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

(Mark One)

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

For the quarterly period ended December 31, 1997

                                       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
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(State or other jurisdiction of              (IRS employer identification number
        incorporation)                                                 
                                                                           



                       One South Church Avenue, Suite 2200
                              Tucson, Arizona 85701
                                 (520) 670-7100
               ---------------------------------------------------
               (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 (February 13, 1998).

                 Common stock, $.01 par value: 14,539,231 shares

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<PAGE>
                         Artisoft Inc. and Subsidiaries
                                      INDEX




                                                                           Page
                                                                           ----
PART I.    FINANCIAL INFORMATION

       Item 1.  Financial Statements

                  Consolidated Balance Sheets-
                     December 31, 1997 and June 30, 1997                      3

                  Consolidated Statements of Operations-
                     Three Months and Six Months Ended
                     December 31, 1997 and 1996                               4

                  Consolidated Statements of Cash Flows-
                     Six Months Ended December 31, 1997
                     and 1996                                                 5

                  Notes to Consolidated Financial Statements                6-9

       Item 2.  Management's Discussion and Analysis of
                  Financial Condition and Results of Operations            10-17


PART II.   OTHER INFORMATION

       Item 1.  Legal Proceedings                                            18

       Item 2.  Changes in Securities                                        18

       Item 3.  Defaults Upon Senior Securities                              18

       Item 4.  Submission of Matters to a Vote by Security Holders          18

       Item 5.  Other Information                                            19

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


SIGNATURES                                                                   20


EXHIBITS

       11       Computation of Net Income (Loss) Per Share                   21

       27       Financial Data Schedule                                      22
                                       2
<PAGE>
                         Artisoft, Inc. and Subsidiaries
                           CONSOLIDATED BALANCE SHEETS
                    (in thousands, except per share amounts)
<TABLE>
<CAPTION>
                                                                                   December 31,     June 30,
ASSETS                                                                                1997            1997
                                                                                      ----            ----
                                                                                  (unaudited)
<S>                                                                                 <C>            <C>     
Current assets:
     Cash and cash equivalents                                                      $ 18,908       $ 14,673
     Receivables:                                                                                  
          Trade accounts, net                                                          3,940          5,011
          Income taxes                                                                  --            4,300
          Notes and other                                                                365            580
     Inventories                                                                       1,167          1,860
     Prepaid expenses                                                                    452            833
     Property and equipment held for sale                                               --            2,543
                                                                                    --------       --------
         Total current assets                                                         24,832         29,800
                                                                                    --------       --------

Property and equipment                                                                 6,942          7,883
     Less accumulated depreciation and amortization                                   (4,828)        (5,060)
                                                                                    --------       --------
         Net property and equipment                                                    2,114          2,823
                                                                                    --------       --------
                                                                                                   
Other assets                                                                           2,373          2,748
                                                                                    --------       --------
                                                                                    $ 29,319       $ 35,371
                                                                                    ========       ========
LIABILITIES AND SHAREHOLDERS' EQUITY                                                               
                                                                                                   
Current liabilities:                                                                               
     Accounts payable                                                               $    954       $  1,345
     Accrued liabilities                                                               2,436          3,118
     Accrued restructuring costs                                                         824          4,950
     Mortgage note payable                                                              --            2,182
     Current portion of capital lease obligations                                        473            458
                                                                                    --------       --------
         Total current liabilities                                                     4,687         12,053
                                                                                    --------       --------
                                                                                                   
Capital lease obligations,                                                                         
     net of current portion                                                              474            714
                                                                                                   
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  27,859,731 shares at December 31,                                                
          1997 and 27,848,464 shares at June 30, 1997                                    279            278
     Additional paid-in capital                                                       96,244         96,227
     Accumulated deficit                                                              (2,581)        (4,117)
     Less treasury stock, at cost, 13,320,500 shares at December 31,                               
          1997 and June 30, 1997                                                     (69,784)       (69,784)
                                                                                    --------       --------
         Total shareholders' equity                                                   24,158         22,604
                                                                                    --------       --------
                                                                                    $ 29,319       $ 35,371
                                                                                    ========       ========
</TABLE>
           See accompanying notes to consolidated financial statements
                                       3
<PAGE>
                         Artisoft, Inc. and Subsidiaries
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (in thousands, except per share amounts)
<TABLE>
<CAPTION>
                                                     Three Months Ended               Six Months Ended
                                                        December 31,                    December 31,
                                                     1997           1996            1997            1996
                                                  ------------------------        ------------------------
                                                         (unaudited)                    (unaudited)
<S>                                               <C>             <C>             <C>             <C>     
Net sales                                         $  6,761        $  9,505        $ 13,486        $ 20,625
Cost of sales                                        1,851           3,116           3,305           7,046
                                                  --------        --------        --------        --------
         Gross profit                                4,910           6,389          10,181          13,579
                                                  --------        --------        --------        --------

