption  or  limitation  of
liability is not  permitted  under the  Delaware  General  Corporation  law (the
"Delaware  GCL").  Under the Delaware GCL, a director may be held liable (i) for
any breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or  omissions  not in good  faith  or  which  involve  intentional
misconduct or a knowing  violation of law, (iii) in respect of certain  unlawful
dividend payments or stock purchases, or (iv) for any transaction from which the
director derived an improper personal  benefit.  The effect of this provision in
the  Amended  Certificate  is to  eliminate  the rights of the  Company  and its
stockholders (through  stockholders'  derivative suits on behalf of the Company)
to recover  monetary damages from a director for breach of the fiduciary duty of
care as a director  (including  breaches  resulting  from  negligent  or grossly
negligent  behavior)  except in the situations  described in clauses (i) through
(iv) above.  In addition,  the Amended  Certificate  provides that any repeal or
modification of this provision by the Company's  stockholders will not adversely
affect any right or protection of a director of the Company existing at the time
of such repeal or modification with respect to acts or omissions occurring prior
to such repeal or  modification.  These provisions do not limit or eliminate the
rights of the Company or any stockholder to seek non-monetary  relief such as an
injunction or recision in the event of a breach of a directors' duty of care.

         The Company's Amended Certificate requires the Company to indemnify its
directors,  officers,  and certain other  representatives of the Company against
expenses and certain other liabilities arising out of their conduct on behalf of
the Company to the maximum extent permitted by the Delaware GCL. Indemnification
is not  available  with respect to  proceedings  or claims  initiated or brought
voluntarily  by an officer,  director,  or other  representative  of the Company
against the Company unless such  proceeding or claim is approved by the Board of
Directors.
                                       7
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Principal Stockholders

         The  following  table sets forth  certain  information  with respect to
beneficial  ownership of the Company's  Common Stock as of April 30, 1998 by (i)
each director of the Company, (ii) each executive officer of the Company,  (iii)
all directors and  executive  officers of the Company as a group,  and (iv) each
person  known by the Company to be the  beneficial  owner of more than 5% of the
Company's Common Stock.

<TABLE>
<CAPTION>
                                                                  Shares Beneficially Owned
                                                                  -------------------------
Name of Beneficial Owner(1)                                      Number(2)(3)     Percent(3)
---------------------------                                      ------------     ----------

<S>                                                               <C>               <C>  
Directors and Executive Officers:
William J. Hinz..........................................           5,000(4)          *
Glenn R. Fitchet.........................................         275,000(5)         6.3%
Gregory K. Roeper........................................          64,000(6)         1.5%
Mark D. Fife (7).........................................               0             *
Gilbert H. Engels........................................          35,000(8)          *
Stephen A McConnell......................................          18,700(9)          *
Steven A. Sherman........................................         485,580(10)       11.2%
Nam K. Woo...............................................           5,000(11)         *
All directors and officers as a
  group (eight persons)..................................         888,280           20.0%

Non-Management 5% Stockholder:
LG Electronics Inc.......................................         812,500           18.7%
</TABLE>

