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                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 March 31, 1997





                         Commission File Number 0-25186

                         APPLIED VOICE TECHNOLOGY, INC.
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                (Name of Registrant as Specified in Its Charter)

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

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

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      Registrant's telephone number, including area code: (206) 820-6000
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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.
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                                                  Yes    X    No
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The number of outstanding  shares of the Registrant's  Common Stock as of May 1,
1997 was 5,649,565 .

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<PAGE>



                         APPLIED VOICE TECHNOLOGY, INC.

                                    FORM 10-Q
                      For the Quarter Ended March 31, 1997

                                Table of Contents



                                                                        Page

 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 6.  Exhibits and Reports on Form 8-K..................... 11

Signatures............................................................... 12

Exhibits................................................................. 13




<PAGE>



                          Part I. FINANCIAL INFORMATION



Item 1.  FINANCIAL STATEMENTS



                         APPLIED VOICE TECHNOLOGY, INC.

                           CONSOLIDATED BALANCE SHEETS

                                   (Unaudited)

                                           March 31,            December 31,
                                              1997                  1996
                                      -----------------     -----------------
                          ASSETS                  (in thousands)

Current assets:
     Cash and cash equivalents        $        8,069         $       12,195
     Short-term investments                   15,672                 15,484
     Accounts receivable, net                  6,222                  6,106
     Inventories                               4,031                  2,458
     Deferred income taxes                     2,381                  1,056
     Prepaid expenses and other                  845                    502
                                       -----------------     -----------------
     Total current assets                     37,220                 37,801

Equipment and leasehold improvements, net      1,899                  1,479
Intangibles, net                               6,575                  6,847
                                       -----------------     -----------------

                                       $      45,694          $      46,127
                                       =================     =================

            LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
     Accounts payable                  $       2,492                $2,033
     Accrued compensation and benefits           740                 1,252
     Other accrued liabilities                 2,038                 2,715
     Note payable - current portion              599                   586
     Federal income taxes payable                896                   345
                                        -----------------     -----------------
     Total current liabilities                 6,765                 6,931
                                        -----------------     -----------------

Note payable                                     158                   313

Shareholders' equity:
     Preferred stock, par value $.01
        per share, 1,000,000
        authorized; none outstanding               -                     -
     Common stock, par value $.01
        per share, 30,000,000
        authorized; 5,614,322 and 5,425,713
        shares outstanding                        56                    54
     Additional paid-in capital               29,348                28,267
     Retained earnings                         9,367                10,562
                                        ----------------      -----------------
     Total shareholders' equity               38,771                38,883
                                        -----------------     -----------------

                                        $     45,694          $     46,127
                                        =================     =================




       See accompanying notes to consolidated financial statements.

<PAGE>

                         APPLIED VOICE TECHNOLOGY, INC.

                        CONSOLIDATED STATEMENTS OF INCOME

                                   (Unaudited)


                                              Quarter ended March 31,

                                        ----------------------------------
                                              1997               1996
                                        ----------------------------------

                                       (in thousands, except per share data)
                                       

    Net sales                           $    12,062       $     9,556
    Cost of sales                             4,590             3,777
                                        -------------       -----------
              Gross profit                    7,472             5,779
    Operating expenses:
         Research and development             1,498               935
         Sales, general and administrative    4,183             3,308
         Write-off of acquired in-process
            research and development          3,898             4,140
                                         -------------       -----------

              Total operating expenses        9,579             8,383
                                         -------------       -----------
    Operating loss                           (2,107)           (2,604)
    Other income, net                           240               173
                                         -------------       -----------
    Loss  before income tax expense          (1,867)           (2,431)
    Income tax (benefit) expense               (672)              608
                                         -------------       -----------
    Net loss                            $    (1,195)       $   (3,039)
                                         =============       ===========


    Net (loss) per common share         $     (0.21)       $    (0.52)



    Weighted average common shares
     outstanding                              5,574             5,793













       See accompanying notes to consolidated financial statements.



<PAGE>



                         APPLIED VOICE TECHNOLOGY, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                                Quarter ended March 31,
                                        ---------------------------------------
                                                 1997                1996
                                        ------------------   ------------------
                                                    (in thousands)
Cash flows from operating activities:
     Net (loss) income                   $      (1,195)       $       (3,039)

                                        ------------------- --------------------
Adjustments  to  reconcile   net  income  to  net  cash  provided  by  operating
         activities:
     Depreciation and amortization                 476                 321
     Write-off of acquired, in-process
      research an development                    3,898               4,140
     Stock compensation expense                     -                   20
     Changes in current assets and
      liabilities, net of effects of
      acquisitions:
         Accounts receivable                       162               1,274
         Inventories                              (851)               (126)
         Deferred income tax asset              (1,325)                (20)
         Prepaid expenses and other assets        (344)               (337)
         Accounts payable                          328                 141
         Accrued compensation and benefits        (529)                616
         Other accrued liabilities                  99                 (87)
         Federal income taxes payable              550                (514)
                                        ------------------- --------------------
         Total adjustments                       2,464               5,428
                                        ------------------- --------------------

