<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, 2000


                        Commission File Number 0-25186


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


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


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


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


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

                            Yes   X     No
                                  --


The number of outstanding shares of the Registrant's Common Stock as of May 3,
2000 was 31,646,295.

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

<PAGE>

                                AVT CORPORATION

                                   FORM 10-Q
                      For the Quarter Ended March 31, 2000

                               Table of Contents

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

           Item 1.   Financial Statements (unaudited)..................................  3
           Item 2.   Management's Discussion and Analysis of Financial Condition
                     and Results of Operations.........................................  9
           Item 3.   Quantitative and Qualitative Disclosures about Market Risk........ 17

PART II.   Other Information

           Item 1.  Legal Proceedings.................................................. 18
           Item 6.  Exhibits and Reports on Form 8-K................................... 18

Signatures............................................................................. 19

</TABLE>

                                       2
<PAGE>

                       Part I.     FINANCIAL INFORMATION


Item 1.   FINANCIAL STATEMENTS


                                AVT CORPORATION

                          CONSOLIDATED BALANCE SHEETS

                                  (Unaudited)


<TABLE>
<CAPTION>
                                                                March 31,     December 31,
                                                                  2000            1999
                                                                ---------     ------------
                           ASSETS                                     (in thousands)
<S>                                                              <C>          <C>
Current assets:
     Cash and cash equivalents                                   $ 25,704        $ 23,923
     Short-term investments                                        61,402          51,095
     Accounts receivable, net                                      15,838          20,303
     Inventories                                                    5,611           5,319
     Deferred and prepaid income taxes                              4,761           3,000
     Prepaid expenses and other                                     2,406           2,089
                                                                 --------        --------
                         Total current assets                     115,722         105,729

Equipment and leasehold improvements, net                           6,407           6,630
Intangibles, net                                                    5,466           5,926
Deferred income taxes                                               3,424           3,424
                                                                 --------        --------
                                                                 $131,019        $121,709
                                                                 ========        ========

                      LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
     Accounts payable                                            $  4,007        $  5,432
     Accrued compensation and benefits                              6,746           5,169
     Other accrued liabilities                                      6,286           7,579
     Federal income taxes payable                                       -           1,324
                                                                 --------        --------
                                                                   17,039          19,504
                                                                 --------        --------

Commitments and contingencies

Shareholders' equity:
     Preferred stock, par value $.01 per share, 2,000,000
        authorized; none outstanding                                    -               -
     Common stock, par value $.01 per share, 120,000,000
        authorized; 31,613,223 and 30,637,054 shares
         outstanding, respectively, and additional paid-in         64,617          55,811
         capital

     Retained earnings                                             49,363          45,812
     Other comprehensive income                                         -             582
                                                                 --------        --------
                         Total shareholders' equity               113,980         102,205
                                                                 --------        --------
                                                                 $131,019        $121,709
                                                                 ========        ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       3
<PAGE>

                                AVT CORPORATION

                       CONSOLIDATED STATEMENTS OF INCOME

                                  (Unaudited)


<TABLE>
<CAPTION>
                                                           Quarter ended
                                                             March 31,
                                                        -------------------
                                                          2000       1999
                                                        -------     -------
                                                       (in thousands, except
                                                          per share data)
<S>                                                    <C>          <C>
Net sales                                               $24,875     $28,843
Cost of sales                                             8,594      10,174
                                                        -------     -------
          Gross profit                                   16,281      18,669

Operating expenses:
     Research and development                             2,463       2,621
     Sales, general and administrative                   10,827      10,277
                                                        -------     -------
          Total operating expenses                       13,290      12,898
                                                        -------     -------
Operating income                                          2,991       5,771
Other income, net (1)                                     2,558         427
                                                        -------     -------
Income before income taxes                                5,549       6,198
Income tax expense                                        1,998       2,256
                                                        -------     -------
Net income                                              $ 3,551     $ 3,942
                                                        =======     =======
Basic earnings per common share                         $  0.11     $  0.14

Weighted average common shares outstanding (2)           31,255      28,804

Diluted earnings per common share                       $  0.10     $  0.13

Weighted average common and common equivalent
  shares outstanding (2)                                 33,841      31,332
</TABLE>

(1)  Quarter ended March 31, 2000 includes a non-recurring gain of $1,784,000
     realized from the sale of marketable securities held for investment.
(2)  All share and earnings per share amounts shown reflect the two-for-one
     stock split that became effective January 11, 2000 for stockholders of
     record on December 27, 1999.


