<PAGE>   1
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                     U.S. 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, 1997

                                       OR

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

                 For the transition period from ______ to ______

                         Commission File Number: 0-28480

                                EDIFY CORPORATION
             (Exact name of Registrant as specified in its charter)

            DELAWARE                                           77-0250992
(State or other jurisdiction of                             (I.R.S. Employer
 incorporation or organization)                          Identification Number)


                            2840 SAN TOMAS EXPRESSWAY
                          SANTA CLARA, CALIFORNIA 95051
                    (Address of principal executive offices)

                              -------------------

                                 (408) 982-2000
              (Registrant's telephone number, including area code)

                              -------------------

Indicate by checkmark 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.

                                  (1) Yes [X]   No [ ]
  
As of June 30, 1997, there were 16,359,478 shares of the Registrant's common
stock outstanding.

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EDIFY CORPORATION
FORM 10-Q
INDEX

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<TABLE>
<CAPTION>
                                                                                                   Page
PART I            FINANCIAL INFORMATION                                                           Number
<S>              <C>                                                                                <C>
ITEM 1:           Financial Statements

                  Condensed Balance Sheets as of June 30, 1997 and December 31, 1996...........      3

                  Condensed Statements of Operations for the three and six months ended
                      June 30, 1997 and 1996...................................................      4

                  Condensed Statements of Cash Flows for the six months ended June 30, 1997
                      and 1996.................................................................      5

                  Notes to Condensed Financial Statements......................................      6

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

ITEM 3:           Quantitative and Qualitative Disclosures About Market Risk...................     16



PART II           OTHER INFORMATION

ITEM 1:           Legal Proceedings............................................................     16

ITEM 2:           Changes in Securities........................................................     16

ITEM 3:           Defaults Upon Senior Securities..............................................     16

ITEM 4:           Submission of Matters to a Vote of Security Holders..........................     16

ITEM 5:           Other Information............................................................     17

ITEM 6:           Exhibits and Reports on Form 8-K.............................................     17

                  Signatures...................................................................     18
</TABLE>
                                      -2-
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PART I:  FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS

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                                EDIFY CORPORATION

                            CONDENSED BALANCE SHEETS
                            (IN THOUSANDS: UNAUDITED)
<TABLE>
<CAPTION>
                                                              June 30,     December 31,
                                                               1997           1996
                                                              --------      --------
<S>                                                           <C>           <C>     
                              ASSETS
Current assets:
    Cash, cash equivalents and short-term investments ...     $ 42,886      $ 44,840
    Accounts receivable, net ............................       12,762         8,837
    Prepaid expenses and other current assets ...........        1,300         1,020
                                                              --------      --------

         Total current assets ...........................       56,948        54,697
Property and equipment, net .............................        6,735         5,790
Other assets ............................................          234           234
                                                              --------      --------

         Total assets ...................................     $ 63,917      $ 60,721
                                                              ========      ========


               LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Accounts payable ....................................     $  1,341      $  1,544
    Current installments of capital lease obligations ...          404           404
    Accrued expenses ....................................        5,650         5,128
    Unearned revenue ....................................        3,838         3,751
                                                              --------      --------
         Total current liabilities ......................       11,233        10,827
                                                              --------      --------
Capital lease obligations, excluding current installments          552           707
Commitments and contingencies
Stockholders' equity:
    Common stock ........................................           16            16
    Additional paid-in capital ..........................       65,552        64,208
    Deferred compensation and other .....................         (304)         (445)
    Accumulated deficit .................................      (13,132)      (14,592)
                                                              --------      --------
         Total stockholders' equity .....................       52,132        49,187
                                                              --------      --------

         Total liabilities and stockholders' equity .....     $ 63,917      $ 60,721
                                                              ========      ========
</TABLE>


See notes to condensed financial statements.


