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

(Mark One)

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

For the quarterly period ended March 31, 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
        incorporation)                                         number)


                           2202 North Forbes Boulevard
                              Tucson, Arizona 85745
                                 (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 (May 14, 1997).

                 Common stock, $.01 par value: 14,539,113 shares

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<PAGE>
                         Artisoft Inc. and Subsidiaries
                                      INDEX




                                                                          Page
PART I.    FINANCIAL INFORMATION

       Item 1.  Financial Statements

                  Consolidated Balance Sheets-
                     March 31, 1997 and June 30, 1996                       3

                  Consolidated Statements of Operations-
                     Three Months and Nine Months Ended
                     March 31, 1997 and 1996                                4

                  Consolidated Statements of Cash Flows-
                     Nine Months Ended March 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            10-16


PART II.   OTHER INFORMATION

       Item 1.  Legal Proceedings                                           17

       Item 2. Changes in Securities                                        17

       Item 3. Defaults Upon Senior Securities                              17

       Item 4. Submission of Matters to a Vote by Security Holders          17

       Item 5. Other Information                                            17

       Item 6.  Exhibits and Reports on Form 8-K                            17



SIGNATURES                                                                  18



EXHIBITS

       11       Computation of Net Loss Per Share                           19

       27       Financial Data Schedule                                     20
                                       2
<PAGE>
                         Artisoft, Inc. and Subsidiaries
                           CONSOLIDATED BALANCE SHEETS
                      (in thousands, except share amounts)
<TABLE>
<CAPTION>

                                                                               March 31,   June 30,
ASSETS                                                                           1997        1996
                                                                               --------    --------
                                                                             (unaudited)
<S>                                                                            <C>         <C>     
Current assets:
     Cash and cash equivalents                                                 $ 17,646    $ 15,325
     Receivables:
          Trade accounts, net                                                    10,462      16,768
          Income taxes                                                             --         1,635
          Notes and other                                                           687       1,405
     Inventories                                                                  2,225       2,998
     Prepaid expenses                                                             1,424         906
     Deferred income taxes                                                        4,521       4,426
                                                                               --------    --------
         Total current assets                                                    36,965      43,463
                                                                               --------    --------


Property and equipment                                                           14,847      13,690
     Less accumulated depreciation and amortization                              (7,641)     (6,166)
                                                                               --------    --------
         Net property and equipment                                               7,206       7,524
                                                                               --------    --------

Deferred income taxes                                                             3,793       3,141
Other assets                                                                      3,079       3,584
                                                                               --------    --------
                                                                               $ 51,043    $ 57,712
                                                                               ========    ========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
     Accounts payable                                                          $  2,259    $  3,333
     Accrued liabilities                                                          2,935       2,640
     Income taxes payable                                                           321         577
     Current portion of long-term debt                                              498          85
                                                                               --------    --------
         Total current liabilities                                                6,013       6,635
                                                                               --------    --------

Long-term debt,
     net of current portion                                                       2,975          96

Commitments and Contingencies                                                      --          --

Shareholders' equity:
     Common stock, $.01 par value.  Authorized 50,000,000 shares;
          issued  27,836,613 shares at March 31,
          1997 and 27,807,890 shares at June 30, 1996                               278         278
     Additional paid-in capital                                                  96,187      96,075
     Retained earnings                                                           15,310      24,308
     Less treasury stock, at cost, 13,297,500 shares at March 31,               (69,720)    (69,680)
     1997 and 13,287,500 shares at June 30, 1996                               --------    --------
         Total shareholders' equity                                              42,055      50,981
                                                                               --------    --------
                                                                               $ 51,043    $ 57,712
                                                                               ========    ========
</TABLE>
           See accompanying notes to consolidated financial statements
                                       3
<PAGE>
                         Artisoft, Inc. and Subsidiaries
                      CONSOLIDATED STATEMENTS OF OPERATIONS