          See accompanying notes to consolidated financial statements.

                                       4
<PAGE>

                                AVT CORPORATION

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                   Three months ended
                                                                        March 31,
                                                                 -----------------------
                                                                   2000            1999
                                                                 --------        -------
                                                                      (in thousands)
<S>                                                              <C>             <C>
Cash flows from operating activities:
           Net income                                            $  3,551        $ 3,942
                                                                 ========        =======
Adjustments to reconcile net income to net cash
  provided by operating activities:
     Depreciation and amortization                                  1,292          1,093
     Deferred income taxes                                           (581)          (205)
     Gain on sale of marketable securities                         (1,784)             -
     Changes in current assets and liabilities:
         Accounts receivable                                        4,465            218
         Inventories                                                 (292)            (5)
         Prepaid expenses and other assets                           (317)           130
         Accounts payable                                          (1,425)           333
         Accrued compensation and benefits                          1,577            (36)
         Other accrued liabilities                                 (1,293)           306
         Federal income taxes payable                               2,043          2,200
                                                                 --------        -------
              Net cash provided by operating activities             7,236          7,976
                                                                 ========        =======
Cash flows from investing activities:
     Purchase of equipment and leasehold improvements                (610)          (964)
     Purchase of short-term investments, net                      (10,624)        (5,144)
     Proceeds from sale of marketable securities                    2,101              -
     Purchase of intangibles and other long-term assets                 -            (18)
                                                                 --------        -------
               Net cash used by investing activities               (9,133)        (6,126)
                                                                 --------        -------
Cash flows from financing activities:
     Proceeds from exercise of stock options                        3,678          2,423
                                                                 --------        -------
               Net cash  provided by financing activities           3,678          2,423
                                                                 --------        -------
Net increase in cash and cash equivalents                           1,781          4,273
Cash and cash equivalents at beginning of period                   23,923         14,466
                                                                 --------        -------
Cash and cash equivalents at end of period                       $ 25,704        $18,739
                                                                 ========        =======
Supplementary disclosures of cash flows:
     Cash paid for income taxes                                  $     31        $   407
</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, 2000 are not necessarily indicative of future financial results.

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



2.   Earnings Per Share
<TABLE>
<CAPTION>
                                                         Quarter ended March 31,
                                                -------------------------------------------
                                                       2000                    1999
                                                -------------------     -------------------
                                                   (in thousands, except per share data)
                                                -------------------------------------------
                                                 Basic      Diluted      Basic      Diluted
                                                -------     -------     -------     -------
<S>                                             <C>         <C>         <C>        <C>
Net income                                      $ 3,551     $ 3,551     $ 3,942     $ 3,942
                                                =======     =======     =======     =======
Computation of common and common
     Equivalent shares outstanding:
               Common Stock                      31,255      31,255      28,804      28,804
               Options                                -       2,586           -       2,528
                                                -------     -------     -------     -------
Common and common equivalent shares
     Used in computing per share amounts         31,255      33,841      28.804      31,332
                                                =======     =======     =======     =======
Net income per share                            $  0.11     $  0.10     $  0.14     $  0.13
                                                =======     =======     =======     =======
</TABLE>


3.   Changes in Shareholders' Equity

<TABLE>
<S>                                                                  <C>
Beginning balance at December 31, 1999                               $102,205
     Net income                                                         3,551
     Exercise of stock options                                          3,678
     Tax benefit from exercise of non-qualified stock options           5,128
     Reversal of unrealized gain on marketable securities                (582)
                                                                     --------
Ending balance at March 31, 2000                                     $113,980
                                                                     ========
</TABLE>

                                       6
<PAGE>

                                AVT CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)