Operating Expenses:
         Sales and marketing                         2,332           5,633           5,030          12,638
         Product development                         1,823           2,266           3,614           4,656
         General and administrative                    734           1,430           1,391           2,868
         Restructuring cost                           --              --              --             1,805
                                                  --------        --------        --------        --------
                  Total operating expenses           4,889           9,329          10,035          21,967
                                                  --------        --------        --------        --------

Income (loss) from operations                           21          (2,940)            146          (8,388)

Other income, net                                    1,386             178           1,499             370
                                                  --------        --------        --------        --------

         Income (loss) before income tax
         benefit and extraordinary item              1,407          (2,762)          1,645          (8,018)

Income tax benefit                                    --               812            --             2,683
                                                  --------        --------        --------        --------

         Income (loss) before extraordinary
         item                                        1,407          (1,950)          1,645          (5,335)

         Extraordinary loss from early
         extinguishment of debt, net of
         $0 income tax benefit                        (109)           --              (109)           --
                                                  --------        --------        --------        --------

         Net income (loss)                        $  1,298        $ (1,950)       $  1,536        $ (5,335)
                                                  --------        --------        --------        --------


Basic and diluted net income (loss)
per share                                         $    .09        $   (.13)       $    .11        $   (.37)
                                                  --------        --------        --------        --------

Weighted average common and
common equivalent shares outstanding                14,612          14,536          14,568          14,530
                                                  --------        --------        --------        --------
</TABLE>
           See accompanying notes to consolidated financial statements
                                       4
<PAGE>
                         Artisoft, Inc. and Subsidiaries
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                             Six Months Ended
                                                                                December 31,
                                                                           1997             1996
                                                                           ----             ----
                                                                        (unaudited)
<S>                                                                      <C>             <C>      
Cash flows from operating activities:
     Net income (loss):                                                  $  1,536        $ (5,335)
     Adjustments to reconcile net income (loss) to net
        cash provided by operating activities:
            Extraordinary loss                                                109            --
            Depreciation and amortization                                     952           1,380
            Deferred income taxes                                            --               640
            Gain from disposition of property, net                         (1,492)             (5)
            Change in accounts receivable and inventory allowances         (2,241)         (1,103)
            Tax benefit of disqualifying dispositions                        --                22
      Changes in assets and liabilities:
            Receivables:
                 Trade accounts                                             2,902           5,031
                 Income taxes                                               4,300           1,635
                 Notes and other                                              215             332
         Inventories                                                        1,103           1,124
         Prepaid expenses                                                     381          (1,217)
         Accounts payable and accrued liabilities                          (1,073)           (765)
         Accrued restructuring costs                                       (4,126)           --
         Other assets                                                           7             (80)
                                                                         --------        --------
              Net cash provided by operating activities                     2,573           1,659
                                                                         --------        --------

Cash flows from investing activities:
     Proceeds from sale of property and equipment                           4,201              35
     Purchases of property and equipment                                     (151)           (972)
                                                                         --------        --------

              Net cash provided by (used in) investing activities           4,050            (937)
                                                                         --------        --------

Cash flows from financing activities:
     Proceeds from issuance of common stock                                    18              47
     Proceeds from sale-leaseback of equipment                               --             1,368
     Principal payments on long term debt                                  (2,406)           (147)
                                                                         --------        --------

              Net cash provided by (used in) financing activities          (2,388)          1,268
                                                                         --------        --------

Net increase in cash and cash equivalents                                   4,235           1,990
Cash and cash equivalents at beginning of period                           14,673          15,325
                                                                         --------        --------
Cash and cash equivalents at end of period                               $ 18,908        $ 17,315
                                                                         --------        --------
</TABLE>
           See accompanying notes to consolidated financial statements
                                       5
<PAGE>
                         Artisoft, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



(1)      Basis of Presentation

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

         The accompanying  unaudited 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 1997 Annual Report to
Shareholders  and report on Form 10-K.  The  results of  operations  for the six
months ended December 31, 1997 are not necessarily  indicative of the results to
be expected for the full year.

(2)      Computation of Net Income (Loss) Per Share

         In February  1997,  the  Financial  Accounting  Standards  Board (FASB)
issued Statement of Financial Accounting Standards No. 128, "Earnings per Share"
(SFAS  No.  128).  This  statement   establishes  standards  for  computing  and
presenting  earnings per share  ("EPS"),  and supersedes APB Opinion No. 15. The
Statement  replaces primary EPS with basic EPS and requires a dual  presentation
of basic and diluted EPS. The Statement is effective for both interim and annual
periods  ending after  December 15, 1997. The Company has adopted the provisions
of SFAS No. 128 for the quarter and six-month  periods  ended  December 31, 1997
and has restated the 1996 data.

(3)   Restructuring Cost

         The  accrued  restructuring  costs  in  the  accompanying  consolidated
balance  sheet at December  31, 1997 include the costs of  involuntary  employee
termination  benefits,  international  sales and  support  office  closures  and
related costs  associated  with the  restructuring  actions  effected during the
fiscal  year  ended  June  30,  1997.  Employee   termination  benefits  include
severance,  wage continuation,  notice pay and medical and other benefits. Other
costs associated with the restructuring  include international sales and support
office closures and related costs of premise and other lease terminations, legal
and other professional fees.