           Three Months and Nine Months Ended March 31, 1997 and 1996
                    (in thousands, except per share amounts)
<TABLE>
<CAPTION>
                                                    Three Months Ended           Nine Months Ended   
                                                        March  31,                   March  31,      
                                                   --------------------         -------------------- 
                                                     1997        1996             1997        1996   
                                                   --------    --------         --------    -------- 
                                                        (unaudited)                 (unaudited)      
<S>                                                <C>         <C>              <C>         <C>      
Net sales                                          $  8,452    $ 15,171         $ 29,077    $ 44,476 
Cost of sales                                         3,034       4,310           10,080      14,897 
                                                   --------    --------         --------    -------- 
         Gross profit                                 5,418      10,861           18,997      29,579 
                                                   --------    --------         --------    -------- 
                                                                                                     
Operating expenses:                                                                                  
     Sales and Marketing                              5,620       6,789           18,258      19,856 
     Product development                              2,305       2,005            6,961       4,598 
     General and administrative                       1,327       1,621            4,195       4,233 
     Purchased in-process technology                                                                 
        and related costs                              --        12,294             --        26,744 
     Restructuring cost                               1,334        --              3,139        --   
                                                   --------    --------         --------    -------- 
         Total operating expenses                    10,586      22,709           32,553      55,431 
                                                   --------    --------         --------    -------- 
                                                                                                     
          Loss from operations                       (5,168)    (11,848)         (13,556)    (25,852)
                                                                                                     
Other income, net                                       118         404              488       1,238 
                                                   --------    --------         --------    -------- 
                                                                                                     
          Loss before income taxes                   (5,050)    (11,444)         (13,068)    (24,614)
                                                                                                     
Income tax benefit                                   (1,387)     (4,937)          (4,070)     (5,337)
                                                   --------    --------         --------    -------- 
                                                                                                     
         Net loss                                  $ (3,663)   $ (6,507)        $ (8,998)   $(19,277)
                                                   ========    ========         ========    ======== 
                                                                                                     
Net loss per common  and                                                                             
     equivalent share                              $   (.25)   $   (.45)            (.62)      (1.33)
                                                   ========    ========         ========    ======== 
                                                                                                     
Shares used in per share calculation                 14,549      14,478           14,542      14,456 
                                                   ========    ========         ========    ======== 
</TABLE>
           See accompanying notes to consolidated financial statements
                                       4
<PAGE>
                         Artisoft, Inc. and Subsidiaries
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                      Nine Months Ended
                                                                           March 31,
                                                                           ---------
                                                                       1997        1996
                                                                     --------    --------
                                                                          (unaudited)
<S>                                                                  <C>         <C>     
Cash flows from operating activities:                                    
     Net loss                                                        $ (8,998)   $(19,277)
     Adjustments to reconcile net loss to net
        cash provided by operating activities:
            Purchased in process technology                              --        21,700
            Depreciation and amortization                               2,074       1,694
            Deferred income taxes                                        (747)     (5,553)
            Loss (Gain)from disposition of property, net                   17        (163)
            Change in accounts receivable and inventory allowances     (1,658)       (156)
            Tax benefit of disqualifying dispositions                      22          70
            Changes in assets and liabilities,
             net of effects from acquisitions of businesses:
              Trade accounts receivable                                 7,149       6,465
         Income taxes receivable                                        1,635        --
         Notes and other receivables                                      718        --
         Inventories                                                    1,588      (1,356)
         Prepaid expenses                                                (518)        569
         Accounts payable and accrued liabilities                        (779)     (3,118)
         Income taxes payable                                            (256)         29
         Other assets                                                     (63)        214
                                                                     --------    --------

              Net cash provided by operating activities                   184       1,118
                                                                     --------    --------
Cash flows from investing activities:
     Purchases of investments                                            --       (35,063)
     Sales of investments                                                --        56,305
     Cash paid for businesses acquired                                   --       (24,794)
     Proceeds from sale of property and equipment                          35       2,966
     Purchases of property and equipment                               (1,256)     (2,018)
                                                                     --------    --------

