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

               UNITED STATES 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 JUNE 30, 1998

                        COMMISSION FILE NUMBER 0-25186

                                AVT CORPORATION

                   (Formerly Applied Voice Technology, Inc.)
               ------------------------------------------------
               (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 July 24,
1998 was 11,964,751 (after adjusting for the Company's two-for-one stock split
payable on May 11, 1998).

================================================================================
<PAGE>
 
                                AVT CORPORATION
                                        
                                   FORM 10-Q
                      FOR THE QUARTER ENDED JUNE 30, 1998
                                        
                               TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<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....................    8

PART II.  OTHER INFORMATION

          Item 4.  Submission of Matters to a Vote of Security Holders....   12
          Item 5.  Other Information......................................   12
          Item 6.  Exhibits and Reports on Form 8-K.......................   12

SIGNATURES................................................................   13

</TABLE>

                                       2
<PAGE>
 
                        PART I.  FINANCIAL INFORMATION


ITEM 1.   FINANCIAL STATEMENTS


                                AVT CORPORATION

                          CONSOLIDATED BALANCE SHEETS

                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                            JUNE 30,     DECEMBER 31,
                                                                              1998          1997
                                                                            --------     ------------
                           ASSETS                                                (in thousands)          
<S>                                                                         <C>          <C>
Current assets:                                                                          
     Cash and cash equivalents                                               $12,257       $ 7,965
     Short-term investments                                                   16,449        14,268
     Accounts receivable, net                                                 10,257        10,098
     Inventories                                                               5,134         4,908
     Deferred income taxes                                                     1,725         1,119
     Prepaid expenses and other                                                1,255           968
                                                                             -------       -------
               Total current assets                                           47,077        39,326
                                                                                           
Equipment and leasehold improvements, net                                      2,661         2,364
Intangibles, net                                                               8,026         8,815
Deferred income taxes                                                          3,739         3,905
                                                                             -------       -------
                                                                             $61,503       $54,410
                                                                             =======       =======
                                                                                           
                         LIABILITIES AND SHAREHOLDERS' EQUITY                    
Current liabilities:                                                                       
     Accounts payable                                                        $ 3,669       $ 2,352
     Accrued compensation and benefits                                         2,381         1,485
     Other accrued liabilities                                                 4,682         4,942
     Federal income taxes payable                                              1,040         2,621
                                                                             -------       -------
                         Total current liabilities                            11,772        11,400
                                                                             -------       -------
                                                                                           
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, 60,000,000                                    
        authorized; 11,963,273 and 11,522,558 shares outstanding                 120           115
     Additional paid-in capital                                               33,692        31,604
     Retained earnings                                                        15,919        11,291
                                                                             -------       -------
                         Total shareholders' equity                           49,731        43,010
                                                                             -------       -------
                                                                             $61,503       $54,410
                                                                             =======       =======
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       3
<PAGE>
 
                                AVT CORPORATION

                       CONSOLIDATED STATEMENTS OF INCOME

                                  [UNAUDITED)

<TABLE>
<CAPTION>
                                                   QUARTER ENDED        SIX MONTHS ENDED      
                                                      JUNE 30,              JUNE 30,          
                                                  ----------------       ---------------
                                                  1998        1997       1998       1997
                                                  ----        ----       ----       ----
                                                   (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                              <C>        <C>        <C>        <C>
Net sales                                        $19,439    $13,660    $36,605    $25,722
Cost of sales                                      6,969      4,958     13,313      9,548
                                                 -------    -------    -------    -------
          Gross profit                            12,470      8,702     23,292     16,174

Operating expenses:                                                               
     Research and development                      2,001      1,571      3,928      3,069
     Sales, general and administrative             6,555      4,640     12,401      8,823
     Non-recurring charges (1)                         -          -        287      3,898
                                                  ------     ------     ------     ------
          Total operating expenses                 8,556      6,211     16,616     15,790
                                                  ------     ------     ------     ------
Operating income                                   3,914      2,491      6,676        384
Other income, net                                    320        278        555        518
                                                  ------     ------     ------     ------
Income before income taxes                         4,234      2,769      7,231        902
Income tax expense                                 1,524        997      2,603        325
                                                  ------     ------     ------     ------
Net income                                       $ 2,710    $ 1,772    $ 4,628    $   577
                                                  ======     ======     ======     ======                               

Basic earnings per common share                  $  0.23    $  0.16    $  0.39    $  0.05
                                                                                  
Weighted average common shares outstanding        11,946     11,302     11,813     11,254
                                                                                  
Diluted earnings per common share                $  0.20    $  0.14    $  0.35    $  0.05
                                                                                  
Weighted average common and common equivalent                                     
 shares outstanding                               13,401     12,255     13,172     12,227
</TABLE>

(1)  Non-recurring charges consist of write-off of costs related to the
     withdrawal of the follow-on stock offering in February, 1998 (originally
     filed in October 1997) and write-off of the purchased in-process research
     and development associated with the acquisition of Telcom Technologies in
     January, 1997.

