<PAGE>

================================================================================

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

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

                                   FORM 10-Q


               Quarterly Report Pursuant to Section 13 or 15(d)
                    of the Securities Exchange Act of 1934
               for the quarterly period ended September 30, 2000



                        Commission File Number 0-25186

                                AVT CORPORATION
               ------------------------------------------------
               (Name of Registrant as Specified in Its Charter)


                    Washington                   91-1190085
            (State of incorporation)          (I.R.S. Employer
                                           Identification Number)


                              11410 NE 122nd Way
                              Kirkland, WA  98034
                   (Address of principal executive offices)


      Registrant's telephone number, including area code: (425) 820-6000



Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                Yes  X     No
                                   -----     -----



The number of outstanding shares of the Registrant's Common Stock as of October
28, 2000 was 30,697,543.

================================================================================
<PAGE>

                                AVT CORPORATION

                                   FORM 10-Q
                   For the Quarter Ended September 30, 2000


                               Table of Contents

<TABLE>
<CAPTION>

                                                                                     Page
                                                                                     ----
<C>       <S>                                                                        <C>
PART I.   Financial Information

          Item 1.  Financial Statements (unaudited)..................................   3

          Item 2.  Management's Discussion and Analysis of Financial Condition
                   and Results of Operations.........................................   9

          Item 3.  Quantitative and Qualitative Disclosures about Market Risk........  17

PART II.  Other Information

          Item 1.  Legal Proceedings.................................................  18

          Item 5.  Other Information.................................................  18

          Item 6.  Exhibits and Reports on Form 8-K..................................  19

Signatures...........................................................................  20
</TABLE>

                                       2
<PAGE>

                        Part I.  FINANCIAL INFORMATION


Item 1.                      FINANCIAL STATEMENTS

                                AVT CORPORATION

                          CONSOLIDATED BALANCE SHEETS

                                  (Unaudited)


<TABLE>
                                                               September 30,       December 31,
                                                                   2000               1999
                                                               -------------       ------------
                            ASSETS                                      (in thousands)
<S>                                                            <C>                 <C>
Current assets:
     Cash and cash equivalents                                   $ 33,907            $ 23,923
     Short-term investments                                        52,783              51,095
     Accounts receivable, net                                      15,049              20,303
     Inventories                                                    5,642               5,319
     Deferred and prepaid income taxes                              4,645               3,000
     Prepaid expenses and other                                     1,923               2,089
                                                               -----------         ------------
          Total current assets                                    113,949             105,729

Equipment and leasehold improvements, net                           6,123               6,630
Intangibles, net and other long-term assets                         5,420               5,926
Deferred income taxes                                               3,424               3,424
                                                               -----------         ------------
                                                                 $128,916            $121,709
                                                               ===========         ============

              LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
     Accounts payable                                            $  4,364            $  5,432
     Accrued compensation and benefits                              4,432               5,169
     Other accrued liabilities                                      8,437               7,579
     Federal income taxes payable                                   1,689               1,324
                                                               -----------         ------------
          Total current liabilities                                18,922              19,504
                                                               -----------         ------------

Commitments and contingencies

Shareholders' equity:
     Preferred stock, par value $.01 per share,
       2,000,000 authorized; none outstanding                           -                   -
     Common stock, par value $.01 per share,
       120,000,000 authorized; 30,696,560 and
       30,637,054 shares outstanding, respectively,
       and additional paid-in capital                              56,125              55,811
     Retained earnings                                             53,869              45,812
     Other comprehensive income                                         -                 582
                                                               -----------         ------------
          Total shareholders' equity                              109,994             102,205
                                                               -----------         ------------
                                                                 $128,916            $121,709
                                                               ===========         ============
</TABLE>

         See accompanying notes to consolidated financial statements.

                                       3
<PAGE>

                                AVT CORPORATION

                       CONSOLIDATED STATEMENTS OF INCOME

                                  (Unaudited)


<TABLE>
<CAPTION>
                                                   Quarter ended             Nine Months ended
                                                   September 30,               September 30,
                                               ---------------------       ---------------------
                                                2000          1999          2000          1999
                                               -------       -------       -------       -------
                                                     (in thousands, except per share data)
<S>                                            <C>           <C>           <C>           <C>
Net sales                                      $25,412       $33,247       $75,527       $93,954
Cost of sales                                    8,228        11,558        25,368        33,054
                                               -------       -------       -------       -------
          Gross profit                          17,184        21,689        50,159        60,900
Operating expenses:
     Research and development                    2,541         2,565         7,498         7,543
     Sales, general and administrative          12,066        11,151        34,617        32,500
     Non-recurring charges (2)                       -             -             -         2,388
                                               -------       -------       -------       -------
          Total operating expenses              14,607        13,716        42,115        42,431
                                               -------       -------       -------       -------
Operating income                                 2,577         7,973         8,044        18,469
Other income, net (1)                              951           512         4,436         1,323
                                               -------       -------       -------       -------
Income before income taxes                       3,528         8,485        12,480        19,792
Income tax expense                               1,235         3,100         4,423         8,067
                                               -------       -------       -------       -------
Net income                                     $ 2,293       $ 5,385       $ 8,057       $11,725
                                               =======       =======       =======       =======

Basic earnings per common share                $  0.07       $  0.18       $  0.26       $  0.40

Weighted average common shares outstanding      30,666        30,176        30,976        29,540

Diluted earnings per common share              $  0.07       $  0.16       $  0.25       $  0.37

Weighted average common and common
  equivalent shares outstanding                 31,119        32,726        32,260        31,772
</TABLE>

(1)  Nine months ended September 30, 2000 includes a non-recurring gain of
     $1,784,000 realized from the sale of marketable securities held for
     investment.
(2)  Non-recurring charges consist of merger-related costs incurred in the
     merger with MediaTel in April 1999.

