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                       SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D.C. 20549-1004
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                                    FORM 10-Q

(MARK ONE)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

    For the Quarterly Period Ended March 31, 2000

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

                       COMMISSION FILE NUMBER 000 - 19462
                                 ARTISOFT, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

          DELAWARE                                             86-0446453
-------------------------------                               -------------
(State or other jurisdiction of                               (IRS employer
        incorporation)                                    identification number)

                               5 CAMBRIDGE CENTER
                               CAMBRIDGE, MA 02142
                                 (617) 354-0600
               (Address, including zip code, and telephone number,
                      including area code, of registrant's
                          principal executive offices)

     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 THE
FILING REQUIREMENTS FOR AT LEAST THE PAST 90 DAYS.

                                    YES[X] NO [ ]

     INDICATE THE NUMBER OF SHARES  OUTSTANDING OF EACH OF THE ISSUER'S  CLASSES
OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE (MAY 15, 2000).

                 COMMON STOCK, $.01 PAR VALUE: 15,269,503 SHARES

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<PAGE>
                         ARTISOFT INC. AND SUBSIDIARIES
                                      INDEX



                                                                            PAGE
                                                                            ----
PART I. FINANCIAL INFORMATION

     Item 1. Financial Statements

             Condensed Consolidated Balance Sheets-
               March 31, 2000 and June 30, 1999                                3

             Condensed Consolidated Statements of Operations-
               Three Months and Nine Months Ended
               March 31, 2000 and 1999                                         4

             Condensed Consolidated Statements of Cash Flows-
               Nine Months Ended March 31, 2000
               and 1999                                                        5

             Notes to Condensed Consolidated Financial Statements            6-8

     Item 2. Management's Discussion and Analysis of
               Financial Condition and Results of Operations                9-18

PART II. OTHER INFORMATION

     Item 1. Legal Proceedings                                                19

     Item 2. Changes in Securities                                            19

     Item 3. Defaults Upon Senior Securities                                  19

     Item 4. Submission of Matters to a Vote by Security Holders              19

     Item 5. Other Information                                                19

     Item 6. Exhibits and Reports on Form 8-K                                 19

SIGNATURES                                                                    20

EXHIBITS

    11       Computation of Net Loss Per Share                                21

    27       Financial Data Schedule                                          22

                                       2
<PAGE>
                         ARTISOFT, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                    (in thousands, except per share amounts)

                                                         March 31,     June 30,
ASSETS                                                     2000          1999
                                                         ---------     --------
                                                        (unaudited)
Current assets:
  Cash and cash equivalents                              $   7,082     $ 16,148
  Short term investments                                     8,791           --
  Receivables:
    Trade accounts, net                                        979        1,055
    Other receivables                                          140           47
  Inventories                                                  996          496
  Prepaid expenses                                             475          301
  Note receivable                                              490           --
                                                         ---------     --------
    Total current assets                                    18,953       18,047
                                                         ---------     --------

Property and equipment                                       1,835        1,537
  Less accumulated depreciation and amortization              (993)        (615)
                                                         ---------     --------
    Net property and equipment                                 842          922
                                                         ---------     --------

Other assets                                                   200          266

Net assets from discontinued operations                      1,967        1,516
                                                         ---------     --------

                                                         $  21,962     $ 20,751
                                                         =========     ========
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                       $   1,020     $    931
  Accrued liabilities                                        1,340        1,237
  Deferred revenue                                           1,009            9
                                                         ---------     --------
    Total current liabilities                                3,369        2,177
                                                         ---------     --------

Commitments and contingencies                                   --           --

Shareholders' equity:
  Preferred stock, $1.00 par value
    Authorized 11,433,600 shares; none issued                   --           --
  Common stock, $.01 par value
    Authorized 50,000,000 shares;
    issued  28,523,997 shares at March 31,
    2000 and 28,144,477 shares at June 30, 1999                285          281
  Additional paid-in capital                               100,723       96,869
  Accumulated deficit                                      (12,631)      (8,792)
  Less treasury stock, at cost, 13,320,500
    shares at March 31, 2000 and June 30, 1999             (69,784)     (69,784)
                                                         ---------     --------
    Total shareholders' equity                              18,593       18,574
                                                         ---------     --------
                                                         $  21,962     $ 20,751
                                                         =========     ========

      See accompanying notes to condensed consolidated financial statements

                                       3
<PAGE>
                         ARTISOFT, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                     Three Months Ended          Nine Months Ended
                                           March 31,                 March 31,
                                     ---------------------     ---------------------
                                       2000         1999         2000         1999
                                     --------     --------     --------     --------
                                          (unaudited)                (unaudited)
<S>                                  <C>          <C>          <C>          <C>
Net sales                            $  4,309     $  1,852     $ 10,683     $  4,805
Cost of sales                           1,464          857        3,973        2,124
                                     --------     --------     --------     --------
  Gross profit                          2,845          995        6,710        2,681
                                     --------     --------     --------     --------
Operating Expenses:
  Sales and marketing                   4,412        1,162        7,792        3,308
  Product development                   1,009          735        2,664        1,781
  General and administrative              755          905        2,174        2,564
                                     --------     --------     --------     --------
    Total operating expenses            6,176        2,802       12,630        7,653
                                     --------     --------     --------     --------

Loss from operations                   (3,331)      (1,807)      (5,920)      (4,972)


Other income, net                         184          186          633          606
                                     --------     --------     --------     --------
  Net loss from continuing
    operations                         (3,147)      (1,621)      (5,287)      (4,366)

  Income (loss) from discontinued
    operations, net of tax               (320)       1,041        1,448        3,224
                                     --------     --------     --------     --------

    Net loss                         $ (3,467)    $   (580)    $ (3,839)    $ (1,142)
                                     ========     ========     ========     ========
Net loss per common share from
  continuing operations-
  Basic and Diluted                  $   (.21)    $   (.11)    $   (.35)    $   (.30)
                                     ========     ========     ========     ========
Net loss per common share-
  Basic and Diluted                  $   (.23)    $   (.04)    $   (.26)    $   (.08)
                                     ========     ========     ========     ========
Weighted average common shares
  outstanding:
    Basic and Diluted                  15,158       14,764       15,001       14,705
                                     ========     ========     ========     ========
</TABLE>

      See accompanying notes to condensed consolidated financial statements

                                       4
<PAGE>
                         ARTISOFT, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)