The accrued  restructuring costs at December 31, 1997 principally consist of the
following:
                                        6
<PAGE>
<TABLE>
<CAPTION>
                                      Employee Termination                            Total Accrued
                                           Benefits          Office Closure Costs   Restructuring Costs
                                           --------          --------------------   -------------------
<S>                                       <C>                    <C>                  <C>       
Balance at June 30, 1997                  $4,200,000             $ 750,000            $4,950,000
                                                           
Cash paid for employee                                                   
termination benefits                      (3,112,000)                  -              (3,112,000)
                                                           
Cash paid for office closure costs               -                (750,000)             (750,000)
                                                           
Reduction in estimate of future                                                     
restructuring costs                         (264,000)                  -                (264,000)
                                          ----------             ---------            ----------
                                                           
Unaudited balance at December 31, 1997    $  824,000             $     -              $  824,000
                                          ----------             ---------            ----------
</TABLE>

         Additionally,  separate from the restructuring  costs identified above,
during the quarter ended September 30, 1996, primarily in response to lower than
expected sales of LANtastic  network  operating system (NOS) products during the
quarter and attendant uncertainty as to future sales levels of NOS products, the
Company elected to take two principal  actions;  first, to realign the resources
of the Company to accelerate the  development,  delivery and potential  customer
adoption of new computer telephony and  communications  products and, second, to
reduce the Company's  operating  expense run rate. As a result of these actions,
the  Company  recorded  a pre-tax  restructuring  charge of $1.8  million in the
quarter ended September 30, 1996 to cover  severance costs  associated with a 50
person head count reduction and other related costs.



 (4)     Inventories

         Inventories  at  December  31,  1997 and June 30,  1997  consist of the
following (in thousands):


                                                  December 31,         June 30,
                                                     1997                1997
                                                  -----------         ----------
                                                  (Unaudited)
                  Raw materials                    $  750             $   1,088
                  Work-in-process                     170                   261
                  Finished goods                      562                 1,236
                                                   ------             ---------
                                                    1,482                 2,585
                  Inventory allowances               (315)                 (725)
                                                   ------             ---------
                                                   $1,167             $   1,860
                                                   ======             =========
                                       7
<PAGE>
(5)      Property and Equipment

         Property  and  equipment at December 31, 1997 and June 30, 1997 consist
of the following (in thousands):

                                  December 31,     June 30,
                                     1997            1997
                                  -----------        ----
                                  (unaudited)

Furniture and fixtures              $    68        $   892
Computers and other equipment         6,780          6,929
Leasehold improvements                   94             62
                                    -------        -------
                                      6,942          7,883
Accumulated depreciation and
amortization                         (4,828)        (5,060)
                                    -------        -------
                                    $ 2,114        $ 2,823
                                    =======        =======


         As described  in Note 3, the  restructuring  actions  commenced in June
1997  included a relocation  of the  Company's  Tucson  operations  to a smaller
facility  in October  1997.  The  property  and  equipment  held for sale in the
accompanying  June 30, 1997  consolidated  balance  sheet was  comprised  of the
expected net realizable value of excess furniture and equipment and the net book
values of the  Tucson land,  buildings  and  improvements.  During the six month
period ended  December 31, 1997, all of the property and equipment held for sale
was disposed of.

         On October 31, 1997 the Company closed escrow on the sale of its Tucson
building.  The Company  received gross proceeds of $4.1 million on the sale, net
cash proceeds of $1.6 million after the  pre-payment of a $2.2 million  mortgage
and other associated  closing costs.  The Company  recognized a net gain of $1.3
million on the sale of the building for the quarter ended December 31, 1997.



(6)      Other Assets

         Other  assets at December  31,  1997 and June 30,  1997  consist of the
following (in thousands):

                                                          December 31,  June 30,
                                                              1997        1997
                                                              ----        ----
                                                          (unaudited)
        Trademarks and patents, net of
              accumulated amortization of $58 and $44        $   67      $   80
        Purchased technology, net of
              accumulated amortization of $1,329 and $984     2,126       2,471
        Recoverable deposits and other                          180         197
                                                             ------      ------
                                                             $2,373      $2,748
                                                             ======      ======


(7)      Subsequent Events

         On January  28,  1998 the  Company  entered  into a software  licensing
agreement with GFI Communications. The Company paid GFI Communications  $275,000
in exchange for a one-time source code drop of a certain communications software
technology.  The technology  purchase will be capitalized and amortized over its
useful life.
                                       8
<PAGE>
                         Artisoft, Inc. and Subsidiaries

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

Results of Operations


                  Net  Sales.  The  Company's  net sales for the  quarter  ended
December  31, 1997 were $6.8  million,  a decrease of 28% from net sales of $9.5
million for the  corresponding  quarter of fiscal 1997 and a increase of 1% from
the first  quarter of fiscal 1998 net sales of $6.7  million.  For the six-month
period ended December 31, 1997,  the Company's net sales were $13.5  million,  a
decrease of 34% from net sales of $20.6 million for the corresponding  period of
fiscal 1997.  The  decreases in net sales for the quarter and  six-month  period
ended  December 31,  1997,  as compared to the  corresponding  periods in fiscal
1997, were  principally  due to the decline in sales of the Company's  LANtastic
network  operating system (NOS) products,  offset to a minor extent by increased
sales of the  Company's  iShare  2.5,  ModemShare  32, and  CoSession  Remote 32
version 8  software  products.  The  sequential  increase  in net sales from the
previous  quarter's net sales was  principally  the result of the release of the
Company's CoSession Remote 32 version 8 software.