         See accompanying notes to consolidated financial statements.

                                       4
<PAGE>
 
                                AVT CORPORATION

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
                 
<TABLE>
<CAPTION>
                                                                               SIX MONTHS ENDED
                                                                                   JUNE 30,
                                                                          ----------------------------         
                                                                          1998                     1997
                                                                          ----                     ----        
                                                                                 (IN THOUSANDS)
<S>                                                                 <C>                      <C>
Cash flows from operating activities:
  Net income                                                          $     4,628              $       577
                                                                      -----------              -----------  
Adjustments to reconcile net income to net cash
 provided by operating activities:
  Depreciation and amortization                                             1,410                      975
  Write-off of purchased in-process research and
   development                                                                  -                    3,898
  Deferred income tax asset                                                  (123)                  (1,448)
  Changes in current assets and liabilities, net of
   effects of acquisition:
    Accounts receivable                                                      (159)                    (622)
    Inventories                                                              (226)                  (1,512)
    Prepaid expenses and other assets                                        (286)                    (333)
    Accounts payable                                                        1,317                     (117)
    Accrued compensation and benefits                                         896                     (185)
    Other accrued liabilities                                                  60                      (20)
    Federal income taxes payable                                             (502)                     823
                                                                      -----------              -----------  
    Total adjustments                                                       2,387                    1,459
                                                                      -----------              -----------  
      Net cash provided by operating activities                             7,015                    2,036
                                                                      -----------              -----------  
Cash flows from investing activities:
  Purchase of equipment and leasehold improvements                           (890)                    (730)
  Cash paid in acquisition, net of cash acquired                                -                   (5,052)
  Proceeds from sale of investments                                             -                    2,635
  Purchase of short-term investments                                       (2,181)                       -
  Purchase of intangibles and other long-term assets                          (29)                     (30)
                                                                      -----------              -----------  
      Net cash used by investing activities                                (3,100)                  (3,177)
                                                                      -----------              -----------  
Cash flows from financing activities:
  Repayment of long-term debt                                                (313)                    (287)
  Proceeds from exercise of stock options                                     690                      422
                                                                      -----------              -----------  
      Net cash  provided by financing activities                              377                      135
                                                                      -----------              -----------  
      Net increase (decrease) in cash and cash
       equivalents                                                          4,292                   (1,006)
 
Cash and cash equivalents at beginning of period                            7,965                   12,195
                                                                      -----------              -----------  
Cash and cash equivalents at end of period                            $    12,257              $    11,189
                                                                      ===========              ===========  
Noncash transactions:
  
  Stock and warrants issued in acquisition                            $         -              $       700

Supplementary disclosures of cash flows:

  Cash paid for income taxes                                          $     3,258              $       892
</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
(formerly Applied Voice Technology, Inc.) 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 month period ended June 30, 1998 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, 1997.

2.   EARNINGS PER SHARE
<TABLE>
<CAPTION>
                                                                         QUARTER ENDED JUNE 30,
                                                   -----------------------------------------------------------------
                                                                 1998                              1997
                                                   -----------------------------      ------------------------------
                                                                 (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                   -----------------------------------------------------------------
<S>                                              <C>                <C>               <C>              <C>
                                                       BASIC            DILUTED            BASIC           DILUTED
                                                   -----------        -----------       -----------      -----------
Net income                                         $     2,710        $     2,710       $     1,772      $     1,772
                                                   ===========        ===========       ===========      ===========
Computation of common and common
 equivalent shares outstanding:
    Common Stock                                        11,946             11,946            11,304           11,304
    Options                                                                 1,455                                953
                                                   -----------        -----------       -----------      -----------

Common and common equivalent shares                         
 used in computing per share amounts                    11,946             13,401            11,302           12,255
                                                   ===========        ===========       ===========      ===========
Net income per share                               $      0.23        $      0.20       $      0.16      $      0.14
                                                   ===========        ===========       ===========      ===========
 