                                                            Nine Months Ended
                                                                March 31,
                                                          ---------------------
                                                            2000         1999
                                                          --------     --------
                                                               (unaudited)
Cash flows from operating activities:
  Net loss                                                $ (3,839)    $ (1,142)
  Adjustments to reconcile net loss to net
    cash used in operating activities:
       Depreciation and amortization                           448          323
       Loss from disposition of property, net                   32           --
       Change in accounts receivable and
         inventory allowances                                 (221)        (362)
       Tax benefit of disqualifying dispositions                --           34
      Changes in assets and liabilities:
        Receivables:
          Trade accounts                                       252           29
          Notes and other                                     (583)        (107)
        Inventories                                           (455)        (187)
        Prepaid expenses                                      (174)        (114)
        Accounts payable, accrued liabilities
          and deferred revenue                               1,192         (245)
        Net (increase) decrease in assets from
          discontinued operations                             (451)         765
        Other assets                                            --          (13)
                                                          --------     --------
          Net cash used in operating activities             (3,799)      (1,019)
                                                          --------     --------

Cash flows from investing activities:
  Purchases of investment securities                        (8,791)          --
  Purchases of property and equipment                         (334)        (626)
                                                          --------     --------

          Net cash used in investing activities             (9,125)        (626)

Cash flows from financing activities:
  Proceeds from issuance of common stock                     3,858          254
                                                          --------     --------


          Net cash provided by financing activities          3,858          254
                                                          --------     --------

Net decrease in cash and cash equivalents                   (9,066)      (1,391)
Cash and cash equivalents at beginning of period            16,148       18,514
                                                          --------     --------
Cash and cash equivalents at end of period                $  7,082     $ 17,123
                                                          --------     --------

     See accompanying notes to condensed consolidated financial statements.

                                       5
<PAGE>
                         ARTISOFT, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) BASIS OF PRESENTATION

     The condensed  consolidated  financial  statements  include the accounts of
Artisoft,  Inc. and its three wholly-owned  subsidiaries:  Triton  Technologies,
Inc.,  Artisoft "FSC",  Ltd. (which has elected to be treated as a foreign sales
corporation)  and  NodeRunner,  Inc. All significant  intercompany  balances and
transactions have been eliminated in consolidation.

     The accompanying unaudited condensed consolidated financial statements have
been prepared by the Company in accordance  with generally  accepted  accounting
principles, pursuant to the rules and regulations of the Securities and Exchange
Commission.   In  the  opinion  of  management,   the   accompanying   condensed
consolidated financial statements include all adjustments (of a normal recurring
nature) which are necessary for a fair presentation of the financial results for
the interim periods  presented.  Certain  information  and footnote  disclosures
normally  included  in  financial  statements  have been  condensed  or  omitted
pursuant to such rules and  regulations.  Although the Company believes that the
disclosures  are  adequate to make the  information  presented  accurate,  it is
suggested  that these  condensed  consolidated  financial  statements be read in
conjunction  with the  consolidated  financial  statements and the notes thereto
included in the Company's 1999 Annual Report to Shareholders  and report on Form
10-K.  The results of operations for the three or nine month periods ended March
31, 2000 are not  necessarily  indicative  of the results to be expected for the
full year.

(2) DISCONTINUED OPERATIONS

     In September  1999, the Company  announced its intention to investigate the
potential  separation of its two business  units:  the  Communications  Software
Group (CSG) and the  Computer  Telephony  Group (CTG).  On April 26,  2000,  the
Company signed a non-binding letter of intent to sell the CSG assets to Prologue
Software  Group.  As a result of this letter of intent,  the Board of  Directors
resolved to discontinue the operations of CSG, thus the Company has reclassified
the accompanying condensed consolidated balance sheets, statements of operations
and statements of cash flows of CSG to Discontinued Operations.

     The  components  of Net Assets of  Discontinued  Operations as of March 31,
2000 and June 30, 1999 follow (in thousands):

                                                March 31, 2000     June 30, 1999
                                                --------------     -------------
                                                  (unaudited)       (unaudited)

Accounts receivable, net                                  $ 1,350       $ 1,231
Inventories                                                   562           718
Prepaid expenses                                               65            34
Property and equipment, net                                   314           443
Other assets                                                  473           897
Accounts payable                                             (109)         (298)
Accrued liabilities                                          (688)       (1,220)
Current portion of capital lease obligation                    --          (289)
                                                          -------       -------
Net Assets of Discontinued Operations                     $ 1,967       $ 1,516
                                                          =======       =======

     The  following is a summary of the  operating  results of the  Discontinued
Operations for the three- and nine-month  periods ended March 31, 2000 and March
31, 1999 (in thousands):

                                       6
<PAGE>
                                    Three Months Ended       Nine Months Ended
                                         March 31,                March 31,
                                   --------------------      ------------------
                                     2000         1999        2000         1999
                                   -------       ------      ------      -------
                                        (unaudited)             (unaudited)

Net sales                          $ 1,857       $3,898      $8,611      $11,442
Cost of sales                          400        1,050       1,964        2,747
                                   -------       ------      ------      -------
Gross profit                         1,457        2,848       6,647        8,695
                                   -------       ------      ------      -------
Operating expenses                   1,777        1,807       5,199        5,471
                                   -------       ------      ------      -------
Net income (loss)                  $  (320)      $1,041      $1,448      $ 3,224
                                   =======       ======      ======      =======

(3) COMPUTATION OF NET LOSS PER SHARE

     Basic net loss per share is  computed by dividing  income  attributable  to
common  shareholders by the weighted average number of common shares outstanding
for the period.  Diluted net loss per share reflects the potential dilution that
could  occur  if  securities  or other  contracts  to issue  common  stock  were
exercised  or  converted  into common  stock that then shared in the loss of the
Company.  In calculating  net loss per common share for the three and nine month
periods ended March 31, 2000,  1,297,477 and 1,242,772  common stock  equivalent
shares  consisting of stock options have been excluded  because their  inclusion
would have been anti-dilutive.  In calculating net loss per common share for the
three and nine month  periods  ended March 31, 1999,  318,209 and 84,919  common
stock equivalent  shares  consisting of stock options have been excluded because
their inclusion would have been anti-dilutive.

