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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 March 31, 2001

                                       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                                  (IRS employer
     of 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, 2001).

                 Common stock, $.01 par value: 15,729,918 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, 2001 (Unaudited) and June 30, 2000                  3

             Condensed Consolidated Statements of Operations
               (Unaudited)- Three and Nine Months Ended
               March 31, 2001 and 2000                                       4

             Condensed Consolidated Statements of Cash Flows
               (Unaudited)- Nine Months Ended March 31, 2001 and 2000        5

             Notes to Unaudited Condensed Consolidated
               Financial Statements                                         6-9

     Item 2. Management's Discussion and Analysis of
               Financial Condition and Results of Operations               10-20

     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

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

                                                          March 31,    June 30,
                                                            2001         2000
                                                         ---------    ---------
                                                        (unaudited)
                                     ASSETS
Current assets:
  Cash and cash equivalents                              $   8,078    $   5,120
  Short term investments                                        --        2,490
  Receivables:
    Trade accounts, net                                        866        1,511
    Other receivables                                           24          146
  Inventories                                                  735          808
  Prepaid expenses                                             527          366
                                                         ---------    ---------
       Total current assets                                 10,230       10,441
                                                         ---------    ---------

Long term investments                                           --        7,797

Property and equipment                                       3,292        2,353
  Less accumulated depreciation and amortization            (1,723)      (1,140)
                                                         ---------    ---------
       Net property and equipment                            1,569        1,213
                                                         ---------    ---------

Other assets                                                   186          179

Net assets from discontinued operations                         --        1,864
                                                         ---------    ---------
                                                         $  11,985    $  21,494
                                                         =========    =========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                       $     592    $     928
  Accrued liabilities                                        1,848        1,937
  Deferred revenue                                             222           41
                                                         ---------    ---------
       Total current liabilities                             2,662        2,906
                                                         ---------    ---------

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  29,045,949 shares
    at March 31, 2001 and 28,742,744 at June 30, 2000          290          287
  Additional paid-in capital                               102,304      101,363
  Accumulated deficit                                      (23,487)     (13,278)
  Less treasury stock, at cost, 13,320,500 shares at
    March 31, 2001 and June 30, 2000                       (69,784)     (69,784)
                                                         ---------    ---------
       Total shareholders' equity                            9,323       18,588
                                                         ---------    ---------
                                                         $  11,985    $  21,494
                                                         =========    =========

                       See accompanying notes to unaudited
                  condensed consolidated financial statements.

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

<TABLE>
<CAPTION>
                                                                      Three Months Ended           Nine Months Ended
                                                                           March 31,                    March 31,
                                                                   -----------------------       -----------------------
                                                                     2001           2000           2001           2000
                                                                   --------       --------       --------       --------
<S>                                                                <C>            <C>            <C>            <C>
Net sales                                                          $  1,689       $  4,309       $  5,932       $ 10,683
Cost of sales                                                           331          1,464          1,303          3,973
                                                                   --------       --------       --------       --------
       Gross profit                                                   1,358          2,845          4,629          6,710
                                                                   --------       --------       --------       --------
Operating Expenses:
  Sales and marketing                                                 2,140          4,412          7,297          7,792
  Product development                                                 1,480          1,009          4,157          2,664
  General and administrative                                          1,255            755          3,838          2,174
                                                                   --------       --------       --------       --------
       Total operating expenses                                       4,875          6,176         15,292         12,630
                                                                   --------       --------       --------       --------

Loss from operations                                                 (3,517)        (3,331)       (10,663)        (5,920)

Other income, net                                                       129            184            454            633
                                                                   --------       --------       --------       --------

       Net loss from continuing operations                         $ (3,388)      $ (3,147)      $(10,209)      $ (5,287)
                                                                   --------       --------       --------       --------

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

       Net loss                                                    $ (3,388)      $ (3,467)      $(10,209)      $ (3,839)
                                                                   ========       ========       ========       ========
Net loss per common share from continuing
  operations - Basic and Diluted                                   $  (0.22)      $  (0.21)      $  (0.66)      $  (0.35)
                                                                   --------       --------       --------       --------

Net loss per common share - Basic and Diluted                      $  (0.22)      $  (0.23)      $  (0.66)      $  (0.26)
                                                                   --------       --------       --------       --------
Weighted average common shares outstanding:
  Basic and Diluted                                                  15,724         15,158         15,488         15,001
                                                                   --------       --------       --------       --------
</TABLE>

                       See accompanying notes to unaudited
                  condensed consolidated financial statements.

