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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, 1998


                        COMMISSION FILE NUMBER 0-25186

                        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 May 1,
1998 was 5,966,642.

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                        APPLIED VOICE TECHNOLOGY, INC.
                                        
                                   FORM 10-Q
                     FOR THE QUARTER ENDED MARCH 31, 1998
                                        
                               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.........................  12

Signatures..................................................................  13

                                       2
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                        PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                        APPLIED VOICE TECHNOLOGY, INC.
                          CONSOLIDATED BALANCE SHEETS
                                  (UNAUDITED)

                                                 MARCH 31,    DECEMBER 31,
                                                   1998           1997
                                                ----------     ----------
                                    ASSETS           (IN THOUSANDS)

Current assets:
  Cash and cash equivalents                     $    7,541     $    7,965
  Short-term investments                            19,009         14,268
  Accounts receivable, net                           9,710         10,098
  Inventories                                        4,365          4,908
  Deferred income taxes                              1,489          1,119
  Prepaid expenses and other                           824            968
                                                ----------     ----------
          Total current assets                      42,938         39,326
                                                ----------     ----------
Equipment and leasehold improvements, net            2,523          2,364
Intangibles, net                                     8,447          8,815
Deferred income taxes                                3,852          3,905
                                                ----------     ----------
                                                $   57,760     $   54,410
                                                ==========     ==========

                     LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Accounts payable                              $    2,278     $    2,352
  Accrued compensation and benefits                    923          1,485
  Other accrued liabilities                          4,984          4,629
  Note payable                                         158            313
  Federal income taxes payable                       2,654          2,621
                                                ----------     ----------
          Total current liabilities                 10,997         11,400
                                                ----------     ----------
 
Commitments and contingencies
 
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; 5,931,112 and
   5,761,279 shares outstanding                         59             58
  Additional paid-in capital                        33,495         31,661
  Retained earnings                                 13,209         11,291
                                                ----------     ----------
          Total shareholders' equity                46,763         43,010
                                                ----------     ----------
 
                                                $   57,760     $   54,410
                                                ==========     ==========

         See accompanying notes to consolidated financial statements.

                                       3
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                         APPLIED VOICE TECHNOLOGY, INC.
                       CONSOLIDATED STATEMENTS OF INCOME
                                  (UNAUDITED)


                                                      QUARTER ENDED
                                                        MARCH 31,
                                                  ---------------------
                                                   1998           1997
                                                ----------     ----------
                                          (IN THOUSANDS, EXCEPT PER SHARE DATA)

Net sales                                       $   17,166     $   12,062
Cost of sales                                        6,344          4,590
                                                ----------     ----------
        Gross profit                                10,822          7,472
Operating expenses:
  Research and development                           1,927          1,498
  Sales, general and administrative                  5,846          4,183
  Non-recurring charges (1)                            287          3,898
                                                ----------     ----------
        Total operating expenses                     8,060          9,579
                                                ----------     ----------
Operating income (loss)                              2,762         (2,107)
Other income, net                                      235            240
                                                ----------     ----------
Income (loss) before income taxes                    2,997         (1,867)
Income tax expense (benefit)                         1,079           (672)
                                                ----------     ----------
Net income (loss)                               $    1,918      $  (1,195)
                                                ==========     ==========
 
Basic earnings  (loss) per common share         $     0.33      $   (0.21)
 
Weighted average common shares outstanding           5,832          5,604
 
Diluted earnings (loss) per common share        $     0.29      $   (0.21)
 
Weighted average common and common equivalent
 shares outstanding                                  6,554          5,604

(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
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                         APPLIED VOICE TECHNOLOGY, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)

                                                             QUARTER ENDED
                                                                MARCH 31
                                                           ------------------
                                                            1998       1997
                                                          --------   --------
                                                             (IN THOUSANDS)  
Cash flows from operating activities:                                  
    Net income (loss)                                      $ 1,918    $(1,195)
                                                           --------   --------
Adjustments to reconcile net income (loss) to                         
  net cash provided by operating activities:                          
    Depreciation and amortization                              676        476
    Write-off of purchased in-process research and                    
      development                                               --      3,898
                                                                      