(4) INVENTORIES

     Inventories at March 31, 2000 and June 30, 1999 consist of the following:


                                                      March 31,         June 30,
                                                         2000             1999
                                                         ----             ----
                                                      (unaudited)
Raw materials                                           $   354           $ 625
Finished goods                                              740              14
                                                        -------           -----
                                                          1,094             639
Inventory allowances                                        (98)           (143)
                                                        -------           -----
                                                        $   996           $ 496
                                                        =======           =====

                                       7
<PAGE>
(5) PROPERTY AND EQUIPMENT

     Property  and  equipment at March 31, 2000 and June 30, 1999 consist of the
following:

                                                      March 31,         June 30,
                                                         2000             1999
                                                         ----             ----
                                                      (unaudited)

Furniture and fixtures                                  $    39         $    36
Computers and other equipment                             1,558           1,266
Leasehold improvements                                      238             235
                                                        -------         -------
                                                          1,835           1,537
Accumulated depreciation
  and amortization                                         (993)           (615)
                                                        -------         -------
                                                        $   842         $   922
                                                        =======         =======

(6) ACCRUED LIABILITIES

     Accrued  liabilities  at March 31,  2000 and June 30,  1999  consist of the
following:

                                                      March 31,         June 30,
                                                         2000             1999
                                                         ----             ----
                                                      (unaudited)

Compensation and benefits                                $  657          $  776
Payroll, sales and property taxes                            98              68
Marketing                                                   265             162
Royalties                                                   187              16
Other                                                       133             215
                                                         ------          ------
                                                         $1,340          $1,237
                                                         ======          ======

                                       8
<PAGE>
                         ARTISOFT, INC. AND SUBSIDIARIES

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

     NET SALES.  Net sales  increased 133% to $4.3 million for the quarter ended
March 31, 2000 from $1.9 million for the quarter ended March 31, 1999. Net sales
increased  122% to $10.7  million  from $4.8  million for the nine month  period
ended  March 31,  2000.  The  increase  in net sales for both the three and nine
month periods ended March 31, 2000 was principally due to two factors: First, an
increase in sales of the Company's  TeleVantage  product line and secondly,  the
sale of the Company's Visual Voice source code to Intel  Corporation  during the
quarter ended  December 31, 1999.  During the quarter  ended  December 31, 1999,
Intel  Corporation  purchased the  Company's  Visual Voice product line for $2.7
million.  Intel  Corporation  also  agreed to pay the  Company  $1.5  million in
professional service fees associated with support and services provided to Intel
Corporation and the existing Visual Voice customers  between October 1, 1999 and
June 30, 2000. The Company  recognized $.9 million of revenue on the sale of the
Visual Voice source code and $.5 million in professional services revenue during
the quarter ended March 31, 2000.

The Company  distributes its products  internationally and tracks sales by major
geographic area.  Non-U.S.  sales increased 16% to $.3 million (7% of net sales)
for the quarter ended March 31, 2000 from $.2 million (13% of net sales) for the
same quarter a year ago. International sales increased to $.7 million (6% of net
sales) for the nine month  period  ended March 31, 2000 from $.6 million (13% of
net sales) for the same period in fiscal 1999. The increase in aggregate dollars
for the three and nine month  periods  ended March 31, 2000,  as compared to the
corresponding periods in fiscal 1999, primarily resulted from an acceleration in
the sales of the  Company's  TeleVantage  software  product  in Europe and Latin
America.  The decrease in  international  net sales as a percentage of total net
sales for the three and nine month  periods ended March 31, 2000 compared to the
corresponding  periods in fiscal 1999, resulted from the overall increase in net
sales.

     GROSS PROFIT.  The Company's  gross profit was $2.8 million for the quarter
ended  March 31, 2000 and $1.0  million for the quarter  ended March 31, 1999 or
66% and 54% of net sales,  respectively.  The  Company's  gross  profit was $6.7
million for the nine month  period ended March 31, 2000 and $2.7 million for the
nine-month   period  ended  March  31,  1999  or  63%  and  56%  of  net  sales,
respectively.  The increase in gross profit  percentage for the quarter and nine
month period ended March 31, 2000 was due to the  following  factors:  first,  a
shift to higher  margin  TeleVantage  software  sales  instead  of lower  margin
TeleVantage  Not For Resale kits (NFR's);  and second,  the receipt of funds for
the sale of Visual Voice source code.  The net increase in aggregate  dollars of
gross profit  margin for the quarter and nine month periods ended March 31, 2000
as  compared  to the  corresponding  periods in fiscal 1999 is due to higher net
sales  from  the  Company's  TeleVantage  product  line and the  recognition  of
revenues associated with the sale of the Company's Visual Voice software code.

     SALES AND MARKETING. Sales and marketing expenses were $4.4 million for the
quarter  ended March 31, 2000 and $1.2  million for the quarter  ended March 31,
1999, representing 102% and 63% of net sales, respectively.  Sales and marketing
expenses  were $7.8  million and $3.3 million for the nine month  periods  ended
March 31, 2000 and 1999, respectively, (73% and 69% of net sales, respectively).
The  increase  in sales and  marketing  expenses in  aggregate  dollars and as a
percentage of total net sales for the quarter and nine month periods ended March
31, 2000 compared to the same periods in fiscal 1999 was due  principally to the
recognition of a one-time  charge of $2.3 million during the quarter ended March
31, 2000 associated  with Artisoft common stock and warrants  granted to Toshiba
America Information Systems "TAIS". In January 2000, the Company granted 100,000
shares of Artisoft common stock and 50,000 warrants to TAIS at a strike price of
$6.994 (the fair market  value of the  Artisoft  common stock on the date of the
execution of the letter of intent). The fair market value of the Artisoft common
stock on the date of  execution  of the  definitive  agreement  was $21.50.  The
difference between the strike price and fair market value of the Artisoft common
stock was charged to selling expense in the quarter ended March 31, 2000.

                                       9

<PAGE>
Higher sales and marketing  staffing levels also contributed to the increases in
sales and marketing  expenses in both  aggregate  dollars and as a percentage of
total  net  sales for the three and nine  month  periods  ended  March 31,  2000
compared to the same periods in fiscal 1999.

     PRODUCT DEVELOPMENT. Product development expenses were $1.0 million for the
quarter  ended March 31,  2000 and $.7  million for the quarter  ended March 31,
1999, representing 23% and 40% of net sales,  respectively.  Product development
expenses  were $2.7  million for the nine month  period ended March 31, 2000 and
$1.8 million for the nine month period  ended March 31, 1999,  representing  25%
and  37%  of  net  sales,  respectively.   The  increase  in  aggregate  product
development expenses for the quarter and nine month periods ended March 31, 2000
compared to the same period in fiscal 1999 is  principally  attributable  to the
addition  of  product  development  resources  to work  on  future  versions  of
TeleVantage.  The addition of new development personnel during the quarter ended
December  31, 2000 was  required to meet  planned  future  product  introduction
timetables.   Specifically,  the  Company  has  added  development  and  quality
assurance  personnel  as  a  result  of  its  entry  into  two  development  and
distribution  agreements,  one with  Intel  Corporation,  pursuant  to which the
Company is to make modifications to the TeleVantage code to ensure compatibility
with Intel's CT Media  Server,  and the second with TAIS,  pursuant to which the
Company will be required to meet certain development milestones. The decrease in
development  expenses  as a  percentage  of net sales for both the  quarter  and
nine-month periods ended March 31, 2000 is principally due to higher overall net
sales.  The Company believes the introduction of new products to the market in a
timely manner is critical to its future success.