--------------------
*    Less than 1% of the outstanding shares of Common Stock.
(1)  Addresses of 5% stockholders:  The address of Glenn R. Fitchet is 8300 East
     Raintree Drive, Scottsdale, Arizona 85260; the address of Steven A. Sherman
     is 4757 E. Greenway Road,  Suite 103-187,  Phoenix,  Arizona 85032; and the
     address of LG  Electronics,  Inc.  is LG Twin Tower,  West Tower 20F,  #20,
     Yoido-dong, Youngdungpo-gu, Seoul 150-721, Korea.
(2)  Includes,  when  applicable,  shares owned of record by such person's minor
     children and spouse and by other  related  individuals  and  entities  over
     whose shares of Common Stock such person has sole or shared voting  control
     or power of  disposition.  Also  includes  shares of Common  Stock that the
     identified  person  had the  right to  acquire  within 60 days of April 30,
     1998, by the exercise of stock options.
(3)  The  percentages  shown  include the shares of Common Stock that each named
     stockholder  has the right to acquire  within 60 days of April 30, 1998. In
     calculating percentage ownership, all shares of Common Stock that the named
     stockholder  has the right to acquire upon exercise of stock options within
     60 days of April 30, 1998 are deemed to be  outstanding  for the purpose of
     computing the percentage of Common Stock owned by such stockholder, but are
     not deemed to be outstanding for the purpose of computing the percentage of
     Common Stock owned by any other stockholder. Percentages may be rounded.
(4)  Represents  5,000 shares of Common Stock  issuable  upon exercise of vested
     options.
(5)  Represents  250,000 shares of Common Stock and 25,000 shares  issuable upon
     exercise of vested options.
(6)  Represents  19,750 shares of Common Stock and 43,750  shares  issuable upon
     exercise  of vested  stock  options  held by Mr.  Roeper  and 500 shares of
     Common Stock  beneficially  owned by Mr.  Roeper's  spouse as custodian for
     their minor child.  Mr.  Roeper serves as the  Company's  Vice  President -
     Finance,   Administration,   and  Operations;   Chief  Financial   Officer;
     Secretary; and Treasurer.
(7)  Mr.  Fife  serves  as the  Company's  Executive  Vice  President  -  Sales,
     Marketing, and Support.
(8)  Represents  25,000 shares of Common Stock and 10,000  shares  issuable upon
     exercise of vested options.
(9)  Represents  8,700 shares of Common Stock and 10,000  shares  issuable  upon
     exercise of vested options.
                                       8
<PAGE>
(10) Represents 253,250 shares of Common Stock held by Mr. Sherman; 8,000 shares
     held by Mr. Sherman as custodian for certain of his minor children;  86,830
     shares held by Sherman Capital Group,  L.L.C.,  of which Mr. Sherman is the
     managing  member;  and  137,500  shares held by Sherman  Capital  Partners,
     L.L.C.,  of which Mr. Sherman is a managing member.  Mr. Sherman  disclaims
     beneficial  ownership of all shares held by Sherman  Capital Group,  L.L.C.
     and  Sherman  Capital  Partners,  L.L.C.  except  to the  extent  that  his
     individual  interest in such shares  arises from his  interest in each such
     entity.
(11) Represents  5,000 shares of Common Stock  issuable  upon exercise of vested
     options.  Mr. Woo  currently  serves as a director  and officer of LGE. LGE
     designated  Mr. Woo to serve as a director of the  Company  pursuant to its
     rights under the Stockholders'  Agreement. See Item 12, "Security Ownership
     of Certain Beneficial Owners and Management - Stockholders' Agreement." Mr.
     Woo disclaims  beneficial  ownership of any shares of the Company's  Common
     Stock beneficially owned by LGE.

Stockholders' Agreement

         In  connection  with the  acquisition  of the Vodavi  Division in April
1994, the Company,  VCS, LGE,  Steven A. Sherman,  and Glenn R. Fitchet  entered
into the Stockholders'  Agreement. The Stockholders' Agreement provides that, if
at any time during the term of the  Stockholders'  Agreement the Company  issues
shares  of  Common  Stock in a public  offering  or a  private  placement  in an
aggregate  amount of 1% or more of the Company's  issued and outstanding  Common
Stock, LGE has the right to purchase a sufficient  number of shares being issued
as may be required to enable it to  maintain  the  percentage  of  ownership  of
Common  Stock  that it holds  immediately  prior to such sale or  issuance.  The
purchase  price to LGE for such  shares  will be the public  offering  price per
share in the case of a public offering or the price per share paid by purchasers
in any private placement.

