================================================================================

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

                                   ----------

                                    FORM 10-Q

(MARK ONE)

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

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002

                                       OR

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


                        COMMISSION FILE NUMBER 000-19462


                                 ARTISOFT, INC.
             (Exact Name of Registrant as Specified in Its Charter)


           DELAWARE                                              86-0446453
(State or Other Jurisdiction of                               (I.R.S. Employer
Incorporation or Organization)                               Identification No.)


                               5 CAMBRIDGE CENTER,
                         CAMBRIDGE, MASSACHUSETTS 02142
               (Address of Principal Executive Offices) (Zip Code)


       Registrant's telephone number, including area code: (617) 354-0600


     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 SUCH
FILING REQUIREMENTS FOR 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.


    TITLE OF CLASS OF COMMON STOCK         SHARES OUTSTANDING AS OF MAY 15, 2002
    ------------------------------         -------------------------------------
Common Stock, $.01 par value per share                  15,782,420

================================================================================
<PAGE>
                           FORWARD-LOOKING STATEMENTS

     This Quarterly Report on Form 10-Q includes forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934 that are subject to a number of risks and
uncertainties. All statements, other than statements of historical fact,
included in this Quarterly Report on Form 10-Q, including statements regarding
our strategy, future operations, financial position, estimated revenues,
projected costs, prospects, plans and objectives of management, are
forward-looking statements. When used in this Quarterly Report on Form 10-Q, the
words "will", "believe", "anticipate", "intend", "estimate", "expect", "project"
and similar expressions are intended to identify forward-looking statements,
although not all forward-looking statements contain these identifying words. We
cannot guarantee future results, levels of activity, performance or
achievements, and you should not place undue reliance on our forward-looking
statements. Our forward-looking statements do not reflect the potential impact
of any future acquisitions, mergers, dispositions, joint ventures or strategic
alliances. Our actual results could differ materially from those anticipated in
these forward-looking statements as a result of various factors, including the
risks described in "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Factors Affecting Operating Results, Business
Prospects and Market Price of Stock" and elsewhere in this Quarterly Report on
Form 10-Q. The forward-looking statements provided by Artisoft in this Quarterly
Report on Form 10-Q represent Artisoft's estimates as of the date this report is
filed with the SEC. We anticipate that subsequent events and developments will
cause our estimates to change. However, while we may elect to update our
forward-looking statements in the future, we specifically disclaim any
obligation to do so. Our forward-looking statements should not be relied upon as
representing our estimates as of any date subsequent to the date this report is
filed with the SEC.

                                 ARTISOFT, INC.
                          QUARTERLY REPORT ON FORM 10-Q

                                      INDEX


PART I - FINANCIAL INFORMATION.................................................3

   Item 1. - Financial Statement...............................................3

             Condensed Consolidated Balance Sheets
               as of March 31, 2002 (Unaudited) and June 30, 2001..............3

             Unaudited Condensed Statement of Operations
               Three and Nine Months Ended March 31, 2002 and 2001.............4

             Unaudited Condensed Consolidated Statement of Cash
               Nine Months Ended March 31, 2002 and 2001.......................5

             Notes To Unaudited Condensed Consolidated
               Financial Statements............................................6

   Item 2. - Management's Discussion And Analysis Of Financial
               Condition And Results Of Operations.............................9

   Item 3. - Quantitative And Qualitative Disclosures About Market Risk.......18

PART II - OTHER INFORMATION...................................................18

   Item 6. - Exhibits and Reports on Form 8-K.................................18

SIGNATURES....................................................................19

                                       2
<PAGE>
                         PART I - FINANCIAL INFORMATION

ITEM 1. - FINANCIAL STATEMENTS

                         ARTISOFT, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                March 31, 2002    June 30, 2001
                                                                --------------    -------------
                                                                 (Unaudited)
<S>                                                               <C>               <C>
ASSETS
Current Assets:
  Cash and cash equivalents                                       $   7,828         $   5,801
  Receivables:
    Trade accounts, net of allowances for returns and bad
      debts of $171 and $249 at March 2002 and June 2001,
      respectively                                                      597               972
    Other receivables                                                     6                27
  Inventories                                                            25               674
  Prepaid expenses                                                      264               500
                                                                  ---------         ---------
               Total current assets                                   8,720             7,974
                                                                  ---------         ---------

Property and equipment                                                3,425             3,331
  Less accumulated depreciation and amortization                     (2,511)           (1,943)
                                                                  ---------         ---------
               Net property and equipment                               914             1,388

Other assets                                                            270               187
                                                                  ---------         ---------
                                                                  $   9,904         $   9,549
                                                                  =========         =========
LIABILITIES AND SHAREHOLDERS EQUITY
Current liabilities:

  Accounts payable                                                $     357         $     682
  Accrued liabilities                                                 1,601             1,424
  Deferred revenue                                                      251               168
  Reserve for stock rotation                                            905               484
                                                                  ---------         ---------
               Total current liabilities                              3,114             2,758
                                                                  ---------         ---------
Commitments and contingencies
Shareholders' equity:
  Preferred stock, $1.00 par value. Authorized 11,433,600
    shares; issued 2,800,000 shares of Series B Convertible
    Preferred Stock at March 31, 2002 and none at
    June 30, 2001 (liquidation preference, $7.0 million)              2,800                --
  Common stock, $.01 par value.  Authorized 50,000,000
    shares; issued 29,102,920 shares at March 31, 2002
    and 29,051,168 at June 30, 2001                                     291               291
  Additional paid-in capital                                        106,377           102,318
  Accumulated deficit                                               (32,894)          (26,034)
  Less treasury stock, at cost, 13,320,500 shares at
    March 31, 2002 and June 30, 2001                                (69,784)          (69,784)
                                                                  ---------         ---------
               Net Shareholders' equity                               6,790             6,791
                                                                  ---------         ---------
                                                                  $   9,904         $   9,549
                                                                  =========         =========
</TABLE>

The  accompanying  notes  are  an  integral  part  of  the  unaudited  condensed
consolidated financial statements.

                                       3
<PAGE>
                         AIRSOFT, INC. AND SUBSIDIARIES
            UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                     Three Months Ended       Nine Months Ended
                                                          March 31,               March 31,
                                                    --------------------    --------------------
                                                      2002        2001        2002        2001
                                                    --------    --------    --------    --------
<S>                                                 <C>         <C>         <C>         <C>
Net revenue:
  Product                                           $    461    $  1,180    $  4,358    $  4,125
  Services                                                --         509          20       1,807
                                                    --------    --------    --------    --------
      Total net revenue                                  461       1,689       4,378       5,932

Cost of sales:
  Product                                                115         331         787       1,303
  Services                                                --         464          12       1,355
                                                    --------    --------    --------    --------
      Total cost of sales                                115         795         799       2,658

Gross profit:
  Product                                                346         849       3,571       2,822
  Services                                                --          45           8         452
                                                    --------    --------    --------    --------
      Total gross profit                                 346         894       3,579       3,274

Operating expenses:
  Sales and marketing                                  1,398       2,140       4,410       7,297
  Product development                                    763       1,016       2,731       2,800
  General and Administrative                           1,077       1,255       3,457       3,840
                                                    --------    --------    --------    --------
               Total operating expenses                3,238       4,411      10,598      13,937
                                                    --------    --------    --------    --------

Loss from operations                                  (2,892)     (3,517)     (7,019)    (10,663)

Other income, net                                         34         129         159         454
                                                    --------    --------    --------    --------

            Net loss                                  (2,858)     (3,388)     (6,860)    (10,209)
                                                    --------    --------    --------    --------

Dividend to Series B preferred Stock                                  --      (2,766)         --

Loss applicable to common stock                     $ (2,858)   $ (3,388)   $ (9,626)   $(10,209)
                                                    ========    ========    ========    ========

Net loss applicable to common stock---
  Basic and Diluted                                 $  (0.18)   $  (0.22)   $  (0.61)   $  (0.66)
                                                    ========    ========    ========    ========

Weighted average common shares outstanding---
  Basic and Diluted                                   15,782      15,724      15,731      15,488
                                                    ========    ========    ========    ========
</TABLE>

The  accompanying  notes  are  an  integral  part  of  the  unaudited  condensed
consolidated financial statements.

                                       4
<PAGE>
                         AIRSOFT, INC. AND SUBSIDIARIES
            UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                          Nine Months Ended
                                                                              March 31,
                                                                       -----------------------
                                                                         2002           2001
                                                                       --------       --------
<S>                                                                    <C>            <C>
Cash flows from operating activities:
Net loss                                                               $ (6,860)      $(10,209)
  Adjustments to reconcile net loss to net
    cash used in operating activities:
    Depreciation and amortization                                           590            594
    Non-Cash changes in accounts receivable, rotation
      and inventory allowances:
        Additions                                                           974             85
        Reductions                                                         (103)          (135)
      Changes in assets and liabilities:
        Receivables
          Trade accounts                                                    418            792
          Other receivables                                                  21            119
        Inventories                                                         522            (25)
        Prepaid expenses                                                    236           (161)
        Accounts payable                                                   (325)          (432)
        Accrued liabilities                                                 177             53
        Deferred revenue                                                     83            137
        Reserve for stock rotation                                         (366)
        Net assets from discontinued operations                              --          1,864
        Other assets                                                       (105)           (15)
                                                                       --------       --------

              Net cash used in operating activities                      (4,738)        (7,333)
                                                                       --------       --------
Cash flows from investing activities:
  Proceeds from sale of investment securities                                --         10,287
  Purchases of property and equipment                                       (94)          (939)
                                                                       --------       --------

              Net cash (used in) provided by investing activities           (94)         9,348
                                                                       --------       --------
Cash flows from financing activities:
  Proceeds from issuance of preferred stock (net of expenses)             6,773             --
  Proceeds from issuance of common stock                                     86            943
                                                                       --------       --------

              Net cash provided by financing activities                   6,859            943
                                                                       --------       --------

Net increase in cash and cash equivalents                                 2,027          2,958
Cash and cash equivalents at beginning of period                          5,801          5,120
                                                                       --------       --------
Cash and cash equivalents at end of period                             $  7,828       $  8,078
                                                                       ========       ========

SUPPLEMENTAL CASH FLOW INFORMATION
  Non cash dividend to Series B Preferred Stock                        $  2,766       $     --
                                                                       ========       ========
</TABLE>

The  accompanying  notes  are  an  integral  part  of  the  unaudited  condensed
consolidated financial statements.