                                      -3-
<PAGE>   4
                                EDIFY CORPORATION

                       CONDENSED STATEMENTS OF OPERATIONS
                (IN THOUSANDS, EXCEPT PER SHARE DATA: UNAUDITED)
<TABLE>
<CAPTION>
                                                Three Months Ended           Six Months Ended
                                                    June 30,                     June 30,
                                               ---------------------      ---------------------
                                                 1997         1996          1997        1996
                                               --------     --------      --------     --------
<S>                                            <C>          <C>           <C>          <C>     
Net revenues:
   License ...............................     $  7,807     $  4,274      $ 14,939     $  8,176
   Services and other ....................        5,730        2,639        10,908        4,554
                                               --------     --------      --------     --------
     Total net revenues ..................       13,537        6,913        25,847       12,730
Cost of license revenues .................          205          110           336          200
Cost of services and other revenues ......        4,274        2,195         8,651        3,942
                                               --------     --------      --------     --------
     Gross profit ........................        9,058        4,608        16,860        8,588
                                               --------     --------      --------     --------
Operating expenses:
   Product development ...................        2,511        1,335         4,609        2,470
   Sales and marketing ...................        4,953        3,473         9,474        6,428
   General and administrative ............        1,155          629         2,182        1,135
                                               --------     --------      --------     --------
     Total operating expenses ............        8,619        5,437        16,265       10,033
                                               --------     --------      --------     --------
     Income (loss) from operations .......          439         (829)          595       (1,445)
Interest income, net .....................          502          351           994          402
                                               --------     --------      --------     --------
     Income (loss) before income taxes ...          941         (478)        1,589       (1,043)
Provision for income taxes ...............           76            6           129            8
                                               --------     --------      --------     --------
     Net income (loss) ...................     $    865     $   (484)     $  1,460     $ (1,051)
                                               ========     ========      ========     ========
Net income (loss) per share ..............     $   0.05     $  (0.03)     $   0.08     $  (0.07)
                                               ========     ========      ========     ========
Shares used in computing net income (loss)
   per share .............................       17,953       15,077        17,948       14,344
                                               ========     ========      ========     ========
</TABLE>



See notes to condensed financial statements.


                                      -4-
<PAGE>   5

                                EDIFY CORPORATION

                       CONDENSED STATEMENTS OF CASH FLOWS
                            (IN THOUSANDS: UNAUDITED)
<TABLE>
<CAPTION>
                                                                            SIX MONTHS ENDED JUNE 30,
                                                                            -----------------------
                                                                              1997          1996
                                                                            --------      --------
<S>                                                                         <C>           <C>      
CASH FLOWS FROM OPERATING ACTIVITIES
    Net income (loss) .................................................     $  1,460      $ (1,051)
    Adjustments to reconcile net loss to net cash provided by (used in)
       operating activities:
      Depreciation and amortization ...................................        1,508           613
      Provision for returns and doubtful accounts .....................          292           504
      Amortization of deferred compensation ...........................          140           214
      Changes in operating assets and liabilities:
        Accounts receivable ...........................................       (4,217)       (1,435)
        Prepaid expenses and other current assets .....................         (280)         (279)
        Accounts payable ..............................................         (203)          351
        Accrued expenses ..............................................          522           746
        Unearned revenue ..............................................           87           815
                                                                            --------      --------
           Net cash provided by (used in) operating activities ........         (691)          478
                                                                            --------      --------


CASH FLOWS FROM INVESTING ACTIVITIES
    Purchases of property and equipment, net ..........................       (2,417)       (2,303)
    Purchases of short-term investments ...............................       (6,391)      (10,019)
    Sales and maturities of short-term investments ....................        1,955         5,054
    Other assets ......................................................           --           (67)
                                                                            --------      --------
           Net cash used in investing activities
                                                                              (6,853)       (7,335)
                                                                            --------      --------
CASH FLOWS FROM FINANCING ACTIVITIES
    Principal payments under capital lease obligations ................         (190)         (191)
    Net proceeds from issuance of common stock ........................        1,344        39,235
                                                                            --------      --------
           Net cash provided by financing activities ..................        1,154        39,044
                                                                            --------      --------
Increase (decrease) in cash and cash equivalents ......................       (6,390)       32,187
Cash and cash equivalents at beginning of period ......................       33,704         1,182
                                                                            --------      --------
Cash and cash equivalents at end of period ............................     $ 27,314      $ 33,369
                                                                            ========      ========

Supplemental schedule of cash flow information:
    Cash paid during the period for interest ..........................     $     61      $     63

    Cash paid during the period for taxes .............................     $     69      $      8

Supplemental schedule of noncash investing and financing activities:
    Property and equipment acquired under capital lease obligations ...     $     35      $    259

    Accrual of stock option deferred compensation .............$ ......           --      $    303

</TABLE>

See notes to condensed financial statements.