              Net cash used in investing activities                    (1,221)     (2,604)
                                                                     --------    --------
Cash flows from financing activities:
     Purchase of treasury  stock                                          (40)       --
     Proceeds from building  mortgage                                   2,200        --
     Proceeds from exercise of stock options                              106         676
     Proceeds from sale-leaseback transaction                           1,368        --
     Principal payments on long term debt                                (276)        (28)
                                                                     --------    --------

              Net cash provided by financing activities                 3,358         648
                                                                     --------    --------


Net increase (decrease) in cash and cash equivalents                    2,321        (838)
Cash and cash equivalents at beginning of period                       15,325      16,551
                                                                     --------    --------
Cash and cash equivalents at end of period                           $ 17,646    $ 15,713
                                                                     ========    ========
</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 1996 Annual Report to
Shareholders  and report on Form 10-K.  The results of  operations  for the nine
months ended March 31, 1997 are not necessarily  indicative of the results to be
expected for the full year.


(2)      Computation of Net Loss Per Share

         Net loss per  common  and  equivalent  share is  computed  based on the
weighted  average  number of common  shares  and the  dilutive  effects of stock
options  during the period using the treasury  stock method.  


(3)      Restructuring Cost

         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.

         The Company recorded an additional pre-tax restructuring charge of $1.3
million  during the quarter ended March 31, 1997  primarily due to severance and
other costs  associated  with the closing of the  Company's  Italian  office and
additional headcount reduction in the U.S.,  principally at the Company's Tucson
and  Cambridge  locations,  in response to the decline in sales of its LANtastic
NOS products.
                                        6
<PAGE>
(4)      Acquisitions

         On November 22, 1995, the Company acquired substantially all the assets
and certain liabilities of Synergy Solutions, Inc. (Synergy), a software company
primarily engaged in the development, marketing and sales of modem and telephone
line sharing  software.  The aggregate cost of the acquisition was approximately
$1.5 million.

         On December  21, 1995,  the Company  purchased  all of the  outstanding
common  stock of  Triton  Technologies,  Inc.  ("Triton"),  a  software  company
primarily  engaged in the development,  marketing and sales of PC remote control
software.  The aggregate cost of acquiring the stock of Triton was approximately
$11.8  million.  The purchase  price was paid in cash and notes  payable,  which
notes were paid in full in January 1996.

         On February 13, 1996, the Company acquired for cash  substantially  all
the assets and certain liabilities of Stylus Innovation Incorporated ("Stylus"),
a software company engaged in the  development,  marketing and sales of computer
telephony applications and tools software. The aggregate cost of the acquisition
was approximately $13.1 million.

         The Company incurred direct transaction costs of approximately $625,000
associated  with  the   acquisitions   of  Synergy,   Triton  and  Stylus  ("the
acquisitions").  These  costs  consisted  of  fees  for  financial,  legal,  and
accounting  services  and were  included in the  allocation  of the  acquisition
costs. The direct costs and purchase prices of the  acquisitions  were allocated
to the assets  acquired and liabilities  assumed based on their  respective fair
values on the dates of the acquisitions, as follows (in thousands):


         Cash                                                  $    421
         Trade receivables                                          604
         Inventories                                                216
         Property and equipment                                     271
         Purchased technology                                     3,456
         Purchased in-process technology                         21,700
         Other                                                      198
                                                              ---------
                                                                 26,866
         Less cash acquired                                        (421)
         Less liabilities assumed                                (1,651)
                                                              ---------
                  Net assets acquired, excluding cash          $ 24,794
                                                              =========


         In conjunction with the  acquisitions,  the Company recorded  aggregate
charges  to  operations  of  $21.7  million  relating  to  purchased  in-process
technology that had not reached technological feasibility and had indeterminable
alternative  future  use.  The $3.5  million  of the  aggregate  purchase  price
attributable to purchased technology is being amortized over five years.