                                       5
<PAGE>
                         ARTISOFT, INC. AND SUBSIDIARIES
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
        (IN THOUSANDS, EXCEPT PERCENTAGES, SHARES AND PER SHARE AMOUNTS)

(1) BASIS OF PRESENTATION

     Artisoft, Inc., ("Artisoft", the "Company" or the Registrant") develops,
markets and sells computer telephony software application products and
associated services.

     The Company's principal executive offices are located at 5 Cambridge
Center, Cambridge, and Massachusetts 02142. The telephone number at that address
is (617) 354-0600. The Company was incorporated in November 1982 and
reincorporated by merger in Delaware in July 1991.

     The condensed consolidated financial statements include the accounts of
Artisoft, Inc., and its three wholly owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in consolidation.

     The accompanying unaudited condensed consolidated financial statements have
been prepared by the Company in accordance with accounting principles generally
accepted in the United States of America and pursuant to the rules and
regulations of the Securities and Exchange Commission (the "SEC"). 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 Annual Report on Form 10-K for the fiscal year
ended June 30, 2001, on file with the SEC. The results of operations for the
three- and nine-months ended March 31, 2002 are not necessarily indicative of
the results to be expected for the full year or any other future periods.

(2) RECENT ACCOUNTING PRONOUNCEMENTS

     In June 2001, the Financial Accounting Standards Board ("FASB") issued
Financial Accounting Standards ("SFAS") No. 143, ACCOUNTING FOR ASSET RETIREMENT
OBLIGATIONS ("SFAS 143)" which addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. SFAS 143 requires an enterprise to record the
fair value of an asset retirement obligation as a liability in the period in
which it incurs a legal obligation associated with the retirement of a tangible
long-lived asset. SFAS 143 also requires the enterprise to record the contra to
the initial obligation as an increase to the carrying amount of the related
long-lived asset and to depreciate that cost over the remaining useful life of
the asset. The liability is changed at the end of each period to reflect the
passage of time and changes in the estimated future cash flows underlying the
initial fair value measurement. SFAS 143 is effective for fiscal years beginning
after June 15, 2002. The Company is currently examining the effect of this
pronouncement on the results of operations and financial position of the
Company, but currently believes the effect will not be material.

     In August 2001, FASB issued SFAS 144, ACCOUNTING FOR THE IMPAIRMENT OR
DISPOSAL OF LONG-LIVED ASSETS ("SFAS 144), which addresses financial accounting
and reporting for the impairment or disposal of long-lived assets and supersedes
FASB Statement No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND
FOR LONG-LIVED ASSETS TO BE DISPOSED OF. SFAS 144 retains many of the
fundamental provisions of that Statement. SFAS 144 also supersedes the
accounting and reporting provisions of Accounting Principle Board Opinion 30,
REPORTING THE RESULTS OF OPERATIONS--REPORTING THE EFFECTS OF DISPOSAL OF A
SEGMENT OF A BUSINESS, AND EXTRAORDINARY, UNUSUAL AND INFREQUENTLY OCCURRING
EVENTS AND TRANSACTIONS ("APB 30"), for the disposal of a segment of a business.
However, it retains the requirement in APB 30 to report separately discontinued
operations and extends that reporting to a component of an entity that either
has been disposed of (by sale, abandonment, or in a distribution to owners) or
is classified as held for sale. SFAS 144 is effective for fiscal years beginning
after December 15, 2001 and interim periods within those fiscal years. The
Company is currently examining the effect of this pronouncement on the results
of operations and financial position of the Company, but currently believes the
effect will not be material.

(3) REVENUE RECOGNITION

     The Company follows the provisions of the American Institute of Certified
Public Accountants Statement of Position ("SOP") 97-2, SOFTWARE REVENUE
RECOGNITION as amended by SOP 98-9, Modification of SOP 97-2 SOFTWARE REVENUE
RECOGNITION, with Respect to Certain Transactions. Generally, the Company
recognizes revenue when it is realized or realizable and earned. The Company
considers revenue realized or realizable and earned when persuasive evidence of
an arrangement exists, the product has been shipped or the services have been
provided to the customer, the sales price is fixed or determinable and

                                       6
<PAGE>
collectibility is reasonably assured. The Company reduces revenue for estimated
customer returns, rotations and sales rebates. Revenue from software license
agreements that have significant customizations and modifications of the
software product is deferred and recognized in a manner that approximates the
percentage of completion method. In addition to the aforementioned general
policy, the following are the specific revenue recognition policies for each
major category of revenue.

     SERVICES. Revenue from time and material service contracts is recognized as
the services are provided. Revenue from fixed price, long-term service or
development contracts is recognized over the contract term based on the
percentage of the cost of services that are provided during the period compared
with the total estimated cost of services to be provided over the entire
contract. Losses on fixed price contracts are recognized during the period in
which the loss first becomes apparent.

