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


                                    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 SEPTEMBER 30, 1999

                                       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 (November 12, 1999).

                 Common stock, $.01 par value: 14,893,269 shares

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<PAGE>
                         ARTISOFT INC. AND SUBSIDIARIES
                                      INDEX


                                                                            PAGE
                                                                            ----
PART I. FINANCIAL INFORMATION

     Item 1. Financial Statements

               Consolidated Balance Sheets-
                  September 30, 1999 and June 30, 1999                         3

               Consolidated Statements of Operations-
                  Three Months Ended
                  September 30, 1999 and 1998                                  4

               Consolidated Statements of Cash Flows-
                  Three Months Ended September 30, 1999
                  and 1998                                                     5

               Notes to Condensed Consolidated Financial Statements          6-8

     Item 2. Management's Discussion and Analysis of
               Financial Condition and Results of Operations                9-20

     Item 2(a) Quantitative and Qualitative Disclosures about Market Risk     20

PART II. OTHER INFORMATION

     Item 1. Legal Proceedings                                                21

     Item 2. Changes in Securities                                            21

     Item 3. Defaults Upon Senior Securities                                  21

     Item 4. Submission of Matters to a Vote by Security Holders              21

     Item 5. Other Information                                                21

     Item 6. Exhibits and Reports on Form 8-K                                 21

SIGNATURES                                                                    22

EXHIBITS

     11   Computation of Net Income Per Share                                 23

     27   Financial Data Schedule                                             24

                                        2
<PAGE>
                         ARTISOFT, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)

                                                       September 30,   June 30,
ASSETS                                                     1999          1999
                                                         --------      --------
                                                        (unaudited)
Current assets:
  Cash and cash equivalents                              $ 15,451      $ 16,148
  Receivables:
      Trade accounts, net                                   2,027         2,267
      Other receivables                                        95            66
  Inventories                                               1,019         1,214
  Prepaid expenses                                            538           335
                                                         --------      --------
      Total current assets                                 19,130        20,030
                                                         --------      --------

Property and equipment                                      6,464         6,349
  Less accumulated depreciation and amortization           (5,212)       (4,984)
                                                         --------      --------
      Net property and equipment                            1,252         1,365
                                                         --------      --------

Other assets                                                  999         1,163
                                                         --------      --------
                                                         $ 21,381      $ 22,558
                                                         ========      ========
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                       $    879      $  1,229
  Accrued liabilities                                       2,193         2,466
  Current portion of capital lease obligations                175           289
                                                         --------      --------
      Total current liabilities                             3,247         3,984
                                                         --------      --------
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 28,162,971 shares
    at September 30, 1999 and 28,144,477 at
    June 30, 1999                                             281           281
  Additional paid-in capital                               96,911        96,869
  Accumulated deficit                                      (9,274)       (8,792)
  Less treasury stock, at cost, 13,320,500 shares
    at September 30, 1999 and June 30, 1999               (69,784)      (69,784)
                                                         --------      --------
      Total shareholders' equity                           18,134        18,574
                                                         --------      --------
                                                         $ 21,381      $ 22,558
                                                         ========      ========

           See accompanying notes to consolidated financial statements

                                        3
<PAGE>
                         ARTISOFT, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                                          Three Months Ended
                                                             September 30,
                                                       ------------------------
                                                         1999            1998
                                                       --------        --------
                                                             (unaudited)

Net sales                                              $  6,401        $  5,094
Cost of sales                                             2,222           1,356
                                                       --------        --------
         Gross profit                                     4,179           3,738
                                                       --------        --------
Operating expenses:
         Sales and marketing                              2,355           2,130
         Product development                              1,468           1,242
         General and administrative                       1,025             879
                                                       --------        --------
                  Total operating expenses                4,848           4,251
                                                       --------        --------
Loss from operations                                       (669)           (513)

Other income, net                                           187             181
                                                       --------        --------
         Net loss                                      $   (482)       $   (332)
                                                       ========        ========
Net loss per common share-basic and diluted            $   (.03)       $   (.02)
                                                       ========        ========
Weighted average common shares outstanding               14,834          14,660
                                                       --------        --------