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<PAGE>   6

                                EDIFY CORPORATION

                     NOTES TO CONDENSED FINANCIAL STATEMENTS


(1)      BASIS OF PRESENTATION

         The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles and, in the
opinion of management, reflect all adjustments (consisting only of normal
recurring adjustments) considered necessary to fairly state the Company's
financial position, results of operations, and cash flows for the periods
presented. These financial statements should be read in conjunction with the
Company's audited financial statements included in the Company's Form 10-K for
the fiscal year ended December 31, 1996. The results of operations for the
three- and six-month periods ended June 30, 1997 are not necessarily indicative
of the results to be expected for any subsequent quarter or for the entire
fiscal year ending December 31, 1997. The December 31, 1996 balance sheet was
derived from audited financial statements, but does not include all disclosures
required by generally accepted accounting principles.

(2)      NET INCOME (LOSS) PER SHARE

         Net income (loss) per share is computed based upon the weighted average
number of shares of common stock outstanding and common equivalent shares from
stock options (under the treasury stock method, if dilutive).

         For the six months ended June 30, 1996, net loss per share is computed
based on the weighted average number of shares of common stock outstanding and
common equivalent shares from stock options (under the treasury stock method, if
dilutive) and preferred stock outstanding (on an "as if converted" basis, even
if antidilutive). In accordance with certain SEC Staff Accounting Bulletins,
this computation includes all common and common equivalent shares (using the
treasury stock method) issued within 12 months of the Company's initial public
offering on May 2, 1996 as if they were outstanding for all periods prior to the
initial public offering using the initial public offering price.

         In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share." SFAS
No. 128 requires the presentation of basic earnings per share ("EPS") and, for
companies with potentially dilutive securities, such as options and warrants,
diluted EPS. SFAS No. 128 is effective for annual and interim periods ending
after December 15, 1997. The Company expects that basic EPS for profitable
periods will be higher than primary earnings per share as presented in the
accompanying financial statements and that diluted EPS for profitable periods
will not differ materially from primary earnings per share as presented in the
accompanying financial statements.  Computations for loss periods should not 
change significantly.




                                      -6-
<PAGE>   7

(3)      INVESTMENTS

         Under the provisions of SFAS No. 115, debt and equity securities
classified as available-for-sale securities for which cost approximated market
value as of June 30, 1997 and December 31, 1996, with maturities generally
within one year, consisted of the following (in thousands):
<TABLE>
<CAPTION>
                                                         June 30,   December 31,
                                                           1997         1996
                                                         --------     --------
<S>                                                      <C>          <C>    
Government agency securities ........................    $ 11,176     $ 8,374
Commercial paper ....................................       5,583       8,172
Corporate bonds .....................................       4,397       4,058
                                                         --------     --------
                                                         $ 21,156     $ 20,604
                                                         ========     ========
</TABLE>

Gains and losses from sales of available-for-sale securities were not
significant for the three or six month periods ended June 30, 1997 and 1996.

(4)      RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

         In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." This Statement establishes standards for reporting and displaying
comprehensive income and its components in the financial statements. It does
not, however, require a specific format for the statement, but requires the
Company to display an amount representing total comprehensive income for the
period in that financial statement. The Company is in the process of determining
its preferred format. This Statement is effective for fiscal years beginning
after December 15, 1997.

         Also in June 1997, the FASB issued SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information." The Statement establishes
standards for the manner in which public business enterprises report information
about operating segments in annual financial statements and requires those
enterprises to report selected information about operating segments in interim
financial reports issued to shareholders. This Statement is effective for
financial statements for periods beginning after December 15, 1997, and is not
expected to have a significant impact on the Company's reporting of segment
information.



                                      -7-
<PAGE>   8

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

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         This Form 10-Q contains forward-looking statements that involve risks
and uncertainties. The Company's actual results could differ materially from
those indicated by the forward-looking statements herein. Factors that could
cause or contribute to such differences include, but are not limited to, those
set forth below in "Factors That May Affect Future Operating Results" as well as
those discussed in the "Business Risks" section included in the Company's Form
10-K for the fiscal year ended December 31, 1996.

RESULTS OF OPERATIONS

NET REVENUES

         Total net revenues were $13.5 million for the quarter ended June 30,
1997 as compared to $6.9 million for the comparable 1996 quarter, representing
an increase of 95.8%. Total net revenues were $25.8 million for the six months
ended June 30, 1997, an increase of 103.0% as compared to $12.7 million for the
same period a year ago. The Company's revenues are principally derived from
software licenses and fees for services, which are generally charged separately.
Revenues are recorded net of reserves for potential product returns and credit
losses, neither of which have been significant to date. In the three- and
six-month periods ended June 30, 1997 and 1996, 5% or less of the Company's
total net revenues were derived from international sales. Over time, the Company
intends to expand its operations outside of the United States and enter
additional international markets. International operations entail a number of
risks including those associated with product customization and regulatory
compliance, and there can be no assurance that such expansion will be
successful.