         See accompanying notes to consolidated financial statements.

                                       4
<PAGE>

                                AVT CORPORATION

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                                  (Unaudited)


<TABLE>
                                                                        Nine months ended
                                                                           September 30,
                                                                     ------------------------
                                                                       2000            1999
                                                                     --------        --------
                                                                          (in thousands)
<S>                                                                  <C>             <C>
Cash flows from operating activities:
     Net income                                                      $  8,057        $ 11,725
                                                                     --------        --------
Adjustments to reconcile net income to net cash
  provided by operating activities:
     Depreciation and amortization                                      3,797           3,477
     Deferred income taxes                                               (375)         (1,031)
     Stock option income tax benefit                                    5,211           4,704
     Gain on sale of marketable securities                             (1,784)              -
     Changes in current assets and liabilities:
          Accounts receivable                                           5,254          (1,718)
          Inventories                                                    (323)          1,070
          Prepaid expenses and other assets                               166             191
          Accounts payable                                             (1,068)            379
          Accrued compensation and benefits                              (737)           (469)
          Other accrued liabilities                                       858           1,438
          Federal income taxes payable                                 (1,484)          1,217
                                                                     --------        --------
               Net cash provided by operating activities               17,572          20,983
                                                                     --------        --------
Cash flows from investing activities:
     Purchase of equipment and leasehold improvements                  (1,941)         (3,004)
     Purchase of short-term investments, net                           (2,008)        (14,049)
     Proceeds from sale of marketable securities                        2,101               -
     Purchase of intangibles and changes in other
       long-term assets                                                  (843)            (68)
                                                                     --------        --------
               Net cash used by investing activities                   (2,691)        (17,121)
                                                                     --------        --------
Cash flows from financing activities:
     Repurchase of common stock                                       (10,265)              -
     Proceeds from exercise of stock options                            5,368           5,307
                                                                     --------        --------
               Net cash (used) provided by financing
                 activities                                            (4,897)          5,307
                                                                     --------        --------
Net increase in cash and cash equivalents                               9,984           9,169

Cash and cash equivalents at beginning of period                       23,923          14,466
                                                                     --------        --------
Cash and cash equivalents at end of period                           $ 33,907        $ 23,635
                                                                     ========        ========

Supplementary disclosures of cash flows:
     Cash paid for income taxes                                      $    367        $  3,177
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       5
<PAGE>

                                AVT CORPORATION

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                  (Unaudited)


1.   Interim Financial Statements

     The accompanying consolidated financial statements of AVT Corporation and
subsidiaries (the Company) are unaudited. In the opinion of the Company's
management, the financial statements include all adjustments, consisting only of
normal recurring adjustments, necessary to state fairly the financial
information set forth therein. Results of operations for the three and nine-
month periods ended September 30, 2000 are not necessarily indicative of future
financial results.

     Certain notes and other information have been condensed or omitted from the
interim financial statements presented in this quarterly report on Form 10-Q.
Accordingly, these financial statements should be read in conjunction with the
Company's Annual Report on Form 10-K for the year ended December 31, 1999.

2.   Earnings Per Share

<TABLE>
<CAPTION>
                                                                     Quarter ended September 30,
                                                      ---------------------------------------------------------
                                                               2000                              1999
                                                      -----------------------          ------------------------
                                                      Basic           Diluted           Basic           Diluted
                                                     -------          -------          -------          -------
                                                                (in thousands, except per share data)
<S>                                                  <C>              <C>              <C>              <C>
Net income                                           $ 2,293          $ 2,293          $ 5,385          $ 5,385
                                                     =======          =======          =======          =======
Computation of common and common
     Equivalent shares outstanding:
          Common Stock                                30,666           30,666           30,176           30,176
          Options                                          -              453                -            2,550
                                                     -------          -------          -------          -------

Common and common equivalent shares
  Used in computing per share amounts                 30,666           31,119           30,176           32,726
                                                     =======          =======          =======          =======
Net income per share                                 $  0.07          $  0.07          $  0.18          $  0.16
                                                     =======          =======          =======          =======
</TABLE>

<TABLE>
<CAPTION>
                                                                  Nine months ended September 30,
                                                     ----------------------------------------------------------
                                                              2000                              1999
                                                     ------------------------          ------------------------
                                                      Basic           Diluted           Basic           Diluted
                                                     -------          -------          -------          -------
                                                                (in thousands, except per share data)
<S>                                                  <C>              <C>              <C>              <C>
Net income                                           $ 8,057          $ 8,057          $11,725          $11,725
                                                     =======          =======          =======          =======
Computation of common and common
     Equivalent shares outstanding:
          Common Stock                                30,976           30,976           29,540           29,540
          Options                                          -            1,284                -            2,232
                                                     -------          -------          -------          -------