         The Company distributes its products in both the U.S. and international
markets.  U.S.  sales  decreased  27% to $4.8 million (71% of net sales) for the
quarter ended December 31, 1997,  from $6.6 million (69% of net sales),  for the
same quarter a year ago. U.S.  sales  decreased 31% to $ 9.9 million (73% of net
sales), for the six-month period ended December 31, 1997 from $14.3 million (69%
of net sales),  for the same period in fiscal  1997.  The  decrease in U.S.  net
sales for both the quarter and the six-month periods ended December 31, 1997, as
compared to the corresponding  periods in fiscal 1997,  primarily  resulted from
the factors  affecting  total sales  described  above.  In addition,  U.S. sales
during such three and  six-month  periods of fiscal 1997 declined as a result of
channel  inventory  reserves  taken  to  maintain  U.S.   distribution   channel
inventories at a level  commensurate with U.S.  distribution sell through levels
partially offset by increased sales of the Company's remote computing software.

         International  sales  decreased 31% to $2.0 million (29% of net sales),
for the quarter ended  December 31, 1997,  from $2.9 million (31% of net sales),
for the same quarter a year ago and increased 25% from the first quarter  fiscal
1998 sales of $1.6 million.  International  sales  decreased 43% to $3.6 million
(27% of net sales),  for the six-month  period ended December 31, 1997 from $6.3
million (31% of net sales) for the same period in fiscal  1997.  The decrease in
international  net sales for both the quarter and the  six-month  periods  ended
December  31,  1997,  as compared to the  corresponding  periods in fiscal 1997,
primarily  resulted  from the  decline in sales of  LANtastic  NOS  products  in
Europe,  offset to a minor  extent by sales of new  products.  The  increase  in
international net sales from the previous quarter's net sales is principally due
to an increase in demand for the Company's  iShare 2.5 and Visual Voice software
in Europe  (particularly  the United  Kingdom)  and an  increase in OEM sales in
Japan.

         Channel Mix.  Artisoft  distributes  substantially  all of its products
through a combination of direct channels (principally  telesales),  and indirect
channels which include OEMs, systems integrators, value-added resellers ("VARs")
and software retailers. Indirect channel revenues for the quarter ended December
31,  1997 and 1996 were 76% and 84% of total  revenues,  respectively.  Indirect
channel  revenues for the six month period ended December 31, 1997 and 1996 were
81% and 83% respectively. The decrease in indirect channel revenues for both the
quarter  and  six  month  periods  ended  December  31,  1997  compared  to  the
corresponding  periods in fiscal 1997 is principally the result of a decrease in
retail  channel  revenues  (relating to the  Company's  LANtastic  NOS products)
partially  offset by an increase in OEM revenues  from the  Company's  CoSession
Remote 32 Version 8, ConfigSafe and iShare 2.5 software.
                                       10
<PAGE>
         Gross  Profit.  The  Company's  gross  profit was $4.9 million and $6.4
million for the quarters ended December 31, 1997 and 1996, respectively (72% and
67% of net  sales,  respectively).  Gross  profit  was $10.2  million  and $13.6
million  for  the  six-month   periods  ended   December  31,  1997,  and  1996,
respectively (76% and 66% of net sales, respectively). The net increase in gross
profit margin  percentages for both the quarter and the six-month  periods ended
December 31, 1997, as compared to the corresponding  periods in fiscal 1997, was
principally  due to the following  factors:  cost  efficiencies  achieved at the
Company's  distribution  center due to the  restructuring  actions  taken during
fiscal year 1997,  decreased  product  translation  costs and increased sales of
higher  margin-software  only  content such as iShare 2.5,  CoSession  Remote 32
Version 8 and to a lesser extent Visual Voice 4.0. The net decrease in aggregate
dollars of gross profit  margin for both the quarter and six month periods ended
December  31,  1997 is the result of the decline in net sales  (principally  the
LANtastic NOS products).

           The  sequential  decrease  in gross  profit  margin  from 79% for the
quarter ended September 30, 1997, to 72% for the quarter ended December 31, 1997
is the  result of higher  software  licensing  fees  incurred  on the  Company's
configuration  tracking and recovery utility (ConfigSafe)  licensed from imagine
LAN, Inc. and to a lesser extent inventory  reserves recorded during the quarter
ended December 31, 1997.

         Gross  profit  margins  may  fluctuate  from  quarter to quarter due to
changes in net sales,  product  mix,  pricing  actions  and changes in sales and
inventory allowances.