         LICENSE REVENUES. License revenues were $7.8 million for the quarter
ended June 30, 1997 as compared to $4.3 million for the comparable 1996 quarter.
License revenues for the six-month period ended June 30, 1997 were $14.9 million
as compared to $8.2 million for the comparable period in 1996. The increases in
license revenues were attributable to an increase in unit volume as a result of
the market's growing awareness and acceptance of Electronic Workforce, revenues
from the Company's Electronic Banking System (introduced in September 1996), and
expansion of the Company's field sales force and indirect distribution channels.
The prices of the Company's licenses have remained relatively constant during
the comparable periods of 1997 and 1996. The Company does not believe that the
historical growth rates of license revenues will be sustainable or are
indicative of future results.

         SERVICES AND OTHER REVENUES. Services and other revenues consist
primarily of fees from consulting, post-contract customer support and, to a
lesser extent, training and installation services. Services and other revenues
were $5.7 million for the quarter ended 


                                      -8-
<PAGE>   9
June 30, 1997 as compared to $2.6 million for the comparable 1996 quarter.
Services and other revenues for the six months ended June 30, 1997 were $10.9
million as compared to $4.6 million for the comparable period of 1996. Services
and other revenues increased as a percentage of total net revenues to 42.3% for
the quarter ended June 30, 1997, from 38.2% for the quarter ended June 30, 1996,
and increased to 42.2% for the six months ended June 30, 1997 from 35.8% for the
comparable 1996 period. The increases in services and other revenues in absolute
dollars and as a percentage of revenues occurred primarily due to increased
demand for consulting services, as well as increases in post-contract customer
support, training and installation services associated with the increased volume
of licenses of the Company's software. Consulting services primarily are
contracted for under time and material arrangements. The Company does not expect
historical growth rates of its services revenues to be sustainable in the
future. To the extent services and other revenues is a higher percentage of
total net revenues, overall gross profit margins may be adversely impacted.

COST OF REVENUES

         COST OF LICENSE REVENUES. Cost of license revenues consists primarily
of the cost of product media, product duplication, documentation and royalties
paid to third parties under technology licenses. Cost of license revenues was
$205,000 and $110,000 for the quarters ended June 30, 1997 and 1996,
representing 2.6% of the related license revenues for each quarter. Cost of
license revenues was $336,000 for the six months ended June 30, 1997 as compared
to $200,000 for the comparable 1996 period, representing 2.2% and 2.4% of the
related license revenues for the respective periods. If the Company were
required to obtain licenses from third parties under patent or other
intellectual property rights, the cost of license revenues could increase
significantly.

         COST OF SERVICES AND OTHER REVENUES. Cost of services and other
revenues consists primarily of personnel-related costs and fees for third-party
consultants incurred in providing consulting, post-contract customer support,
training and installation services to customers. Cost of services and other
revenues was $4.3 million and $2.2 million for the quarters ended June 30, 1997
and 1996, representing 74.6% and 83.2% of the related services and other
revenues for the respective quarters. Cost of services and other revenues was
$8.7 million for the six months ended June 30, 1997 as compared to $3.9 million
for the comparable 1996 period, representing 79.3% and 86.6% of the related
services and other revenues for the respective periods. The increases in
absolute dollars for the comparable quarterly periods were due primarily to
increases in personnel-related costs as the Company continued to expand its
consulting, customer support, training and installation services organizations.
The cost of services and other revenues as a percentage of services and other
revenues may vary between periods due to the mix of services provided by the
Company and to varying levels of expenditures to build the services
organizations. Any significant decline in the demand for the Company's
consulting services would have a material adverse impact on the Company's
revenues and, as a result of the under-utilization of consulting personnel, on
the Company's gross profit and results of operations.



                                      -9-
<PAGE>   10
PRODUCT DEVELOPMENT

         Product development expenses were $2.5 million and $1.3 million, or
18.5% and 19.3% of total net revenues, for the quarters ended June 30, 1997 and
1996, respectively. Product development expenses were $4.6 million and $2.5
million, or 17.8% and 19.4% of total net revenues, for the six-month periods
ended June 30, 1997, respectively. Product development expenses consist
primarily of salaries and other related expenses for research and development
personnel, as well as the cost of facilities and depreciation of capital
equipment. The increases in absolute dollars for the comparable periods were
attributable primarily to increased staffing related to development of
application products, the development of a version of Electronic Workforce to
run on Windows NT, and ongoing enhancements to Electronic Workforce. The
reductions in product development expenses as a percentage of total net revenues
from 1996 to 1997 were due primarily to the growth in total net revenues. The
Company believes that significant investments in product development are
required to remain competitive. As a result, the Company expects that product
development expenses will increase in absolute dollars in the future and will
not decline significantly as a percentage of total net revenues from their
current levels. The failure to develop and introduce Windows NT versions of its
products on a timely basis would have a material adverse affect on the Company's
business and results of operations.