         Also pursuant to the terms of the Stockholders'  Agreement, Mr. Sherman
and Mr.  Fitchet  have agreed to vote their  shares of Common  Stock to elect as
directors of the Company that number of persons designated by LGE that comprises
a  percentage  of the  Board of  Directors  equal to LGE's  then  percentage  of
ownership of the Company's Common Stock. In addition,  as long as LGE owns 8% or
more of the outstanding  Common Stock of the Company,  those persons have agreed
to vote their  shares in favor of election of at least one  designee of LGE as a
director of the Company.  All designees of LGE to the Board of Directors must be
executive  officers or directors of LGE,  directors of any  affiliate of LGE, or
other persons reasonably  acceptable to the Company and the other parties to the
Stockholders' Agreement.  Unless LGE consents in writing, no LGE designee may be
removed as a director  of the  Company,  except  for  cause.  The  Stockholders'
Agreement  also  requires  the Company to employ one of the LGE  designees  in a
position  and at such salary as is mutually  agreed upon by the Company and LGE.
The  Stockholders'  Agreement also  establishes the Board of Directors of VCS at
four directors,  of which two must be designees of LGE, and provides that unless
LGE consents in writing, no LGE designee to the Board of Directors of VCS may be
removed, except for cause.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The Company,  VCS,  LGE,  Steven A.  Sherman,  and Glenn R. Fitchet are
parties to the  Stockholders'  Agreement.  Under the terms of the  Stockholders'
Agreement,  LGE has the right to purchase from the Company  additional shares of
the Company's  Common Stock in order to maintain its  percentage of ownership of
the Company;  certain of Mr.  Sherman's shares of the Company's Common Stock are
held in escrow;  and LGE has the right to designate a certain  number of persons
to serve  as  directors  of both the  Company  and VCS.  See Item 12,  "Security
Ownership  of  Certain   Beneficial   Owners  and  Management  -   Stockholders'
Agreement."

         The  Company  purchases  certain  of  its  key  telephone  systems  and
commercial grade telephones from LGE. The Company purchased  approximately  $8.2
million of key telephone  systems from LGE during 1997.  Under an agreement with
LG Srithai,  Inc.  ("LGST"),  a joint venture  between LGE and a  Thailand-based
entity,  the Company  purchases  certain of its telephone systems and commercial
grade telephones from LGST. The Company purchased approximately $10.6 million of
telephone systems and commercial grade telephones from LGST during 1997.
                                       9
<PAGE>
         In August 1996, Novatel Wireless, Inc. ("Novatel"),  of which Steven A.
Sherman is the Chairman of the Board, President,  and a significant shareholder,
acquired certain assets from NovAtel  Communications,  Ltd., a Canadian company.
The acquired  assets  included an agreement with the Company to jointly  develop
certain  wireless  telephone  systems.  During  1997,  the  Company  and Novatel
terminated  joint  development  of  wireless  telephone  systems and the Company
entered  into an  alliance  with a third  party to market a  wireless  telephone
system  developed by the third party.  Payments by the Company to Novatel during
the term of the  agreement  totaled  approximately  $205,000.  The  Company  and
NovAtel  currently  are  negotiating a refund of a portion of that amount to the
Company.
                                       10
<PAGE>
                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
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.

Date April 29, 1998          By:/s/ Glenn R. Fitchet
                                --------------------
                                Glenn R. Fitchet
                                President, Chief Executive Officer, and Director

         Pursuant to the requirements of the Securities Act of 1934, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities and on the date indicated.

<TABLE>
<CAPTION>
               Signature                         Title                               Date
               ---------                         -----                               ----

<S>                                  <C>                                        <C> 
/s/ William J. Hinz                  Chairman of the Board                      April 29, 1998
--------------------------------
         William J. Hinz

/s/ Glenn R. Fitchet                 President, Chief Executive Officer,        April 29, 1998
--------------------------------     and Director
         Glenn R. Fitchet          

/s/ Gregory K. Roeper                                                           April 29, 1998
--------------------------------     Vice President - Finance,
        Gregory K. Roeper            Administration, and Operations;
                                     Chief Financial Officer; Secretary; 
                                     and Treasurer (Principal Financial
                                     and Accounting Officer)

/s/ Nam K. Woo                       Director                                   April 29, 1998
--------------------------------
           Nam K. Woo

/s/ Steven A. Sherman                Director                                   April 29, 1998
--------------------------------
       Steven A. Sherman

/s/ Gilbert H. Engels                Director                                   April 29, 1998
--------------------------------
       Gilbert H. Engels

/s/ Stephen A. McConnell             Director                                   April 29, 1998
--------------------------------
      Stephen A McConnell
</TABLE>
                                       11