           See accompanying notes to consolidated financial statements

                                        4
<PAGE>
                         ARTISOFT, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

                                                           Three Months Ended
                                                              September 30,
                                                         ----------------------
                                                           1999          1998
                                                         --------      --------
                                                               (unaudited)
Cash flows from operating activities:
  Net loss                                               $   (482)     $   (332)
  Adjustments to reconcile net loss to net
    cash used in operating activities:
      Depreciation and amortization                           392           342
      Gain from disposition of property, net                    3            --
      Change in accounts receivable and
        inventory allowances                                  (29)         (203)
   Changes in assets and liabilities:
      Receivables:
        Trade accounts                                        303           872
        Other receivables                                     (29)          139
      Inventories                                             161            81
      Prepaid expenses                                       (203)           13
      Accounts payable and accrued liabilities               (623)         (519)
      Accrued restructuring costs                              --          (926)
      Other assets                                             --           (43)
                                                         --------      --------
        Net cash used in operating activities                (507)         (576)
                                                         --------      --------
Cash flows from investing activities:
  Proceeds from sale of property and equipment                 --             3
  Purchases of property and equipment                        (118)         (222)
                                                         --------      --------
        Net cash used in investing activities                (118)         (219)
                                                         --------      --------
Cash flows from financing activities:
  Proceeds from issuance of common stock                       42            --
  Principal payments on capital lease obligations            (114)         (161)
                                                         --------      --------
        Net cash used in financing activities                 (72)         (161)
                                                         --------      --------
Net decrease in cash and cash equivalents                    (697)         (956)

Cash and cash equivalents at beginning of period           16,148        18,514
                                                         --------      --------
Cash and cash equivalents at end of period               $ 15,451      $ 17,558
                                                         ========      ========

          See accompanying notes to consolidated financial statements.

                                        5
<PAGE>
                         ARTISOFT, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
        (in thousands, except percentages, shares and per share amounts)

(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 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  not  misleading,  it is  suggested  that these
financial  statements be read in  conjunction  with the  consolidated  financial
statements and the notes thereto included in the Company's 1999 Annual Report on
Form 10-K.  The results of operations  for the three months ended  September 30,
1999 are not  necessarily  indicative of the results to be expected for the full
year.

(2)  COMPUTATION OF NET LOSS PER SHARE

     Basic loss per share is computed by dividing  loss  attributable  to common
shareholders by the weighted average number of common shares outstanding for the
period.  Diluted 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  earnings  (loss) of the
Company.  In  calculating  net loss per common share for the three month periods
ended September 30, 1999 and 1998,  666,724 and 4,132 shares,  respectively,  of
anti-dilutive  common stock equivalent  shares  consisting of stock options have
been  excluded  because  their  inclusion  would  have been  anti-dilutive.

(3)  SEGMENTATION OF FINANCIAL RESULTS

     The  financial  results for the three months ended  September  30, 1999 and
     1998 are summarized below by product group:

                                                    Three Months Ended
                                                       September 30,
                                                  -----------------------
                                                   1999            1998
                                                  -------         -------
     Computer Telephony Group:

              Net sales                           $ 2,721         $ 1,357
              Gross profit                        $ 1,453         $   837
              Gross profit margin                      53%             62%
              Operating loss                      $(1,656)        $(1,561)
              Capital expenditures                $    83         $   217
              Depreciation and
              amortization                        $   157         $    83

                                        6
<PAGE>
     Communications Software Group

              Net sales                           $ 3,680         $ 3,737
              Gross profit                        $ 2,726         $ 2,901
              Gross profit margin                      74%             78%
              Operating income                    $   987         $ 1,048
              Capital expenditures                $    35         $     5
              Depreciation and
              amortization                        $   235         $   259

     The Company's Computer  Telephony Group principally  includes revenues from
the  TeleVantage  and Visual Voice product lines.  The Company's  Communications
Software Group principally  includes revenues from the LANtastic NOS,  CoSession
Remote, i.Share, ModemShare, WinBeep and BizFax product lines.