                                                                       SIX MONTHS ENDED JUNE 30,
                                                   -----------------------------------------------------------------
                                                                 1998                              1997
                                                   -----------------------------      ------------------------------
                                                                 (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                   -----------------------------------------------------------------
                                                       BASIC            DILUTED            BASIC           DILUTED
                                                   -----------        -----------       -----------      -----------
Net income                                         $     4,628        $     4,628       $       577      $       577
                                                   ===========        ===========       ===========      ===========
Computation of common and common
 equivalent shares outstanding:
    Common Stock                                        11,813             11,813            11,254           11,254
    Options                                                                 1,359                                973
                                                   -----------        -----------       -----------      -----------

Common and common equivalent shares                         
 used in computing per share amounts                    11,813             13,172            11,254           12,227
                                                   ===========        ===========       ===========      ===========
Net income per share                               $      0.39        $      0.35       $      0.05      $      0.05
                                                   ===========        ===========       ===========      ===========
</TABLE>

                                       6
<PAGE>
 
                                AVT CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                  (UNAUDITED)


3.   SHAREHOLDERS' EQUITY

     On April 23, 1998, the Company announced that its Board of Directors
approved a two-for-one stock split of the Common Stock effected in the form of a
stock dividend.  Shareholders received an additional share of common stock for
every share held on the record date of May 4, 1998.  The additional shares were
payable on May 11, 1998.  Accordingly, the accompanying financial statements
have been restated to reflect this stock split.

     On April 20, 1998, the Company's Board of Directors approved an increase of
the authorized shares of Common Stock, from 30 million to 60 million and an
increase of the authorized shares of Preferred Stock from one million to two
million, in order to reflect the stock split.  Shareholder approval of these
increases was not required.

4.  CHANGES IN SHAREHOLDERS' EQUITY


<TABLE>
<S>                                                              <C>
Beginning balance at December 31, 1997                           $43,010
Net Income                                                         4,628
Exercise of stock options                                            697
Tax benefit from exercise of non-qualified stock options           1,396
                                                                 -------
Ending balance at June 30, 1998                                  $49,731
                                                                 =======
</TABLE>

                                       7
<PAGE>
 
Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS

     The Company is a leading provider of software-based computer-telephony
solutions for medium-sized enterprises.  These solutions are designed to enhance
individual and work group productivity, improve customer service, reduce
business operating costs and simplify access to data and dissemination of
information.  The Company's products provide enhanced voice and data integration
through applications such as unified voice and data messaging, call center
management, interactive voice response (IVR) and document distribution.  The
Company's key products are multi-application computer-telephony platforms that
run on off-the-shelf hardware, support Windows NT and OS/2 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 serve the needs of two distinct segments of the
computer telephony market  the telephony oriented buyer and the data oriented
buyer of enterprise software and systems.  The Company's telephony-oriented
products include: CallXpress for Windows NT and CallXpress3, the Company's
premier multi-application, high capacity computer-telephony product lines;
PhoneXpress, a full-featured voice messaging system for small to medium-sized
enterprises; AgentXpress for Windows NT, a high-performance Windows NT-based ACD
system for medium-sized call centers; the recently released Automated Agent for
Windows NT, an IVR capability for CallXpress for Windows NT; and Enhanced Agent,
a set of interfaces and applications designed to extend the capabilities of
AgentXpress.  The Company's data-oriented products include RightFAX and RightFAX
Enterprise, the Company's LAN-based fax server lines for Windows NT, and
CommercePath's line of production document delivery systems for Windows NT and
Unix.  At this time the Company's data-oriented products are focused on the
enterprise fax market.  The Company significantly expanded its product offering
in the past 18 months by releasing Windows NT-based products in each of its main
product areas.