         In addition,  as a result of the  acquisitions,  the Company charged to
operations  other  related  costs  totaling  $5.0  million.  Other related costs
included   increases  in  allowances   for  returns,   rotations  and  inventory
obsolescence  associated  with the transition to the new  technology;  costs for
severance and  outplacement;  and facility costs relating to the cancellation of
leases in order to support consolidated technical support and distribution.

         The acquisitions were accounted for as purchase  business  combinations
and, accordingly,  the results of operations of the acquired companies have been
combined with those of the Company as of the  respective  dates of  acquisition.
                                        7
<PAGE>
The  pro  forma  effects  of the  business  combinations  for  the  quarter  and
nine-month  period  ended  March 31,  1996  would  have been  immaterial  to the
Company's consolidated results of operations for those periods.


(5)      Inventories

         Inventories consist of the following (in thousands):


                                                         March 31,      June 30,
                                                           1997           1996
                                                         --------       --------

                  Raw materials                          $ 1,334        $ 2,167
                  Work-in-process                            414            584
                  Finished goods                           1,227          1,812
                                                         -------        -------
                                                           2,975          4,563
                  Inventory allowances                      (750)        (1,565)
                                                         -------        -------
                                                         $ 2,225        $ 2,998
                                                         =======        =======




(6)      Property and Equipment

         Property and Equipment consist of the following (in thousands):

                                               March 31,           June 30,
                                                 1997                1996
                                                 ----                ----

         Land                                 $    807             $    807
         Buildings and improvements              1,992                1,991
         Furniture and fixtures                  1,091                1,058
         Computers and other equipment          10,809                9,741
         Leasehold improvements                    148                   93
                                              --------             --------
                                                14,847               13,690
         Accumulated depreciation and
         amortization                            7,641                6,166
                                              --------             --------
                                              $  7,206             $  7,524
                                              ========             ========
                                       8
<PAGE>
(7)      Other Assets

         Other assets consist of the following (in thousands):

                                                        March 31,     June 30,
                                                          1997         1996
                                                          ----         ----

         Trademarks and patents, net of
                  accumulated amortization              $   236       $   285
         Purchased technology, net of
                  accumulated amortization                2,644         3,172
         Recoverable deposits and other                     199           127
                                                        -------       -------
                                                        $ 3,079       $ 3,584
                                                        =======       =======


(8)      Long Term Debt

                  In  December  1996, the  Company  entered  into a $1.4 million
sale-leaseback of computer equipment and software.  The underlying capital lease
has a term of three years,  requires monthly  payments of approximately  $42,000
and includes a 10% purchase option.

                  In February  1997,  the Company  entered  into a $2.2  million
mortgage loan transaction.  The underlying promissory note, secured by a deed of
trust  on  certain  real  property  owned by the  Company  in  Tucson,  Arizona,
amortizes  monthly  over a 20 year term at an  annual  rate of 8.2% with a final
balloon payment due at the end of ten years.  The note requires monthly payments
of approximately $19,000.


(9)      Shareholders' Equity

                  In February  1997 the Company's  Board of Directors  readopted
and extended a stock repurchase program under which the Company is authorized to
repurchase up to 1,000,000  shares of its  outstanding  common stock for general
corporate purposes. Under the repurchase program, management is authorized, with
certain  limitations,  to repurchase  the Company's  common  stock  depending on
market conditions and other factors. 
                                       9
<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 March
31, 1997 were $8.5  million,  a decrease of 44% from net sales of $15.1  million
for the  corresponding  quarter of fiscal 1996. For the nine-month  period ended
March 31, 1997,  the Company's net sales were $29.1  million,  a decrease of 35%
from net sales of $44.5 million for the corresponding period of fiscal 1996. The
decreases  in net sales for the quarter and  nine-month  period  ended March 31,
1997, as compared to the corresponding  periods in fiscal 1996, were principally
due to the  decline  in  sales  of the  Company's  LANtastic  network  operating
system(NOS)  products,  offset to a minor extent by sales of computer  telephony
and  PC   communications   products.   Sales  of  computer   telephony   and  PC
communications  products  commenced  upon the  acquisitions  of  three  software
companies during the quarters ended December 31, 1995 and March 31, 1996.

