<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 March 31, 1999


                        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 
April 30, 1999 was 13,121,341.

<PAGE>
 
                                AVT CORPORATION
                                        
                                   FORM 10-Q
                     For the Quarter Ended March 31, 1999
                                        
                               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

                                       2
<PAGE>
 
                        Part I.  FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS

                                AVT CORPORATION

                          CONSOLIDATED BALANCE SHEETS

                                  (Unaudited)

<TABLE>
<CAPTION> 
                                                          March 31,           December 31,
                                                            1999                  1998
                                                      ----------------     ----------------
                           ASSETS                                (in thousands)
Current assets:
<S>                                                   <C>                  <C>
     Cash and cash equivalents                               $14,357              $10,824
     Short-term investments                                   33,369               28,225
     Accounts receivable, net                                 13,620               14,153
     Inventories                                               5,565                5,560
     Deferred and prepaid income taxes                         2,109                1,430
     Prepaid expenses and other                                1,248                1,393
                                                      ----------------     ----------------
                  Total current assets                        70,268               61,585

Equipment and leasehold improvements, net                      3,448                3,263
Intangibles, net                                               7,249                7,677
Deferred income taxes                                          3,518                3,582
                                                      ----------------     ----------------
                                                             $84,483              $76,107
                                                      ================     ================
</TABLE>

                     LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Current liabilities:
<S>                                                   <C>                  <C>
     Accounts payable                                        $ 3,444              $ 3,669
     Accrued compensation and benefits                         4,061                3,768
     Other accrued liabilities                                 5,160                4,901
     Federal income taxes payable                                  -                  374
                                                      ----------------     ----------------
                  Total current liabilities                   12,665               12,712
                                                      ----------------     ----------------
 
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; 13,094,053 and                    131                  126
        12,623,255 shares outstanding
     Additional paid-in capital                               45,473               40,368
     Retained earnings                                        26,214               22,901
                                                      ----------------     ----------------
                  Total shareholders' equity                  71,818               63,395
                                                      ----------------     ----------------
 
                                                             $84,483              $76,107
                                                      ================     ================
</TABLE>

         See accompanying notes to consolidated financial statements.

                                       3
<PAGE>
 
                                AVT CORPORATION

                       CONSOLIDATED STATEMENTS OF INCOME

                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                 Quarter ended
                                                                   March 31,
                                                      ------------------------------------
                                                             1999              1998
                                                      ------------------------------------
                                                      (in thousands, except per share data)
<S>                                                        <C>               <C>
Net sales                                                   $22,621           $17,166
Cost of sales                                                 7,696             6,344
                                                      ----------------     ---------------
          Gross profit                                       14,925            10,822
Operating expenses:                                                  
     Research and development                                 2,242             1,927
     Sales, general and administrative                        7,895             5,846
     Non-recurring charges (1)                                    -               287
                                                      ----------------     ---------------
          Total operating expenses                           10,137             8,060
                                                      ----------------     ---------------
Operating income                                              4,788             2,762
Other income, net                                               388               235
                                                      ----------------     ---------------
Income before income taxes                                    5,176             2,997
Income tax expense                                            1,863             1,079
                                                      ----------------     ---------------
Net income                                                  $ 3,313           $ 1,918
                                                      ================     ===============
                                                                     
Basic earnings per common share                             $  0.26           $  0.16
 
Weighted average common shares outstanding                   12,792            11,664
 
Diluted earnings per common share                           $  0.24           $  0.16
 
Weighted average common and common equivalent 
 shares outstanding                                          13,814            13,108
</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).

         See accompanying notes to consolidated financial statements.

                                       4
<PAGE>
 
                                AVT CORPORATION

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                                  (Unaudited)
<TABLE>
<CAPTION> 
                                                                     Quarter ended
                                                                       March 31,
                                                         -------------------------------------
                                                                1999               1998
                                                         ------------------  -----------------
                                                                    (in thousands)
<S>                                                        <C>                 <C>
Cash flows from operating activities:
     Net income                                                   $ 3,313            $ 1,918
                                                         ------------------  -----------------
Adjustments to reconcile net income to net cash
         provided by operating activities:
     Depreciation and amortization                                    792                676
     Deferred income tax asset                                       (205)                 -
     Changes in current assets and liabilities,                               
          net of effects of acquisition:                                      
         Accounts receivable                                          533                388
         Inventories                                                   (5)               543
         Prepaid expenses and other assets                            145                144
         Accounts payable                                            (225)               (74)
         Accrued compensation and benefits                            293               (562)
         Other accrued liabilities                                    259                355
         Federal income taxes payable                               1,911              1,112
                                                         ------------------  -----------------
         Total adjustments                                          3,499              2,582
                                                         ------------------  -----------------
              Net cash provided by operating activities             6,812              4,500
                                                         ------------------  -----------------
Cash flows from investing activities:
     Purchase of equipment and leasehold improvements                (532)              (438)
     Purchase of short-term investments                            (5,144)            (4,741)
     Purchase of intangibles and other long-term assets               (18)               (29)
                                                         ------------------  -----------------
               Net cash used by investing activities               (5,694)            (5,208)
                                                         ------------------  -----------------
Cash flows from financing activities:                   
     Repayment of long-term debt                                        -               (155)
     Proceeds from exercise of stock options                        2,415                439
                                                         ------------------  -----------------
               Net cash  provided by financing activities           2,415                284
                                                         ------------------  -----------------
           Net increase (decrease) in cash and cash         
            equivalents                                             3,533               (424)
 