     The Company deploys separate distribution efforts to market these products
to the two distinct segments of the computer telephony market, utilizing both
indirect and direct resources in each.  The Company manages and reports its
operations in concert with this dual-pronged product line/distribution effort
strategy and refers to these two current market focuses as: the Computer
Telephony Products Group (those targeted at the telephony-oriented buyer, and
hereafter, referred to as CTG) and Enterprise Fax (those targeted at the data-
oriented buyer). Since January 1996, the Company has made three strategic
acquisitions, each of which was accounted for as a purchase.  The Company
acquired RightFAX, a developer of LAN-based fax server software, in January
1996.  In January 1997, the Company acquired selected assets and liabilities of
Telcom Technologies, a developer of NT-based open architecture ACD systems. In
October 1997, the Company acquired CommercePath, a developer of high-volume
production-oriented fax servers. In connection with the RightFAX, Telcom
Technologies and CommercePath acquisitions, the Company recorded nonrecurring
charges of $4.1 million, $3.9 million and $7.1 million, respectively, in January
1996, January 1997 and October 1997, for the write-off of purchased, in-process
research and development, and recorded additional amounts of goodwill that are
being amortized over future years.  See "-Liquidity and Capital Resources."

     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 and in Item 1
(Business) of the 1997 Annual Report on Form 10-K.  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.

                                       8
<PAGE>
 
RESULTS OF OPERATIONS

     Net sales.  Net sales increased 42% to $19,439,000 in the quarter ended
June 30, 1998, from $13,660,000 in the comparable 1997 quarter. This growth was
fueled by Enterprise Fax sales which increased 107% from the comparable prior-
year quarter and represented 56.8% of net sales. Sales of low margin PhoneXpress
product lines in the CTG area continued to decline consistent with the Company's
historical trend, resulting in basic messaging sales declining 20% in the
current quarter as compared to the comparable prior-year quarter. The Company
expects sales of the lower-margin basic messaging products to continue to be
affected by price pressures from competitive offerings and decline as a
percentage of total sales in the future. International sales for the second
quarter of 1998 increased 51% compared to the second quarter of 1997, and
represented 21.5% of total net sales.

     For the six months ended June 30, 1998, net sales increased 42% to
$36,605,000 from $25,722,000 in the comparable prior-year period due to the
higher sales of Enterprise Fax products which increased 120% due in part to the
inclusion of CommercePath in 1998, and represented 56.3% of total net sales.
International sales increased  49% from the comparable prior-year period and
represented 20.4% of  total net sales.

     Gross profit.  Gross profit as a percentage of net sales improved to 64.0%
in the quarter ended June 30, 1998, as compared to 63.7% in the comparable 
prior-year quarter, due to the continued sales mix shift toward the higher
margin Enterprise Fax and NT-based CTG product lines.

     For the six months ended June 30, 1998, gross profit as a percentage of
sales improved to 63.6% from 62.9% in the comparable prior-year period, due to
the favorable sales mix.

     Research and development.  Research and development expenses increased to
$2,001,000 in the quarter ended June 30, 1998 from $1,571,000 in the comparable
prior-year period, due primarily to increased personnel costs relating to
acceleration of certain development projects, and the inclusion of the  research
and development expenses associated with CommercePath. Research and development
expenses for the current quarter declined to 10.3% of net sales as compared with
11.5% of net sales in the comparable prior-year quarter.  For the six months
ended June 30, 1998, research and development expenses increased to $3,928,000
from $3,069,000 in the comparable prior-year period.  As a percentage of net
sales, research and development expenses represented 10.7% for the six months
ended June 30, 1998, as compared to 11.9% in the comparable prior-year period.

     Sales, general and administrative.  Sales, general and administrative
expenses increased to $6,555,000 in the quarter ended June 30, 1998 from
$4,640,000 in the comparable prior-year quarter, due primarily to increased
marketing and personnel-related costs of developing domestic and international
distribution for both the CTG and Enterprise Fax channels as well as the
inclusion of CommercePath expenses. Sales, general and administrative costs for
the current quarter represented 33.7% of net sales, a reduction from 34.0% in
the comparable prior-year quarter.  For the six months ended June 30, 1998,
sales, general and administrative expenses increased to $12,401,000 from
$8,823,000 in the comparable prior-year period.  As a percentage, sales, general
and administrative expenses were 33.9% and 34.3% of net sales for the six-month
periods ending June 30, 1998 and 1997, respectively.

     Operating income.  Operating income for the quarter ended June 30, 1998
increased to $3,914,000, or 20.1% of net sales, from $2,491,000 in the
comparable prior-year quarter.  For the six months ended June 30, 1998,
operating income was $6,676,000 or 18.2% of net sales compared to $384,000 in
the comparable prior-year period. In the first quarter of 1998, the Company
wrote off costs of $287,000 related to the withdrawal in February of the follow-
on stock offering originally filed in October 1997. In the first quarter of
1997, the Company recognized a nonrecurring charge of $3,898,000 for the write-
off of purchased, in-process research and development resulting from the
acquisition of Telcom Technologies in January 1997. Excluding these nonrecurring
charges, the Company's operating income for the six months ended June 30, 1998
was $6,963,000 or 19.0% of net sales, an increase of 63% as compared to
operating income of $4,282,000 in the comparable prior-year period.