Common and common equivalent shares
  Used in computing per share amounts                 30,976           32,260           29,540           31,772
                                                     =======          =======          =======          =======
Net income per share                                 $  0.26          $  0.25          $  0.40          $  0.37
                                                     =======          =======          =======          =======
</TABLE>

                                       6
<PAGE>

                                AVT CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

3.   Changes in Shareholders' Equity

<TABLE>
<S>                                                                               <C>
Beginning balance at December 31, 1999                                                $102,205
     Net income                                                                          8,057
     Exercise of stock options                                                           5,368
     Tax benefit from exercise of non-qualified stock options                            5,211
     Stock buyback                                                                     (10,265)
     Reclassification of unrealized gain on marketable securities upon sale               (582)
                                                                                  ------------
Ending balance at September 30, 2000                                                  $109,994
                                                                                  ============
</TABLE>

4.   Segment Reporting

     The Company has adopted Statement of Accounting Standard No. 131
"Disclosures about Segments of an Enterprise and Related Information" (SFAS No.
131).  SFAS 131 requires companies to disclose certain information about
operating segments.  Based on the criteria within SFAS No. 131, the Company has
determined that it has one reportable segment, computer telephony products.

Sales of the Company's product by categories and amount are as follows:

<TABLE>
<CAPTION>
                                                                      Quarter ended             Nine months ended
                                                                      September 30,               September 30,
                                                               ---------------------------  --------------------------
                                                                    2000          1999          2000          1999
                                                               -------------  ------------  ------------  ------------
                                                                                     (in thousands)
<S>                                                            <C>            <C>           <C>           <C>
Document solutions.......................................            $18,977       $21,274       $56,285       $62,088
Advanced messaging.......................................              5,783        10,458        17,046        27,120
Basic messaging products.................................                652         1,515         2,196         4,746
                                                                     -------       -------       -------       -------
                                                                     $25,412       $33,247       $75,527       $93,954
                                                                     =======       =======       =======       =======
</TABLE>

The Company's sales by country were as follows:

<TABLE>
<CAPTION>
                                                                      Quarter ended             Nine months ended
                                                                      September 30,               September 30,
                                                               ---------------------------  --------------------------
                                                                    2000          1999          2000          1999
                                                               -------------  ------------  ------------  ------------
                                                                                     (in thousands)
<S>                                                            <C>            <C>           <C>           <C>

United States............................................            $20,618       $27,431       $61,302       $77,334
Canada...................................................                783           591         2,289         2,903
United Kingdom...........................................              1,637         1,528         4,588         3,643
Other....................................................              2,374         3,697         7,348        10,074
                                                                     -------       -------       -------       -------
                                                                     $25,412       $33,247       $75,527       $93,954
                                                                     =======       =======       =======       =======
</TABLE>

                                       7
<PAGE>

                                AVT CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

5.   Stock Buy-back Program

     On August 10, 2000 the Board of Directors authorized the Company to
repurchase up to $15 million worth of its common stock.  As of September 30,
2000 approximately $200,000 of the authorized funds had been expended to
repurchase approximately 35,000 shares.  The program is ongoing, although the
timing and size of repurchases, if any, are subject to market conditions, stock
prices and AVT's cash position and requirements going forward.


6.  Legal Proceedings

    As described in the Company's Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 2000, on March 21, 2000 a class-action lawsuit
was filed in the United States District Court for the Western District of
Washington alleging that during the period January 20, 2000 through March 17,
2000, the Company and several officers and directors made or participated in
misrepresentations about the impact of Y2K and competition on the Company's
ability to achieve revenue expectations for the first quarter of 2000.
Additional lawsuits were then filed that were identical to the March 21 lawsuit,
with the exception of the name of the plaintiff. During the quarter ended
September 30, 2000 the court approved appointment of three plaintiffs to act as
Lead Plaintiffs and consolidated all lawsuits into a single action, which seeks
unspecified damages on behalf of a proposed class of purchasers of the Company's
stock during the specified period. No class has been certified. The Plaintiffs
filed a Consolidated Amended Complaint ("CAC") on July 28, 2000, and the Company
filed a motion to dismiss the CAC on the ground that it fails to meet the legal
standards of the Private Securities Litigation Reform Act of 1995. The motion
will be fully briefed by all parties and submitted for consideration by the
court in November 2000. The Company believes that the allegations of the
lawsuits are without merit and intends to vigorously defend the actions.

                                       8
<PAGE>

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

     The Company is a leading provider of business to business communication
solutions for small, medium and enterprise-sized organizations. The Company
provides flexible, cost-effective products that address the unified messaging,
voice messaging, fax server, production fax and outsourced document delivery
markets, and distributes these products primarily through independent
distributors, value-added resellers and OEM's. The Company's products run on
off-the-shelf hardware, support Windows NT and Windows 2000; and interface with
a wide variety of telephony and computer equipment. The Company also offers add-
on modules and software upgrades that provide increased capacity and
functionality.