     PRODUCTS-SOFTWARE, NOT-FOR-RESALE KITS (NFR'S) AND HARDWARE. Revenue from
delivered elements of one-time charge licensed software is recognized at the
inception of the license term, provided the Company has vendor-specific
objective evidence of the fair value of each undelivered element. Revenue is
deferred for the future value of any undelivered elements. Revenue is also
deferred for the entire arrangement if vendor-specific objective evidence does
not exist for each undelivered contract element. Examples of undelivered
elements in which the timing of delivery is uncertain include contractual
elements that give customers rights to any future upgrades at no additional
charge or future maintenance that is provided within the overall price. The
revenue that is deferred for any contract element is recognized when all of the
revenue recognition criteria have been met for that element. Revenue for annual
software subscriptions is recognized ratably over the length of the software
subscription as product revenue.

     In December 1999, the Company executed a strategic alliance agreement with
Intel Corporation ("Intel"). Under the terms of the agreement, the Company was
required to provide Intel with a software-based phone switch, voice mail and
auto attendant applications that are compatible with Intel's softswitch
framework and CT Media platform. In May 2001, Artisoft announced the release of
these applications, called TeleVantage CTM Suite. TeleVantage CTM Suite is being
loaded on certain configurations of the Intel Converged Communications Platform,
an open standards-based application ready platform that will support a broad
range of compatible telephone and business applications, peripherals, and
services from multiple vendors on a single system. The Company delivered this
product to Intel in May 2001, and Intel began shipping the applications in
August 2001. The Company completed the recognition of revenue associated with
this fixed price arrangement in the quarter ended September 30, 2001.

     In January 2000, the Company executed a strategic alliance agreement with
Toshiba America Information Systems ("TOSHIBA") intended to allow the Company
and TOSHIBA to deliver an integrated communications server and software-PBX
solution for small and midsize businesses. TeleVantage 4.0 represents the
results of a 1-1/2 year joint-engineering project with TOSHIBA to integrate
TeleVantage with TOSHIBA digital handsets. Through an Original Equipment
Manufacturer "OEM" arrangement with Artisoft, TOSHIBA is marketing TeleVantage
4.0 under the Strata CS brand, which is being distributed and supported through
Toshiba's established dealer channel. Under the terms of the agreement, TOSHIBA
will purchase licenses of TeleVantage for customized versions of the software
product to be integrated with its digital handsets and communications server
product offerings. The costs associated with this customization have been
incurred and reported as an element of cost of sales as part of this development
agreement. At the end of September 2001 and upon completion of the development
portion of this arrangement, we began to account for product shipped to TOSHIBA
as product sales. The OEM agreement with Toshiba allows for the rotation of
inventory it holds for updated versions of the products. At March 31, 2002, the
Company recorded a stock rotation reserve of $.8 million as a reduction to
revenue. The stock rotation reserve was recorded based on the anticipated amount
of TeleVantage 4.0 inventory that Toshiba will rotate with the expected release
of TeleVantage 5.0, later in calendar year 2002.

     For future Toshiba product sales, the Company will defer revenue until the
product is resold by Toshiba to its customers (sell-through) because the
arrangement with Toshiba includes stock rotation rights the potential impact of
which the Company believes it can no longer estimate.

(4) COMPUTATION OF NET LOSS PER SHARE

     Net loss per share-basic and diluted are based upon the weighted average
number of common shares outstanding. Common equivalent shares, consisting of
outstanding stock options, convertible preferred shares and warrants to purchase
common stock are included in the diluted per share calculations where the effect
of their inclusion would be dilutive.

                                       7
<PAGE>
     A reconciliation of basic and diluted weighted average common shares is as
follows: (in thousands)

<TABLE>
<CAPTION>
                                                 Three Months ended     Nine Months ended
                                                      March 31,             March 31,
                                                   ---------------       ---------------
                                                    2002     2001         2002     2001
                                                   ------   ------       ------   ------
<S>                                                <C>      <C>          <C>      <C>
Weighted average shares-basic                      15,782   15,724       15,731   15,488

Net effect of dilutive potential common
shares outstanding based on Treasury
stock method using average market price                --       --           --       --
                                                   ------   ------       ------   ------

Weighted average common shares diluted             15,782   15,724       15,731   14,488
                                                   ======   ======       ======   ======
Antidilutive potential common shares
excluded from net loss per share                    5,710      149        4,257      381
                                                   ======   ======       ======   ======
</TABLE>

(5) SERIES B CONVERTIBLE PREFERRED STOCK

     On August 8, 2001, the Company entered into an agreement for a $7 million
private placement financing to issue an aggregate of 2,800,000 shares of its
Series B Convertible Preferred Stock ("Series B Preferred"). $3.9 million of the
financing was received on August 8, 2001 upon the issuance of 1,560,060 shares
of Series B Preferred. The remaining $3.1 million was received on November 14,
2001 upon the issuance of the remaining 1,240,000 share of Series B Preferred.
Under the terms of the agreement, each share of Series B Preferred was issued at
a price of $2.50. At the election at any time of the holder thereof, each share
of Series B Preferred can be converted into one share of the Company's common
stock, subject to adjustment in certain events. Under certain circumstances, the
Company has the right to effect the automatic conversion of the Series B
Preferred to common stock in the event the closing per share bid price of the
common stock exceeds $5.00 per share for 30 consecutive trading days. The
holders of the Series B Preferred, as a class, are entitled to elect up to two
directors of the Company and have a preference in liquidation over the common
shareholders. The shares of Series B Preferred are entitled to receive dividends
only when and if declared by the Board of Directors of the Company.