         Operating  Expenses.  Operating  expenses  were $4.9  million  and $9.3
million for the quarters ended December 31, 1997 and 1996 respectively, (72% and
98% of net sales, respectively). Total operating expenses were $10.0 million and
$22.0  million  for the  six-month  periods  ended  December  31, 1997 and 1996,
respectively,  (74%  and  107% of net  sales,  respectively).  The  decrease  in
absolute dollars was due to the restructuring actions implemented by the Company
during the fiscal year ended June 30,  1997.  The  decrease  in total  operating
expenses as a percentage of net sales for both the quarter and six month periods
ended  December  31,  1997  was  due to the  aforementioned  expense  reductions
associated with these  restructuring  actions offset to a significant  degree by
the decline in net sales.

         Sales and Marketing. Sales and marketing expenses were $2.3 million and
$5.6 million for the quarters  ended  December 31, 1997 and 1996,  respectively,
(34% and 59% of net sales, respectively). Sales and marketing expenses were $5.0
million and $12.6 million for the six-month  periods ended December 31, 1997 and
1996, respectively,  (37% and 61% of net sales,  respectively).  The decrease in
aggregate  dollars for sales and  marketing  expenses and as a percentage of net
sales for the quarter and the  six-month  periods  ended  December 31, 1997,  as
compared to the corresponding periods in fiscal 1997, are due principally to the
Company's restructuring actions undertaken during the fiscal year ended June 30,
1997.  These  actions  included  the  closure  of  six of  the  Company's  eight
international sales offices and marketing headcount  reductions at the Company's
Tucson headquarters.  Additionally,  the Company reduced certain other marketing
and  promotional  expenses  associated  with its  LANtastic  NOS  product  lines
primarily as a response to the decline in sales.  These  reductions in sales and
marketing  expenses  were  offset  to a minor  extent  by  increased  sales  and
marketing  expenditures on the Company's iShare 2.5, CoSession Remote 32 Version
8, and Visual Voice software.

         Product Development. Product development expenses were $1.8 million and
$2.3 million for the quarters  ended  December 31, 1997 and 1996,  respectively,
(26% and 24% of net sales, respectively). Product development expenses were $3.6
million and $4.7 million for the six-month  periods ended  December 31, 1997 and
1996, respectively,  (27% and 23% of net sales,  respectively).  The decrease in
aggregate dollars for product development expenses for the quarter and six month
period  ended  December 31, 1997,  as compared to the  corresponding  periods in
fiscal 1997 is principally  attributable to the headcount reductions  associated
with the restructuring actions taken during the fiscal year ended June 30, 1997.
The  reduction in product  development  personnel  occurred  principally  in the
Company's  LANtastic NOS product line and was the result of declining sales. The
reduction in aggregate dollars for product development  expenses for the quarter
and six month  periods ended  December 31, 1997, as compared with  corresponding
periods in fiscal  1997 was offset to a  significant  degree by the  addition of
product  development  personnel in the computer  telephony and remote  computing
product segments  associated with the development of Visual Voice 4.0, CoSession
Remote  32  Version 8 and  TeleVantage.  The  increase  in  product  development
expenses as a percentage  of net sales for both the quarter and six month period
ended December 31, 1997 as compared to the corresponding  periods in fiscal 1997
is  primarily  due to the  decrease in sales of the  Company's  LANtastic  (NOS)
products.
                                       11
<PAGE>
         General and  Administrative.  General and administrative  expenses were
$.7 million and $1.4 million for the quarters  ended December 31, 1997 and 1996,
respectively,   (10%  and  15%  of  net  sales,   respectively).   General   and
administrative  expenses  were $1.4 million and $2.9  million for the  six-month
periods  ended  December  31,  1997 and 1996,  respectively  (10% and 14% of net
sales,  respectively).  The  decrease  in  aggregate  dollars  for  general  and
administrative expenses for the quarter and six month periods ended December 31,
1997 as compared to the corresponding periods in fiscal 1997, is attributable to
reductions in  administrative  personnel  effected  during the fiscal year ended
June 30, 1997 as a part of the Company's restructuring plan. To a lesser extent,
the  decrease is also the result of lower  occupancy  and  maintenance  expenses
principally due to the sale of the Company's  Tucson,  Arizona  headquarters and
the  relocation  to  a  lower  cost  facility.   The  decrease  in  general  and
administrative  expenses  as a  percentage  of net sales for the quarter and the
six-month  periods  ended  December 31, 1997,  as compared to the  corresponding
periods in fiscal 1997, is primarily the result of the aforementioned reductions
partially  offset  by the  decline  in sales of the  Company's  LANtastic  (NOS)
products.

         Restructuring  Cost.  During the  quarter  ended  September  30,  1996,
primarily in response to lower than  expected  sales of  LANtastic  NOS products
during the quarter and  attendant  uncertainty  as to future sales levels of NOS
products,  the Company elected to take two principal actions;  first, to realign
the  resources  of the  Company to  accelerate  the  development,  delivery  and
customer  adoption of new computer  telephony and  communications  products and,
second,  to  reduce  the  Company's  operating  expenses.   The  effect  of  the
realignment  was to increase the Company's  investment  in product  development,
marketing  and channel  development  in the high growth  computer  telephony and
communications  segments of the Company's  business and thereby bring more focus
to the  delivery of products in these  areas,  as well as to support  continuing
differentiation for LANtastic in the future.