     The Company's product lines include both telephony-oriented and computer-
oriented products, and outsourced electronic document (e-document) delivery
services. The Company's telephony-oriented product lines serve the messaging
markets and focus on voice and call processing, unified messaging, and personal
and workgroup call management. The Company's computer-oriented product lines
target the fax server and production fax markets and focus on high-performance
fax processing and unified messaging, as well as Internet, corporate intranet
and phone-based information access. E-document delivery services target the
outsource mass fax and email markets for time-critical business-to-business
(B2B) communications.  These services include high-volume, instantaneous IP fax
and email broadcast and merge offerings, fax reply and fax-on-demand
applications as well as industry-specific services and custom workflow solutions
for unique customer requirements.

     The Company sells its products primarily through an indirect channel of
resellers and distributors, as well as through direct sales, OEM and private
label agreements.  The Company's telephony-oriented products include:
CallXpress, and CallXpress Enterprise, a multi-application, high capacity
unified messaging platform and PhoneXpress, a full-featured advanced messaging
system for small to medium-sized enterprises.  The company's data oriented
enhanced fax products include RightFAX and RightFAX Enterprise, the Company's
LAN-based fax server lines for Windows NT / Windows 2000, and the RightFAX
Production System, a high-volume production-oriented server that enables fax and
other forms of electronic transmission for electronic commerce applications. The
Company's e-document delivery services, branded under the name MediaLinq, offer
high-volume, simultaneous delivery of fax and email documents via the web, from
desktop software or a fax machine.

     When used in this discussion, the words "believes," "anticipates" and
similar expressions are intended to identify forward-looking statements. Such
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from those projected.  Factors which could
affect the Company's financial results are described below under the heading
"Risk Factors." Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof.  The Company
undertakes no obligation to publicly release the results of any revisions to
these forward-looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrences of
unanticipated events.

                                       9
<PAGE>

Results of Operations

     Net sales.  Net sales decreased 23.6% to $25,412,000 in the quarter ended
September 30, 2000, from $33,247,000 in the comparable 1999 quarter.  Sales of
telephony products decreased 46.3% while sales of document solutions products
decreased 10.8% during the period.  Sales of low margin basic messaging CTG
product lines approximated $652,000, a decrease of 57% when compared to the same
quarter in 1999.  This was in line with the Company's expectation that sales of
the lower-margin basic messaging products would continue to be affected by price
pressures from competitive offerings and decline as a percentage of total sales.
International sales for the quarter decreased 17.8% compared to the third
quarter of 1999, and represented 18.9% of total net sales.

     For the nine months ended September 30, 2000, net sales decreased 19.6% to
$75,527,000 from $93,954,000 in the comparable prior-year period.  Sales of
telephony products decreased 39.6% while documents solutions products decreased
9.3% during the period.  International sales decreased 14.4% from the prior year
nine-month total and represented 18.8% of total net sales.

     Gross profit.  Gross profit as a percentage of net sales improved to 67.6%
in the quarter ended September 30, 2000, as compared to 65.2% in the comparable
prior-year quarter.  The increase in gross profit as a percentage of sales
reflects the greater contribution from software and kit sales verses full system
sales primarily from the CTG product lines.

     For the nine months ended September 30, 2000, gross profit as a percentage
of sales increased to 66.4% from 64.8% in the comparable prior year period.

     Research and development.  As a percentage of sales, research and
development expenses for the current quarter increased to 10% compared with 7.7%
of net sales in the comparable prior-year quarter. This percentage increase is
due to the reduced sales volume as the Company chose to maintain its level of
investment in research and development for future benefit. Research and
development expenses decreased from $2,565,000 in the quarter ended September
30, 1999 to $2,541,000 in the current quarter.

     For the nine months ended September 30, 2000, research and development
expenses decreased from $7,543,000 in the nine months ended September 30, 1999
to $7,498,000 in the current period. As a percentage of net sales, research and
development represented 9.9% for the nine months ended September 30, 2000, as
compared to 8.0% in the comparable prior-year period.

     Sales, general and administrative.  Sales, general and administrative
expenses increased to $12,066,000 in the quarter ended September 30, 2000 from
$11,151,000 in the comparable prior-year quarter, due primarily to increased
personnel-related costs as the company continues to invest in an enterprise
level sales force and support structure.  Sales, general and administrative
costs for the current quarter represented 47.5% of net sales, an increase from
33.5% in the comparable prior-year quarter.

     For the nine months ended September 30, 2000, sales, general and
administrative expenses increased to $34,617,000 from $32,500,000 in the
comparable prior-year period.  As a percentage of sales, general and
administrative expenses were 45.8% and 34.6% of net sales for the nine-month
periods ending September 30, 2000 and 1999, respectively.

     Operating income.  Operating income for the quarter ended September 30,
2000 decreased to $2,577,000, or 10.1% of net sales, from $7,973,000, or 24.0%
of net sales, in the comparable prior-year quarter primarily due to the lower
sales volume.

     For the nine months ended September 30, 2000, operating income decreased to
$8,044,000 or 10.7% of net sales from $18,469,000 or 19.7% of net sales in the
comparable prior-year period.  In the second quarter of 1999, the Company wrote
off costs of $2,388,000 related to the merger with MediaTel in April 1999.
Excluding this non-recurring charge, the operating income for the nine-month
period ending September 30, 1999 would have been $20,857,000 or 22.2% of net
sales.

     Other income, net.  Net other income increased from $512,000 in the prior
year quarter to $951,000 in the quarter ended September 30, 2000,  due primarily
to increased interest income.