         The Company distributes its products in both the U.S. and international
markets.  U.S.  sales  decreased  39% to $6.2 million (73% of net sales) for the
quarter  ended March 31, 1997,  from $10.1  million (67% of net sales),  for the
same quarter a year ago. U.S.  sales  decreased 32% to $20.0 million (69% of net
sales),  for the nine-month  period ended March 31, 1997 from $29.3 million (66%
of net sales),  for the same period in fiscal  1996.  The  decrease in U.S.  net
sales for both the quarter and the  nine-month  period ended March 31, 1997,  as
compared to the corresponding  periods in fiscal 1996,  primarily  resulted from
the decline in sales of LANtastic NOS products in the U.S. distribution channels
and actions  taken during the  nine-month  period ended March 31, 1997 to reduce
U.S. distribution channel inventories.

         International  sales  decreased 57% to $2.2 million (26% of net sales),
for the quarter ended March 31, 1997, from $5.1 million (34% of net sales),  for
the same quarter a year ago.  International  sales decreased 41% to $9.0 million
(31% of net sales),  for the  nine-month  period ended March 31, 1997 from $15.2
million (34% of net sales) for the same period in fiscal  1996.  The decrease in
international  net sales for both the quarter and the  nine-month  period  ended
March 31,  1997,  as  compared  to the  corresponding  periods  in fiscal  1996,
primarily  resulted  from the  decline in sales of  LANtastic  NOS  products  in
Europe, offset to a minor extent by sales of new products.

         Gross  Profit.  The  Company's  gross profit was $5.4 million and $10.9
million for the quarters  ended March 31, 1997 and 1996,  respectively  (64% and
72% of net  sales,  respectively).  Gross  profit  was $19.0  million  and $29.6
million for the nine-month periods ended March 31, 1997, and 1996,  respectively
(65% and 67% of net  sales,  respectively).  The net  decrease  in gross  profit
margin for both the quarter and the  nine-month  period ended March 31, 1997, as
compared to the  corresponding  periods in fiscal 1996, was primarily the result
of the decline in net sales and  consequent  lower sales  dollars  absorbing the
fixed elements of cost of goods sold. To a lesser extent,  the Company's product
mix sold in the quarter  ended March 31, 1997  included a higher  percentage  of
LANtastic 7.0 starter and adapter kits which because of their hardware  content,
have lower gross margins than  software-only  products.  The decrease in margins
was to a minor extent offset by higher margin software products acquired in
                                       10
<PAGE>
connection  with the purchase of three  software  companies  during fiscal 1996.
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.

         Sales and Marketing. Sales and marketing expenses were $5.6 million and
$6.8 million for the quarters ended March 31, 1997 and 1996, respectively,  (66%
and 45% of net sales,  respectively).  Sales and  marketing  expenses were $18.3
million and $19.9  million for the  nine-month  periods ended March 31, 1997 and
1996, respectively,  (63% and 45% of net sales,  respectively).  The decrease in
aggregate  dollars  for sales and  marketing  expenses  for the  quarter and the
nine-month period ended March 31, 1997, as compared to the corresponding periods
in  fiscal  1996,  are due  primarily  to the  Company's  restructuring  actions
undertaken  during the quarters ended September 30, 1996 and March 31, 1997 that
reduced  operating  expenses,  offset by the cost of  activities  related to the
launch of LANtastic  7.0. The  increases  in sales and  marketing  expenses as a
percentage  of net sales for the quarter and the  nine-month  period ended March
31, 1997 as compared to the corresponding periods in fiscal 1996, are due to the
decreases in net sales experienced during those periods.