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

<TABLE>
<CAPTION>
                                                                                 Nine Months Ended
                                                                                     March 31,
                                                                              -----------------------
                                                                                2001           2000
                                                                              --------       --------
                                                                             (unaudited)
<S>                                                                           <C>            <C>
Cash flows from operating activities:
 Net loss                                                                     $(10,209)      $ (3,839)
 Adjustments to reconcile net loss to net
  cash used in operating activities:
   Fair value of common stock and warrants issued for services                      --          2,289
   Depreciation and amortization                                                   639            448
   Loss from disposition of property, net                                           --             32
   Change in accounts receivable allowances                                       (161)          (221)
 Changes in assets and liabilities:
   Receivables:
     Trade accounts                                                                838            252
     Other receivables                                                             122           (583)
   Inventories                                                                      41           (455)
   Prepaid expenses                                                               (161)          (174)
   Accounts payable, accrued liabilities and deferred revenue                     (244)         1,192
   Net assets from discontinued operations                                       1,864           (451)
   Other assets                                                                    (59)            --
                                                                              --------       --------
       Net cash used in operating activities                                    (7,330)        (1,510)
                                                                              --------       --------
Cash flows from investing activities:
  Proceeds from sale of investment securities                                   10,287             --
  Purchases of investment securities                                                --         (8,791)
  Purchases of property and equipment                                             (943)          (334)
                                                                              --------       --------
       Net cash provided by (used in) investing activities                       9,344         (9,125)
                                                                              --------       --------
Cash flows from financing activities:
  Proceeds from the issuance of common shares to Toshiba                            --            700
  Proceeds from the exercise of stock options                                      944            869
                                                                              --------       --------
       Net cash provided by financing activities                                   944          1,569
                                                                              --------       --------

Net increase (decrease) in cash and cash equivalents                             2,958         (9,066)
Cash and cash equivalents at beginning of period                                 5,120         16,148
                                                                              --------       --------
Cash and cash equivalents at end of period                                    $  8,078       $  7,082
                                                                              ========       ========
</TABLE>

                       See accompanying notes to unaudited
                  condensed consolidated financial statements.

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

(1)  Basis of Presentation

     The  unaudited  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 accounting  principles generally
accepted  in the  United  States  of  America  and  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  2000 Annual Report on Form 10-K. The results
of  operations  for the  three  or nine  months  ended  March  31,  2001 are not
necessarily  indicative  of the results to be expected  for the full year or any
other future period.

(2) Recent Accounting Pronouncements

     In March  2000,  the  Financial  Accounting  Standards  Board  issued  FASB
Interpretation  No. 44,  Accounting  for Certain  Transactions  involving  Stock
Compensation  (an  interpretation  of APB Opinion No. 25).  This  interpretation
provides  guidance  regarding  the  application  of  APB  Opinion  25  to  Stock
Compensation  involving  employees.  This  interpretation  was effective July 1,
2000, except for certain  provisions which were effective as of an earlier date,
and did not have a material effect on the Company's financial statements.

     In June 1998, the Financial  Accounting Standards Board issued Statement of
Financial  Accounting  Standards  ("SFAS") No. 133,  Accounting  for  Derivative
Instruments and Hedging Activities.  SFAS No. 133 as amended by SFAS No. 137, is
effective for fiscal years  beginning  after June 15, 2000. The Company  adopted
SFAS  No.  133 on July 1,  2000.  SFAS No.  133  requires  that  all  derivative
instruments be recorded on the balance sheet at their fair value. Changes in the
fair value of derivatives are recorded each period in current  earnings or other
comprehensive  income  (loss)  depending on whether a derivative  is designed as
part of a hedge transaction and, if so, the type of hedge transaction  involved.
The  Company's  adoption  of SFAS No. 133 did not have a material  impact on its
consolidated financial position or results of operations as the Company does not
currently hold any derivative financial instruments.

(3) Revenue Recognition

     The  Company  follows  the  provisions  of  SOP  97-2,   Software   Revenue
Recognition.   Revenue  from  TeleVantage  Software,  TeleVantage  Hardware  and
TeleVantage  NFR kits is  recognized  when (i) a signed  noncancelable  purchase
order is  received,  (ii) the product  has been  shipped  from our  distribution
facilities,  (iii) our revenue on the transaction is fixed or determinable,  and
(iv)  collectibility is probable.  Revenue from software license agreements that
have  significant  customizations  and  modification of the software  product is
deferred and recognized in a manner that approximates the percentage  completion
method.  The Company  accrues for estimated  sales returns and  allowances  upon
shipment. There was no material change to our accounting for revenue as a result
of the adoption of SOP 97-2.

                                       6
<PAGE>
     Revenue from training,  implementation  and consulting is recognized as the
services  are  performed,  collectibility  is  probable  and such  revenues  are
contractually  non-refundable.  Amounts  collected prior to satisfying the above
revenue recognition criteria are classified as deferred revenue.