     GENERAL AND  ADMINISTRATIVE.  General and administrative  expenses were $.8
million  for the  quarter  ended  March 31, 2000 and $.9 million for the quarter
ended  March 31,  1999,  representing  18% and 49% of net  sales,  respectively.
General and  administrative  expenses were $2.2 million and $2.6 million for the
nine-month  period  ended  March  31,  2000 and March  31,  1999,  respectively,
representing 20% and 53% of net sales, respectively. The decrease in general and
administrative  expenses as a  percentage  of net sales for both the quarter and
nine month  periods  ended March 31, 1999  compared to the same period in fiscal
1999 is  principally  the  result of the  increase  in overall  net  sales.  The
decrease in general and  administrative  expenses in  aggregate  dollars for the
nine month  period  ended March 31, 2000 is  principally  due to reduced  senior
administrative personnel costs during the quarter ended March 31, 2000.

     OTHER INCOME, NET. For the quarter ended March 31, 2000, other income, net,
remained  unchanged at $.2  million,  from the  corresponding  quarter of fiscal
1999.  For the nine month  period  ended  March 31,  2000,  other  income,  net,
remained  unchanged  at $.6 million  from the nine month  period ended March 31,
1999.

     INCOME (LOSS) FROM DISCONTINUED OPERATIONS. For the quarter ended March 31,
2000,  Loss from  discontinued  operations was $(.3) million  compared to income
from operations of $1.0 million for the three month period ended March 31, 1999.
Income from  discontinued  operations  for the nine month period ended March 31,
2000 was $1.4 million  compared to income from  discontinued  operations of $3.2
million for the nine month period  ended March 31, 1999.  The decrease in income
from  discontinued  operations  for both the three month and nine month  periods
ended March 31, 2000,  is due  principally  to lower sales of the  Company's CSG
products.

FUTURE RESULTS

     The  Company   intends  to  continue  to  increase  its   investments   and
expenditures  in sales,  marketing  and  development  of its  flagship  product,
TeleVantage.  The Company will likely see increased operating  expenditures over
the next several  quarters as it completes  planned  development,  marketing and
sales personnel  expansion efforts in its Computer Telephony Product Group. With
these planned headcount increases,  the Company may also see increased occupancy
expenses associated with its Cambridge, Massachusetts corporate headquarters.

     In  September  1999,  the  Company  announced  that  it  would  investigate
alternatives for a possible division of its business units,  which could involve
the  sale or  other  disposition  of all or a  portion  of one of the  Company's
business  units.  On April 26, 2000, the Company  announced that it had signed a
non-binding   letter  of  intent  with  Prologue  Software  Group  to  sell  its
Communications  Software Group assets. While the Company believes it is probable
that it will enter into a definitive  agreement  with  Prologue  Software  Group
there can be no assurances  that a definitive  agreement  will be signed or that
the Communications Software Group assets will be sold.

     In December  1999,  the  Company  executed an  Intellectual  Property  (IP)
Purchase Agreement with Intel Corporation. The Company agreed to sell its Visual
Voice software code to Intel Corporation for consideration of $2.7 million.  The
$2.7 million was paid to Artisoft  upon  execution of the  agreement on December
30, 1999. Intel Corporation also agreed to allow the Company to continue to sell

                                       10
<PAGE>
its Visual  Voice  software  until June 30, 2000 royalty free up to a maximum of
$1.4 million in sales per quarter.  Subsequent to June 30, 2000 the Company will
be required to pay a royalty to Intel  Corporation  on all sales of Visual Voice
software.  Intel also agreed to pay the  Company  $1.5  million in  professional
services  revenue.  The Company  recognized  $1.4 million of Visual Voice source
code sale and  professional  services revenue during the quarter ended March 31,
2000 and  anticipates it will recognize  another $1.4 million during the quarter
ended June 30, 2000.

     In December 1999, the Company  executed a strategic  partnership with Intel
Corporation.  Under the terms of the  agreement,  the  Company  is  required  to
provide Intel  Corporation with a version of TeleVantage that is compatible with
Intel Corporation's CT Media Server.

     In January 2000,  the Company  executed a strategic  partnership  with TAIS
intended to allow the Company and TAIS to deliver an  integrated  communications
server and software-PBX  solution for small and midsized  businesses.  Under the
terms of the  agreement,  TAIS  will  invest  in  licenses  of  TeleVantage  for
customized  versions of the software  product to be integrated with its computer
telephony systems and communications server product offerings.  The Company will
be required to meet certain  development  milestones in providing the customized
software to TAIS.  TAIS acquired  100,000  shares of Artisoft  common stock at a
price of $6.994  per share and has the right to  acquire  an  additional  50,000
shares pursuant to a warrant  agreement.  Additionally,  the Company  authorized
TAIS to purchase an additional 1,350,000 shares of the Company's common stock on
the open market.  The Company  incurred a charge of  approximately  $2.3 million
dollars on the issuance of these  securities,  which was  recognized  as selling
expense during the quarter ended March 31, 2000.

     The failure of the Company to successfully meet its development  milestones
on either one of these key strategic  agreements  may have an adverse  effect on
the  Company's  anticipated  future  revenues  from  TeleVantage.  The Company's
ability to  significantly  expand its selling and marketing of  TeleVantage to a
broad customer base may depend on its ability to successfully  execute these two
key strategic  agreements.  The failure of one or both of these  partnerships or
the Company's  inability to continue to develop  future  strategic  partnerships
could adversely effect the Company's operating results.

     The Company's  future  results of operations  involve a number of risks and
uncertainties.  Among the  factors  that could  cause  future  results to differ
materially from historical  results are the following:  business  conditions and
the general economy; business and technological developments in the emerging and
rapidly changing software-based PBX market; competitive pressures, acceptance of
new  products  and  price  pressures;  availability  of third  party  compatible
products at reasonable prices; risk of nonpayment of accounts  receivable;  risk
of product  line or  inventory  obsolescence  due to shifts in  technologies  or
market demand; timing of software introductions; and litigation. These and other
risk factors are outlined below.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

     The Company had cash and  short-term  investments of $15.9 million at March
31, 2000 compared to $16.1 million at June 30, 1999 and working capital of $15.6
million  at March 31,  2000  compared  to $15.9  million at June 30,  1999.  The
decrease in cash and short term investments of $.2 million was the result of the
following factors:  the operating losses incurred by the Company during the nine
month  period  ended  March 31, 2000  partially  offset by the receipt of a $2.7
million  payment from Intel  Corporation for the sale of the Visual Voice source
code (of which only $1.8 million was  recognized as revenue  during the December
and March  quarters).  The  decrease  in the  Company's  working  capital of $.3
million  was  primarily  the  result  of the  decrease  in cash and  short  term
investment balances and accounts receivable balances.