                                       10
<PAGE>

     For the nine months ended September 30, 2000, other income was $4,436,000
compared to $1,323,000 in the comparable prior-year period due to a first
quarter one-time realized gain of $1,784,000 on the sale of a marketable
security held for investment and increased interest income.

     Income tax expense.  The effective tax rate for the quarter ended September
30, 2000 and 1999 was 35.0% and 36.5% respectively, with income tax expense of
$1,235,000 for the quarter ended September 30, 2000 and  $3,100,000 in the
comparable prior-year quarter.

     Income tax expense for the nine-month periods ended September 30, 2000 and
1999 was $4,423,000 and $8,067,000, respectively. The tax expense for the nine-
month period of 1999 reflects the non-deductibility of the $2,388,000 in merger-
related costs associated with the merger with MediaTel in April 1999.

     Net income.  The Company recognized net income of $2,293,000 or $0.07 per
diluted common share for the quarter ended September 30, 2000, as compared to
$5,385,000 or $0.16 per diluted common share for the comparable prior-year
quarter.

     As a result of the non-recurring items discussed above, the Company
recognized net income for the nine months ended September 30, 2000 of $8,057,000
compared to $11,725,000 in the comparable 1999 period.  Excluding these non-
recurring items, net income for the first nine months of 2000 would have been
$6,915,000 or $0.21 per diluted common share as compared to $14,113,000 or $0.44
per diluted common share in the comparable prior-year period.


Liquidity and Capital Resources

     Cash provided by operating activities in the nine months ended September
30, 2000 was $17.6 million due primarily to continuing profitable operations and
collections on accounts receivable as compared to $21.0 million in the
comparable prior-year period. The accounts receivable collection period
remained comparable to prior periods and approximated 50 days at September 30,
2000. Accounts receivable decreased from $20.3 million at December 31, 1999 to
$15.0 million at September 30, 2000.

     On August 10, 2000 the Board of Directors authorized the Company to
repurchase up to $15 million worth of its common stock. As of September 30, 2000
approximately $200,000 of the authorized funds had been expended to repurchase
approximately 35,000 shares. The program is ongoing, although the timing and
size of repurchases, if any, are subject to market conditions, stock prices and
AVT's cash position and requirements going forward.

     In January of 2000 the Company announced the formation of AVT Capital LLC,
a venture capital subsidiary of AVT Corporation. AVT Capital has been chartered
to invest up to $25 million in emerging technologies that are strategic to
accelerating the growth of AVT's core business. To date, AVT Capital has made no
investment and expenditures have been insignificant. During the quarter, the
formal launch of AVT Capital as a stand-alone effort was delayed.

     The Company expects that its current cash and investments of $86.7 million,
cash flow from operations, and available bank line of credit will provide
sufficient working capital for operations for the foreseeable future.

                                       11
<PAGE>

Risk Factors

The following factors may materially adversely affect our business, financial
condition or results of operations.  In that event the trading price of our
shares could decline and you may lose part or all of your investment, therefore,
you should carefully consider the risks described below before making an
investment decision.

Our operating results fluctuate from quarter to quarter, which could cause our
operating results to fall below expectations of securities analysts and
investors.

We expect our operating results to fluctuate significantly from quarter to
quarter in the future. Because of these fluctuations, our operating results for
a particular quarter may fall below the expectations of securities analysts and
investors. If this occurs, the trading price of our stock may decline. Such
fluctuations could cause period-to-period comparisons to be less than
meaningful.  Numerous factors contribute to the unpredictability of our
operating results, including

 .  the timing of customer orders;

 .  changes in our mix of products and distribution channels;

 .  the announcement or introduction of new products by us or our competitors;

 .  pricing pressures; and

 .  general economic conditions.

Most of our software product revenue comes from current quarter orders and
sales, of which a substantial portion, and sometimes a majority, occurs in the
last month of each quarter.  We do not maintain a large backlog of orders, and
most of our distributors maintain little or no inventory.  Order fulfillment
cycles are typically short, and often as short as one to two days.  Accordingly,
the timing of customer orders can cause significant variations in quarterly
results of operations.  Because we sell our products to end-customers through
various third parties such as telephone system manufacturers, value-added
resellers, telephone interconnect dealers, and others, we are unable to project
with certainty the actual orders, sales, and revenues these third parties will
generate in a given quarter.  The combination of these factors impairs and
delays our ability to know when revenues and earnings will be higher or lower
than expected. We base product development and other operating expenses on our
expected revenues. Because our expenses are relatively fixed in the short term,
we may be unable to adjust our spending in time to compensate for any unexpected
shortfall in quarterly revenues.

Our operating results may vary by season, which could cause our operating
results to fall below expectations of securities analysts and investors.

Our results of operations may fluctuate as a result of seasonal factors, and
this may cause our operating results to fall below expectations of securities
analysts and investors for a particular quarter. Specifically, due to typical
year-end dealer sales patterns and end-user buying patterns, net sales in our
first quarter, without taking into account the effect of acquisitions, have in
the past declined from the fourth quarter of the previous year.

We rely heavily on telephone system manufacturers, independent equipment dealers
and value-added resellers.