(4) Classification and Presentation of Investments

     At June 30,  2000 the  Company  had $10.3  million  in long and short  term
investments.  Prior to June 30, 2000, the Company classified these securities as
"held to maturity"and  accordingly,  presented the securities at cost,  adjusted
for the  amortization or accretion of premiums or discounts.  Subsequent to June
30, 2000, the Company  classified  these  securities as "available for sale" and
accordingly,  recorded the  securities at the current  market value.  During the
quarter ended March 31, 2001,  the Company  liquidated  all of these  securities
prior to maturity to fund operations.

(5) 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  earnings 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  unaudited net loss per common share for the three and
nine month periods ended March 31, 2001 and 2000,  129,871,  371,937,  1,297,477
and 1,242,772  shares,  respectively,  of anti-dilutive  common stock equivalent
shares  consisting of stock options have been excluded  because their  inclusion
wouldhave been anti-dilutive.

(6) Discontinued Operations

     In September  1999, the Company  announced its intention to investigate the
potential separation of its two then existing business units: the Communications
Software Group (CSG) and the Computer  Telephony  Group (CTG).  On June 2, 2000,
the Company  signed a  definitive  agreement  to sell the CSG assets to Prologue
Software Group for approximately $3.0 million (including  accounts  receivable).
The sale was closed  effective June 30, 2000. Thus the Company has  reclassified
the  accompanying  consolidated  balance  sheets,  statements of operations  and
statements of cash flows of CSG to Discontinued Operations.

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

                                       Three Months Ended     Nine Months Ended
                                         March 31, 2000         March 31, 2000
                                         --------------         --------------
                                          (Unaudited)             (Unaudited)
Net sales                                   $ 1,857                 $ 8,611
Cost of sales                                   400                   1,964
                                            -------                 -------
Gross profit                                  1,457                   6,647
                                            -------                 -------

Operating expenses                            1,777                   5,199
                                            -------                 -------
Net income (loss)                           $  (320)                $ 1,448
                                            =======                 =======

                                       7
<PAGE>
(7) Inventories

     Inventories at March 31, 2001 and June 30, 2000 consist of the following:

                                            March 31, 2001       June 30, 2000
                                            --------------       -------------
                                              (Unaudited)
Raw materials                                   $  20                $ 487
Work-in-process                                    --                   --
Finished goods                                    847                  550
                                                  ---               ------
                                                  867                1,037
Inventory allowances                             (132)                (229)
                                                -----               ------
                                                $ 735               $  808
                                                =====               ======

(8) Property and Equipment

     Property  and  equipment at March 31, 2001 and June 30, 2000 consist of the
following:

                                            March 31, 2001       June 30, 2000
                                            --------------       -------------
                                              (Unaudited)
Furniture and fixtures                          $    78             $    39
Computers and other equipment                     2,894               2,035
Leasehold improvements                              320                 279
                                                -------             -------
                                                  3,292               2,353
  Accumulated depreciation and
    amortization                                 (1,723)             (1,140)
                                                -------             -------
                                                $ 1,569             $ 1,213
                                                =======             =======

(9) Other Assets

     Other assets at March 31, 2001 and June 30, 2000 consist of the following:

                                            March 31, 2001       June 30, 2000
                                            --------------       -------------
                                              (Unaudited)
Purchased technology, net of accumulated
  amortization of $430 and $374                   $  7                $ 63
Intangibles, net                                     3                  --
Recoverable deposits and other                     176                 116
                                                  ----                ----
                                                  $186                $179
                                                  ====                ====

                                       8
<PAGE>
(10) Accrued Liabilities

     Accrued  liabilities  at March 31,  2001 and June 30,  2000  consist of the
following:

                                            March 31, 2001       June 30, 2000
                                            --------------       -------------
                                              (Unaudited)
Compensation and benefits                       $  960              $1,032
Payroll, sales and property taxes                  154                  33
Marketing                                          491                 374
Royalties                                            4                 334
Other                                              239                 164
                                                ------              ------
                                                $1,848              $1,937
                                                ======              ======

                                       9
<PAGE>
                         ARTISOFT, INC. AND SUBSIDIARIES

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

Results of Operations

     NET SALES.  Net sales  decreased  61% to $1.7 million for the quarter ended
March 31, 2001 from $4.3 million for the quarter ended March 31, 2000. Net sales
decreased  44% to $5.9  million for the nine month  period  ended March 31, 2001
from $10.7 million for the nine month period ended March 31, 2000.  The decrease
in net sales for the  quarter  and nine month  period  ended  March 31,  2001 as
compared  to the  quarter  and nine month  period  ended  March 31, 2000 was due
primarily to the discontinuation of sales of the Company's Visual Voice software
product line.  The Company has continued to sell Visual Voice hardware in fiscal
year 2001 but in  significantly  smaller  quantities  than in fiscal  year 2000.
Although  net  sales of the  Company's  TeleVantage  product  were  sequentially
relatively  unchanged between the quarters ended December 31, 2000 and March 31,
2001, TeleVantage software sales have increased gradually since the beginning of
fiscal year 1999.