         Product Development. Product development expenses were $2.3 million and
$2.0 million for the quarters ended March 31, 1997 and 1996, respectively,  (27%
and 13% of net sales,  respectively).  Product  development  expenses  were $7.0
million and $4.6  million for the  nine-month  periods  ended March 31, 1997 and
1996, respectively,  (24% and 10% of net sales,  respectively).  The increase in
aggregate  dollars for  product  development  expenses  for the quarter and nine
month  period ended March 31, 1997 as compared to the  corresponding  periods in
fiscal 1996 is principally  attributable to the addition of product  development
personnel  in the  computer telephony and PC communications  segments,  both  in
connection with the acquisitions of the three software  companies in fiscal 1996
and subsequent thereto the expansion and acceleration of development  efforts in
those segments.  The increase in product development expenses as a percentage of
net sales for the  quarter  and the  nine-month  period  ended March 31, 1997 as
compared to the  corresponding  periods in fiscal 1996, are primarily due to the
decreases in net sales experienced during those periods.

         General and  Administrative.  General and administrative  expenses were
$1.3 million and $1.6  million for the  quarters  ended March 31, 1997 and 1996,
respectively,   (15%  and  11%  of  net  sales,   respectively).   General   and
administrative  expenses were $4.2 million for both the nine-month periods ended
March 31, 1997 and 1996, respectively, (14% and 10% of net sales, respectively).
The decrease in aggregate  dollars for general and  administrative  expenses for
the quarter  ended March 31, 1997, as compared to the  corresponding  quarter in
fiscal 1996 is  principally  attributable  to reductions  in personnel  effected
during the quarter  ended  September  30, 1996 and  additional  cost  reductions
achieved  in  the  quarter   ended  March  31,  1997   resulting   from  further
administrative  staff  reductions.  The  increase in general and  administrative
expenses as a percentage of net sales for the quarter and the nine-month  period
ended March 31, 1997, as compared to the  corresponding  periods in fiscal 1996,
is principally the result of the decrease in net sales.

         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  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.
                                       11
<PAGE>
         During the  quarter  ended  March 31,  1997,  primarily  in response to
continued  weakness in sales of LANtastic network operating system NOS products,
the  Company  elected  to  further  reduce  its  operating  expenses  in Europe,
principally  through  the  closure of the  Italian  sales  office,  and  certain
personnel costs in the U.S., principally at the Tucson and Cambridge facilities.
The Company recorded a $1.3 million  restructuring  charge for the quarter ended
March 31, 1997 to cover  severance costs  associated  with these actions,  along
with other related expenses.

         Purchased In-Process  Technology And Related Costs. In conjunction with
the acquisitions of Synergy, Triton and Stylus, the Company recorded a charge to
operations  during the second and third  quarters of fiscal 1996 totaling  $21.7
million.  The charge  related to purchased  in-process  technology  that had not
reached technological feasibility and had indeterminable alternative future use.
In addition,  as a result of the acquisitions,  the Company recorded a charge to
operations  for other  related  costs  totaling $5 million.  Other related costs
included   increases  in  allowances   for  returns,   rotations  and  inventory
obsolescence  associated  with  the  transition  to new  technology,  costs  for
severance and  outplacement,  and facility costs relating to the cancellation of
leases in order to consolidate technical support and distribution.


         Other Income,  Net. For the quarter ended March 31, 1997, other income,
net,  decreased to $118,000,  from  $404,000,  in the  corresponding  quarter of
fiscal 1996. For the nine-month period ended March 31, 1997, other income,  net,
decreased to $488,000,  from  $1,238,000 in the  corresponding  period of fiscal
1996.  The decrease in other  income,  net, for the quarter ended March 31, 1997
and the nine-month  period  ended March 31,  1997, resulted  principally  from a
decrease  in  investment  income  resulting  from  the  reduction  in  cash  and
investment  balances  due to the  acquisitions  for cash of the  three  software
companies  in  fiscal  1996.  