    Deferred income tax asset                                   --     (1,325)
    Changes in current assets and liabilities,                        
      net of effects of acquisition:                                  
        Accounts receivable                                    388        162
        Inventories                                            543       (851)
        Prepaid expenses and other assets                      144       (344)
        Accounts payable                                       (74)       328
        Accrued compensation and benefits                     (562)      (529)
        Other accrued liabilities                              355         99
        Federal income taxes payable                         1,112        550
                                                           --------   --------
        Total adjustments                                    2,582      2,464
                                                           --------   --------
            Net cash provided by operating activities        4,500      1,269
                                                           --------   --------
Cash flows from investing activities:                                 
    Purchase of equipment and leasehold improvements          (438)      (396)
    Cash paid in acquisition, net of cash acquired              --     (5,052)
    Purchase of short-term investments                      (4,741)      (188)
    Purchase of intangibles and other long-term assets         (29)        --
                                                           --------   --------
            Net cash used by investing activities           (5,208)    (5,636)
                                                           --------   --------
Cash flows from financing activities:                                 
    Repayment of long-term debt                               (155)      (142)
    Proceeds from exercise of stock options                    439        383
                                                           --------   --------
            Net cash provided by financing activities          284        241
                                                           --------   --------
            Net decrease in cash and cash equivalents         (424)    (4,126)
Cash and cash equivalents at beginning of period             7,965     12,195
                                                           --------   --------
Cash and cash equivalents at end of period                 $ 7,541    $ 8,069
                                                           ========   ========
Noncash transactions:                                      
Stock and warrants issued in acquisitions                  $    --    $   700

         See accompanying notes to consolidated financial statements.

                                       5
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                        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, 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.  SHORT-TERM INVESTMENTS

     In accordance with FAS 115, the Company has classified its investments as
"available-for-sale" and recorded these investments at estimated fair value with
unrealized gains and losses, when material, 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, 1998
consisted of municipal notes and bonds whose amortized cost approximates
estimated fair value. The average maturity for these investments is four months.

3.  INVENTORIES
 
                                        MARCH 31,          DECEMBER 31,
                                          1998                1997
                                    ----------------     ----------------
                                               (IN THOUSANDS)
  Raw materials and service parts     $     4,115          $     4,629
  Finished goods                              250                  279
                                    ----------------     ----------------
                                      $     4,365          $     4,908
                                    ================     ================

                                       6

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                         APPLIED VOICE TECHNOLOGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

4.  EARNINGS PER SHARE

                                                QUARTER ENDED MARCH 31,
                                           -----------------------------------
                                                1998               1997
                                           ---------------    ----------------
                                          (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                           -----------------------------------
                                           BASIC   DILUTED    BASIC    DILUTED
                                           -----   -------    -----    -------
Net income                                 $1,918   $1,918   $(1,195)  $(1,195)
                                                                     
Computation of common and common                                     
  equivalent shares outstanding:                                  
    Common Stock                            5,832    5,832     5,604     5,604
    Options                                            722
                                           ------   ------   -------   -------
Common and common equivalent shares         
  used in computing per share amounts       5,832    6,554     5,604     5,604
                                           ======   ======   =======   =======
Net income per share                       $ 0.33   $ 0.29   $ (0.21)  $ (0.21)
                                           ======   ======   =======   =======

                                       7
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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'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."

                                       8
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     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.

RESULTS OF OPERATIONS

     Net sales.  Net sales increased 42% to $17,166,000 in the quarter ended
March 31, 1998, from $12,062,000 in the comparable 1997 quarter. This growth was
fueled by Enterprise Fax sales which increased 136% from the comparable prior-
year quarter and represented 56% of net sales, the first time Enterprise Fax
sales have exceeded CTG sales. Sales of low margin PhoneXpress product lines in
the CTG area continued to decline consistent with the Company's historical
trend, resulting in CTG sales declining 5% in the current quarter as compared to
the comparable prior-year quarter. The Company expects sales of the lower-margin
PhoneXpress product lines 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 1998 increased 48% compared to the
first quarter of 1997, and represented 19.3% of total net sales.