         In accordance with Statement of Financial Accounting Standards No. 86,
the Company capitalizes eligible computer software development costs upon the
achievement of technological feasibility, subject to net realizable value
considerations. The Company has defined technological feasibility as completion
of a working model. To date, such capitalizable costs have not been material.
Accordingly, the Company has charged all such costs to product development
expenses in the accompanying statements of operations.

SALES AND MARKETING

         Sales and marketing expenses were $5.0 million and $3.5 million, or
36.6% and 50.2% of total net revenues, for the quarters ended June 30, 1997 and
1996, respectively. Sales and marketing expenses were $9.5 million and $6.4
million, or 36.7% and 50.5% of total net revenues, for the six-month periods
ended June 30, 1997 and 1996, respectively. Sales and marketing expenses consist
primarily of salaries and commissions earned by sales and marketing personnel
and promotional expenses. The increases in absolute dollars for the comparable
periods were due primarily to the expansion of the Company's field and indirect
sales operations and increased marketing activities. The reductions in sales and
marketing expenses as a percentage of total net revenues were due primarily to
the growth in total net revenues. The Company expects to continue to expand its
field sales and marketing efforts, its third party value added reseller ("VAR")
distribution channel and its operations outside the United States and,
therefore, anticipates that sales and marketing expenditures will increase in
absolute dollars in the future. In addition, sales and marketing expenses as a
percentage of total net revenues may fluctuate between periods due to varying
levels of expenditures to build the sales and marketing organizations.



                                      -10-
<PAGE>   11
GENERAL AND ADMINISTRATIVE

         General and administrative expenses were $1.2 million and $629,000, or
8.5% and 9.1% of total net revenues, for the quarters ended June 30, 1997 and
1996, respectively. General and administrative expenses were $2.2 million and
$1.1 million, or 8.4% and 8.9% of total net revenues, for the six months ended
June 30, 1997 and 1996, respectively. General and administrative expenses
consist primarily of salaries and other related expenses of administrative,
executive and financial personnel and outside professional fees. The increases
in absolute dollars for the comparable periods were attributable primarily to
the addition of staff, increased costs associated with expansion of information
systems to support the growth of the Company's business and increased costs to
take on the additional responsibilities associated with being a public company.
The Company expects to continue to expand its staffing, information systems and
other items related to infrastructure and, therefore, anticipates that general
and administrative expenditures will increase in absolute dollars in the future.

INTEREST INCOME, NET

         Interest income, net was $502,000 and $351,000 for the quarters ended
June 30, 1997 and 1996, respectively. Interest income, net for the six months
ended June 30, 1997 and 1996 was $994,000 and $402,000, respectively. The
increases from 1996 to 1997 were due primarily to increases in average
investment balances as a result of the investment of the proceeds from the
Company's initial public offering in May 1996.

PROVISION FOR INCOME TAXES

         The provision for income taxes was $76,000 and $6,000 for the quarters
ended June 30, 1997 and 1996, respectively. The provision for income taxes was
$129,000 and $8,000 for the six months ended June 30, 1997 and 1996,
respectively. For the three and six months ended June 30, 1997, income taxes
have been provided based upon an estimated annualized effective tax rate of 8%
applied to earnings for the period, primarily reflecting the benefit of
available net operating loss carryforwards.

LIQUIDITY AND CAPITAL RESOURCES

         From inception through April 1996, the Company financed its operations
and met its capital expenditure requirements primarily through the private sales
of preferred stock, totaling $24.1 million. On May 2, 1996, the Company
completed its initial public offering of 2,875,000 shares of its common stock at
a price of $15.00 per share. Proceeds to the Company from this offering were
approximately $38.9 million, net of underwriting discounts and other offering
costs. At June 30, 1997, the Company's cash, cash equivalents and short-term
investments (short-term, interest-bearing, investment-grade securities) totaled
$42.9 million.