4.   Segment Reporting

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

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

<TABLE>
<CAPTION>
                                                                Quarter Ended
                                                            ---------------------
                                                                  March 31,
                                                            ---------------------
                                                              2000          1999
                                                            -------       -------
                                                                (in thousands)
<S>                                                       <C>            <C>
Document solutions.....................................     $18,817       $19,224
Advanced messaging and call center products............       5,244         7,982
Basic messaging products...............................         814         1,637
                                                            -------       -------
                                                            $24,875       $28,843
                                                            =======       =======
</TABLE>

The Company's sales by country were as follows:

<TABLE>
<CAPTION>
                                                                Quarter Ended
                                                            ---------------------
                                                                  March 31,
                                                            ---------------------
                                                              2000          1999
                                                            -------       -------
                                                                (in thousands)
<S>                                                       <C>            <C>
United States.........................................       $20,445       $23,444
Canada................................................           743         1,233
United Kingdom........................................         1,363         1,076
Other.................................................         2,324         3,090
                                                             -------       -------
                                                             $24,875       $28,843
                                                             =======       =======
</TABLE>


5.  Stock Buy-back Program

     In March of 2000 the Board of Directors authorized the Company to
repurchase up to $10 million worth of its common stock. Through May 8, 2000 the
Company had utilized a total of $6,696,000 to repurchase 642,200 shares.

                                       7
<PAGE>

                                AVT CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)


6.   Legal Proceedings

     On March 21, 2000 a class-action lawsuit was filed in the United States
District Court for the Western District of Washington alleging that during the
period January 20, 2000 through March 17, 2000, the Company and several officers
and directors made or participated in misrepresentations about the Company's
business and future prospects.  Since the March 21 lawsuit was filed, additional
lawsuits have been filed that are identical to the March 21 lawsuit, with the
exception of the name of the plaintiff.  Each lawsuit seeks unspecified damages
on behalf of a proposed class of purchasers of the Company's stock during the
specified period.  The Company believes that the allegations of the lawsuits are
without merit and intends to vigorously defend the actions.

                                       8
<PAGE>

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

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

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

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

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

                                       9
<PAGE>

Results of Operations

     Net sales.  Net sales decreased 13.8% to $24,875,000 in the quarter ended
March 31, 2000, from $28,843,000 in the comparable 1999 quarter.  Sales of
telephony and computer oriented products decreased 24%.  Sales of low margin
basic messaging CTG product lines approximated $800,000, a decrease of 50% when
compared to the same quarter in 1999.  This was in line with the Company's
expectation that sales of the lower-margin basic messaging products would
continue to be affected by price pressures from competitive offerings and
decline as a percentage of total sales.    International sales for the quarter
decreased 17.4% compared to the first quarter of 1999, and represented 17.8% of
total net sales.

     Gross profit.  Gross profit as a percentage of net sales improved to 65.5%
in the quarter ended March 31, 2000, as compared to 64.7% in the comparable
prior-year quarter, despite the low sales volume relative to the non-volume-
related costs such as support and operations.

     Research and development.  As a percentage of sales, research and
development expenses for the current quarter increased to 9.9% compared with
9.1% of net sales in the comparable prior-year quarter. Research and development
expenses decreased to $2,463,000 in the quarter ended March 31, 2000 from
$2,621,000 in the comparable prior-year period .

     Sales, general and administrative.  Sales, general and administrative
expenses increased to $10,827,000 in the quarter ended March 31, 2000 from
$10,277,000 in the comparable prior-year quarter, due primarily to increased
personnel-related costs.  Sales, general and administrative costs for the
current quarter represented 43.5% of net sales, an increase from 35.6% in the
comparable prior-year quarter.

     Operating income.  Operating income for the quarter ended March 31, 2000
decreased to $2,991,000, or 12.0% of net sales, from $5,771,000, or 20.0% of net
sales, in the comparable prior-year quarter primarily due to the lower sales
volume.

     Other income, net.  Net other income was $2,558,000 in the quarter ended
March 31, 2000, as compared to $427,000 in the comparable prior-year quarter,
due to a one-time $1,784,000 realized gain on the sale of a marketable security
held for investment and increased interest income on investments.