Cash and cash equivalents at beginning of period                   10,824              7,965
                                                         ------------------  -----------------
Cash and cash equivalents at end of period                 $       14,357      $       7,541
                                                         ==================  =================
                                                        
                                                        
Supplementary disclosures of cash flows:                
     Cash paid for income taxes                            $          158      $           -
</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 month period
ended March 31, 1999 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, 1998.

2.   Earnings Per Share

<TABLE>
<CAPTION>
                                                                                  Quarter ended March 31,
                                                               -----------------------------------------------------------
                                                                          1999                             1998
                                                               ---------------------------    ----------------------------
                                                                          (in thousands, except per share data)
                                                               -----------------------------------------------------------
<S>                                                            <C>              <C>              <C>              <C> 
                                                                  Basic         Diluted           Basic          Diluted
                                                               ----------    -------------    ------------     -----------
Net income                                                       $ 3,313        $ 3,313          $ 1,918         $ 1,918
                                                               ==========    =============    ============     ===========
 
Computation of common and common
     equivalent shares outstanding:
               Common Stock                                       12,792         12,792           11,664          11,664
               Options                                                            1,022                            1,444
                                                               ----------    -------------    ------------     -----------
Common and common equivalent shares                               
     used in computing per share amounts                          12,792         13,814           11,664          13,108
                                                               ==========    =============    ============     ===========
Net income per share                                             $  0.26        $  0.24          $  0.16         $  0.15
                                                               ==========    =============    ============     ===========
</TABLE>

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, 1998                   $63,395
Net Income                                                 3,313
Exercise of stock options                                  2,415
Tax benefit from exercise of non-qualified stock      
 options                                                   2,695
                                                      
                                                      ----------
Ending balance at March 31, 1999                         $71,818
                                                      ==========
</TABLE>

                                       6
<PAGE>
 
                                AVT CORPORATION

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                  (Unaudited)
                                             
                                      
5.   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
                                                          -------------------
                                                               March 31,
                                                               ---------  
                                                            1999       1998
                                                          ---------  --------
                                                             (in thousands)
   <S>                                                    <C>         <C> 
   Enhanced fax products...............................    $13,002    $ 9,571
   Advanced messaging and call center products.........      7,982      5,902
   Basic messaging products............................      1,637      1,693
                                                           -------    -------
                                                           $22,621    $17,166
                                                           =======    =======
</TABLE>
                                                                                
6.   Acquisition of MediaTel

     On April 14, 1999, the Company acquired MediaTel Corporation, a privately
held San Francisco based provider of outsourced electronic document delivery
services, in a transaction accounted for as a pooling of interests. The Company
issued 1,609,596 shares of common stock for all outstanding shares of MediaTel
and exchanged options to purchase 284,958 shares of the Company's common stock
at a weighted average price of $3.66 per share for the outstanding MediaTel
options.

     Had the acquisition been consummated at March 31, 1999, the pro forma
results of the combined companies would have been as follows:

<TABLE>
<CAPTION>
                                                             Quarter Ended
                                                          -------------------
                                                               March 31,
                                                               ---------
                                                            1999       1998
                                                          --------   --------
                                                         (in thousands except
                                                           per share data)
<S>                                                       <C>         <C>
   Revenue............................................    $28,843     $22,313
   Net income.........................................      3,942       2,405
   Basic earnings per share...........................    $  0.27     $  0.18
   Diluted earnings per share.........................    $  0.25     $  0.16
</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, 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 sells its products primarily through an indirect channel of
resellers and distributors, as well as through direct sales and OEM and private
label agreements. The Company's product lines serve the needs of two areas 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
automated call center (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.

   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
1998 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.


Results of Operations

   Net sales.  Net sales increased 31.8% to $22,621,000 in the quarter ended
March 31, 1999, from $17,166,000 in the comparable 1998 quarter. This growth was
fueled by enhanced fax sales which increased 35.8% from the comparable prior-
year quarter and represented 57.5% of net sales, and unified messaging and
installed base upgrade sales in our computer telephony group which increased 35%
and represented 35% of total net sales. Sales of low margin basic messaging
product lines were flat when compared to the same quarter in 1998. 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 first
quarter of 1999 increased 62.3% compared to the first quarter of 1998, and
represented 23.7% of total net sales.

   Gross profit.  Gross profit as a percentage of net sales improved to 66.0% in
the quarter ended March 31, 1999, as compared to 63.0% in the comparable prior-
year quarter, due to the continued sales mix shift toward the higher margin
enhanced  fax and NT-based CTG product lines.