         The Company's effective income tax rate for the quarter ended March 31,
1997, was (27.5%) compared to an effective rate of (43.1%) in the  corresponding
quarter of fiscal 1996.  The decrease in the  effective  income tax rate for the
quarter ended March 31, 1997, as compared to the corresponding quarter in fiscal
1996 is principally the result of adjustments to the tax benefit  recognized for
state net operating loss carryforwards.
                                       12
<PAGE>
Liquidity and Capital Resources

         The Company had cash and cash equivalents of $17.6 million at March 31,
1997,  compared to $15.3  million at June 30, 1996,  and working  capital of $31
million  at March 31,  1997  compared  to $36.8  million at June 30,  1996.  The
increase in cash and cash  equivalents was principally the result of the receipt
of aggregate  federal  income tax refunds of  approximately  $4.9 million,  cash
received   from  a   sale-leaseback   of  computer  and  related   equipment  of
approximately  $1.4  million,  and cash received from a mortgage of certain real
property owned by the Company of approximately $2.1 million, partially offset by
severance payments associated with the Company's  restructuring actions effected
at the end of the  quarters  ended  September  30,  1996 and March 31, 1997 (See
caption  entitled  Restructuring  Cost above).  Days sales  outstanding in trade
accounts receivable at March 31, 1997 increased to 113 days from 97 days at June
30, 1996,  due  principally to the decrease in net sales.  The Company  believes
that its allowances for product returns and doubtful accounts are adequate.

         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.

         In  February 1997, the  Company's  Board  of  Directors  readopted  and
extended a stock  repurchase  program  under which the Company is  authorized to
repurchase up to 1,000,000  shares of its  outstanding  common stock for general
corporate  purposes.  The Board of Directors  authorized  Company  management to
pursue  the  repurchase  program  in  open  market  transactions   periodically,
depending upon market conditions and other factors.

Recent Accounting Pronouncements

         In February  1997,  the  Financial  Accounting  Standards  Board issued
Statement of Accounting Standards No. 128, "Earnings per Share" (Statement 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.  Earlier  application is not permitted.  After adoption,  all
prior period EPS data shall be restated to conform to Statement  128.  Basic and
diluted EPS, as calculated under Statement 128 would have been $(.25) and $(.62)
for the three month and nine month periods ended March 31, 1997.
 
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.  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  control
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.  Further,  in  light of the
significant  decline in sales experienced over the last several quarters,  there
can  be no  assurance  that  the  Company's  major  domestic  and  international
distributors will continue to purchase the Company's products at the same levels
(relative to rates of resale) or under the same terms and  conditions  as in the
past. 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 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 manage the volume of its sales to  distributors  and other volume
purchasers,  overstocking  by these  customers  or  changes  in their  inventory
policies or practices may require the Company to accept returns above historical
levels.  In addition,  the risk of product returns and rotations may increase if
the demand for  existing  products  or new  products  introduced  by the Company
proves to be lower than  anticipated.  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.
                                       13
<PAGE>
         The  Company  is also  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. 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 believes that it has provided an adequate
allowance  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.

         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  has  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  receive  market
development  funds from the Company for  purchasing  Company  products  and from
time to time  may also receive  negotiated  cash rebates or extended  terms,  in
accordance  with  industry  practice,  depending  upon  competitive  conditions.
Changes in purchasing  patterns by one or more of the Company's major customers,
changes in customer  policies  pertaining to desired inventory levels of Company
products, negotiations of market development funds and rebates, or otherwise, or
in the  Company's  ability to  anticipate in advance the product mix of customer
orders, or to ship large quantities of products near the end of a quarter, could
result in  material  fluctuations  in  quarterly  operating  results.  Expedited
outsourcing of production and component parts to meet unanticipated demand could
also adversely affect gross margins.