     The Company  distributes its products both domestically and internationally
through distributors and OEM's and tracks sales by customer and major geographic
area.  International net sales represented 14% and 7% of total net sales for the
quarters ended March 31, 2001 and 2000,  respectively.  Aggregate  international
net sales for each of the  quarters  ended March 31, 2001 and March 31, 2000 was
$.3 million. International net sales increased to $.8 million for the nine month
period  ended March 31, 2001 from $.7  million for the nine month  period  ended
March  31,  2000.  International  net sales as a  percentage  of total net sales
increased  from 6% for the nine month period ended March 31, 2000 to 13% for the
nine month period ended March 31, 2001.  The overall  increase in  international
sales as a percentage of total net sales for both the three month and nine month
periods  ended March 31, 2001 as compared to the same periods in fiscal 2000 was
due to the  aforementioned  discontinuation of the Visual Voice software product
line  recognized  primarily  in the  United  States.  The  Company  expects  the
percentages  of U.S.  and  international  net sales to  change as the  Company's
distribution of its TeleVantage software continues to develop.

     GROSS PROFIT.  The Company's  gross profit was $1.4 million for the quarter
ended  March 31, 2001 and $2.8  million for the quarter  ended March 31, 2000 or
80% and 66% of net sales,  respectively.  The  Company's  gross  profit was $4.6
million for the nine month  period ended March 31, 2001 and $6.7 million for the
nine  month  period  ended  March  31,  2000  or  78%  and  63%  of  net  sales,
respectively.  The increase in gross profit  percentage for the quarter and nine
months  ended March 31,  2001 as  compared to the quarter and nine months  ended
March 31, 2000 was due to the discontinuation of Visual Voice hardware sales and
lower sales as a  percentage  of total sales of the  TeleVantage  Not For Resale
Kits  (NFR's)  associated  with the  Company's  development  of its  TeleVantage
reseller  channel.  TeleVantage  Not For Resale  Kits are sold to the  Company's
value added resellers and are designed to be used  exclusively as  demonstration
systems in the  reseller's  sales and  marketing  efforts.  TeleVantage  Not For
Resale  kits  include a  hardware  component  causing  the gross  profit  margin
percentage  realized on sales of these kits to be  substantially  lower than the
gross profit  margin  percentage  realized on  TeleVantage  software  sales.  In
addition,  the Company  incurred lower royalty  expense during the quarter ended
March 31, 2001 due to the  discontinuation of its Microsoft SQL Server licensing
agreement  effective December 31, 2000. The net decrease in aggregate dollars of
gross profit  margin for the quarter and nine month periods ended March 31, 2001
as compared to the corresponding  periods in fiscal 2000 is due to lower overall
net sales caused  principally by the  discontinuation  of sales of the Company's
Visual  Voice  product  line.  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 $2.1 million for the
quarter  ended March 31, 2001 and $4.4  million for the quarter  ended March 31,
2000, representing 127% and 102% of net sales, respectively. Sales and marketing
expenses  were $7.3  million and $7.8 million for the nine month  periods  ended
March 31, 2001 and 2000, respectively (123% and 73% of net sales, respectively).
The  decrease  in sales and  marketing  expenses  in  aggregate  dollars for the

                                       10
<PAGE>
quarter  and nine months  ended  March 31,  2001  compared to the same period in
fiscal 2000 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  sold  100,000  shares of Artisoft  common stock and
granted  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 fair market value of the
warrants granted to TAIS and the difference  between the purchase price and fair
market value of the Artisoft  common stock was charged to selling expense in the
quarter ended March 31, 2000. The increase in sales and marketing  expenses as a
percentage  of sales for the quarter and nine month periods ended March 31, 2001
compared to the same  periods in fiscal  2000 is due to the overall  decrease in
net sales for the quarter and nine months  ended March 31, 2001.  Overall  sales
and  marketing  expenses have  increased  even while overall sales have remained
relatively  unchanged  due to sales and  marketing  infrastructure  requirements
associated with the future  anticipated  revenue streams from the Intel and TAIS
arrangements.