         At June 30, 1997, the Company also had available an $8.0 million
unsecured revolving bank line of credit agreement which expires in December 1997
and contains 


                                      -11-
<PAGE>   12
certain financial covenants, with which the Company was in compliance.
Borrowings accrue interest at the bank's prime rate. As of June 30, 1997, there
were no borrowings outstanding under this line of credit.

         For the six months ended June 30, 1997, operating activities used cash
of $691,000, resulting primarily from an increase in accounts receivable,
partially offset by net income and depreciation and amortization. Investing
activities used cash of $6.9 million for the net purchase of $4.4 million in
short-term investments and the purchase of $2.4 million in property and
equipment. The Company expects that its capital expenditures will increase as
the Company's employee base grows. Net cash generated from financing activities
of $1.2 million was related primarily to proceeds from the issuance of the
Company's common stock through its Employee Stock Purchase Plan and stock option
exercises.

         At June 30, 1997, the Company's working capital was $45.7 million. The
Company has no significant capital spending or purchase commitments other than
normal purchase commitments and commitments under its operating and capital
leases. The Company believes that its working capital, together with its bank
line of credit and anticipated cash flows from operations, if any, will be
sufficient to meet its working capital and capital expenditure requirements for
at least the next twelve months.


FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS

         Except for the historical information contained in this Form 10-Q, the
matters discussed herein are forward-looking statements. These forward-looking
statements concern matters which include, but are not limited to, the
sustainability of historical revenue growth rates, the Company's expected mix of
revenues, expected gross margins on services and other revenues, certain
expected operating expense levels and the Company's liquidity and capital needs.
These matters involve risks and uncertainties that could cause actual results to
differ materially from those in the forward-looking statements. The revenue
levels, results of operations and growth rates achieved during the quarter and
six months ended June 30, 1997 are not necessarily indicative of the results
that may be achieved in any future period. There can be no assurance that the
Company will sustain profitability or experience growth in revenues in any
future quarter. The Company's revenues, margins and operating results have
fluctuated in the past, and are expected to continue to fluctuate in the future,
on an annual and quarterly basis as a result of a number of factors, such as
demand for the Company's products, including new products and product
enhancements, the mix of products and services sold, the mix of distribution
channels through which the Company's products are sold, customer order deferrals
in anticipation of new products, purchasing patterns of value added resellers
and customers, Company decisions regarding hiring and other expenses and
competitive conditions in the industry. In particular, the Company plans to
increase its operating expenses to expand its sales and marketing operations,
expand its distribution channels, fund greater levels of product development,
broaden its consulting services and customer support capabilities and increase
its administrative infrastructure. A relatively high percentage of the Company's
expenses is fixed in the short term as the Company's expense levels are based,
in part, on its expectations as to future revenues. If


                                      -12-
<PAGE>   13
revenues fall below expectations, expenditure levels could be disproportionately
high as a percentage of total net revenues, and operating results would be
immediately and adversely affected.

         The Company historically has operated with little backlog because its
products are generally shipped as orders are received. As a result, license
revenues in any quarter depend on the volume and timing of, and the Company's
ability to fill, orders received in that quarter. Individual orders for the
Company's products typically are for relatively large dollar amounts. The
Company also believes the purchase of its products is relatively discretionary
and generally involves a significant commitment of capital resources. Therefore,
any downturn in any potential customer's business, or any loss or delay of
individual orders for any reason, would have a significant impact on the
Company's revenues and quarterly results. In addition, because the Company
typically recognizes a substantial portion of its total revenue from
transactions booked and shipped in the last weeks, or even days, of the quarter,
the magnitude of quarterly fluctuations may not become evident until very late
in a particular quarter. Revenues are difficult to forecast because the market
for the Company's products is rapidly evolving.

         Based upon all of the foregoing, the Company believes that its
quarterly revenues, expenses and operating results could vary significantly in
the future and that period-to-period comparisons should not be relied upon as
indications of future performance. There can be no assurance that the Company
will be able to grow in future periods or that it will be able to sustain its
level of total net revenues or its rate of revenue growth on a quarterly or
annual basis. It is likely that, in some future quarters, the Company's
operating results will be below the expectations of stock market analysts and
investors. In such event, the price of the Company's common stock could be
materially adversely affected.