         Net cash (used) provided by operating
           activities                            1,269               2,389

                                        ------------------- --------------------
Cash flows from investing activities:
     Purchase of equipment and leasehold
       improvements                               (396)               (127)
     Cash paid in acquisition, net of
       cash acquired                            (5,052)             (3,318)
     Purchase of short-term investments           (188)                 -
     Net proceeds from the sale of investments      -                4,180
                                        ------------------- --------------------

        Net cash used by investing activities   (5,636)                735
                                        ------------------- --------------------

Cash flows from financing activities:
     Repayment of long-term debt                  (142)               (131)
     Proceeds from exercise of stock options       383                  12
                                        ------------------- --------------------
        Net cash (used) provided by financing
          activities                               241                (119)
                                        ------------------- --------------------

        Net change in cash                      (4,126)              3,005

Cash and cash equivalents at
     beginning of period                        12,195              12,249
                                        =================== ====================

Cash and cash equivalents at
      end of period                     $        8,069       $      15,254
                                        =================== ====================
Noncash transactions:
Stock and warrants issued in
     business acquisitions              $          700       $       2,846



        See accompanying notes to consolidated financial statements.

<PAGE>



                         APPLIED VOICE TECHNOLOGY, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (Unaudited)


1.       Interim Financial Statements

The accompanying  consolidated financial statements of 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 March 31,  1997 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, 1996.


2.       Short-Term Investments

         The Company has classified its investments as "available-for-sale"  and
recorded these  investments at estimated  fair value with  unrealized  gains and
losses reported as a separate component of Shareholders' Equity.

         Interest income is recorded using an effective  interest rate, with the
associated premium or discount amortized to interest income over the term of the
investment.   The  cost  of   securities   sold  is  based  upon  the   specific
identification  method.  Available-for-sale  securities  as of  March  31,  1997
consisted  of  municipal  notes  and bonds  whose  amortized  cost  approximates
estimated fair value. The average maturity for these investments is four months.


3.       Inventories

         Inventories consisted of the following:

                                            March 31,          December 31,
                                               1997                1996
                                       -------------------  --------------------
                                                     (in thousands)

    Raw materials and service parts    $     3,693          $      2,193
                                               
    Finished goods                             338                   265
                                       ===================  ====================
                                       $     4,031          $      2,458
                                       ===================  ====================



<PAGE>



                         APPLIED VOICE TECHNOLOGY, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (Unaudited)


4.       Businesses Acquired

         On  January  3,  1997,  the  Company   acquired   selected  assets  and
liabilities   of  Telcom   Technologies,   Inc.,   a   developer   of   NT-based
open-architecture  automatic call distribution (ACD) systems. The purchase price
for the acquisition was $3.5 million in cash, plus warrants to purchase  100,000
shares of the Company's common stock exercisable at $13.36 per share,  which may
be exercised at 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 acquired.

         On January 2, 1996,  the  Company  acquired  Cracchiolo  & Feder,  Inc.
(d/b/a  RightFAX),  a privately held developer of fax server  software for local
area  networks,  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 163,000 shares of the Company's  common stock. In addition,
the Company paid  consideration of $1.4 million in cash and 95,000 shares of the
Company's  common  stock in 1997,  relating to the 1996 earn out and  guaranteed
value of the Company's  common  stock.  As a result of the earn out, the Company
recorded an additional $2.0 million of goodwill at December 31, 1996. The former
shareholders  of  RightFAX  will  be  further  entitled  to  receive  additional
consideration  worth $1.8  million in a  combination  of cash and the  Company's
common stock over the next two years, if certain revenue and profit margin goals
are achieved by RightFAX.


5.       New Accounting Pronouncements


         In February  1997,  the  Financial  Accounting  Standards  Board issued
Statement of Financial  Accounting  Standards No. 128,  Earnings Per Share (SFAS
128), and No. 129, Disclosure of Information About Capital Structure (SFAS 129),
which are  effective for periods  beginning  after  December 15, 1997.  SFAS 128
establishes new standards for computing and presenting earnings per share (EPS).
Companies  will now report  basic EPS and  diluted  EPS  compared to primary and
fully diluted EPS, which were previously reported.  Under the new standard,  the
Company's  basic and diluted EPS for the quarter ended March 31, 1997,  would be
both a net loss per share of $(0.21). SFAS 129 requires companies to disclose in
their  financial   statements   details  of  their  capital  structure  and  EPS
calculations, both of which are currently disclosed in exhibits to the Company's
10-K and 10-Q filings.