     PRODUCT DEVELOPMENT. Product development expenses were $1.5 million for the
quarter  ended March 31, 2001 and $1.0  million for the quarter  ended March 31,
2000, representing 88% and 23% of net sales,  respectively.  Product development
expenses  were $4.2  million for the nine month  period ended March 31, 2001 and
$2.7 million for the nine month period  ended March 31, 2000,  representing  70%
and  25%  of  net  sales,  respectively.   The  increase  in  aggregate  product
development  expenses  for the  quarter  and nine  months  ended  March 31, 2001
compared to the same periods in fiscal 2000 is principally  attributable  to the
addition  of  new   development   personnel  to  meet  planned   future  product
introduction  timetables.   Specifically,  the  Company  has  added  development
personnel  in advance of the expected  future  release of  TeleVantage  4.0, its
flagship  product,   and  current   development   efforts  associated  with  the
anticipated  future  release of TeleVantage  CTM Suite.  The increase in product
development expenses as a percentage of net sales for the quarter and nine month
periods  ended  March 31, 2001  compared  to the same  periods in fiscal 2000 is
principally due to the overall  decrease in net sales from Visual Voice products
between the two periods and the aforementioned  increase in expenses  associated
with the  addition  of new product  development  personnel  for the  TeleVantage
products. The Company believes the introduction of new products to the market in
a timely  manner is critical  to its future  success  and  anticipates  that its
future quarterly product development expenses will remain relatively  consistent
with the levels of these expenditures for the quarter ended March 31, 2001.

     GENERAL AND ADMINISTRATIVE.  General and administrative  expenses were $1.3
million  for the  quarter  ended March 31, 2001 and $ .8 million for the quarter
ended  March 31,  2000,  representing  74% and 18% of net  sales,  respectively.
General and  administrative  expenses were $3.8 million and $2.2 million for the
nine month period ended March 31, 2001 and 2000, representing 65% and 20% of net
sales,  respectively.  The  increase in  aggregate  general  and  administrative
expenses for the quarter and nine month periods ended March 31, 2001 compared to
the same  periods  in  fiscal  2000 is  principally  the  result  of  additional
occupancy costs incurred subsequent to the expansion of the Company's Cambridge,
Massachusetts-based  headquarters  and  increased  depreciation  expense  on the
Company's fixed assets.  The increase in general and  administrative  costs as a
percentage  of net sales for the quarter and nine month  periods ended March 31,
2001  compared  to the same  periods in fiscal  2000 is  principally  due to the
overall decrease in net sales from Visual Voice products between the two periods
and the  aforementioned  increase in occupancy costs. The Company  anticipates a
decrease in its overall  general  and  administrative  expenses in the future as
compared to the expenses incurred during the quarter ended March 31, 2001 due to
cost reductions achieved in April 2001.

     OTHER INCOME, NET. For the quarter ended March 31, 2001, other income, net,
decreased to $129,000 from $184,000 in the corresponding quarter of fiscal 2000.
For the nine month period ended March 31, 2001, other income,  net, decreased to
$454,000  from  $633,000.  The decrease  for the quarter and nine month  periods
ended  March  31,  2001  resulted  principally  from the  liquidation  of higher
yielding  long-term  corporate bonds into short-term money market securities and
the overall decrease in cash and investment balances due to the operating losses
incurred.

                                       11
<PAGE>
FUTURE RESULTS

     The  Company  intends to continue  investing  in the sales,  marketing  and
development of its software-based phone system, TeleVantage. The Company expects
operating  expenditures  for the  balance  of  calendar  2001 to be  lower  than
operating expenses as reported for the quarter ended March 31, 2001. The Company
also  anticpates  lower marketing and  administrative  expenses due to headcount
reductions implemented in late April 2001.

     In December  1999,  the  Company  executed an  Intellectual  Property  (IP)
Purchase  Agreement with  Dialogic.  The Company agreed to sell its Visual Voice
source code to Dialogic (an Intel  Company) for  consideration  of $2.7 million.
The $2.7  million  was paid to  Artisoft  upon  execution  of the  agreement  on
December 30, 1999. The Company also recognized $1.5 million in professional fees
received  from  Dialogic in  exchange  for the  Company  continuing  to sell and
support Visual Voice in fiscal 2000. Approximately 50% of the Company's revenues
in the nine month period ended March 31, 2000 were  attributable to Visual Voice
sales  or  Visual  Voice  source  code  acquisition   revenue  or  Visual  Voice
professional fees. Visual Voice hardware revenues recognized in fiscal 2001 have
been minimal. The loss of this revenue stream along with sequentially relatively
unchanged  TeleVantage  revenues  in  fiscal  2001  has led to and  will  likely
continue to lead to  operating  losses  during the next  several  quarters.  The
Company  anticipates that future TeleVantage  revenues will increase and thereby
in conjunction  with reductions in operating  expenses  reduce future  operating
losses,  however,  in the event that  TeleVantage  revenues  do not  increase as
anticipated the Company will need to seek additional debt or equity financing in
order to fund future  operations.  The Company may also seek  additional debt or
equity  financing  regardless of future  operating  losses  incurred or cash and
investment levels in order to pursue strategic business opportunities.