         The Company's future success will depend on its ability to design,
develop, test, sell and support new software products and enhancements of
current products on a timely basis in response to changing customer needs,
competition, technological developments and emerging industry standards. The
current versions of the Company's software products run on IBM Corporation's
OS/2 operating system. The Company believes that some potential customers will
not license the Company's products unless and until it runs on an alternative
operating system. Accordingly, the Company is devoting significant engineering
and research and development resources to design and develop versions of its
products to run on the Microsoft Windows NT operating system. It is possible
that the Company's intention to develop a Windows NT-based version of its
products will cause potential customers to defer or forgo purchases of current
or future versions of these products, which could have a material adverse effect
on the Company's business, financial condition and results of operations. The
Company's future success, particularly in Web and Intranet applications, will
depend upon the timely and successful completion of this development and the
ability of the Company to provide a Windows NT-based version of its products
with an adequate level of performance and functionality. There can be no
assurance that the Company will be successful in developing, on a timely basis
or at all, a fully functional Windows NT-based version of its products or that
such versions, if developed, will achieve customer acceptance. Failure by the
Company to develop Windows NT-based versions successfully and in a 



                                      -13-
<PAGE>   14
timely manner would have a material adverse effect on the Company's business,
financial condition and results of operations.

         In March 1996, the Company received a letter from Syntellect Technology
Corporation ("Syntellect") inviting the Company to negotiate a license of
certain of Syntellect's patents. Since then, Syntellect has called additional
Syntellect patents to the Company's attention. Based on its investigation of the
patents referenced in Syntellect's letter, the Company believes that it has
substantial arguments that it does not violate any valid claims of the
Syntellect patents.

         In April 1996, the Company received a letter from Lucent Technologies
Inc. ("Lucent") inviting the Company to negotiate a license of Lucent's patents.
Since then, Lucent has asserted that it believes that certain of the Company's
products infringe certain of Lucent's patents and has offered to license those
patents to the Company for a substantial payment. Lucent and the Company are
discussing Lucent's assertions. Lucent is examining other patents it holds to
determine whether to make further assertions to the Company. Based on its
investigation of the patents referenced in Lucent's April 1996 letter, the
Company believes that it has substantial arguments that it does not violate any
valid claims of such Lucent patents.

         There can be no assurance, however, that the Company will not be found
to infringe any of the patents identified by Syntellect or Lucent. If the
Company is required to seek licenses on any of these patents, there can be no
assurance that the costs associated with such licenses, if available, would not
have a material adverse effect on the Company's business, financial condition or
results of operations. In the event that the Company cannot come to an agreement
with these parties, the Company may be drawn into litigation with such parties.
There can be no assurance that the costs associated with participating in or
settling such litigation would not have a material adverse effect on the
Company's business, financial condition or results of operations. In the future,
the Company may receive additional communications from these or other parties
asserting that the Company's products, trademarks or other proprietary rights
require a license of intellectual property rights or infringe, or may infringe,
on their property rights. As the number of software products in the industry
increases, and the functionality of these products further overlaps, the Company
believes that software developers may become increasingly subject to
infringement claims. Any such claims, with or without merit, could be time
consuming, result in costly litigation, cause product shipment delays or require
the Company to enter into royalty or licensing agreements. Such royalty or
licensing agreements, if required, may not be available on terms acceptable to
the Company, or at all, which could have a material adverse effect on the
Company's business, financial condition and results of operations.

         An integral part of the Company's strategy is to develop multiple
distribution channels, including a field sales force, VARs and OEMs. The Company
intends to increase its reliance on third-party distribution partners in the
future. The Company is expending and intends to continue to expend significant
resources to develop the VAR channel. VARs are not, however, subject to any
minimum purchase or resale requirements and can cease marketing the Company's
products at any time. Certain VARs also offer competing 


                                      -14-
<PAGE>   15
products that they produce or that are produced by third parties. There can be
no assurance that the Company's existing VARs will continue to provide the level
of services and technical support necessary to provide a complete self service
solution to the Company's customers or that they will not emphasize their own or
third-party products to the detriment of the Company's products. The loss of
VARs, the failure of such parties to perform under agreements with the Company
or the inability of the Company to attract and retain new VARs with the
technical, industry and application expertise required to market the Company's
products successfully in the future could have a material adverse effect on the
Company's business, financial condition and results of operations. To the extent
that the Company is successful in increasing its sales through VARs, those sales
will be at discounted rates, and revenue to the Company for each such sale will
be less than if the Company had licensed the same products to the customer
directly.