<PAGE>



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


         Founded  in 1982,  the  Company  develops,  manufactures,  markets  and
supports a broad line of open  systems-based  software  products and systems for
the rapidly growing computer telephony integration (CTI) market. CTI encompasses
a  wide  range  of  products  that  allow  two of the  most  essential  business
instruments, telephones and personal computers (PCs), to work together. Some CTI
products let people access and control telephone  functions through a PC; others
let people access and control computer  functions  through a telephone.  The CTI
market has emerged from the  convergence of these two powerful and useful tools;
each with a different technological origin and marketing orientation.
         The Company has implemented a dual-pronged  strategy to address the CTI
market;    developing    telephony-oriented    products   marketed   through   a
telephony-oriented  distribution channel and computer-oriented products marketed
through  a  computer-oriented  channel.  The  telephony-oriented  products  are:
CallXpress3,  the  Company's  premier,  multi-application,   high  capacity  CTI
product;  PhoneXpress,  a high-performance  call answering and routing and voice
mail system;  px100, a basic voice mail and call answering  system for the small
business  market;  and  the  recently-introduced  AgentXpressNT,  a call  center
management system. The computer-oriented product line is RightFAX, the Company's
premier, high performance, LAN-based fax server.
         These  products  address the needs of four  segments of the CTI market:
advanced CTI applications,  "CTI-ready"  systems,  basic messaging systems,  and
installed base add-ons and service.  Advanced CTI applications  products include
CallXpress3  systems sold with at least one advanced CTI application  module (in
addition to voice mail/automated attendant), RightFAX and AgentXpressNT servers.
"CTI-ready"   systems  are   CallXpress3   systems  sold  initially  with  voice
mail/automated  attendant capabilities only, but which can be easily upgraded to
full  advanced  CTI  features.  The basic  messaging  market is addressed by the
PhoneXpress and px100 products. Sales of non-CTI  capability-enhancing  add-ons,
capacity-increasing  upgrades, and service parts to the installed base represent
the fourth market segment.
         The  Company's  strategies  are  focused  on  addressing  these  market
segments,  and results of operations are reported accordingly.  In January 1997,
the Company acquired selected assets and liabilities of Telcom  Technologies,  a
developer of  WindowsNT-based,  open-architecture  automatic  call  distribution
systems.  The Company  released  AgentXpressNT  in March 1997 utilizing the core
technology acquired from Telcom Technologies.
         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  Company's  Annual  Report  on Form  l0-K for the year  ended
December 31, 1996.  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.



Results of Operations
      Net sales.  Net sales  increased 26% to  $12,062,000  in the quarter ended
March 31, 1997,  from  $9,556,000 in the comparable  1996 quarter.  The increase
resulted primarily from sales of advanced CTI applications,  which increased 63%
from the comparable  prior-year quarter,  and represented 55% of total sales, as
compared with 43% in the comparable  prior-year  quarter.  The low-margin  basic
messaging  market  continues to be affected by price pressures from  competitive
offerings.  Basic messaging sales declined 17% in the first quarter of 1997 from
the  comparable  prior-year  quarter.  Sales to the installed base increased 68%
from the comparable  prior-year quarter due to accelerated  marketing efforts of
telephony-oriented  products and the  inclusion of  maintenance  and spare parts
sales  related  to  the  January  1997  acquisition  of  the  assets  of  Telcom
Technologies,  included for the first time.  International sales for the quarter
increased 39% compared to the first quarter of 1996,  and  represented  18.5% of
total net sales.

      Gross profit.  Gross profit as a percentage of sales  improved to 61.9% in
the first  quarter  1997 as  compared  with 60.5% in the  comparable  prior-year
quarter, due to the favorable sales mix of advanced CTI applications as compared
with basic messaging systems.  Because advanced CTI application products contain
a higher software content, gross margins are typically higher than other sales.
      Research and development.  Research and development  expenses increased to
$1,498,000  in the  first  quarter  of  1997  from  $935,000  in the  comparable
prior-year  period,  due  primarily to  increased  personnel  costs  relating to
acceleration of certain  development  projects and the inclusion of the recently
formed  call  center   development   group,   which  was  acquired  from  Telcom
Technologies.   Research  and  development  expenses  for  the  current  quarter
represented  12.4%  of net  sales  as  compared  with  9.8% of net  sales in the
comparable prior-year quarter.

      Sales,  general and  administrative.  Sales,  general  and  administrative
expenses increased to $4,183,000 in the first quarter of 1997 from $3,308,000 in
the comparable  prior-year period, due primarily to increased  personnel-related
costs  of  domestic  and  international  distribution  development  of both  the
telephony-oriented   and   computer-oriented   channels.   Sales,   general  and
administrative  costs for the current  quarter  represented  34.7% of net sales,
essentially unchanged from 34.6% in the comparable prior-year period.