                                       9
<PAGE>
 
   Other income, net.  Net other income was $320,000 in the quarter ended June
30, 1998, as compared to $278,000 in the comparable prior-year quarter.  For the
six months ended June 30, 1998, net other income increased to $555,000 from
$518,000 in the comparable prior-year period.

   Income tax expense.  The effective tax rate for the quarters and six months
ended June 30, 1998 and 1997 was 36.0%, with income tax expense of $1,524,000
for the quarter ended June 30, 1998 and  $997,000 in the comparable prior-year
quarter. The income tax expense for the six-month periods ended June 30, 1998
and 1997 was $2,603,000 and $325,000 respectively.  The acquisition of Telcom
Technologies in the first quarter of 1997 was a taxable purchase of assets, and,
therefore, the resulting excess of purchase price over net tangible assets
acquired was deductible for income tax purposes and resulted in an income tax
benefit for that quarter.

   Net income.  The Company recognized net income of $2,710,000 or $0.20 per
diluted common share for the quarter ended June 30, 1998, as compared to
$1,772,000 or $0.14 per diluted common share for the comparable prior-year
quarter. Due to the first quarter non-recurring charges discussed above, the
Company recognized net income for the six months ended June 30, 1998 of
$4,628,000 compared to $577,000 in the comparable 1997 period. Excluding these
non-recurring charges, net income for the first six months of 1998 would have
been $4,812,000 or $0.37 per diluted common share as compared with $3,072,000,
or $0.25 per diluted common share, in the comparable prior-year period.

LIQUIDITY AND CAPITAL RESOURCES

   Cash provided by operating activities in the six months ended June 30, 1998
was $7.0 million due primarily to continuing profitable operations.  The average
accounts receivable collection period remained favorable at approximately 50
days.  Inventories increased to $5.1 million at June 30, 1998 from $4.9 million
at December 31, 1997,  primarily due to the need to support increased sales
levels.

   In January 1997, the Company acquired selected assets and liabilities of
Telcom Technologies.  The purchase price for the acquisition was $3.5 million in
cash, plus warrants to purchase 200,000 shares of the Company's common stock
exercisable at $6.68 per share, which may be exercised any time prior to January
3, 2002.  The Company accounted for the business combination as a purchase and
recognized a nonrecurring charge of $3.9 million in the first quarter of 1997,
representing the value of the purchased, in-process research and development.

   In January 1996, the Company acquired RightFAX through a merger of RightFAX
into a wholly owned subsidiary of the Company.  The purchase price for the
acquisition paid at the closing was $4.2 million in cash plus 326,000 shares of
the Company's common stock.  Approximately $4.1 million of the purchase price
was recognized as a nonrecurring charge in the first quarter of 1996,
representing the value of purchased, in-process research and development.  The
remaining intangible assets are being amortized over seven years from the date
of acquisition.  In addition, the Company paid $668,000 in cash and 52,000
shares of the Company's common stock in the first quarter of 1998, and $1.4
million in cash and 190,000 shares in 1997, pursuant to an earn out and
guaranteed value of the Company's common stock.  As a result of the earn out,
the Company recorded  additional goodwill of $1.3 million and $2.0 million at
December 31, 1997 and 1996, respectively.  The former shareholders of RightFAX
are entitled to receive additional consideration of up to $500,000 in a
combination of cash and the Company's common stock, if certain revenue and
profit margin goals are achieved by RightFAX during 1998.

   In October 1997, the Company acquired all the outstanding capital stock of
CommercePath from Forest City Trading Group, Inc. for $10.4 million in cash.  In
connection with the acquisition, the Company also granted options to purchase
240,000 shares of Common Stock, at an exercise price of $14.04 per share, to two
of CommercePath's executive officers.  The Company has accounted for the
acquisition as a purchase and recorded a nonrecurring charge of $7.1 million for
the write-off of purchased, in-process research and development.  In addition,
the Company recorded additional amounts of goodwill that will be amortized over
seven years.

                                       10
<PAGE>
 
  The Company expects that its current cash, cash flow from operations, and
available bank line of credit will provide sufficient working capital for
operations for the foreseeable future.