     Income tax expense.  The effective tax rate for the quarter ended March 31,
2000 and 1999 was 36.0% and 36.4% respectively, with income tax expense of
$1,998,000 for the quarter ended March 31, 2000 and  $2,256,000 in the
comparable prior-year quarter.

     Net income.  The Company recognized net income of $3,551,000 or $0.10 per
diluted common share for the quarter ended March 31, 2000, as compared to
$3,942,000 or $0.13 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,
2000 was $ 7.2 million due primarily to continuing profitable operations.  The
accounts receivable collection period was approximately 54 days at March 31,
2000 compared to 50 days in the comparable prior year period. Accounts
receivable decreased from $20.3 million at December 31, 1999 to $15.8 million at
March 31, 2000.

     In March of 2000 the Board of Directors authorized the use of up to $10
million to repurchase shares of the Company's common stock.  As of May 8, 2000,
a total of $6,696,000 had been utilized to repurchase 642,200 shares.  Subject
to market conditions, stock prices, and the company's cash position and
requirements going forward, the Company intends to use the remaining funds to
repurchase additional shares.

     In January of 2000 the Company announced the formation of AVT Capital LLC,
a venture capital subsidiary of AVT Corporation. AVT Capital has been chartered
to invest up to $25 million in emerging technologies that are strategic to
accelerating the growth of AVT's core

                                       10
<PAGE>

business. To date, AVT Capital has made no investment and expenditures have been
insignificant. The Company intends AVT Capital to be fully operational in the
second half of 2000 and intends to report this activity as a separate business
segment when material.

     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 Year 2000 Issues

     Since January 1, 2000, the Company has not experienced any material
disruptions as a result of the failure of computer systems or software products
to be Year 2000 complaint.  The Company believes it has taken 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 in the
future.

     All of the Company's products currently available for sale to customers are
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. To date, the Company has incurred costs of developing and providing
such upgrades of approximately $100,000.  The Company does not intend to offer
upgrades for certain of its older products.  The financial impact to the Company
of the development and administration of its upgrade programs has not been and
is not anticipated to be material to its financial position or results of
operations in any given year.  However, the Company is dependent on its
customers to take necessary steps, and if any customers have not or do not make
necessary modifications, conversions, migrations, or upgrades, it could have a
material adverse effect on the Company in the form of legal costs or the loss of
customers.

     Notwithstanding the steps we have taken with respect to matters within our
control to ensure that our business would not be directly impacted in a material
way by the failure of computer systems and software products to be Year 2000
compliant, we believe that our sales for the first quarter of 2000 have been
indirectly affected by the Year 2000 issue.  We believe that IT departments are
either recovering from fatigue of implementing Year 2000 upgrades during 1999,
or continuing to fight problems that have spilled over into 2000.  In either
event, our sales partners have reported that many potential AVT customers have
delayed new purchase decisions until their schedules allow them to take on new
products.   As a result, our channel partners have reported that their new sales
pipelines were at unusually low levels in January and February of 2000.  We
cannot be certain that this indirect impact of the Year 2000 problem will not
continue into future quarters.

     The discussion of our efforts and ongoing expectations relating to year
2000 compliance include some forward-looking statements.  Because the extent of
existing but undetected Year 2000 problems is unknown to us, we cannot be
certain that we will not incur additional, unanticipated costs, losses or
liabilities related to internal or third-party year 2000 problems.  Such costs,
losses and liabilities could have a material adverse effect on our business,
financial condition and operating results.

Risk Factors

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

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

     We expect our operating results to fluctuate significantly from quarter to
quarter in the future. Because of these fluctuations, our operating results for
a particular quarter may fall below the expectations of securities analysts and
investors. If this occurs, the trading price of our stock may

                                       11
<PAGE>

decline. Such fluctuations could cause period-to-period comparisons to be less
than meaningful. Numerous factors contribute to the unpredictability of our
operating results, including

 .  the timing of customer orders;

 .  changes in our mix of products and distribution channels;

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

 .  pricing pressures; and

 .  general economic conditions.