(4)  INVENTORIES

     Inventories  at  September  30,  1999  and  June 30,  1999  consist  of the
following:

                                               September 30,       June 30,
                                                  1999              1999
                                                 -------           -------
     Raw materials                               $   674           $ 1,177
     Work-in-process                                   4                 7
     Finished goods                                  518               173
                                                 -------           -------
                                                   1,196             1,357
     Inventory allowances                           (177)             (143)
                                                 -------           -------
                                                 $ 1,019           $ 1,214
                                                 =======           =======

(5)  PROPERTY AND EQUIPMENT

     Property and  equipment at September  30, 1999 and June 30, 1999 consist of
the following:

                                              September 30,       June 30,
                                                  1999              1999
                                                 -------           -------
     Furniture and fixtures                      $    36           $    36
     Computers and other equipment                 6,160             6,046
     Leasehold improvements                          268               267
                                                 -------           -------
                                                   6,464             6,349
     Accumulated depreciation and
       amortization                               (5,212)           (4,984)
                                                 -------           -------
                                                 $ 1,252           $ 1,365
                                                 =======           =======

                                        7
<PAGE>
(6)  OTHER ASSETS

     Other  assets  at  September  30,  1999 and June 30,  1999  consist  of the
following:

                                                         September 30,  June 30,
                                                             1999         1999
                                                            ------       ------
     Trademarks and patents, net of
          accumulated amortization of $101 and $95          $   23       $   29
     Purchased technology, net of
          accumulated amortization of $1,880 and $1,451        851        1,009
     Recoverable deposits and other                            125          125
                                                            ------       ------
                                                            $  999       $1,163
                                                            ======       ======

(7)  ACCRUED LIABILITIES

     Accrued  liabilities at September 30, 1999 and June 30, 1999 consist of the
following:

                                                    September 30,   June 30,
                                                        1999          1999
                                                       ------        ------
     Compensation and benefits                         $1,024        $1,183
     Payroll, sales and property taxes                    208           258
     Marketing                                            487           427
     Royalties                                             80           216
     Other                                                394           382
                                                       ------        ------
                                                       $2,193        $2,466
                                                       ======        ======

                                        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 for the Company's  Computer  Telephony  Product Group
increased  101% to $2.7 million for the quarter  ended  September  30, 1999 from
$1.3 million for the quarter ended September 30, 1998. The increase in net sales
was principally due to increased sales of the Computer Telephony Product Group's
TeleVantage product.

     Net sales for the  Company's  Communications  Software  Product  Group were
substantially  unchanged at $3.7  million for the quarter  ended  September  30,
1999.  A continued  decline in the sales volume of the  Communications  Software
Group's   LANtastic   NOS  products  was  offset  by  increased   sales  of  the
Communications  Software  Group's  CoSession Remote software and the addition of
sales of the Company's recently acquired WinBeep paging products.

     The  Company's  overall  net sales  increased  26% to $6.4  million for the
quarter  ended  September  30,  1999 from $5.1  million  for the  quarter  ended
September  30,  1998  principally  due  to  substantially  higher  sales  of the
Company's  Computer  Telephony product  TeleVantage.

     The Company  distributes its products  internationally  and tracks sales by
major geographic area. Non-U.S. sales represented 16% and 18% of total net sales
for the quarters ended September 30, 1999 and 1998, respectively. The percentage
decrease  in  international  sales  is  due  to the  increase  in the  Company's
non-European  net sales in the quarter ended  September 30, 1999 compared to the
quarter ended  September  30, 1998.  International  sales  increased 12% to $1.0
million  for the  quarter  ended  September  30,  1999 from $.9  million for the
quarter  ended  September  30, 1998. A majority of the  Company's  international
sales during the quarter ended  September  30, 1999 were  comprised of LANtastic
and other communications software products. Management believes that the reasons
for the increase in  international  net sales in the quarter ended September 30,
1999  compared  to the quarter  ended  September  30,  1998 is due to  increased
international  sales of the Company's Computer  Telephony  products  (especially
TeleVantage).