     In addition, pursuant to the agreement for the financing, the Company
issued to the holders of the Series B Preferred, warrants to purchase up to
1,560,000 and 1,240,000 shares of the Company's common stock on August 8, 2001
and November 14, 2001, respectively. The warrants expire on September 30, 2006
and are exercisable at a per share price of $3.75. The warrants have a call
provision that provides that if the closing per share bid price of the common
stock exceeds $7.50 per share for 30 consecutive trading days and certain other
conditions are met, the Company has the right to require the warrant holders to
exercise their warrants for common stock. Both the per share exercise price and
the number of shares issuable upon exercise of the warrants are subject to
adjustment in certain events.

     The fair market value of the warrants issued on August 8, 2001, as
calculated using a Black Sholes pricing model, was estimated at $3.7 million and
was recorded as a credit to additional paid-in capital. The value of the
beneficial conversion feature embedded in the outstanding shares of Series B
Preferred issued on August 8, 2001 was estimated to be $2.4 million and was
recorded as an immediate non-cash dividend to the Series B Preferred
stockholders with a corresponding credit to additional paid-in-capital. This
dividend, which represents a purchase discount to the Series B Preferred
stockholders for shares that may be converted into common shares, was included
in the computation of the loss available to common stockholders and in the loss
per share in the quarter ended September 30, 2001. The excess of the aggregate
fair value of the beneficial conversion feature over the proceeds received
amounted to $1 million and it was not reflected in the results of operations or
financial position of the Company at September 30, 2001.

     The fair market value of the warrants issued on November 14, 2001, as
calculated using a Black Sholes pricing model, was estimated at $1.2 million and
was recorded as a credit to additional paid-in capital. The value of the
beneficial conversion feature embedded in the outstanding shares of Series B
Preferred issued on November 14, 2001 was estimated to be $.4 million and was

                                       8
<PAGE>
recorded as an immediate non-cash dividend to the Series B Preferred
Stockholders with a corresponding a credit to additional paid-in-capital. The
dividend, which represents a purchase discount to the preferred shareholders for
shares that may be converted into common shares, was included in the computation
of the loss available to common stockholders and in the loss per share in the
quarter ended December 31, 2001 and the nine months ended March 31, 2002.

ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

     You should read the following discussion together with the condensed
consolidated financial statements and related notes appearing elsewhere in this
Quarterly Report on Form 10-Q. This Item contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities and Exchange Act of 1934 that involve risks and uncertainties.
Actual results may differ materially from those included in such forward-looking
statements. Factors which could cause actual results to differ materially
include those set forth under "Factors Affecting Operating Results, Business
Prospects and Market Price of Stock" commencing on page 13, as well as those
otherwise discussed in this section and elsewhere in this Quarterly Report on
Form 10-Q. See "Forward-Looking Statements".

CRITICAL ACCOUNTING POLICIES

     Artisoft's financial statements and accompanying notes are prepared in
accordance with generally accepted accounting principles in the United States.
Preparing financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenue and
expenses. These estimates and assumptions are affected by management's
application of accounting policies. Critical accounting policies are those
policies that are reflective of significant judgments and uncertainties and
potentially result in materially different results under different assumptions
and conditions. Artisoft believes its most critical accounting policies are as
follows:

     SOFTWARE REVENUE RECOGNITION. Artisoft accounts for the licensing of
software in accordance with American Institute of Certified Public Accountants
(AICPA) Statement of Position (SOP) 97-2, Software Revenue Recognition as
amended by SOP 98-9. The application of SOP 97-2 and 98-9 requires judgment,
including whether a software arrangement includes multiple elements, and if so
whether vendor-specific objective evidence of fair value exists for those
elements. The individual elements and related revenue could require different
timing for recognizing revenue from each element. Revenue from software
development contracts is deferred and recognized in a manner that approximates
the percentage of completion. Judgment is required as to how much revenue to
recognize based on estimates of future costs to complete and the total amount of
revenue that can be billed. Changes to the value of the elements in a software
arrangement or changes in the estimated cost to complete a development could
materially impact the amount of earned and unearned revenue.

     RETURNS, ROTATIONS AND REBATES. The Company reduces revenue for estimated
returns, rotations and sales rebates. To estimate reserves for returns,
rotations and rebates, the Company regularly reviews history of actual returns,
analyzes monthly inventory and sell-through information received from the
channel partners and monitors unusual events and market conditions. Although we
monitor our channel inventory, overstocking may occur if the demand for our
products were to rapidly decline due to economic troubles, increased
competition, under-performance of distributors or the introduction of new
products by our competition or us. This could impact the predictability and
timing of sales to end users and the management of returns and rotations to us
of unsold product. The result could be material fluctuations in quarterly sales
and operating results. For future Toshiba American Information Systems
("Toshiba") product sales, the Company will defer revenue until the product is
resold by Toshiba to its customers because the arrangement with Toshiba includes
stock rotation rights, the potential impact of which the Company believes it can
no longer estimate. The Company believes that it can estimate returns, rotations
and rebates and establish appropriate reserves for all other customers.