     The Company funds its working capital  requirements  primarily through cash
flows from operations and existing cash balances.  While the Company anticipates
that existing cash balances and cash flows from  operations  will be adequate to
meet the Company's  current and expected cash requirements for at least the next
year,  additional  investments  by the Company to acquire new  technologies  and

                                       11
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products or loss of revenues from disposed  business  segments could necessitate
that the Company  seek  additional  debt or equity  capital.  In  addition,  the
Company  may also  from  time to time  seek debt  financing  or  solicit  equity
investments  for various  business  reasons.  There can be no assurance that any
such  additional  debt financing or equity capital will be available when needed
or, if  available,  will be on  satisfactory  terms.  The issuance of additional
equity securities may result in substantial dilution.

"SAFE HARBOR"  STATEMENT UNDER THE PRIVATE  SECURITIES  LITIGATION REFORM ACT OF
1995

     This Form 10-Q may contain  forward-looking  statements  that involve risks
and  uncertainties.  Among the important factors that could cause actual results
to differ  materially from forward looking  statements  contained herein are the
impact of competitive products and pricing, product demand and market acceptance
risks, the presence of competitors  with greater  financial  resources,  product
development and  commercialization  risks, costs associated with the integration
and  administration of acquired  operations,  capacity and supply constraints or
difficulties,  the results of financing  efforts,  and other risks detailed from
time to time in the Company's  Securities and Exchange Commission  filings.  The
Company filed its second quarter fiscal 2000 form 10-Q on February 14, 2000.

RISK FACTORS

GENERAL

     COMPETITION.  The computer telephony and communications software industries
are highly competitive and are characterized by rapidly changing  technology and
evolving industry standards. The Company competes with other software companies,
many of which have substantially greater financial,  technological,  production,
sales and marketing and other resources, as well as greater name recognition and
larger customer bases, than the Company.  As a result,  these competitors may be
able to respond more quickly and effectively to new or emerging technologies and
changes  in  customer  requirements  or  to  devote  greater  resources  to  the
development,  promotion,  sales and support of their  products than the Company.
The Company's new product introductions can be subject to severe price and other
competitive pressures.  While the Company endeavors to introduce its products to
the  marketplace  in a timely manner there can be no assurances  that due to the
greater  financial  resources of the Company's  competitors  that these products
will  be  successful  or even  accepted.  There  can be no  assurance  that  the
Company's  products  will be able to compete  successfully  with other  products
offered presently or in the future by other vendors.

     NEW INDUSTRY  DEVELOPMENT.  The Company's  principal product,  TeleVantage,
competes in the newly emerging  software-based  PBX market.  Software-based  PBX
products  operate in conjunction  with and are affected by developments in other
related  industries.  These industries include highly developed product markets,
such as PCs, PC  operating  systems  and  servers,  proprietary  PBX and related
telephone  hardware  and  software  products,  and  telephone,  data  and  cable
transmission  systems, as well as new emerging products and industries,  such as
internet  communications  and Internet Protocol ("IP")  telephony.  All of these
industries and product markets are currently  undergoing  rapid changes,  market
evolution and consolidation.  The manner, in which these industries and products
evolve,  including the  engineering-  and  market-based  decisions that are made
regarding the  interconnection  of the products and industries,  will affect the
opportunities  and  prospects  for the Company's  computer  telephony  products,
including TeleVantage.  The Company's software-based PBX solution,  TeleVantage,
competes  directly with other  software-based  PBX solutions as well as existing
traditional,  proprietary hardware solutions offered by companies such as Lucent
and  Nortel.   While  the  Company   anticipates  a  gradual   migration  toward
software-based PBX solutions, there can be no assurances that this will actually
occur or will occur at the rate that the Company anticipates.

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<PAGE>
     RETURNS AND PRICE PROTECTION. The Company is exposed to the risk of product
returns and rotations from its distributors and value added resellers, which are
estimated  and  recorded by the Company as a reduction  in sales.  Although  the
Company  attempts to monitor its  reseller  and  distributor  inventories  to be
consistent with current levels of sell through, localized overstocking may occur
with certain  products due to rapidly evolving market  conditions.  In addition,
the risk of product  returns and  rotations  may  increase if the demand for its
existing  products should rapidly decline due to regional  economic  troubles or
increased  competition.  Although the Company believes that it provides adequate
allowances  for product  returns and  rotations,  there can be no assurance that
actual product  returns and rotations will not exceed the Company's  allowances.
Any product returns and rotations in excess of recorded  allowances could result
in a material adverse effect on net sales and operating results.  As the Company
introduces  more new  products,  the  predictability  and timing of sales to end
users and the  management  of  returns  to the  Company  of unsold  products  by
distributors  and volume  purchasers  becomes  more  complex and could result in
material fluctuations in quarterly sales and operating results.

     FACTORS  AFFECTING  PRICING.  Substantially all of the Company's revenue in
each fiscal  quarter  results from orders booked in that quarter.  A significant
percentage of the Company's  bookings and sales to distributors  and value added
resellers  historically  have occurred  during the last month of the quarter and
are  concentrated  in the  latter  half of that  month.  Orders  placed by major
customers are typically based upon customers'  recent  historical and forecasted
sales  levels for Company  products  and  inventory  levels of Company  products
desired to be  maintained  by those major  customers  at the time of the orders.
Moreover,  orders may also be based upon financial  practices by major customers
designed  to  increase  the  return on  investment  or yield on the sales of the
Company's  products to value-added  resellers or end-users.  Major  distribution
customers  occasionally  receive market  development  funds from the Company for
purchasing  Company products and from time to time extended terms, in accordance
with industry  practice,  depending  upon  competitive  conditions.  The Company
currently  does not offer any cash  rebates to its U.S.  distribution  partners.
Changes in purchasing  patterns by one or more of the Company's major customers,
changes in customer  policies  pertaining to desired inventory levels of Company
products,  negotiations of market development funds and changes in the Company's
ability to anticipate in advance the product mix of customer orders could result
in material fluctuations in quarterly operating results.

     PRODUCT CONCENTRATION.  The Company has in the past derived, and may in the
future  derive,  a significant  portion of its revenues from a relatively  small
number of  products.  Declines in the  revenues  from these  software  products,
whether as a result of  competition,  technological  change,  price pressures or
other factors,  could have a material adverse effect on the Company's  business,
results of  operations  and  financial  condition.  Further,  life cycles of the
Company's products are difficult to estimate due in part to the recent emergence
of certain of the  Company's  products,  the effect of new  products  or product
enhancements,  technological  changes  in the  software  industry  in which  the
Company  operates and future  competition.  There can be no  assurance  that the
Company will be  successful  in  maintaining  market  acceptance  of its current
products or any new products or product enhancements.