     Gross profit.  Gross profit as a percentage of net sales improved to 63.0%
in the quarter ended March 31, 1998, as compared to 61.9% 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.

     Research and development.  Research and development expenses increased to
$1,927,000 in the quarter ended March 31, 1998 from $1,498,000 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 represented 11.2% of net sales as compared with
12.4% of net sales in the comparable prior-year quarter.

     Sales, general and administrative.  Sales, general and administrative
expenses increased to $5,846,000 in the quarter ended March 31, 1998 from
$4,183,000 in the comparable prior-year period, due primarily to increased
personnel-related costs of domestic and international development of both the
CTG and Enterprise Fax distribution channels and the inclusion of CommercePath
expenses. Sales, general and administrative costs for the current quarter
represented 34.1% of net sales, a reduction from 34.7% in the comparable prior-
year period.

     Operating income (loss).  Operating income for the quarter ended March 31,
1998 increased to $2,762,000, or 16.1% of net sales, from a loss of $2,107,000
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. 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 the nonrecurring
charges, the Company's operating income for the first quarter of 1998 was
$3,049,000 or 17.8% of net sales, an increase of 70.2% as compared to operating
income of $1,791,000 in the comparable prior-year quarter.

     Other income, net.  Net other income was $235,000 in the quarter ended
March 31, 1998, as compared to $240,000 in the comparable prior-year quarter.

     Income tax expense (benefit).  The effective tax rate for the quarters
ended March 31, 1998 and 1997 was 36.0%, with income tax expense for the quarter
ended March 31, 1998 of $1,079,000 and a benefit of $672,000 in the comparable
prior-year quarter. The acquisition of Telcom Technologies in the first quarter
of 1997 was a taxable purchase of assets, and, therefore, the

                                       9
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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 (loss).  The Company recognized net income of $1,918,000 or
$0.29 per diluted common share for the quarter ended March 31, 1998, as compared
to a loss of $1,195,000 or $0.21 per diluted common share for the comparable
prior-year quarter. Excluding the nonrecurring charges discussed above, net
income for the first quarter of 1998 would have been $2,102,000 or $0.32 per
diluted common share as compared with $1,300,000, or $0.21 per diluted common
share, in the comparable prior-year period.

LIQUIDITY AND CAPITAL RESOURCES

     Cash provided by operating activities in the quarter ended March 31, 1998
was $4.5 million due primarily to continuing profitable operations. The average
accounts receivable collection period remained favorable at approximately 47
days. Inventories decreased to $4.4 million at March 31, 1998 from $4.9 million
at December 31, 1997, due primarily to a continuing effort to control inventory
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 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 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 163,000 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 26,000 shares in
the first quarter of 1998, $1.4 million in cash and 95,000 shares of the
Company's common stock in 1997, relating 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
120,000 shares of Common Stock, at an exercise price of $28.09 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.

     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.

                                      10
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IMPACT OF THE YEAR 2000 ISSUE

     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 software 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 necessary updates
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 managements' 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.

                                      11
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                          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 filed a Current Report on Form 8-K on
                    October 23, 1997 relating to the Company's acquisition of
                    CommercePath, Inc. (formerly American International
                    Facsimile Products, Inc.). Historical financial information
                    regarding CommercePath, Inc. and pro forma financial
                    information relating to such acquisition was filed by
                    amendments to the October 23, 1997 Form 8-K, which were
                    filed on January 5 and 6, 1998.

                                       12
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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.

                              Applied Voice Technology, Inc.
                              (Registrant)

Date:  May 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

                                      13
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                                 EXHIBIT INDEX

EXHIBIT NO.         DESCRIPTION
-----------         -----------
   27.1             Financial Data Schedule