         In addition to the factors discussed above, among the other factors
that could cause actual results to differ materially are the following: demand
for and market acceptance of application products; the Company's ability to
deliver on time, and market acceptance of, new products or upgrades of existing
products; customer order deferrals in anticipation of new products; the timing
of, or delay in, large customer orders; continued availability of technology and
intellectual property license rights; changes in the mix of distribution
channels through which the Company's products are offered; competitive
conditions in the industry; risks associated with global operations; general
economic conditions; and the "Business Risks" listed from time to time in
reports that the Company files with the U.S. Securities and Exchange Commission,
including but not limited to the Company's Form 10-K for the fiscal year ended
December 31, 1996.




                                      -15-
<PAGE>   16
ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

          Not applicable.

-------------------------------------------------------------------------------

PART II.  OTHER INFORMATION

-------------------------------------------------------------------------------


ITEM 1.   LEGAL PROCEEDINGS
 
          None.

ITEM 2.   CHANGES IN SECURITIES

          Not applicable.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

          Not applicable.

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

         (a)      The Company held its Annual Meeting of Stockholders on May 8,
                  1997.

         (b)      The Company's stockholders voted upon the following matters:

                (i)   Election of directors.  All nominees were elected, with
                      the votes indicated below:
<TABLE>
<CAPTION>

                    Name                                      Votes For        Votes Withheld
                    ----                                      ---------        --------------
                    <S>                                      <C>                       <C>
                    Jeffrey M. Crowe                         13,935,714                18,554
                    Stephen M. Berkley                       13,935,714                18,554
                    Tench Coxe                               13,935,364                18,904
                    Stewart A. Schuster                      13,935,364                18,904
</TABLE>
                (ii)  Approval of an amendment to the 1996 Equity Incentive Plan
                      to increase the number of shares of Common Stock reserved
                      for issuance thereunder by 1,300,000 shares, from
                      1,000,000 shares to 2,300,000 shares. 9,523,012 votes were
                      cast in favor of the amendment, 2,320,128 votes were cast
                      against and zero votes were withheld; there were 4,873
                      abstentions and 2,106,255 broker non-votes.

                                      -16-
<PAGE>   17
                (iii) Approval of an amendment to the 1996 Employee Stock
                      Purchase Plan to increase the number of shares of Common
                      Stock reserved for issuance thereunder by 300,000 shares,
                      from 300,000 shares to 600,000 shares. 11,785,204 votes
                      were cast in favor of the amendment, 80,889 votes were
                      cast against and zero votes were withheld; there were
                      10,548 abstentions and 2,077,627 broker non-votes.

                (iv)  Ratification of selection of independent auditors. The
                      stockholders ratified the appointment of KPMG Peat Marwick
                      LLP as the Company's independent auditors to perform the
                      audit of the Company's financial statements for the year
                      ending December 31, 1997. 13,929,979 votes were cast in
                      favor of the amendment, 13,950 votes were cast against and
                      zero votes were withheld; there were 10,339 abstentions
                      and zero broker non-votes.


ITEM 5.   OTHER INFORMATION

          Not applicable.

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K


         (a)      The following exhibits are being filed as part of this Report:
<TABLE>
                  <S>      <C>
                  10.02    Registrant's 1996 Equity Incentive Plan and related documents (1)

                  10.03    Registrant's Directors Stock Option Plan and related documents

                  10.04    Registrant's 1996 Employee Stock Purchase Plan (2)

                  11.01    Statement of Net Income (Loss) Per Share

                  27.01    Financial Data Schedule
</TABLE>

         (b)      Reports on Form 8-K:

                  No report on Form 8-K has been filed for the quarterly period
ended June 30, 1997.


-------------------


         (1)      Incorporated by reference to Exhibit 4.03 to Registrant's 
                  Registration Statement on Form S-8 (No. 333-31833), filed on
                  July 22, 1997.

         (2)      Incorporated by reference to Exhibit 4.04 to Registrant's 
                  Registration Statement on Form S-8 (No. 333-31833), filed on
                  July 22, 1997.


                                      -17-
<PAGE>   18

-------------------------------------------------------------------------------

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.

                          EDIFY CORPORATION




Date: August 13, 1997     By:    /s/  Stephanie A. Vinella
                                 ----------------------------
                                 Stephanie A. Vinella
                                 Vice President of Finance and Administration,
                                 Chief Financial Officer and Secretary




                                      -18-
<PAGE>   19

-------------------------------------------------------------------------------

EDIFY CORPORATION
FORM 10-Q
EXHIBIT INDEX

-------------------------------------------------------------------------------



                  EXHIBITS


10.03             Registrant's Directors Stock Option Plan and related documents

11.01             Statement of Net Income (Loss) Per Share

27.01             Financial Data Schedule