     GROSS PROFIT.  The Company's  gross profit was $4.2 million for the quarter
ended  September 30, 1999 and $3.7 million for the quarter  ended  September 30,
1998 or 65% and 73% of net sales,  respectively.  The  decrease in gross  profit
percentage  for  fiscal  1999 was due to a shift in product  mix.  Specifically,
sales of the Company's lower margin Visual Voice hardware products, and sales of
the Company's lower margin  TeleVantage  Not For Resale kits (NFR's)  associated
with the Company's development on its TeleVantage reseller channel, increased as
a  percentage  of total net sales.  Also  contributing  to the  decline in gross
profit  percentage  was  increases  in royalty  expenses on  ConfigSafe  Support
Edition sales. The increase in gross profit dollars was the result of higher net
sales of the Company's Computer Telephony  products.  Gross profit may fluctuate
on a quarterly  basis  because of product  mix,  pricing  actions and changes in
sales and inventory allowances.

     SALES AND MARKETING. Sales and marketing expenses were $2.4 million for the
quarter  ended  September  30,  1999  and $2.1  million  for the  quarter  ended
September 30, 1998,  representing  37% and 42% of net sales,  respectively.  The
increase in sales and  marketing  expenses in aggregate  dollars for the quarter
ended  September  30,  1999  compared  to the same period in fiscal 1999 was due
principally to increased expenditures on the sales and marketing  infrastructure
in the Company's  Computer  Telephony  Products Group. The decrease in sales and
marketing  expenses as a percentage of sales for the quarter ended September 30,
1999  compared to the same period in fiscal 1999 is due to the overall  increase
in net sales for the quarter ended September 30, 1999.

                                        9
<PAGE>
     PRODUCT DEVELOPMENT. Product development expenses were $1.5 million for the
quarter  ended  September  30,  1999  and $1.2  million  for the  quarter  ended
September 30, 1998,  representing  23% and 24% of net sales,  respectively.  The
increase  in  aggregate  product  development  expenses  for the  quarter  ended
September  30, 1999  compared  to the same period in fiscal 1999 is  principally
attributable to the addition of product  development  resources in the Company's
Computer  Telephony  Group.  The  addition of new  development  personnel to the
Computer  Telephony  Group  during the  quarter  ended  September  30,  1999 was
required to meet planned future product introduction  timetables.  Specifically,
the Company has added  development  personnel in advance of the expected  future
release of  TeleVantage  3.0, its  flagship  product.  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 $1.0
million  for the  quarter  ended  September  30,  1999 and $ .9 million  for the
quarter  ended  September  30,  1998,  representing  16% and  17% of net  sales,
respectively.  The increase in aggregate general and administrative expenses for
the quarter ended  September 30, 1999 compared to the same period in fiscal 1999
is principally the result of additional  occupancy costs incurred  subsequent to
the expansion of the Company's Cambridge,  Massachusetts-based headquarters, the
addition  of  certain   executive   administrative   personnel   and   increased
depreciation   expense  on  the  Company's   fixed  assets  in  its   Cambridge,
Massachusetts headquarters.  The decrease in general and administrative costs as
a percentage of net sales for the quarter  ended  September 30, 1999 compared to
the same  period  in fiscal  1999 is due to the  overall  increase  in net sales
between the two periods.

     OTHER INCOME,  NET. For the quarter ended September 30, 1999, other income,
net, increased to $187,000, from $181,000 in the corresponding quarter of fiscal
1999. The increase for the quarter ended September 30, 1999 resulted principally
from  the  receipt  of  increased  interest  income  on the  Company's  cash and
investment  balances  and to a lesser  extent by  reduced  interest  expense  on
certain of the Company's capital lease arrangements.

YEAR 2000

     The Company  recognizes the potential  business impacts related to the Year
2000 computer  system issue and has implemented a plan to assess and improve the
Company's state of readiness with respect to such issues. The Year 2000 issue is
one where computer  systems may recognize the  designation  "00" as 1900 when it
means 2000, resulting in system failure or miscalculations.