RESULTS OF OPERATIONS

NET REVENUES

     TOTAL. Total net revenue was $.5 million and $1.7 million for the quarters
ended March 31, 2002 and 2001 respectively, a decrease of 72.7%. Total net
revenue for the nine months ended March 31, 2002 and 2001 was $4.4 million and
$5.9 million respectively, a decrease of 26.2%. For the quarter ended March 31,
2002 the Company recorded a stock rotation reserve of $.8 million as a reduction
to revenue. The stock rotation reserve was recorded based on the anticipated
amount of TeleVantage 4.0 inventory that Toshiba will rotate with the expected
release of TeleVantage 5.0 later this calendar year. For future Toshiba product
sales, the Company will defer revenue until the product is resold by Toshiba to
its customers.

                                       9
<PAGE>
     PRODUCT. Net product revenue was $.5 million and $1.2 million for the
quarters ended March 31, 2002 and 2001 respectively or a decrease of 60.9%. Net
product revenue was $4.4 million and $4.1 million for the nine months ended
March 31, 2002 and 2001 respectively, an increase of 5.6%. Net product revenue
was reduced in the quarter ended March 31, 2002 by $.8 million for the product
rotation reserve mentioned above. The impact of the inventory rotation reserve
is partially offset by increased sales in the March 2002 quarter of the
TeleVantage CTM Suite product that is bundled on Intel's Converged Communication
Platform. Included in product revenue, net of the $.8 million product rotation
reserve, for the nine-month period ended March 31, 2002, is $1.0 million
relating to Toshiba. Revenue received from this customer in fiscal 2001 was
reflected in service revenue. In addition, for the three and nine month periods
ending March 31, 2001, there was $77,000 and $.4 million of net product revenue
related primarily to discontinued sales of the Company's Visual Voice product
line. There were no comparable amounts in the corresponding periods in 2002

     SERVICES. The Company recorded no service revenue for the quarter ended
March 31, 2002 compared with revenue of $.5 million for the quarter ended March
31, 2001. The decline in service revenue was primarily a result of the Company
completing the development phase of its OEM agreement with Toshiba America
Information Systems ("Toshiba"). The Toshiba agreement shifted from a
development services to a product contract at the end of September 30, 2001 and
no additional services revenue is anticipated under that agreement. For the
nine-month period ended March 31, 2002 the Company recorded $20,000 of service
revenue from Intel and zero service revenue from Toshiba. For the corresponding
period in fiscal year 2001, total service revenue was $1.8 million including
$1.1 million from Toshiba and $.7 million from Intel. The Company completed its
development obligation under an agreement with Intel Corporation at the end of
September 2001 and no additional services revenue is anticipated under that
agreement.

     The Company distributes its products internationally. International product
revenue was $.1 million for the quarters ended March 31, 2002 and 2001
respectively or 15.8% and 6.6% of total net revenue, respectively. For the
nine-month periods ending March 31, 2002 and 2001 international product revenue
was $.3 million and $.7 million, a decrease of 50.3%. For the nine month periods
ended March 31, 2002 and 2001 international revenue was 7.4% and 11.0% of total
net revenue respectively. The decline in international revenue can be expected
to change as the company strengthens distribution in these geographic regions.
The percentage of international product revenue to total product revenue for the
three and nine month periods ended March 31, 2002 reflects the reduction in
total revenue related to the $.8 million inventory rotation reserve.

GROSS PROFIT

     PRODUCT. Gross profit from net product revenue was $.3 million and $.8
million for the quarters ended March 31, 2002 and 2001 respectively or 75.1% and
71.9% of net product revenue, respectively. Gross profit for the nine months
ended March 31, 2002 and 2001 was $3.6 million and $2.8 million respectively or
81.9% and 68.4% of net product revenue respectively. Gross profit aggregate
dollars and percentage for the quarter and nine-month periods ended March 31,
2002 was reduced because of the reduction in revenue related to the $.8
inventory rotation reserve. Partially offsetting the impact of this reserve in
the fiscal 2002 periods is an increase in the percentage of revenue from higher
margin TeleVantage software products coupled with a decrease in the percentage
of revenue derived from lower margin Not for Resale Kits (NFR'S) and Dialogic
add-on hardware. Gross profit may fluctuate on a quarterly basis because of
sales mix, pricing actions, stock rotations and changes in sales allowances.

     SERVICES. The Company had no service revenues for the quarter ended March
31, 2002. Gross profit from net service revenue for the quarter ended March 31,
2001 was $45,000 or 8.8%. The Company's gross profit from net services revenue
was $8,000 and $.5 million for the nine-month periods ended March 31, 2002, and
2001, respectively or 40.0% and 25.1%, respectively. The level of gross profit
dollars and percentage reflect the estimated percentage of completion for each
project.


SALES AND MARKETING

     Sales and marketing expenses were $1.4 million and $2.1 million for the
quarters ended March 31, 2002 and 2001, respectively, or 303.3% and 126.7% of
total net revenue, respectively. Sales and marketing expenses were $4.4 million
and $7.3 million for the nine months ended March 31, 2002 and 2001 respectively
or 100.7 % and 123.0% of total net revenue, respectively. The increase in the
ratio of sales and marketing expense to total net revenue for the quarter and
nine month periods ended March 31, 2002 is due primarily to the reduction in
revenue related to the $.8 inventory rotation reserve. The decrease in sales and
marketing expenses in aggregate dollars for the quarter and nine month periods
ended March 31, 2002 compared to the comparable periods in 2001 is due primarily
to a restructuring in personnel costs as a result of workforce reductions
implemented in April 2001 and September 2001 and a reduction in marketing
programs and other expenses.