     Also in December 1999, the Company  executed a strategic  partnership  with
Dialogic.  Under the terms of the agreement,  the Company is required to provide
Dialogic  with a  software-based  phone  switch  that is  compatible  with Intel
Corporation's  CT Media  Platform.  The Company has  delivered a beta version of
this source code to Intel and anticipates completing its development obligations
under the intial phase of this  agreement  in the first  quarter of fiscal 2002.
The Company has recognized revenues associated with this development arrangement
since January 2000. The Company  anticipates  completing the recognition of this
revenue upon satisfying its development obligations under the agreement.

     In January 2000,  the Company  executed a strategic  partnership  agreement
with Toshiba America  Information Systems ("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  purchase  licenses  of  TeleVantage  for  customized  versions of the
software  product to be  integrated  with its  computer  telephony  systems  and
communications  server product  offerings.  All the costs  associated  with this
customization have been substantially  incurred. 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.

     The Company's ability to significantly  expand its selling and marketing of
TeleVantage  to a broad  customer  base may  depend on the  success of these two
strategic relationships. 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:  the extent to which the
Company is able to increase its sales of TeleVantage and the times at which such
increases  occur; the  availability of additional  equity or debt financing,  if
needed, on terms acceptable to the Company,  if at all; 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.

                                       12
<PAGE>
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

     CASH AND CASH  EQUIVALENTS.  The Company had cash and cash  equivalents  of
$8.1  million at March 31, 2001  compared  to $5.1  million at June 30, 2000 and
working  capital of $7.6  million at March 31, 2001  compared to $7.5 million at
June 30, 2000. The increase in cash and cash equivalents of $3.0 million was the
result  of the  liquidation  of all  short  and  long-term  investments  and the
conversion of a portion of these  proceeds into cash and cash  equivalents  less
cash used in operations.

     The Company used $7.3 million in cash balances to fund operating activities
during the nine month period  ended March 31,  2001.  The cash used in operating
activities was principally the result of the operating losses incurred offset by
the cash received from discontinued operations of $1.9 million. Cash provided by
investing  activities  was $9.3  million  during the nine months ended March 31,
2001.  This was  principally  the  result  of the sale of  short  and long  term
investments  offset by  purchases of property and  equipment.  Cash  provided by
financing  activities  of  $.9  million  resulted  from  employee  stock  option
exercises.

     The  increases  in the  Company's  cash and cash  equivalents  and  working
capital at March 31, 2001  compared  to June 30, 2000 should be viewed  together
with the decreases in the Company's short and long-term investments at March 31,
2001,  discussed below. The total amount of the Company's cash, cash equivalents
and short and long-term  investments was $8.1 million at March 31, 2001 compared
to $15.4 million at June 30, 2000, a decrease of $7.3  million,  or 48%. Of this
$7.3 million decrease,  $2.6 million occurred during the quarter ended March 31,
2001 and $4.0 million  occurred  during the quarter ended December 31, 2000. The
cash  reduction  in the  first  quarter  of fiscal  year 2001 was  offset by the
receipt of proceeds of $3.0 million (including accounts  receivable) on the sale
of the  Company's  Communication  Software  Group to Prologue  Software  and the
proceeds from issuance of common stock  options.  The Company  expects its cash,
cash  equivalents  to decrease in the future as it incurs  additional  operating
losses.

     In the past, the Company has funded its  continuing  operations and working
capital  requirements  primarily  through cash from  operations  and the sale of
shares of its  common  stock.  In order to  obtain  the  funds to  continue  its
operations and meet its working  capital  requirements,  the Company may require
additional  equity  financing  or  debt  financing.  The  Company  is  currently
exploring various  potential  sources of equity and debt financing.  The Company
may also from time to time seek additional equity financing or debt financing in
order to fund other  business  initiatives,  including the  acquisition of other
businesses.  Additional  financing may place significant limits on the Company's
financial and operating  flexibility,  and any future  financing could result in
substantial  dilution to the Company's  shareholders.  There can be no assurance
that any such additional equity financing or debt financing will be available to
the Company when needed or on terms acceptable to the Company. If the Company is
not able to successfully  obtain  additional equity financing or debt financing,
if needed,  the business,  financial  condition and results of operations of the
Company will be materially and adversely affected.