     Commencing in 1997,  the Company  initiated a  comprehensive  review of its
core  information  technology  systems,   non-information   technology  systems,
computer  hardware  and  software  products  sold by the  Company  and  computer
hardware and software  products and components and other  equipment  supplied to
the Company by third parties which the Company is dependent upon for the conduct
of day to day business  operations,  in order to determine the adequacy of those
systems in light of future business  requirements.  This review included testing
and  analysis of Company  products  and  inquiries  of third  parties  supplying
information technology and non-information technology systems, computer hardware
and software products and components and other equipment to the Company.

     The  Company  divided its Year 2000  review  into three  phases.  The first
addressed  the  Company's  core  information  technology  systems  and  products
currently sold by the Company.  The second phase addressed non-core  information
technology systems and  non-information  technology  systems.  In addition,  the
Company  implemented  required  Year 2000 upgrades and  replacements  during the
second  phase.  The third phase  addresses  third party  suppliers  of products,
supplies and services  necessary to the  Company's  ongoing  operations.  In the
third phase, the Company also developed Year 2000 contingency plans. The Company
completed the first phase of its review in September 1998. The Company completed
the second phase of its review during the quarter ended  September 30, 1999. The
Company completed  substantially all of the third phase of its review during the
quarter ended September 30, 1999. The Company  anticipates  that all of its Year
2000 remediation efforts will be completed by November 30, 1999.

                                       10
<PAGE>
     In the first phase of its Year 2000  review,  the Company  tested  software
products  currently  manufactured and shipped by the Company and determined that
most products are Year 2000  compliant.  Certain of the Company's  products that
were  discontinued  prior to fiscal 1998 are not Year 2000  compliant.  In cases
where such  non-Y2K  compliant  products are still sold on a  replacement  basis
only,  the Company  requires the customer to sign a release of liability for all
damages  potentially  caused by such  non-Y2K  compliant  products.  The Company
maintains a section on its web site that  identifies  all  products  the Company
sells and ships and lists their Y2K status. The Company also responds via direct
mail, e-mail or telephone, as appropriate, to customer and supplier requests for
information  on Y2K  compliance  of its  products.  The Company has notified its
distributors,  resellers and end users of cases of non-compliance where possible
and has authorized returns and replacement of these products where possible. The
Company  believes  the cost of  these  returns  or  product  replacements  to be
immaterial  and that the  Company's  reserves are adequate to cover such returns
and replacements. The Company also has made inquiries of third parties supplying
the  Company  with  computer  hardware  and  software  products  and  components
currently  sold by the Company and is in the process of  receiving  responses to
these inquires.  The Company has not received  notice of any material  problems.
The Company has followed up with third party  suppliers  and vendors who did not
respond to the  Company's  initial  inquiries via  telephone,  mail or e-mail as
appropriate.  The Company  will review  supplier/vendor  replacement  options as
necessary.  With respect to core  information  technology,  the Company has made
inquires of third parties  supplying  computer  hardware and software  operating
systems to the Company and has  received  assurances  that,  except as discussed
below, such hardware and software systems are or will be Year 2000 compliant.

     As a result of its  review,  the  Company  determined  that  certain of its
internal  financial  software  systems were inadequate for the Company's  future
business  needs and needed to be  replaced  because  of various  considerations,
including Year 2000  non-compliance.  In certain cases the timing of replacement
systems  was  accelerated  because of Year 2000  issues,  although  the  Company
believes  replacement would have been necessary in the near future regardless of
such issues. The Company successfully  completed its migration to a new internal
financial software package in May 1999. The Company has spent less than $300,000
to  implement  and  migrate to this new  software  package.  These costs will be
capitalized over the life of the purchased  software  package.  The Company does
not expect the amounts to be expensed  over the life of the software  package to
have a material  effect on its financial  position or results of operations.  In
addition to the aforementioned  software implementation and migration costs, the
Company has assigned certain employees to handle Year 2000 remediation  efforts.
The total  cost to the  Company  for all Year  2000  remediation  efforts  as of
September 30, 1999 was approximately $.5 million.  The Company  anticipates that
its total Year 2000 remediation costs will not exceed $.6 million.