     TECHNOLOGICAL  CHANGE.  The markets for computer  telephony  solutions  are
characterized by rapid technological  change,  changing customer needs, frequent
product  introductions  and evolving  industry  standards.  The  introduction of
products  incorporating  new  technologies  and the  emergence  of new  industry
standards   could  render  the   Company's   existing   products   obsolete  and
unmarketable.  The  Company's  future  success  will  depend upon its ability to
develop and introduce new computer  telephony  products  (including new releases
and  enhancements)  on  a  timely  basis  that  keep  pace  with   technological
developments  and  emerging  industry  standards  and address  the  increasingly
sophisticated needs of its customers. There can be no assurance that the Company
will be successful in developing and marketing new computer  telephony  products
that respond to technological  changes or evolving industry standards,  that the
Company  will not  experience  difficulties  that  could  delay or  prevent  the
successful  development,  introduction  and marketing of these new products,  or
that its new products will adequately  meet the  requirements of the marketplace
and achieve market  acceptance.  If the Company is unable,  for technological or
other  reasons,  to develop and introduce new computer  telephony  products in a
timely   manner  in  response  to  changing   market   conditions   or  customer
requirements,  the  Company's  business,  results of  operations  and  financial
condition could be adversely affected.

                                       13
<PAGE>
     POTENTIAL  FOR  UNDETECTED  ERRORS.  Software  products as complex as those
offered by the Company may contain undetected errors.  There can be no assurance
that,  despite  testing by the Company and by current and  potential  customers,
errors  will not be found in new or  existing  products  after  commencement  of
commercial shipments,  resulting in loss of or delay in market acceptance or the
recall of such  products,  which could have a material  adverse  effect upon the
Company's business,  results of operations and financial condition.  The Company
provides  customer  support for most of its  products.  The Company  will in the
future offer new products.  If these products are flawed,  or are more difficult
to use than traditional Company products,  customer support costs could rise and
customer satisfaction levels could fall.

     HARDWARE AVAILABILITY AND QUALITY. Most of the Company's computer telephony
software  requires  the  availability  of certain  hardware.  Specifically,  the
TeleVantage  software-based  PBX operates on certain voice processing boards. To
the extent that these boards become  unavailable  or in short supply the Company
could  experience  delays  in  shipping  software-based  phone  systems  to  its
customers,  which may have a material  adverse  affect on the  Company's  future
operating results.  In addition,  the Company is dependent on the reliability of
this  hardware  and to the extent the  hardware  has  defects it will impact the
performance  of its own  software-based  phone system.  To the extent,  that the
hardware  becomes  unreliable or does not perform in a manner that is acceptable
to the  Company's  customers,  the Company could  experience a material  adverse
impact on its future  operating  results.  Such  delays or quality  problems  if
encountered  could also cause damage to the Company's  reputation for delivering
high quality, reliable computer telephony solutions.

     INTELLECTUAL  PROPERTY RIGHTS.  The Company's success is dependent upon its
software  code  base,  its  programming  methodologies  and  other  intellectual
properties. To protect its proprietary technology,  the Company relies primarily
on a combination of trade secret laws and  nondisclosure,  confidentiality,  and
other agreements and procedures,  as well as copyright and trademark laws. These
laws and actions may afford only limited  protection.  There can be no assurance
that the steps taken by the Company  will be adequate to deter  misappropriation
of its  proprietary  information,  or to prevent the successful  assertion of an
adverse claim to software  utilized by the Company,  or that the Company will be
able to  detect  unauthorized  use and  take  effective  steps  to  enforce  its
intellectual  property  rights.  The  Company  owns  United  States and  foreign
trademark registrations for certain of its trademarks.  In addition, the Company
has applied for trademark  protection on a number of its recently introduced new
technologies.  Certain of the Company's trademark applications are still pending
and no assurances can be made that the trademark  applications  will be accepted
by the U.S.  Trademark and Patent  Office and relevant  foreign  authorities.  A
rejection of one or more of these trademark  applications  could have a material
adverse affect on the Company's  ability to  successfully  sell and market these
new products.  In selling its products,  the Company relies primarily on "shrink
wrap"  licenses  that  are  not  signed  by  licensees  and,  therefore,  may be
unenforceable under the laws of certain jurisdictions.  In addition, the laws of
some foreign  countries provide  substantially  less protection to the Company's
proprietary  rights than do the laws of the United  States.  Trademark or patent
challenges in such foreign countries could, if successful, materially disrupt or
even terminate the Company's ability to sell its products in such markets. There
can be no assurance  that the  Company's  means of  protecting  its  proprietary
rights will be adequate or that the Company's competitors will not independently
develop similar technology.  Although the Company believes that its services and
products do not infringe on the  intellectual  property  rights of others,  such
claims have been and in the future may be  asserted  against  the  Company.  The
failure of the Company to protect its proprietary  property, or the infringement
of the  Company's  proprietary  property  on the rights of others,  could have a
material  adverse  effect on the Company's  business,  results of operations and
financial condition.

     DEPENDENCE UPON KEY PERSONNEL.  The Company's future performance depends in
significant part upon key technical and senior management personnel. The Company
is dependent on its ability to identify,  hire, train,  retain and motivate high
quality  personnel,  especially highly skilled engineers involved in the ongoing
research and development  required to develop and enhance the Company's software
products  and  introduce  enhanced  future  products.  A high level of  employee
mobility  and  aggressive  recruiting  of  skilled  personnel  characterize  the
industry.  There can be no assurance that the Company's  current  employees will
continue  to work  for the  Company  or that  the  Company  will be able to hire
additional  employees  on a timely  basis.  Loss of  services  of  existing  key
employees  or failure  to timely  hire new key  employees  could have a material

                                       14
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adverse  effect on the Company's  business,  results of operations and financial
condition.  The Company  expects to grant  additional  stock options and provide
other forms of incentive  compensation  to attract and retain key  technical and
executive   personnel.   These   additional   incentives  will  lead  to  higher
compensation  costs in the future and may adversely  effect the Company's future
results of operations.  The Company has  experienced  and expects to continue to
experience  difficulty in hiring key  technical  personnel in certain of its key
development offices.  These difficulties could lead to higher compensation costs
and may adversely effect the Company's future results of operations.