                                       10
<PAGE>
PRODUCT DEVELOPMENT

     Product development expenses were $.8 million and $ 1.0 million for the
quarters ended March 31, 2002 and 2001, respectively or 165.5% and 60.2% of
total net revenue, respectively. Product development expense were $2.7 million
and $2.8 million for the nine months ended March 31, 2002 and 2001 respectively,
or 62.3% and 47.2% of total net revenue, respectively. The increase in the ratio
of product development expense to total net revenue for the quarter and nine
month period ended March 31, 2002 is due primarily to the reduction in revenue
related to the $.8 inventory rotation reserve. For the quarter ended March 31,
2001 approximately $.5 million of development expenses were classified to cost
of sales. These costs were associated with the Intel and Toshiba development
projects which were completed in the quarter ended September 30, 2001. The
Company reduced its development personnel headcount in September 2001 to reflect
the completion of the Intel and Toshiba developments. The Company believes that
continued development and introduction of new versions of TeleVantage to the
market in a timely manner is critical to its future success.

GENERAL AND ADMINISTRATIVE

     General and administrative expenses were $1.1 million and $1.3 million for
the quarters ended March 31, 2002 and 2001, respectively, or 233.6 % and 74.3%%
of total net revenue respectively. General and administrative expenses were $3.5
million and $3.8 million for the nine months ended March 31, 2002 and 2001
respectively or 79.0% and 64.7% of total net revenue, respectively. The increase
in the ratio of general and administrative expenses to total net revenue for the
quarter and nine month periods ended March 31, 2002 is due primarily to the
reduction in revenue related to the $.8 million inventory rotation reserve. The
decrease in general and administrative expenses in aggregate dollars for the
quarter and nine month periods ended March 31, 2002 compared to the comparable
periods in 2001 is principally the result of reduced headcount for
administrative personnel and other expense reductions.

OTHER INCOME, NET

     For the quarter ended March 31, 2002 other income, net decreased to $34,000
from $129,000 in the quarter ended March 31, 2001. For the nine-month period
ended March 31, 2002, other income, net decreased to $159,000 from $454,000 in
the nine-month period ended March 31, 2001. The decrease for the quarter and
nine-month period resulted primarily from lower interest rates combined with
lower cash and investment balances due to funding of the operating losses.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

     The Company had cash and cash equivalents of $7.8 million at March 31, 2002
compared to $5.8 million at June 30, 2001, an increase of $2.0 million. Working
capital was $5.6 million at March 31, 2002 compared to $5.2 million at June 30,
2001, an increase of $.4 million. Included in current liabilities at March 31,
2002 is $.9 million of inventory rotation reserves compared to $.5 million at
March 31, 2001.The increase in cash and equivalents is primarily a result of the
gross receipt of $7.0 million of equity financing received on August 8, 2001 and
on November 14, 2001 less cash used in operations during the quarter and nine
month period ended March 31, 2002.

The Company used cash of $4.7 million to fund operating activities during the
nine months ended March 31, 2002. The cash used in operating activities was
principally the result of $6.9 million in net loss offset by depreciation and
amortization of $.6 million, a decrease in accounts receivable and inventory of
$1.0 million and an increase in current liabilities of $.4 million. Cash
provided by financing activities was $6.9 million and resulted primarily from
the financing discussed below.

The Company leases office, product packaging, storage space and equipment under
noncancelable operating lease agreements. The approximate minimum rental
commitments under noncancelable operating lease that have remaining
noncancelable terms in excess of one year at March 31, 2002 were as follows:

                                       11
<PAGE>
             Years ending                             Future Minimum
               June 30                                Lease Payments
               -------                                --------------
                2002                                        369
                2003                                      1,218
                2004                                      1,151
                2005                                      1,151
                2006                                        236
                                                          -----
               Total                                      4,125
                                                          =====

     On August 8, 2001, the Company entered into an agreement for a $7 million
private placement financing to issue an aggregate of 2,800,000 shares of its
Series B Convertible Preferred Stock ("Series B Preferred"). $3.9 million of the
financing was received on August 8, 2001 upon the issuance of 1,560,060 shares
of Series B Preferred. The remaining $3.1 million was received on November 14,
2001 upon the issuance of the remaining 1, 240,000 share of Series B Preferred.
Under the terms of the agreement, each share of Series B Preferred was issued at
a price of $2.50. At the election at any time of the holder thereof, each share
of Series B Preferred can be converted into one share of the Company's common
stock, subject to adjustment in certain events. Under certain circumstances, the
Company has the right to effect the automatic conversion of the Series B
Preferred to common stock in the event the closing per share bid price of the
common stock exceeds $5.00 per share for 30 consecutive trading days. The
holders of the Series B Preferred, as a class, are entitled to elect up to two
directors of the Company and have a preference in liquidation over the common
shareholders. The shares of Series B Preferred are entitled to receive dividends
only when and if declared by the Board of Directors of the Company.