     The Company has also identified certain other internal sales, marketing and
support  management  software  packages that were not fully Year 2000 compliant.
The Company has  completed  the  evaluation  of these  internal  systems and has
completed the necessary programming to ensure Year 2000 compliancy.

     The Company has developed certain Year 2000 contingency  plans. In addition
to the review and remedial  actions  described  above, the Company has taken the
following steps: First, the Company has set up a Year 2000 task force consisting
of programmers,  Information Systems and Technology personnel and key developers
who will  remain "on call"  between  December  25,  1999 and January 10, 2000 to
resolve  any  Year  2000  problems.  Second,  the  Company  has  identified  key
alternative  suppliers in the event its primary  suppliers  experience Year 2000
problems which  interrupt  their ability to supply key raw materials or services
to the Company. The Company will contact each of these alternative  suppliers in
advance and record all pertinent  information to facilitate a smooth  transition
should it be warranted.  Finally,  the Company will increase its  inventories on
hand for certain key raw materials to insure against potential  shortages caused
by third party Year 2000 problems. The Company maintains and deploys contingency
plans designed to address various other potential business interruptions.  These
plans may also be applicable to address the  interruption of support provided by
third parties resulting from their failure to be Year 2000 ready.

                                       11
<PAGE>
     If the Company or the third parties with which it has relationships were to
cease or not successfully  complete its or their Year 2000 remediation  efforts,
the  Company  could  encounter  disruptions  to its  business  that could have a
material  adverse  effect on its  business,  financial  position  and results of
operations.  The Company  could also be  materially  and  adversely  impacted by
widespread economic or financial market disruption.

FUTURE RESULTS

     The Company is currently and will continue to focus a substantial  majority
of its business  resources on its computer telephony  products.  Concurrent with
the  expanded  investment  in  computer  telephony  products,  the  Company  has
substantially reduced its expenditures on its communications  software products.
It  is  unlikely  that,  with  the  reduced  sales,  marketing  and  development
expenditures  on  its  communications  software  products,  revenue  levels  for
communications  software  products will continue at their current  levels in the
future.

     The  Company   intends  to  continue  to  increase  its   investments   and
expenditures  in sales,  marketing  and  development  of its  flagship  product,
TeleVantage.  There  can be no  assurance  that the  Company  will be able  sell
TeleVantage  successfully at particular levels or within particular time-frames.
Accordingly,  the Company could experience a slower than anticipated increase in
TeleVantage  revenues  as it  attempts to further  expand its  distribution  and
reseller network that may build market awareness for its TeleVantage  product. A
slow increase in the Company's  TeleVantage  revenues,  particularly if combined
with increased expenditures on its TeleVantage product development and marketing
and declining  communications software product revenues, could cause the Company
to experience substantially higher operating losses in the future.

     The Company recently announced its intention to pursue the investigation of
alternatives for a possible division of its business units,  which could involve
the  sale  or  other  disposition  of all or a  portion  of one or  both  of the
Company's business units. The Company intends to pursue this investigation in an
effort to further  focus its  resources on its computer  telephony  products and
potentially  maximize  shareholder  value.  There  can  be no  assurance  that a
separation of the business  units will be successful or even  initiated upon the
conclusion of this  investigation.

     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.

     On October 22, 1999,  the Company  announced its intent to form a strategic
alliance with Toshiba American  Information Systems (TAIS). Under the terms of a
letter of intent dated  October 19, 1999,  Artisoft and TAIS would enter into an
OEM relationship  which would couple the marketing and development  plans of the
two organizations.  As a part of the OEM arrangement, TAIS would make an initial
volume purchase of licenses for the Company's TeleVantage products. In addition,
TAIS  would be  granted  rights  to  purchase  up to 1.5  million  shares of the
Company's Common Stock through a possible  combination of open market purchases,
purchases  from the Company and  warrants.