     FLUCTUATIONS  IN  QUARTERLY  OPERATING  RESULTS.  The  Company's  operating
results  have in the past  fluctuated,  and may in the  future  fluctuate,  from
quarter  to  quarter,  as a result of a number  of  factors  including,  but not
limited to,  changes in pricing  policies or price  reductions by the Company or
its  competitors;  variations  in the  Company's  sales  channels  or the mix of
product sales; the timing of new product  announcements and introductions by the
Company or its competitors; the availability and cost of supplies; the financial
stability  of major  customers;  market  acceptance  of new products and product
enhancements;  the  Company's  ability  to  develop,  introduce  and  market new
products,  applications  and  product  enhancements;  the  Company's  ability to
control costs;  possible  delays in the shipment of new products;  the Company's
success in expanding  its sales and  marketing  programs;  deferrals of customer
orders in  anticipation  of new  products,  product  enhancements  or  operating
systems;  changes in Company strategy;  personnel changes;  and general economic
factors.  The Company's  software  products are generally  shipped as orders are
received and  accordingly,  the Company has  historically  operated  with little
backlog.  As a result,  sales in any quarter are  dependent  primarily on orders
booked and shipped in that  quarter and are not  predictable  with any degree of
certainty.  In addition, the Company's expense levels are based, in part, on its
expectations as to future  revenues.  If revenue levels are below  expectations,
operating results are likely to be adversely affected.  The Company's net income
may be  disproportionately  affected by a reduction in revenues because of fixed
costs related to generating  its revenues.  These or other factors may influence
quarterly  results  in the future  and,  accordingly,  there may be  significant
variations  in  the  Company's  quarterly   operating  results.   The  Company's
historical   operating   results  are  not  necessarily   indicative  of  future
performance for any particular period.  Due to all of the foregoing factors,  it
is possible that in some future quarter the Company's  operating  results may be
below the  expectations of public market analysts and investors.  In such event,
the price of the Company's Common Stock could be adversely affected.

     POSSIBLE  VOLATILITY  OF STOCK PRICE.  The trading  price of the  Company's
Common Stock is likely to be subject to significant  fluctuations in response to
variations in quarterly operating results, changes in management,  announcements
of  technological  innovations or new products by the Company,  its customers or
its  competitors,  legislative  or  regulatory  changes,  general  trends in the
industry and other events or factors.  The stock market has experienced  extreme
price and volume fluctuations which have particularly  affected the market price
for many high technology  companies  similar to the Company and which have often
been  unrelated to the operating  performance  of these  companies.  These broad
market  fluctuations  may  adversely  affect the market  price of the  Company's
Common  Stock.   Further,   factors  such  as  announcements  of  new  strategic
partnerships  or product  offerings by the Company or its competitors and market
conditions  for stocks  similar to that of the  Company  could have  significant
impact on the market price of the Common Stock.

     POSSIBLE  ACQUISITIONS OR DIVESTITURES.  From time to time, the Company may
consider acquisitions of or alliances with other companies that could complement
the Company's existing business, including acquisitions of complementary product
lines. Although the Company may periodically discuss such potential transactions
with a number of companies, there can be no assurance that suitable acquisition,
alliance or purchase  candidates  can be  identified,  or that,  if  identified,
acceptable terms can be agreed upon or adequate and acceptable financing sources
will be  available  to the  Company  or  purchasers  that would  enable  them to
consummate such transactions. Even if an acquisition or alliance is consummated,
there  can  be  no  assurance  that  the  Company  will  be  able  to  integrate
successfully  such  acquired  companies  or  product  lines  into  its  existing
operations,  which  could  increase  the  Company's  operating  expenses  in the
short-term  and  materially  and  adversely  affect  the  Company's  results  of
operations.  Moreover,  certain  acquisitions  by the  Company  could  result in
potentially   dilutive  issuances  of  equity  securities,   the  incurrence  of
additional debt and  amortization of expenses related to goodwill and intangible
assets,  all of  which  could  adversely  affect  the  Company's  profitability.

                                       15
<PAGE>
Divestitures  of product lines or operating  groups could  adversely  affect the
Company's   profitability   by  reducing  the  Company's   revenues   without  a
corresponding  reduction in expenses.  Acquisitions,  alliances and divestitures
involve numerous risks,  such as the diversion of the attention of the Company's
management  from other  business  concerns,  the  entrance of the  Company  into
markets  in  which  it  has  had  no  or  only  limited  experience,  unforeseen
consequences  of exiting  from  product  markets and the  potential  loss of key
employees of the acquired  company,  all of which could have a material  adverse
effect on the Company's business, financial condition and results of operations.

COMPUTER TELEPHONY

     COMPUTER  TELEPHONY  PRODUCT MARKET.  The market for open,  standards-based
computer telephony tools,  applications and system-level  products is relatively
new and is characterized by the rapid evolution of computer  telephony  hardware
and  software   standards,   emerging   technologies   and   changing   customer
requirements.  These characteristics may render the Company's computer telephony
products unmarketable or may make the expansion, timing and direction of product
development  unpredictable.  As a  result  of  these  factors,  there  can be no
assurance that computer  telephony  markets will continue to expand, or that the
Company's products will achieve market acceptance.

     The Company believes that the principal  competitive  factors affecting the
computer  telephony  markets it serves  include  vendor and product  reputation,
product  architecture,  functionality  and features,  scalability,  ease of use,
quality of product and support,  performance,  price, brand name recognition and
effectiveness of sales and marketing efforts. There can be no assurance that the
Company can maintain and grow its market position  against current and potential
competitors,  especially those with significantly greater financial,  marketing,
service, support,  technical and other competitive resources. Any failure by the
Company to  maintain  and grow its  competitive  position  could have a material
adverse effect upon the Company's  revenues from its computer  telephony product
line.

     TeleVantage  is a  telephone  system  designed  for small and medium  sized
businesses  and  branch  offices.   The  Company  believes   TeleVantage  offers
functionality  superior to that of a traditional standalone PBX. However, due to
the complexity of this software and the mission  critical systems it is designed
to operate,  there can be no assurances  that the software will be  successfully
sold in high volume.  Additionally,  there can be no assurances that competitors
with substantially greater financial resources than that of the Company will not
develop their own software-based PBX solutions and subsequently adversely affect
the  Company's  ability  to  market  or sell its  software-based  PBX  solution,
TeleVantage.

     TeleVantage  could  also  face  direct   competition  from  companies  with
significantly  greater  financial,  marketing,  service,  support and  technical
resources.  In addition to the  possibility  that these  companies may release a
software-based PBX solution, they have signaled their intentions to develop "IP"
(Internet  Protocol)  based  applications.  Several of the  Company's  potential
competitors  with  substantially   greater  financial  resources  have  recently
announced  partnerships  designed  to  develop,  market  and sell IP  based  and
software based telephony solutions.  These developments could put the Company at
a competitive  disadvantage and adversely  affect the Company's  ability to sell
and market its own  software-  based PBX  solution,  TeleVantage.  Although  the
Company has recently  partnered  with TAIS and Intel  Corporation to deliver its
software-based  PBX  to  small  and  medium  sized  businesses  there  can be no
assurances these partnerships will  substantially  expand the market presence of
the Company's  software-based PBX, TeleVantage.  The Company anticipates certain
competitors with greater  financial  resources will continue to make substantial
new  investments in developing IP based and software based  telephony  solutions
and may form  further  partnerships  that will put the Company at a  competitive
disadvantage.  Thus there can be no  assurance  that the Company will be able to
successfully  market  or sell  its own  competing  IP  based  or  software-based
telephony solutions.