         Other  Income,  Net. For the quarter  ended  December  31, 1997,  other
income,  net,  increased to $1.4 million,  from $.2 million in the corresponding
quarter of fiscal 1997. For the six-month  period ended December 31, 1997, other
income,  net,  increased to $1.5 million,  from $.4 million in the corresponding
period of fiscal 1997. The increase in other income,  net, for the quarter ended
December  31,  1997 and the  six-month  period  ended  December  31,  1997,  was
principally  attributable  to the  recognition  of a gain  on  the  sale  of the
Company's Tucson, Arizona headquarters of $1.3 million.

         Income Tax Benefit.  The  Company's  effective  income tax rate for the
quarter ended December 31, 1997, was 0% compared to an effective rate of (29.4%)
in the corresponding  quarter of fiscal 1997. The Company's effective income tax
rate for the six month  period ended  December  31, 1997,  was 0% compared to an
effective  rate of  (32.7%)  in the  corresponding  period of fiscal  1997.  The
Company did not recognize tax expense for the quarter or six-month periods ended
December  31, 1997 due to the  carryforward  of federal and state net  operating
losses and the reversal of certain book-tax timing differences.

         Extraordinary loss from early  extinguishment of debt. In October 1997,
the Company incurred a $109,000  prepayment penalty upon the sale of its Tucson,
Arizona  headquarters and the subsequent repayment of a $2.2 million mortgage on
that  facility.  The Company  utilized  proceeds  received  from the sale of its
Tucson,  Arizona  headquarters  to prepay the mortgage  obligation.  There is no
income tax effect from the  transaction.  The per share amount of  extraordinary
loss net of income tax effects is $(.01) for the quarter and  six-month  periods
ended December 31, 1997.
                                       12
<PAGE>
Future Results

         The Company's  future  results of operations  involve a number of risks
and  uncertainties.  Among the factors that could cause future results to differ
materially from historical  results are the following:  business  conditions and
the general economy; competitive pressures, acceptance of new products and price
pressures; availability of third party compatible products at reasonable prices;
risk of  nonpayment  of  accounts or notes  receivable;  risks  associated  with
foreign operations  (especially those in Japan and other Asian countries);  risk
of product  line or  inventory  obsolescence  due to shifts in  technologies  or
market demand;  timing of software  introductions;  litigation.  These and other
risk factors are outlined below.

         The Company is addressing the issues  associated  with the "year 2000."
The Company is utilizing resources to identify, correct, reprogram and test both
its  systems  used  internally  as well as the  products  it sells for year 2000
compliance. It is anticipated that all reprogramming and correction efforts will
be completed by December 31, 1998.

Liquidity and Capital Resources

         The Company had cash and cash  equivalents of $18.9 million at December
31, 1997,  compared to $14.7  million at June 30, 1997,  and working  capital of
$20.1  million at December 31, 1997  compared to $17.7 million at June 30, 1997.
The  increase in cash and cash  equivalents  was  principally  the result of the
receipt of a federal  income  tax refund of  approximately  $4.2  million,  cash
received  from the  sale of its  Tucson,  Arizona  headquarters  and  associated
furniture and equipment,  partially offset by severance  payments as a result of
the Company's  restructuring  actions effected during the quarter ended June 30,
1997 and the prepayment of the mortgage on the Tucson facility.  The increase in
the Company's  working capital was primarily the result of the increases in cash
balances as described above.

         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 may necessitate that the Company seek additional debt
or equity capital. There can be no assurance that such additional financing will
be available when needed or, if available,  will be on  satisfactory  terms.  In
order to raise capital,  the Company may issue debt or equity securities and may
incur substantial dilution.

Risk Factors

         Competition. The PC industry is highly competitive and is characterized
by rapidly changing  technology and evolving industry  standards.  The Company's
products compete with products available from numerous 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 PC industry  is likely to  intensify  as current  competitors  expand  their
product lines,  more features are included in operating  systems (e.g.,  Windows
95), motherboards and microprocessors, and as new companies enter the markets or
segments  in  which  the  Company  currently  competes.  The  industry  is  also
characterized  by a high degree of  consolidation  which favors  companies  with
greater resources than those of the Company.  Consequently,  the Company expects
to  continue  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.  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.

         Customers.  The Company relies on a network of  distributors  and value
added  resellers  (VARs)  for a  significant  portion of both its  domestic  and
international  networking and PC communications product revenues. In addition, a
majority of the sales of CoSession  Remote,  the  Company's PC remote  computing
product, are to PC OEM's. Generally,  there are no minimum purchase requirements
for the  Company's  distributors,  VARs  and  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 as
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 a  material  adverse  effect  on  the  Company's
business, financial condition and results of operation. Certain of the Company's
PC OEM relationships require the scheduled delivery of product revisions and new
products.  The failure to adhere to agreed-upon product delivery schedules could
result in the  termination  of key  relationships  with major PC  manufacturers,
which could have a significant  adverse impact on current and future revenues in
the PC OEM channel.  The  Company's OEM revenue  streams are dependent  upon the
maintenance of one or more key PC OEM relationships.  The termination of any one
of these relationships may materially adversely effect the Company's current and
future revenues.
                                       13
<PAGE>
         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 if  necessary  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.