                                       12
<PAGE>
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

     The Company had cash and cash equivalents of $15.5 million at September 30,
1999  compared to $16.1  million at June 30,  1999 and working  capital of $15.9
million at September 30, 1999  compared to $16.0  million at June 30, 1999.  The
decrease  in cash and cash  equivalents  of $.6  million  was the  result of the
following factors:  increased  development,  sales force expansion and marketing
investments  in the Company's  Computer  Telephony  Products Group and increased
research and  development  personnel costs in the Company's  Computer  Telephony
Products Group. The decrease in the Company's working capital of $.1 million was
primarily the result of the Company's operating loss.

     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
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.

     In the  event  the  Company  and TAIS  enter  into the  strategic  alliance
discussed  above  under  "Future  Results,"  TAIS may  acquire up to 1.5 million
shares of the  Company's  Common Stock,  from the Company,  pursuant to warrants
and/or on the open market. TAIS's acquisition of all or a portion of such shares
could result in dilution to existing  holders of the Company's  Common Stock. In
addition, such acquisition could affect the market price of the Company's Common
Stock.

"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.  There can be no assurances  that the Company will achieve a
final  agreement with TAIS on the terms  described  herein.  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,  Year 2000 issues, and other risks detailed from time to time
in the Company's  Securities and Exchange Commission filings.  The Company filed
its 1999 Form 10-K on September 23, 1999.

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.
Competition  in  the  software  industry  is  likely  to  intensify  as  current
competitors  expand their product lines, more features are included in operating
systems (e.g.,  Windows NT 5.0),  new  applications  are  developed,  and as new
companies enter the markets or segments in which the Company currently competes.
The software  industry is also  characterized  by a high degree of consolidation
which favors companies with greater resources than those of the Company.

                                       13
<PAGE>
Consequently,   the  Company  expects  its  products  to  experience   increased
competition which could result in significant  price reductions,  loss of market
share and lack of acceptance of new products, any of which could have a material
adverse  effect on the Company's  business,  financial  condition and results of
operations.  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.

     RETURNS AND PRICE PROTECTION. The Company is exposed to the risk of product
returns and rotations from its distributors and other volume  purchasers,  which
are estimated and recorded by the Company as a reduction in sales.  Although the
Company attempts to monitor and adjust its channel  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 other volume
purchasers  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.

                                       14
<PAGE>
     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 software  applications 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  software  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 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 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.

     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.

     CD ROM AVAILABILITY.  The Company primarily sells most of its software in a
form that includes a CD-ROM or CD-ROMs and a manual.  Currently, the Company has
the capability to produce its products  in-house only on 3 1/2 -inch  diskettes.
However,  with the expansion of the size of most software  programs,  CD-ROM has
surpassed diskettes as the most prominent medium. The Company does not currently
have the capability to produce  CD-ROMs and the cost to develop such  production
capability may be prohibitive. The Company currently contracts CD-ROM production
to  specialized  CD-ROM  facilities.   The  Company  expects  continued  rapidly
expanding growth in the CD-ROM usage medium, more of the Company's relationships
would  involve  CD-ROM  production  and  the  Company's  business,   results  of
operations and financial condition could be adversely affected.

     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

                                       15
<PAGE>
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.  The industry is characterized
by a high  level of  employee  mobility  and  aggressive  recruiting  of skilled
personnel.  There can be no assurance that the Company's  current employees will
continue to work for the Company. Loss of services of key employees could have a
material  adverse  effect on the Company's  business,  results of operations and
financial  condition.  The  Company  may need to grant  additional  options  and
provide  other  forms of  incentive  compensation  to  attract  and  retain  key
personnel.  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. Quarterly results in the future may be
influenced by these or other factors 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

                                       16
<PAGE>
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 contracts 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.  The Company may also consider the  divestiture of certain of its product
segments and operating groups, should conditions warrant,  particularly in light
of the Company's  strategy of focusing its  resources on its Computer  Telephony
Group. 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.
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.