     COMPUTER   TELEPHONY   HARDWARE   SUPPLIER   DEPENDENCIES.   The  Company's
software-based PBX product,  TeleVantage,  is designed to operate in conjunction
with voice processing boards  manufactured by Intel  Corporation.  Additionally,
Intel  Corporation  is  currently  the  Company's  only  supplier  of the  voice
processing boards that are necessary for the operation of TeleVantage.  If Intel
Corporation becomes unable to continue to manufacture and supply these boards in

                                       16
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the volume,  price and technical  specifications the Company requires,  then the
Company would have to adapt its products to a substitute supplier. Introducing a
new supplier of voice  processing  boards could result in unforeseen  additional
product  development or  customization  costs and could  introduce  hardware and
software  operating  or  compatibility  problems.  These  problems  could affect
product  shipments,  be costly to correct or damage the Company's  reputation in
the markets in which it operates,  and could have a material  adverse  affect on
its business, financial condition or results of operations.

     Additionally,  Intel  Corporation  hardware failures could adversely affect
the  Company's  ability to ship and sell its own software  products,  damage its
reputation  in the  markets  in which it  operates,  and could  have a  material
adverse affect on its business, financial condition or results of operations.

     COMPUTER  TELEPHONY  CUSTOMERS  AND  MARKET  ACCEPTANCE.   The  Company  is
currently and will continue to invest significant  resources in the development,
marketing  and  sales of  TeleVantage,  a  software-based  PBX.  There can be no
assurance  that the Company will achieve  market  acceptance  of these  products
whose PBX and related  telephone  needs have  traditionally  been served through
proprietary PBX and key system  distributors  and  interconnects.  The Company's
potential  customer  base  for its  TeleVantage  product,  small,  medium  sized
businesses  and  branch  offices,  have  well  established  histories  of buying
existing  telecommunications  products,  including  proprietary PBXs and related
products, and have found such products to be generally reliable. Moreover, large
companies such as Lucent and Nortel have invested  substantial  resources in the
development and marketing of existing  proprietary PBXs and related products and
maintain  well-developed  distribution channels.  Accordingly,  the Company will
face substantial  market barriers and competitive  pressures in achieving market
acceptance  of its new software  based PBX  products.  There can be no assurance
that the Company will be successful in establishing a critical mass of qualified
computer telephony resellers or that such resellers will be able to successfully
market TeleVantage.  The Company's success in selling these products will likely
be  influenced  by  its  ability  to  attract  and  inform  qualified  VARs  and
distributors  and  interconnects  on the  features  and  functionality  of these
emerging technologies.

     The Company's computer telephony products compete in a relatively  immature
industry with as yet unproven technologies. The Company believes that there will
be a gradual evolution toward open server-based  telephony enabled  applications
from  the  traditional  proprietary  PBX  environment  and  that,  in such a new
environment,  software-based  PBX systems will be widely  accepted.  The Company
also believes that there may be an eventual gravitation toward Internet Protocol
architectures  and/or  voice over wire  applications.  However,  there can be no
assurance that the current  technological  innovations in the computer telephony
industry  will be widely  adopted by small to medium  sized  businesses  or that
telephony  standards  will  evolve  in a  manner  that  is  advantageous  to  or
anticipated by the Company.

     TeleVantage  currently  runs  only on  Microsoft  Windows  NT  servers.  In
addition,  the Company's products use other Microsoft Corporation  technologies,
including  Microsoft  Exchange  Server and  Microsoft  SQL Server.  A decline in
market  acceptance  for Microsoft  technologies  or the increased  acceptance of
other  server   technologies  could  cause  the  Company  to  incur  significant
development  costs and could have a material  adverse  effect on our  ability to
market  our  current  products.   Although,   the  Company  believes   Microsoft
technologies  will continue to be widely used by businesses,  there  nonetheless
can be no assurance that businesses will adopt these technologies as anticipated
or will not migrate to other competing technologies that the Company's telephony
products do not currently support.

     Additionally,  since the  operation  of the  Company's  software-based  PBX
solution is  dependent  upon  certain  Microsoft  technologies,  there can be no
assurances  that in the event of a price increase by Microsoft on its SQL Server
licenses  or other  technologies  that the  Company  will be able to continue to
successfully sell and market its software- based PBX. Furthermore, Microsoft has
not yet signaled  whether they intend to offer a competing  software-based  PBX.
Should  Microsoft or any other  operating  system  provider  with  substantially
greater financial resources than that of the Company introduce competing product
offerings, the Company could be put at a competitive disadvantage.

                                       17
<PAGE>
ITEM 2(A). QUANITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     MARKET  RISK.  During the normal  course of business  Artisoft is routinely
subjected to a variety of market risks,  examples of which include,  but are not
limited to, interest rate movements and  collectibility of accounts  receivable.
Artisoft  currently  assesses  these  risks  and has  established  policies  and
practices to protect  against the adverse  effects of these and other  potential
exposures.  Although  Artisoft does not anticipate any material  losses in these
risk areas,  no assurances can be made that material losses will not be incurred
in these areas in the future.

     INTEREST  RATE  RISK.  Artisoft  may be exposed  to  interest  rate risk on
certain of its cash  equivalents.  The value of certain  of the  Company's  cash
equivalents may be impacted in a rising  interest rate  investment  environment.
Although  Artisoft does not anticipate any material  losses from such a movement
in interest  rates,  no assurances can be made that material  losses will not be
incurred in the future.

                                       18
<PAGE>
                         ARTISOFT, INC. AND SUBSIDIARIES
                           PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     The Company is subject to lawsuits and other claims arising in the ordinary
course of its  operations.  In the opinion of management,  based on consultation
with legal  counsel,  the  effects of such  matters  will not have a  materially
adverse effect on the Company's financial position.

ITEM 2. CHANGES IN SECURITIES

     None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     None

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

     None

ITEM 5. OTHER INFORMATION

     None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits

          No. 11 - Computation of Net Loss Per Share

          No. 27 - Financial Data Schedule for Form 10-Q dated May 15, 2000

     (c)  Reports on Form 8-K

          There were no reports  filed on Form 8-K during the three months ended
          March 31, 2000

                                       19
<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 hereunto duly authorized.

                                        ARTISOFT, INC.


Date: May 15, 2000                      By /s/ Michael P. Downey
                                          --------------------------------------
                                          Michael P. Downey
                                          Interim Chief Executive Officer and
                                          Chairman of the Board of Directors



                                        By /s/ Kirk D. Mayes
                                          --------------------------------------
                                          Kirk D. Mayes
                                          Controller and Acting Chief Financial
                                          Officer

                                       20