         The Company is also occasionally  exposed to its distributors and other
volume  purchasers for price protection for list price reductions by the Company
on its products held in such customers'  inventories.  The Company  provides its
distributors  with price  protection  in the event that the Company  reduces the
list  price  of  its  products  due  to  uncontrollable  competitive  pressures.
Distributors  and other volume  purchasers  are usually  offered  credit for the
impact of a list price  reduction  on the expected  revenue  from the  Company's
products in the  distributors'  inventories at the time of the price  reduction.
Although  the  Company  maintains  allowances  against the effects of such price
protections,  and believes that it has provided  adequate  allowances  for price
protection,  there can be no  assurance  that the  impact of actual  list  price
reductions  by the Company will not exceed the  Company's  allowance.  Any price
protection  in excess  of the  recorded  allowance  could  result in a  material
adverse effect on sales and operating results.

         Foreign Conditions.  The Company is exposed to certain risks associated
with the  current  financial  conditions  in  Southeast  Asia that are  having a
negative impact upon the currencies and economies of Australia,  Japan and other
Asian  countries.  The  Company  has  operations  in Japan  that  accounted  for
approximately  5% of its net revenues for the quarter  ended  December 31, 1997.
While the Company  believes that its operations in Japan and other revenues from
Asia will not be materially impacted by this current financial turmoil there can
be no assurances that continued  severe  economic  disruption in these economies
would not adversely affect future 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  VARs  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,  or otherwise,  or 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>
         Networking.  The  Company's  major  competitors  in the small  business
networking  market  are  Microsoft  Corporation  (Microsoft)  and  Novell,  Inc.
(Novell).   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 operating
system  (released in August 1995) have had a detrimental  impact on sales of the
Company's  LANtastic  NOS  products.  Windows 95 is  pre-loaded on virtually all
Pentium processor-based  personal computers currently sold worldwide. The impact
of Windows 95 has been  compounded by the dominance and  visibility of Microsoft
in the personal  computer software market and the upgrade by small businesses to
Pentium PC's. In August 1996, Microsoft released Windows NT 4.0, a client server
network version of the Windows  operating system.  Management  believes that the
workstation  version  of  Windows  NT  4.0  which,  like  Windows  95,  includes
peer-to-peer  networking  capabilities  and is pre-loaded  on Pentium PC's,  has
provided  significant  direct  competition  to the  LANtastic  NOS in the  small
business  networking market.  Further,  business  applications  software vendors
appear to be rapidly adapting their products to Windows NT. Management  believes
that this trend  combined  with the fact that DOS,  Windows  3.x and  Windows 95
clients  are  compatible  with the NT server  has and will  continue  to provide
substantial  competitive pressure on sales of LANtastic NOS products.  Microsoft
recently  announced a plan to target the small business  market with versions of
NT and BackOffice  specially  designed to meet the buying  requirements of small
businesses,  and  therefore  potentially  reducing  opportunities  for LANtastic
technologies  to add value for small  business  customers.  This  solution  will
likely further  diminish the demand for LANtastic in the small  business  market
(1-100 users).

         Finally,  the movement of the networking  industry  towards the uniform
use of Internet  technologies  in the  construction  of local area  networks (so
called intranets)  constitutes a risk that demand for more proprietary networks,
such as LANtastic, will decline further, and that competition will emerge from a
new class of players,  such as Netscape  Communications,  Sun Microsystems,  and
others.

         Remote Computing.  The principal distribution channel for the Company's
remote  computing  product,  CoSession  Remote  32  version  8, is  through  OEM
arrangements  with PC  manufacturers.  In December 1997, the Company  released a
32-bit version of the product to support the Windows 95 and Windows NT operating
systems.  As the Company's major  competitors also offer 32-bit remote computing
products, it is critical, for the continuance of the OEM relationships, that the
Company  successfully  market the  32-bit  product  and meet major OEM  customer
e-commerce and other promotional requirements. The Company's ability to grow its
remote  computing  software  revenues  will  likely  depend  on its  success  in
leveraging  existing OEM relationships to develop new sources of revenue such as
e-commerce.  The loss of one or more of these  OEM  relationships  could  have a
significant impact on the Company's net sales and operating  results.  Microsoft
has  announced  its  intention  to include a remote  computing  component in its
Windows 98 operating systems (tentatively scheduled for release in the Spring of
1998) and  currently  distributes  Net  Meeting at no charge  from its Web site.
These actions could lead to diminished demand for the Company's CoSession remote
control product, and consequently decreased net sales and operating results.