IMPACT OF THE YEAR 2000 ISSUE

  The "Year 2000 Issue" is pervasive and complex as virtually every computer
operation will be affected in some way by the rollover of the two-digit year
value to 00.  Systems that do not properly recognize date sensitive information
when the year changes to 2000, or interact with systems or components that fail
to do so, could generate erroneous data or otherwise fail to function properly,
or at all.

  The Company has developed a plan to ensure its systems and products are
compliant with the requirements to process transactions in the year 2000. The
Company believes that with upgrades to existing systems and modifications to its
products, the impact of the Year 2000 Issue can be mitigated. However, if such
upgrades, modifications and conversions are not made, or are not made in a
timely manner, the Year 2000 Issue could have a material impact on the Company's
operations.

  The Company is currently in the process of completing all such upgrades,
modifications and conversions to its programs and equipment to ensure they will
continue to be effective in the year 2000. Amounts incurred are being expensed
as incurred and are not expected to be material. The Company plans to complete
the Year 2000 project not later than December 31, 1998.

  The costs of the Year 2000 project and the date on which the Company plans to
complete Year 2000 modifications are based on management's best estimates, which
were derived utilizing numerous assumptions of future events including the
continued availability of certain resources, third party modification plans and
other factors. However, there can be no guarantee that these estimates will be
achieved and actual results could differ materially from those plans.

  Even if the Company's systems and products are not adversely affected when the
year changes to 2000, the Company may be materially adversely affected if
important suppliers, distributors or customers of the Company experience
significant disruptions in their systems or business due to the advent of the
Year 2000.  Although the Company has tested and will continue to test computer
components, including fax and voice cards it purchases from third parties, it
has not otherwise verified that the companies it does business with are Year
2000 complaint.  The Company has, as a plan to mitigate the impact of the Year
2000 Issue, identified alternate sources for critical components in the event
that a supplier's business is disrupted by the advent of the year 2000.

CORPORATE NAME CHANGE

  On July 23, 1998, the Company formally announced the change of its corporate
name from Applied Voice Technology, Inc. to AVT Corporation.

                                       11
<PAGE>
 
                          PART II.  OTHER INFORMATION


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

      The Annual Meeting of Shareholders of AVT Corporation was held on May 6,
      1998.  A total of  10,459,840 shares of the Company's common stock were
      represented in person or by proxy at the meeting, which comprised  88.06%
      of the total number of shares of the Company's common stock outstanding on
      March 3, 1998, the record date for the meeting.

      At the meeting Robert F. Gilb was elected and William L. True was re-
      elected to serve as directors of the Company for a term of three years
      until the Company's Annual Meeting of Shareholder in 2001.   The votes
      were as follows:


                               Votes For           Votes Withheld
                         --------------------  ----------------------
  William L. True              10,102,240              357,600
  Robert F. Gilb               10,100,640              359,200


      Approved at the meeting was a proposed amendment to the 1989 Restated
      Stock Option Plan to increase the number of shares available for grant by
      1,000,000 to a total of 2,850,000.  Also approved was an amendment to
      eliminate the fixed termination date provision of the 1989 Plan and to
      allow for the grant of Incentive Stock Options up to 10 years after the
      adoption of any Plan amendment that, for tax purposes, is deemed to be the
      adoption of a new plan.

ITEM 5.  OTHER INFORMATION

      In accordance with the Company's Bylaws, a shareholder proposing to
      transact business at the Company's annual meeting must provide notice of
      such proposal, in the manner required by the Company's Bylaws, no fewer
      than 60 nor more than 90 days prior to the date of such annual meeting
      (or, if the Company provides less than 60 days' notice of such meeting, no
      later than 10 days after the date of the Company's notice).  In addition,
      if the Company receives notice of a shareholder proposal after February
      21, 1999, the persons named as proxies in such proxy statement and proxy
      will have discretionary authority to vote on such shareholder proposal.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

        (a)  Exhibits

             27.1  Financial Data Schedule

        (b)  Reports on Form 8-K
             The Company did not file any reports on Form 8-K during the quarter
             ended June 30, 1998.

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                                   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:   August 12, 1998              By: /s/ Roger A. Fukai
                                           -----------------------------------
                                           Roger A. Fukai
                                           Executive Vice President
                                           Finance and Administration,
                                           Chief Financial Officer

                                           Signing on behalf of registrant and
                                             as principal financial officer

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