      Operating  (loss).  The  Company  recognized  a  nonrecurring   charge  of
$3,898,000 for the write-off of acquired,  in-process  research and  development
resulting from the  acquisition of Telcom  Technologies  in January 1997. In the
comparable  prior-year  period,  the Company had recognized a $4,140,000 similar
charge resulting from the January 1996  acquisition of Cracchiolo & Feder,  Inc.
(d/b/a/  RightFAX).  Therefore,  the Company  recognized  an  operating  loss of
$2,107,000  in the first  quarter  1997,  as  compared to an  operating  loss of
$2,604,000 in the comparable  prior-year  period.  Excluding these  nonrecurring
charges, operating income for the first quarter 1997 would have been $1,791,000,
an  increase  of 17% as  compared  to  operating  income  of  $1,536,000  in the
comparable prior-year quarter.

      Other income,  net. Other income in the first quarter 1997 was $240,000 as
compared to $173,000 in the  comparable  prior-year  quarter,  due  primarily to
higher average cash and short-term investment balances.

      Income tax (benefit) expense. The Company recognized a $672,000 income tax
benefit  for the  first  quarter  of  1997,  an  effective  rate of  36.0%.  The
acquisition  of  Telcom  Technologies  was a taxable  purchase  of  assets,  and
therefore,  the resulting  excess of purchase price over net assets  acquired is
deductible for income tax purpose. The first quarter 1996 nonrecurring charge of
in-process  research and development and the amortization of goodwill associated
with the acquisition of RightFAX are not tax  deductible,  therefore the Company
recognized  income tax expense of $608,000 in the first  quarter  1996.  For the
remainder  of  1997,  the  effective  tax rate is  expected  to  continue  to be
approximately 36.0%.

      Net loss. Due to the  nonrecurring  charges  discussed  above, the Company
recognized  net loss of $1,195,000 or $0.21 per share for the first quarter 1997
as compared to a net loss of  $3,039,000  or $0.52 per share for the  comparable
prior-year  quarter.  Excluding  these  nonrecurring  charges net income for the
first  quarter  1997 would have been  $1,300,000  or $0.21 per share as compared
with $1,101,000 or $0.19 per share in the comparable prior-year period.



Liquidity and Capital Resources

      Cash  provided by operating  activities  in the first  quarter of 1997 was
$1.3 million due primarily to continuing  operating  profitability.  The average
accounts  receivable  collection  period remained  unchanged at approximately 40
days.  Inventories increased to $4.0 million at March 31, 1997 from $2.5 million
at  December  31,  1996 due  primarily  to the  acquisition  of assets of Telcom
Technologies.

      In January 1997, the Company  acquired  selected assets and liabilities of
Telcom  Technologies,  Inc. a developer  of  WindowsNT-based,  open-architecture
automatic  call  distribution  systems.  The purchase price for the January 1997
acquisition of Telcom  Technologies  was $3.5 million in cash,  plus warrants to
purchase 100,000 shares of the Company's common stock  exercisable at $13.36 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 acquired, in-process research and development.

      On January 2, 1996, the Company acquired  Cracchiolo & Feder,  Inc. (d/b/a
RightFAX),  a privately  held  developer  of fax server  software for local area
networks,  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 163,000 shares of the Company's  common stock. In addition,
the Company paid  consideration of $1.4 million in cash and 95,000 shares of the
Company's  common  stock in 1997,  relating to the 1996 earn out and  guaranteed
value of the Company's  common  stock.  As a result of the earn out, the Company
recorded an additional $2.0 million of goodwill at December 31, 1996. The former
shareholders  of  RightFAX  will  be  further  entitled  to  receive  additional
consideration  worth $1.8  million in a  combination  of cash and the  Company's
common stock over the next two years, if certain revenue and profit margin goals
are achieved by RightFAX.

      The Company expects that its current cash, cash flow from operations,  and
available  bank line of credit  will  provide  sufficient  working  capital  for
operations.



<PAGE>



                           Part II. OTHER INFORMATION





Item 6.  Exhibits and Reports on Form 8-K

               (a)  Exhibits
                    11.1     Computation of Earnings Per Share
                    27.1     Financial Data Schedule

               (b)  Reports on Form 8-K
                    On January 23,  1997 the Company  filed a report on Form 8-K
                    dated January 3, 1997 relating to the  acquisition of Telcom
                    Technologies,  Inc. No financial  statements  were  included
                    with such report on Form 8-K.





<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.

                                              Applied Voice Technology, Inc.
                                                    (Registrant)


    Date:   May 9, 1997                       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