                                       12
<PAGE>

A substantial majority of our net sales depends on a network of independent
telephone equipment dealers and computer-oriented value-added resellers. There
is intense competition for the attention of these independent dealers and
resellers from our competitors and from providers of other products distributed
through these channels. Many of these dealers and resellers do not have the
financial resources to withstand a downturn in their businesses. We may not be
able to maintain or expand our network of dealers and resellers in the future.
Moreover, our dealers and resellers may not maintain or expand their present
level of efforts to sell our products. If we lose a major dealer or reseller, or
if our dealers and resellers lose interest in selling our products, our
business, results of operations and financial condition may suffer.

A failure to establish and maintain strategic relationships could limit our
ability to increase our sales.

We also depend on relationships to introduce, market and distribute our products
to potential customers to whom we might otherwise not have access. We currently
have strategic relationships with Ericsson, NEC Corporation, Fujitsu Limited,
Lotus Development Corporation, Xerox Corporation and others.

The integration of recent and any future acquisitions may be difficult and
disruptive.

We frequently evaluate potential acquisitions of products, technologies and
businesses. Since January 1997, we have made three strategic acquisitions. Our
recent and any future acquisitions may direct management's attention away from
the day-to-day operations of our business and may pose numerous other risks. For
instance, we may not be able to successfully integrate any technologies,
products, personnel or operations of companies that we may acquire.

In making acquisitions, we may need to make dilutive issuances of our equity
securities, incur debt, write off purchased, in-process research and development
and amortize expenses related to goodwill and other intangible assets.

Technology and customer needs change rapidly in our industry.

In our industry, technology and customer demands change rapidly, and we and our
competitors frequently introduce new products and features. To succeed, we must
identify, develop and market new products, features and services that achieve
broad market acceptance by satisfying those changing customer needs and keeping
pace with those technological developments. To do this, we must spend
substantial funds on product development. We regularly devote significant
resources to technologies that we anticipate will be widely adopted. In
addition, in the future, we intend to pursue new revenue streams by leveraging
our expertise in voice and data communication to integrate these capabilities in
unified messaging and mobile wireless delivery, among other possible areas.  The
market for unified messaging software and mobile wireless delivery is relatively
new and as yet unproven. To be successful, we must, among other things, develop
and market products and services that achieve broad market acceptance. We may
not be able to develop new products or product enhancements on a timely basis.
Even if we do, the market may not accept the new products or product
enhancements that we develop.

Our market is highly competitive.

The computer-telephony market is highly competitive. Moreover, we believe the
competitive pressures we face are likely to intensify, particularly as our
competitors make new offerings based on the Windows operating system. We may not
have the financial resources, marketing, distribution and service capability,
depth of key personnel or technological knowledge to continue to compete
successfully in each of our markets.

                                       13
<PAGE>

We believe the main competitive factors affecting our business are breadth and
quality of application software, product integration, ability to respond to
technological change, quality of a company's sales force, price, size of the
installed base, level of customer support and professional services.

In the telephony-oriented market for messaging systems, our principal
competitors are independent suppliers such as the Octel Messaging Division of
Lucent Technologies, Inc. (now Avaya), Mitel Corporation, Active Voice
Corporation, and Callware Technologies, Inc.

In addition to independent suppliers of computer-telephony solutions, we also
compete with private branch exchange and key telephone systems manufacturers.
Those manufacturers offer integrated voice messaging systems, unified messaging
systems and automatic call distribution systems of their own design or under
various OEM agreements. Competitors in this category include Lucent
Technologies, Inc. (now Avaya), Nortel Networks Corporation, Siemens Business
Communication Systems, Inc., Mitel Corporation and NEC America, Inc.

In the market for LAN-based facsimile systems, our principal competitors are
Omtool, Ltd., Optus Software, Inc., Esker, S.A. and Computer Associates
International, Inc. Our fax server products also compete with vendors offering a
range of alternative facsimile solutions, including operating systems containing
facsimile and document transmission features, low-end fax modem products,
desktop fax software, single-platform facsimile software products and customized
proprietary software solutions. In the market for production facsimile systems,
our principal competitors are Biscom, Inc., Esker, S.A. and Topcall
International AG. In the market for document distribution products, our
principal competitors include the Xpedite division of PTEK Holdings, Inc. and
other telecommunications providers such as AT&T Corp., MCI WorldCom, Inc. and
Cable & Wireless, Inc.

Further acceptance of open systems architectures and the development of industry
standards in the call processing market may eliminate some of the technical
barriers to entry, allowing additional competitors to enter the market. Many of
our existing competitors have larger customer and installed bases and
substantially greater technical, financial and marketing resources than we do.
In addition, some of our competitors have a marketing advantage because they can
sell their call processing equipment or facsimile solutions as part of their
broader product offerings. Recently we believe our business has been, and may
continue to be, adversely affected by the introduction of next generation IP PBX
switches as potential customers delay purchasing decisions as they evaluate
these new product offerings. We expect our competitors will continue to offer
improved product technologies and capabilities. The availability of these
products could cause sales of our existing products to decline. For these
reasons, we may be unable to compete successfully against our current and future
competitors.

Our average sales prices have declined for some of our products.