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

     This  Quarterly  Report on Form 10-Q contains  forward-looking  statements.
Forward-looking statements include those regarding the Company's goals, beliefs,
plans or current  expectations and other statements  regarding  matters that are
not  historical  facts.  For  example,   words  such  as  "project,"  "believe,"
"anticipate," "plan," "expect," "estimate," "intend," "should," "would," "will,"
"could," or "may," or other words that convey  uncertainty  of future  events or
outcome, are intended to identify forward-looking statements.  While the Company
may elect to update  forward-looking  statements in the future,  it specifically
disclaims  any  obligation  to do so, even if its  estimates  change,  and these

                                       13
<PAGE>
forward-looking  statements  should  not be  relied  upon  as  representing  the
Company's views as of any date  subsequent to the date of this Quarterly  Report
on Form 10-Q.  There are a number of important  factors and  uncertainties  that
could  cause the  Company's  actual  results  to differ  materially  from  those
described in these forward-looking statements.  These factors and uncertainties,
include, but are not limited to, those set forth below under "Risk Factors."

RISK FACTORS

GENERAL

     DEVELOPMENT OF NEW PRODUCT.  The Company's  sales are derived from a single
product,  TeleVantage.  TeleVantage  is a  relatively  new  product in the newly
emerging market for software-based phone systems.  Accordingly,  there currently
are relatively  low sales of TeleVantage  and it is difficult to predict when or
if such sales will increase  substantially.  At the same time,  the Company must
incur operating expenses related to, amongst other things, the marketing,  sales
and  development  of  its  TeleVantage  products.  Thus,  like  other  companies
competing in newly developing  product markets,  the Company faces a substantial
risk that its sales  will not  increase  quickly  enough to cover its  operating
expenses and that it will continue to incur operating losses.

     COMPETITION.  The computer  telephony industry is highly competitive and is
characterized by rapidly evolving industry standards.  The Company competes with
other  phone  system  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.

     HISTORY OF  SIGNIFICANT  OPERATING  LOSSES AND  NEGATIVE  CASH  FLOWS.  The
Company had  operating  losses for the three and nine month  periods ended March
31,  2001 and in each of the last  five  years,  and  negative  cash  flow  from
operating  activities for the three and nine months ended March 31, 2001 and for
the  year  ended  June 30,  2000.  The  Company  expects  to  incur  significant
expenditures in connection with the continued  development,  marketing and sales
of  its  TeleVantage  product.  As  a  result,  the  Company  expects  to  incur
significant  future  operating  losses and negative  cash flow. If the Company's
revenues do not increase significantly or the increase in the Company's expenses
is greater than expected,  the Company may not achieve or sustain  profitability
or generate positive cash flow in the future.

     NEED FOR  ADDITIONAL  THIRD PARTY  FINANCING.  In the past, the Company has
funded its continuing  operations  and working  capital  requirements  primarily
through  cash from  operations  and the sale of shares of its common  stock.  In
order to obtain  the  funds to  continue  its  operations  and meet its  working
capital  requirements,  the Company may require  additional  equity financing or
debt financing.  The Company is currently exploring various potential sources of
equity  and  debt  financing.  The  Company  may  also  from  time to time  seek
additional  equity  financing or debt  financing in order to fund other business
initiatives, including the acquisition of other businesses. Additional financing
may  place  significant   limits  on  the  Company's   financial  and  operating
flexibility,  and any future  financing could result in substantial  dilution to
the Company's  shareholders.  There can be no assurance that any such additional
equity  financing or debt financing will be available to the Company when needed
or on  terms  acceptable  to  the  Company.  If  the  Company  is  not  able  to
successfully  obtain additional  equity financing or debt financing,  if needed,
the business,  financial condition and results of operations of the Company will
likely be materially and adversely affected.

                                       14
<PAGE>
     NEW INDUSTRY  DEVELOPMENT.  The Company's  principal product,  TeleVantage,
competes   in  the  newly   emerging   software-based   phone   system   market.
Software-based  phone systems  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  TeleVantage.
TeleVantage  competes directly with other  software-based phone system solutions
as well as  existing  traditional,  proprietary  hardware  solutions  offered by
companies such as Avaya  Communications,  Nortel and Siemens.  While the Company
anticipates a migration toward software-based phone system solutions,  there can
be no  assurances  that this will  occur,  or occur at the rate that the Company
anticipates.