         Communications.  Microsoft,  because of its dominant position in the PC
operating  systems  and  business   applications   markets,   frequently  offers
value-added  functionality  to its products in the form of  enhancements  to its
Windows operating systems, which are pre-loaded on new PC's, or by offering free
products for download  from its World Wide Web site.  The Company  believes that
Microsoft's  next version of its Windows NT Server  (tentatively  scheduled  for
release in either late 1998 or early 1999) may  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 iShare products which could have a
significant  impact on the Company's  sales and  operating  results (see caption
above entitled, "Networking" for further discussion of Windows NT).
                                       15
<PAGE>
         Computer  Telephony.  The  market for open,  standards-based  telephony
tools,  applications  and  system-level  products is relatively new, and rapidly
evolving. There can be no assurances that these markets will continue to expand,
or if they do, that the Company's products will receive  widespread  acceptance.
Further, the market for the Company's telephony products is characterized by the
rapid  evolution of  telephony  hardware  and  software  standards,  by changing
customer requirements,  and is highly competitive with respect to timely product
introduction.  These characteristics may render the Company's telephony products
obsolete or unmarketable.

         The  Company  is  currently  investing  significant  resources  in  the
development,  marketing  and  launch  of  new  telephony  products.  Due  to the
complexity  of these tools and system  level  products,  and the  difficulty  in
gauging the  engineering  effort required to develop and bring these products to
market,  the Company's  telephony  product line is subject to significant  risk.
Software products as complex as those currently under development by the Company
are often  subject to market  acceptance  challenges.  There can be no assurance
that the Company will not encounter  difficulties in  successfully  introducing,
marketing  and  promoting  these  products.  Additionally,  these new  telephony
products  are  principally  targeted  at medium to large  size  businesses.  The
Company's  existing  network of qualified  resellers has  historically  sold the
Company's products to small businesses. The Company's success in launching these
products  will  likely be  influenced  by its  ability  to  attract  and  inform
qualified  value  added  resellers  and   interconnects   on  the  features  and
functionality of these emerging technologies.

         The Company believes that the principal  competitive  factors affecting
the 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 assurances 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 expand its distribution channel for telephony products
or any  failure  to  maintain  and grow its  competitive  position  would have a
material adverse effect upon the Company's  revenues from its telephony  product
line.

         Due to  the  foregoing,  and  other  factors  affecting  the  Company's
operating results,  past financial  performance should not be considered to be a
reliable  indicator  of  future  performance,   and  investors  should  not  use
historical trends to anticipate results or trends in future periods.


"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,   including,  but  not  limited  to,  the  impact  of
competitive  products and pricing,  product demand and market  acceptance risks,
the  presence  of  competitors  with  greater   financial   resources,   product
development and  commercialization  risks, costs associated with the integration
and  administration of acquired  operations,  capacity and supply constraints or
difficulties,  the results of financing  efforts and other risks  detailed  from
time to time in the Company's Securities and Exchange Commission filings.
                                       16
<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
            (a)    The  Company's  Annual  Shareholders'  Meeting  was  held  on
                   November 3, 1997.

            (b)    At  the  Annual   Shareholders'   Meeting,   proposals   were
                   considered  for, (i) the  election of Jerry E.  Goldress as a
                   Class II  director  to serve  until  the  annual  meeting  of
                   shareholders' in 2000, (ii) the election of T. Paul Thomas as
                   a Class II  director  to serve  until  the  annual meeting of
                   shareholders'  in  2000, and  (iii)  the ratification  of the
                   selection of  KPMG Peat  Marwick LLP as  the auditors of  the
                   Company for the 1998 fiscal year.

                   The  director-nominees  were elected and the  ratification of
                   KPMG Peat  Marwick was  approved  with the voting  results as
                   follows:

<TABLE>
<CAPTION>
Proposal                Votes For       Votes Against      Votes Withheld     Abstained       Not Voted
--------------------------------------------------------------------------------------------------------
<S>                    <C>                   <C>             <C>                  <C>          <C>    
Election of Jerry
E. Goldress as a
Class II Director      13,489,196               -              211,700            -            828,068

Election of T.
Paul Thomas as
a Class II Director    12,214,836               -            1,486,060            -            828,068

Ratification of
selection of KPMG
Peat Marwick as
auditors of the
Company for fiscal
year 1998              13,602,104            70,561             28,231            -            828,068
</TABLE>
                                       17
<PAGE>
Item 5.     OTHER INFORMATION
                 None

Item 6.     EXHIBITS AND REPORTS ON FORM 8-K

(a)   Exhibits
              No. 11 - Computation of Net Income (Loss) Per Share

              No. 27 - Financial Data Schedule for Form 10-Q dated  February 13,
                       1998

(c)   Reports on Form 8-K
              There were no reports filed  on Form 8-K during  the three  months
              ended December 31, 1997
                                       18
<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:  February 13, 1998                By  /s/ T. Paul Thomas
                                          -----------------------------------
                                             T. Paul Thomas
                                             President and Chief Operating
                                             Officer






                                        By /s/ Kirk D. Mayes
                                          -----------------------------------
                                            Kirk D. Mayes
                                            Corporate Controller, Principal
                                            Accounting Officer
                                            (Acting Principal Financial Officer)

                                       19