The average sales prices in our basic voice messaging products have declined due
to competitive pressures. In the future, prices may decline in some of our other
product lines. If the average sales prices of our more significant product lines
fall, our overall gross margins will likely fall. To offset and forestall
declining average sales prices, we must continue to develop product enhancements
and new products with advanced features that are likely to generate higher-
margin incremental revenue. If we are unable to do so in a timely manner or if
our products do not achieve significant customer acceptance, our business,
results of operations and financial condition may suffer.

We may be unable to adequately protect our proprietary rights.

To succeed, we must adequately protect our proprietary technology. We rely on a
combination of patent, copyright, trademark and trade secret laws, nondisclosure
and other agreements and technical measures to protect our proprietary
technology, but those measures may be insufficient.

                                       14
<PAGE>

We have one patent in the area of unified messaging, but our competitors may
challenge or circumvent the claims in that patent. Our current patent, or any
future patents, may never provide us with any competitive advantages. Other
measures that we take to protect our proprietary technology may not prevent or
deter misappropriation of our technology or the development of technologies with
similar characteristics. Moreover, our use of open systems architecture in the
design of our products may make it easier for competitors to misappropriate or
replicate our designs and developments.

We may face liability for infringement of third-party proprietary rights.

Historically, competitors in the computer-telephony software industry have filed
numerous allegations of patent infringement, resulting in considerable
litigation. We have received claims of patent infringement from several parties
and will probably receive additional claims in the future. While none of those
claims has led to litigation, they may yet result in litigation. Any litigation,
regardless of our success, would probably be costly and require significant time
and attention of our key management and technical personnel. Litigation could
also force us to

 .  stop or delay selling, or using, products that use the challenged
    intellectual property;

 .  pay damages for infringement;

 .  obtain licenses, which may be unavailable on acceptable terms; or

 .  redesign products or services that use the infringing technology.

We face risks from expansion of our international operations.

Our growth depends in part on continued expansion of our international sales.
International sales generated approximately 16%, 15% and 18% of our net sales in
the years ended December 31, 1997, 1998 and 1999, respectively. We have spent
significant management attention and financial resources on our international
operations. A significant portion of our revenues are subject to the risks
associated with international sales, which include

 .  difficulty adapting products to local languages and telephone system
    technology;

 .  inability to respond to changes in regulatory requirements;

 .  inability to meet special standards requirements;

 .  exposure to exchange rate fluctuations;

 .  tariffs and other trade barriers;

 .  difficulties in staffing and managing international operations;

 .  potentially adverse tax consequences; and

 .  uncertainties arising from local business practices and cultural
    considerations.

In addition, the laws of some foreign countries are uncertain or do not protect
intellectual property rights to the same extent as the United States.  Moreover,
we could be sued for patent infringement or other intellectual property
violations in a foreign country where it could be very costly to defend such a
lawsuit.

                                       15
<PAGE>

Currently, substantially all of our international sales are denominated in U.S.
dollars. Increases in the value of the dollar against local currency could cause
our products to become relatively more expensive to customers in a particular
country, leading to reduced sales or profitability in that country. As we
continue to expand our international operations, we expect our non-dollar-
denominated sales and our exposure to gains and losses on international currency
transactions to increase. We do not currently engage in transactions to hedge
against the risk of currency fluctuations, but we may do so in the future.

We depend on certain key employees.

To succeed, we must attract and retain key personnel in engineering, research
and development, marketing, sales, finance and administration. In particular, we
depend to a significant degree on the efforts of our senior management team.
Competition for skilled personnel is intense. When our stock price is lower than
our employees' stock option price, it is particularly difficult to retain
skilled personnel. The failure to recruit such personnel or the loss of the
services of existing key persons in any functional area could adversely affect
our current operations and new product development efforts. We do not maintain
material key person life insurance.

We may experience difficulties in managing our growth.

Growth in our business has placed, and will continue to place, significant
demands on our management and operations. To succeed, our officers and key
employees must manage growth successfully. We must continue to implement and
improve our operational, financial and management information systems. In
addition, we must expand, train and manage our employee base. We may be unable
to timely and successfully accomplish these tasks.

We depend on third parties for certain key components of our products.

We use standard computer hardware for our products. Most of the components we
use are readily available. However, only three domestic suppliers can provide
voice processing circuit boards in the quantities we need. In addition, only two
domestic suppliers can provide our facsimile processing circuit boards in the
quantity we require. Historically, we have relied almost exclusively on Dialogic
Corporation (now a part of Intel Corporation) for our voice cards, and on
Dialogic and Brooktrout, Inc. for our fax cards. We rely on those suppliers
primarily because of volume price discounts and the cost and effort required to
develop software for an alternate voice or fax card. Significant delays,
interruptions or reductions in our supply of voice or fax cards, or unfavorable
changes to price and delivery terms could adversely affect our business.

Our stock price may be highly volatile.

The market price of our common stock has been, and may continue to be, highly
volatile. The future price of the common stock will fluctuate in response to
factors such as

 .  new product announcements or changes in product pricing policies by us or
    our competitors;

 .  quarterly fluctuations in our operating results;

 .  announcements of technical innovations;

 .  announcements relating to strategic relationships or acquisitions;

 .  changes in earnings estimates by securities analysts; and

 .  general conditions in the computer-telephony market.

                                       16
<PAGE>

In addition, the market prices of securities issued by many companies,
particularly in high-technology industries, are volatile for reasons unrelated
to the operating performance of the specific companies. These broad market
fluctuations may adversely affect the market price of our common stock.


Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

  The Company is exposed to market risk related to changes in interest rates and
foreign currency exchange rates, each of which could adversely affect the value
of the Company's investments.  The Company does not currently use derivative
financial instruments.

  The Company maintains a short-term investment portfolio consisting of interest
bearing securities with an average maturity of less than one year.  These
securities are classified as "available for sale" securities.  The interest
bearing securities are subject to interest rate risk and will fall in value if
market interest rates increase.  If market interest rates were to increase
immediately and uniformly by 10% from levels at September 30, 2000, the fair
value of the portfolio would decline by an immaterial amount.  Because the
Company has the current ability to hold its fixed income investments until
maturity, it does not expect its operating results or cash flows to be affected
to any significant degree by a sudden change in market interest rates on its
securities portfolio.

  The Company has assets and liabilities denominated in certain foreign
currencies related to the Company's international sales operations.  The Company
has not hedged its translation risk on these currencies as the Company has the
current ability to hold its foreign-currency denominated assets indefinitely and
does not expect that a sudden or significant change in foreign exchange rates
would have a material impact on future net income or cash flows.

                                       17
<PAGE>

                          Part II.  OTHER INFORMATION

Item 1.  Legal Proceedings

   As described in the Company's Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 2000, on March 21, 2000 a class-action lawsuit was filed
in the United States District Court for the Western District of Washington
alleging that during the period January 20, 2000 through March 17, 2000, the
Company and several officers and directors made or participated in
misrepresentations about the impact of Y2K and competition on the Company's
ability to achieve revenue expectations for the first quarter of 2000.
Additional lawsuits were then filed that were identical to the March 21 lawsuit,
with the exception of the name of the plaintiff.  During the quarter ended
September 30, 2000 the court approved appointment of three plaintiffs to act as
Lead Plaintiffs and consolidated all lawsuits into a single action, which seeks
unspecified damages on behalf of a proposed class of purchasers of the Company's
stock during the specified period.  No class has been certified.  The Plaintiffs
filed a Consolidated Amended Complaint ("CAC") on July 28, 2000, and the Company
filed a motion to dismiss the CAC on the ground that it fails to meet the legal
standards of the Private Securities Litigation Reform Act of 1995.  The motion
will be fully briefed by all parties and submitted for consideration by the
court in November 2000. The Company believes that the allegations of the
lawsuits are without merit and intends to vigorously defend the actions.

Item 5.  Other Information

   On July 20, 2000, the company announced the retirement of Richard J. LaPorte
as President and Chief Executive Officer.  Mr. LaPorte will continue as Chairman
of the AVT Board of Directors and will be actively involved in various company
initiatives.  Roger A. Fukai, formerly AVT's Chief Financial Officer, was named
the Company's President and CEO on an interim basis, until a permanent chief
executive was hired.  On July 20, 2000, the Company also announced the promotion
of Jeffrey B. deCillia to Executive Vice President and Chief Financial Officer,
replacing Mr. Fukai in that role.  Mr. deCillia, who joined the Company in 1999,
was previously the Company's Senior Vice President of Finance and
Administration.  On October 27, 2000 the Company announced the hiring of David
P. Anastasi as the Company's new President, CEO and director.

   Under the SEC's proxy rules, shareholder proposals that meet certain
conditions may be included in the Company's proxy statement and form of proxy
for a particular annual meeting.  Shareholders that intend to present a proposal
at the Company 's 2001 annual meeting must give notice of the proposal to the
Company no later than December 11, 2000 to be considered for inclusion in the
proxy statement and form of proxy relating to that meeting. Shareholders that
intend to present a proposal that will not be included in the proxy statement
and form of proxy must give notice of the proposal to the Company no fewer than
60 days and no more than 90 days prior to the date of the 2001 annual meeting.
Receipt by the Company of any such proposal from a qualified shareholder in a
timely manner will not guarantee its inclusion in the Company 's proxy materials
or its presentation at the 2001 annual meeting because there are other
requirements in the proxy rules.

                                       18
<PAGE>

   Pursuant to Rule 14a-4 under the Securities Exchange Act of 1934, as amended,
the Company intends to retain discretionary authority to vote proxies with
respect to shareholder proposals for which the proponent does not seek inclusion
of the proposed matter in the Company 's proxy statement for our 2001 annual
meeting, except in circumstances where (a) the Company receives notice of the
proposed matter no earlier than February 8, 2001 and no later than March 12,
2001 and (b) the proponent complies with the other requirements set forth in
Rule 14a-4.

Item 6.  Exhibits and Reports on Form 8-K

        (a)  Exhibits

             27.1  Financial Data Schedule for the nine months ended September
                   30, 2000

        (b)  Reports on Form 8-K

             The Company did not file any reports on Form 8-K during the quarter
             ended September 30, 2000.

                                       19
<PAGE>

                                   SIGNATURES

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

                                  AVT Corporation
                                  (Registrant)

  Date:   November 13, 2000       By: /s/ Jeffrey B. deCillia
                                      -----------------------------------
                                      Jeffrey B. deCillia
                                      Executive Vice President,
                                      Chief Financial Officer

                                      Signing on behalf of registrant and
                                         as principal financial officer

                                       20