     PRODUCT RETURNS AND ROTATIONS;DISTRIBUTOR  INVENTORY LEVELS. 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.  In  addition,  the  Company  is  exposed  to the  risk of
fluctuations in quarterly sales if resellers and distributors  purchase and hold
excessive  amounts of inventory at any time.  Although the Company  monitors its
reseller and distributor  inventories  and current and projected  levels of sell
through,  localized  overstocking  may occur  with  TeleVantage  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. All of these
risks tend to be increased for companies  that rely on sales of a single product
in a newly  emerging  market.  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 overstocking by resellers or distributors or 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  may  become  more  complex  and  could  result  in  material
fluctuations in quarterly sales and operating results.

     FACTORS AFFECTING  PRICING.  During fiscal year 2001,  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  distributors  are typically  based upon  distributors'  recent
historical and forecasted sales levels for Company products and inventory levels
of Company products  desired to be maintained by those  distributors at the time
of the orders.  Moreover,  orders may also be based upon financial  practices by
distributors 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 in accordance with industry  practice,
depending upon competitive conditions.  The Company currently does not offer any
cash  rebates  to its  U.S.  distribution  partners.  Certain  of the  Company's
international  partners may receive from time to time slightly extended terms as
compared to its domestic customers,  in accordance with local industry practice,
depending on local competitive conditions. Changes in purchasing patterns by one
or  more  of  the  Company's  distributors,   changes  in  distributor  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  distributor  orders  could  result  in  material
fluctuations in quarterly operating results.

     PRODUCT CONCENTRATION. The Company has in the past derived, and anticipates
that it will in the future  derive,  a significant  portion of its revenues from
one product line.  Declines in the revenues from this software product,  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

                                       15
<PAGE>
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 key 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.

     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.  The  Company's  computer  telephony
software  requires  the  availability  of certain  hardware.  Specifically,  the
TeleVantage  software-based  phone system  operates on certain voice  processing
boards  manufactured  by Dialogic (an Intel  Company).  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.  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

                                       16
<PAGE>
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
negative impact 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 negative
impact 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  affect 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 affect
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, the extent and timing of sales and operating  expense  increases and
decreases, 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.  Sales may also be  affected  by the level of  returns  beyond  those
estimated  and provided for at any point in time.  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 loss 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

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<PAGE>
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  ability to achieve
profitability.  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 products is relatively new and is characterized by the rapid
evolution of 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. There can be no
assurances that competitors with substantially  greater financial resources than
that of the  Company  will not develop  their own  software-based  phone  system
solutions and subsequently  adversely affect the Company's  ability to market or
sell its software-based phone system solution, TeleVantage.

     TeleVantage  could  also  face  direct   competition  from  companies  with
significantly  greater  financial,  marketing,  service,  support and  technical
resources.  Although the Company has recently partnered with TAIS,  Dialogic (an
Intel Company),  Compaq,  Hewlett Packard, CDW and IBM amongst others to deliver
its  software-based  phone system 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

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<PAGE>
telephony  solutions.  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.  The Company's development of a version of TeleVantage that
will  run on  Intel's  Converged  Communications  Platform  could  lead to other
competitors developing software-based PBX's that could run on Intel's softswitch
framework  and be marketed  and sold to the  Company's  other  distribution  and
reseller  partners.  The  development,  marketing  and  sale of  such  competing
products could  materially  adversely  affect the Company's  anticipated  future
revenue stream from the release of the Intel Converged  Communications  Platform
and its other distributors and resellers.

     COMPUTER   TELEPHONY   HARDWARE   SUPPLIER   DEPENDENCIES.   The  Company's
software-based phone system,  TeleVantage, is designed to operate in conjunction
with  voice  processing  boards  manufactured  by  Dialogic,  an Intel  Company.
Additionally,  Dialogic,  an Intel  Company  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 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, Dialogic (an Intel Company) 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  investing  and will continue to invest  significant  resources in the
development,  marketing and sales of TeleVantage, a software-based phone system.
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 Avaya  Communications  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 in the volumes that the Company anticipates. The
Company's  success in selling  these  products  will likely be influenced by its
ability to attract and inform the highest  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 an 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.  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 the Microsoft Data Engine (MSDE) . 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,

                                       19
<PAGE>
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  phone
system solution is dependent upon certain Microsoft  technologies,  there can be
no  assurances  that in the  event of a price  increase  by  Microsoft  that the
Company  will  be  able  to  continue  to  successfully   sell  and  market  its
software-based phone system.

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.

                                       20
<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

          None

     (b)  Reports on Form 8-K(a)

          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: May 15, 2001                      By /s/ Steven G. Manson
                                          --------------------------------------
                                          Steven G. Manson
                                          President and Chief Executive Officer
                                          (Principal Executive Officer)


                                        By /s/ Michael J. O'Donnell
                                          --------------------------------------
                                          Michael J. O'Donnell
                                          Chief Financial Officer
                                          (Principal Financial and Accounting
                                          Officer)

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