                                       8
<PAGE>
 
   Research and development.  Research and development expenses increased to
$2,242,000 in the quarter ended March 31, 1999 from $1,927,000 in the comparable
prior-year period, due primarily to increased personnel costs relating to
acceleration of certain development projects.  As a percentage of sales,
research and development expenses for the current quarter declined to 10.0%
compared with 11.2% of net sales in the comparable prior-year quarter.

   Sales, general and administrative.  Sales, general and administrative
expenses increased to $7,895,000 in the quarter ended March 31, 1999 from
$5,846,000 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. Sales, general and
administrative costs for the current quarter represented 34.9% of net sales, an
increase from 34.1% in the comparable prior-year quarter.

   Operating  income.  Operating income for the quarter ended March 31, 1999
increased to $4,788,000, or 21.2% of net sales, from $2,762,000, or 16.1% of net
sales, in the comparable prior-year quarter. 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.

   Other income, net.  Net other income was $388,000 in the quarter ended March
31, 1999, as compared to $235,000 in the comparable prior-year quarter due to
increased interest income on investments.

   Income tax expense.  The effective tax rate for the quarter ended March 31,
1999 and 1998 was 36.0%, with income tax expense of $1,863,000 for the quarter
ended March 31, 1999 and  $1,079,000 in the comparable prior-year quarter.

   Net income.  The Company recognized net income of $3,313,000 or $0.24 per
diluted common share for the quarter ended March 31, 1999, as compared to
$1,918,000 or $0.15 per diluted common share for the comparable prior-year
quarter.

 
Liquidity and Capital Resources

   Cash provided by operating activities in the three months ended March 31,
1999 was $6.8 million due primarily to continuing profitable operations.  The
average accounts receivable collection period remained favorable at  51 days.
Inventories remained constant at $5.6 million at March 31, 1999 and December 31,
1998.

   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. There is speculation that a significant amount of litigation will
arise out of Year 2000 compliance issues, and the Company is aware of a growing
number of lawsuits against other software vendors. Because of the unprecedented
nature of such litigation, it is uncertain whether or to what extent the Company
may be affected by it.

   The Company has developed a plan to ensure its internal systems and products
are Year 2000 compliant, and to mitigate its risks in the event that its vendors
or other third-parties with whom it has material relationships are not Year 2000
compliant on a timely basis. The Company has potential exposure relating to the
Year 2000 issue in four areas: (1) the Company's internal software and hardware
systems, including non-information technology systems; (2) suppliers of

                                       9
<PAGE>
 
hardware and software the Company resells as part of its products; (3)
internally developed software the Company sells; and (4) other third-parties
with whom the Company has material relationships. The following information
explains how the Company is addressing each of these potential risk areas:

     1.  With respect to internal software and hardware systems, the Company
         reviewed all its material systems to determine which systems were not
         Year 2000 compliant. The Company is currently in the process of
         completing all necessary upgrades, modifications and conversions to its
         programs and equipment to ensure they will continue to be effective in
         the year 2000, and expects to complete this process not later than June
         30, 1999. All of such upgrades have been or are being done as part of a
         normal upgrade cycle and accordingly no additional costs are being
         incurred as a result of Year 2000 issues. The Company expects that the
         only expense it will incur to make its internal software and hardware
         systems Year 2000 compliant is approximately $5,000 to update an alarm
         system.

     2.  The Company has tested and will continue to test computer components,
         including fax and voice cards and software it purchases from third
         parties, for Year 2000 compliance. The Company has verified that all
         such components and software currently in use are Year 2000 complaint.
         The Company, however, has identified alternate sources for critical
         components in the event that a supplier's business is disrupted by the
         advent of the year 2000.

     3.  Since June 1998, all of the Company's products available for sale to
         customers have been Year 2000 compliant. The Company has offered free
         or reduced cost upgrades to certain purchasers of the Company's
         products that were not Year 2000 compliant when sold. The cost of
         developing and providing such upgrades was approximately $100,000. The
         Company does not intend to offer upgrades for certain of its older
         products.

     4.  The Company has implemented a process to contact third parties with
         which it has material relationships, including its vendors,
         distributors, banks, and transfer agent, to attempt to determine their
         preparedness with respect to Year 2000 issues and to analyze the risks
         to the Company in the event any such third parties experience
         significant business interruptions as a result of Year 2000
         noncompliance. At March 31, 1999, the Company had substantially
         completed this review.

   The Company believes that it is taking the necessary steps regarding Year
2000 compliance with respect to matters within its control to ensure that the
Year 2000 issue will not materially impact the Company. However, the Company may
be materially adversely affected if important distributors or customers of the
Company experience significant disruptions in their systems or business due to
the advent of the Year 2000. In addition, 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. There can be no
guarantee that these assumptions will prove to be correct and actual results
could differ materially from those expected. The Company intends to develop a
contingency plan to address unexpected Year 2000 issues by June 30, 1999.

                                      10
<PAGE>
 
                         Part II.   OTHER INFORMATION

                                        
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 March 31, 1999.

                                      11
<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:  May  12, 1999                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

                                      12