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

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

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

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

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

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

      We also depend on relationships to introduce, market and distribute our
products to potential customers to whom we might otherwise not have access. We
currently have strategic relationships

                                       12
<PAGE>

with Ericsson, NEC Corporation, Fujitsu Limited, Lotus Development Corporation,
Xerox Corporation and others.

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

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

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

Technology and customer needs change rapidly in our industry.

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

Our market is highly competitive.

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

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

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

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

                                       13
<PAGE>

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

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

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

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

We may be unable to adequately protect our proprietary rights.

     To succeed, we must adequately protect our proprietary technology. We rely
on a combination of patent, copyright, trademark and trade secret laws,
nondisclosure and other agreements and technical measures to protect our
proprietary technology, but those measures may be insufficient. We have one
patent in the area of unified messaging, but our competitors may challenge or
circumvent the claims in that patent. Our current patent, or any future patents,
may never provide us with any competitive advantages. Other measures that we
take to protect our proprietary technology may not prevent or deter
misappropriation of our technology or the development of technologies with
similar characteristics. Moreover, our use of open systems architecture in the
design of our products may make it easier for competitors to misappropriate or
replicate our designs and developments.

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

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

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

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 .  pay damages for infringement;

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

 .  redesign products or services that use the infringing technology.

We face risks from expansion of our international operations.

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

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

 .  inability to respond to changes in regulatory requirements;

 .  inability to meet special standards requirements;

 .  exposure to exchange rate fluctuations;

 .  tariffs and other trade barriers;

 .  difficulties in staffing and managing international operations;

 .  potentially adverse tax consequences; and

 .  uncertainties arising from local business practices and cultural
    considerations.

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

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

We depend on certain key employees.

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

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We may experience difficulties in managing our growth.

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

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

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

Our stock price may be highly volatile.

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

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

 .  quarterly fluctuations in our operating results;

 .  announcements of technical innovations;

 .  announcements relating to strategic relationships or acquisitions;

 .  changes in earnings estimates by securities analysts; and

 .  general conditions in the computer-telephony market.

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

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Item 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

     The Company maintains a short-term investment portfolio consisting of
interest bearing securities with an average maturity of less than one year.
These securities are classified as "available for sale" securities. The interest
bearing securities are subject to interest rate risk and will fall in value if
market interest rates increase. If market interest rates were to increase
immediately and uniformly by 10% from levels at March 31, 2000, the fair value
of the portfolio would decline by an immaterial amount. Because the Company has
the current ability to hold its fixed income investments until maturity, it does
not expect its operating results or cash flows to be affected to any significant
degree by a sudden change in market interest rates on its securities portfolio.

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

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                        Part II.     OTHER INFORMATION

Item 1.   LEGAL PROCEEDINGS

     On March 21, 2000 a class-action lawsuit was filed in the United States
District Court for the Western District of Washington alleging that during the
period January 20, 2000 through March 17, 2000, the Company and several officers
and directors made or participated in misrepresentations about the Company's
business and future prospects.  Since the March 21 lawsuit was filed, additional
lawsuits have been filed that are identical to the March 21 lawsuit, with the
exception of the name of the plaintiff.  Each lawsuit seeks unspecified damages
on behalf of a proposed class of purchasers of the Company's stock during the
specified period.  The Company believes that the allegations of the lawsuits are
without merit and intends to vigorously defend the actions.


Item 6.   EXHIBITS AND REPORTS ON FORM 8-K

          (a)  Exhibits

               27.1   Financial Data Schedule for the three months ended March
                      31, 2000

          (b)  Reports on Form 8-K

               The Company did not file any reports on Form 8-K during the
               quarter ended March 31, 2000.

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                                   SIGNATURES

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

                              AVT Corporation
                              (Registrant)

  Date:   May 12, 2000        By:  /s/ Roger A. Fukai
                                   ------------------------
                                   Roger A. Fukai
                                   Executive Vice President,
                                   Chief Financial Officer

                                   Signing on behalf of registrant and
                                    as principal financial officer

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