                                       17
<PAGE>
     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.  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 Dialogic Corporation.  Additionally,  Dialogic
is currently the Company's only supplier of the voice processing boards that are
necessary  for the  operation  of  TeleVantage.  If Dialogic  becomes  unable to
continue  to  manufacture  and  supply  these  boards in 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 unforseen  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,   Dialogic  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. Additionally, the
Company's  software  based PBX  products  are  principally  targeted at small to
medium  sized  businesses.   The  Company's  potential  customer  base  for  its
TeleVantage  product,  small and medium sized businesses,  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,  Nortel and Toshiba,  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

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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.

COMMUNICATIONS AND NETWORKING SOFTWARE

     NETWORKING AND COMMUNICATIONS  SOFTWARE CUSTOMERS.  The Company relies on a
network of distributors and VARs for a significant  portion of both its domestic
and international  networking and  communications  software product revenues.  A
majority of the sales of CoSession Remote,  the Company's remote  communications
software product, are to PC original equipment manufacturers.  Generally,  there
are no minimum  purchase  requirements for the Company's  distributors,  VARs or
OEMs and many of the Company's  distributors and VARs sell competitive products.
There  can be no  assurance  that  these  customers  will give  priority  to the
marketing  of  the  Company's   products  compared  to  competing   products  or
alternative  solutions  or that  such  customers  will  continue  to  offer  the
Company's   products.   In  the  event  of  the  termination  of  the  Company's
relationship with one or more major distributors, the Company would have to find
suitable alternative channels of distribution.  The absence of such alternatives
could have an adverse affect on the Company's business,  financial condition and
results of operation.  Certain of the Company's  OEM  relationships  require the
scheduled delivery of product revisions and new products.  Some of the Company's
OEM product offerings involve the bundling of licensed technologies with its own
technologies.  The failure of the Company  and/or one of its licensors to adhere
to agreed-upon product delivery schedules could result in the termination of key
relationships with major PC manufacturers, which could have an adverse impact on
current  and future  revenues  in the OEM  channel.  The  Company's  OEM revenue
streams are dependent upon the maintenance of one or more key OEM relationships.
The termination of any one of these  relationships may have an adverse affect on
the Company's current and future revenues.

     NETWORKING AND  COMMUNICATIONS  SOFTWARE  COMPETITORS.  The Company's major
competitors  in  the  small  business  networking  market  are  Microsoft,   the
industry's  principal  operating  system  provider,  and Novell,  the industry's
leading  network  operating  system  provider.  Both  of  these  companies  have
substantially  greater  financial,  technological,   production  and  sales  and
marketing resources than those of the Company.

     Management believes that the inclusion of networking capabilities (printer,
file and  application  sharing) in Microsoft's  Windows 95/98  operating  system
(released in August 1995 and June 1998,  respectively) has had and will continue
to have a significant detrimental impact on sales of the Company's LANtastic NOS
products.  Windows 95/98 is pre-loaded on virtually all Pentium  processor-based
personal computers currently sold worldwide.  In April 1999,  Microsoft released
Windows 2000 Beta 3.0.  Management  believes that Microsoft will release Windows
NT 5.0 (Windows  2000) in mid 1999.  Windows NT 5.0  (Windows  2000) will likely
combine the enhanced  security features of Windows NT 4.0 with the functionality
of Windows 98. This release may further  erode the market share of the Company's

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<PAGE>
LANtastic  NOS product line.  The Company  believes that Windows NT 5.0 (Windows
2000) server will include both modem sharing and internet sharing  capabilities.
The inclusion of modem sharing and internet  sharing  capabilities in Windows NT
could result in substantially increased competition for the Company's ModemShare
and i.Share  products,  which could have a  significant  impact on the Company's
sales and operating results.

ITEM 2(a). QUANTITATIVE 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.

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<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 November 12, 1999

(c)  Reports on Form 8-K

          None

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<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: November 12, 1999                 By /s/ T. Paul Thomas
                                           -------------------------------------
                                           T. Paul Thomas
                                           President and Chief Executive Officer



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

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