         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 more  rapid  than  expected
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 preloaded 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.
Press  reports  suggest  that  Microsoft  is planning a direct  assault on small
business  with  versions  of NT and  BackOffice  specially  designed to meet the
buying requirements of small businesses,  and potentially reducing opportunities
for LANtastic  technologies  to add value for small business  customers.  Such a
solution from Microsoft could further diminish demand for LANtastic.

         In February 1997,  Novell,  released a new version of its  IntranetWare
NOS, aimed at the small business  market.  The product,  IntranetWare  for Small
Business,  is targeted toward businesses with 25 or fewer users and priced lower
than previous NetWare versions.  There can be no assurance that the introduction
of IntranetWare for Small Business along with other new products from Novell may
not adversely affect the Company's  competitive  positioning,  and its financial
results. 
                                       14
<PAGE>
         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.  Due to the negative impact of competition on sales of the LANtastic NOS
product line to date, and the likely further decline in the future,  the Company
is evaluating  the strategic  alternatives  which might be available to optimize
the asset value attendant to such product line.

         PC Communications. The principal distribution channel for the Company's
remote control product,  CoSession Remote,  is through OEM  arrangements with PC
manufacturers.  The  Company is  developing,  but has not yet  released a 32-bit
version of the  product  to support  the  Windows  95 and  Windows NT  operating
systems.  As the  Company's  major  competitors  currently  offer 32-bit  remote
control products, it is critical,  for the continuance of the OEM relationships,
that the Company  successfully  complete development of the 32 bit products in a
timely manner and in accordance with any  agreed-upon  delivery  schedules.  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,  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.
Microsoft  has announced its intention to release a version of Windows NT Server
with modem sharing capabilities.  The inclusion of modem sharing capabilities in
Windows NT could result in substantially increased competition for the Company's
ModemShare  product 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). Microsoft has also announced its intention to include
remote control components in future versions of Windows operating  systems,  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.

         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  of 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 subject to frequent and
unpredictable  delays  during  development.  There can be no assurance  that the
Company  will  not  encounter  difficulties  that  could  delay or  prevent  the
successful and timely development, introduction and marketing of these products.
Furthermore,  the successful  development of the Company's telephony products is
dependent to a significant  extent upon a number of key technical  employees and
technical  contractors,  the loss of one or more of whom  could  have a material
adverse effect upon the Company's  development  schedule.  The future success of
the  Company's  telephony  products  will depend in large part on its ability to
attract and retain talented and qualified technical personnel.

         The Company believes that the principal  competitive  factors affecting
the  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.
Additionally, an integral part of the Company's sales strategy for the telephony
products  is  the  expansion  into  new  distribution  channels,  including  the
recruitment of new value-added  resellers and interconnects.  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.
                                       15
<PAGE>
                         Artisoft, Inc. and Subsidiaries
                           PART II. OTHER INFORMATION


Item 1.     LEGAL PROCEEDINGS


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

Item 2.     CHANGES IN SECURITIES
                 None

Item 3.     DEFAULTS UPON SENIOR SECURITIES
                 None

Item 4.     SUBMISSION OF MATTERS TO A VOTE BY SECURITY HOLDERS
                 None

Item 5.     OTHER INFORMATION
                 None

Item 6.     EXHIBITS AND REPORTS ON FORM 8-K

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

              No. 27 - Financial Data Schedule for Form 10-Q  dated May 15, 1997

(c)   Reports on Form 8-K
              There were no reports filed on  Form 8-K during  the three  months
              ended March 31, 1997.
                                       16
<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, 1997             By  /s/ William C. Keiper
                                  ------------------------------------------
                                      William C. Keiper
                                      Chairman and Chief Executive Officer






                                By  /s/ Gary R. Acord
                                  ------------------------------------------
                                      Gary R. Acord
                                      Vice President and Chief Financial Officer
                                      (Principal Financial Officer)
                                       17