     In addition, pursuant to the agreement for the financing, the Company
issued to the holders of the Series B Preferred, warrants to purchase up to
1,560,000 and 1,240,000 shares of the Company's common stock on August 8, 2001
and November 14, 2001, respectively. The warrants expire on September 30, 2006
and are exercisable at a per share price of $3.75. The warrants have a call
provision that provides that if the closing per share bid price of the common
stock exceeds $7.50 per share for 30 consecutive trading days and certain other
conditions are met, the Company has the right to require the warrant holders to
exercise their warrants for common stock. Both the per share exercise price and
the number of shares issuable upon exercise of the warrants are subject to
adjustment in certain events.

     The fair market value of the warrants issued on August 8, 2001, as
calculated using a Black Sholes pricing model, was estimated at $3.7 million and
was recorded as a credit to additional paid-in capital. The value of the
beneficial conversion feature embedded in the outstanding shares of Series B
Preferred issued on August 8, 2001 was estimated to be $2.4 million and was
recorded as an immediate non-cash dividend to the Series B Preferred
stockholders with a corresponding credit to additional paid-in-capital. This
dividend, which represents a purchase discount to the Series B Preferred
stockholders for shares that may be converted into common shares, was included
in the computation of the loss available to common stockholders and in the loss
per share in the quarter ended September 30, 2001 and for the nine months ended
March 31, 2002.. The excess of the aggregate fair value of the beneficial
conversion feature over the proceeds received amounted to $1 million and it was
not reflected in the results of operations or financial position of the Company
at September 30, 2001.

     The fair market value of the warrants issued on November 14, 2001, as
calculated using a Black Sholes pricing model, was estimated at $1.2 million and
was recorded as a credit to additional paid-in capital. The value of the
beneficial conversion feature embedded in the outstanding shares of Series B
Preferred issued on November 14, 2001 was estimated to be $.4 million and was
recorded as an immediate non-cash dividend to the Series B Preferred
Stockholders with a corresponding a credit to additional paid-in-capital. The
dividend, which represents a purchase discount to the preferred shareholders for
shares that may be converted into common shares, was included in the computation
of the loss available to common stockholders and in the loss per share in the
quarter ended December 31, 2001 and for the nine months ended March 31, 2002.

     The Company anticipates, based on a growing pipeline and forecasts from
strategic partners, that existing cash balances will be adequate to fund the
Company's expected cash requirements for the next twelve months. However, a
change in circumstances could necessitate that the Company seek additional debt
or equity capital. In addition the Company may also from time to time seek debt
or equity financing for various business reasons. In the event the Company seeks
and successfully receives additional equity capital such additional financing
may result in significant shareholder dilution. There can be no assurance that

                                       12
<PAGE>
any such additional financing will be available when needed or on acceptable
terms to allow the Company to successfully achieve its operating plan or fund
future investments in its TeleVantage product line.

FUTURE RESULTS

     The Company intends to continue investing in the sales, marketing and
development of its software-based phone system, TeleVantage. The Company expects
operating expenditures for the remainder of fiscal year 2002 will be comparable
to the level of expenses incurred for the nine-month period ended March 31,
2002.

     The Company believes that future TeleVantage revenues will increase and
together with the restructuring in operating expenses previously implemented
future operating losses will be reduced. However, the rate at which these
revenues may increase and future operating losses may decrease will be highly
dependent on the overall telecommunications industry, the capital spending
environment, the rate of market acceptance of TeleVantage and the success of the
Company's strategic relationships with Toshiba and Intel. The Company also
anticipates gross margin percentages to increase as its TeleVantage software
revenues grow.

     Specifically, through an OEM development arrangement with Artisoft, Toshiba
is marketing TeleVantage 4.0 under the Strata CS brand, which is being
distributed and supported through Toshiba's established dealer channel. Under
the terms of the agreement, Toshiba will purchase licenses of TeleVantage for
customized versions of the software product to be integrated with its digital
handsets and communications server product offerings. Any significant delay,
cancellation, or termination of this arrangement with Toshiba will have a
material adverse effect on the Company's future results of operations. However,
any such events will be mitigated to the extent the Company receives minimum
revenue guarantees over the life of the Company's OEM agreement with Toshiba,
which expires in December 2002.

     In May 2001, Artisoft announced the first release of TeleVantage CTM Suite,
which delivers on the Company's joint engineering relationship with Intel.
TeleVantage CTM Suite is being pre-loaded on certain configurations of the Intel
Converged Communications Platform, an open, standards-based, application-ready
platform that supports a broad range of compatible telephony and business
applications, peripherals, and services from multiple vendors on a single
system. The Company delivered a final version of this product to Intel in May
2001 and has completed its development obligations under this agreement. The
Company expects that significant revenues from the CTM Suite will be realized in
calendar year 2002. Cancellation or termination of this arrangement with Intel
would have a material adverse effect on the Company's future results of
operations.

FACTORS AFFECTING OPERATING RESULTS, BUSINESS PROSPECTS AND MARKET PRICE OF
STOCK

     We caution you that the following important factors, among others, in the
future could cause our actual results to differ materially from those expressed
in forward-looking statements made by or on behalf of us in filings with the
Securities and Exchange Commission, press releases, communications with
investors and oral statements. Any or all of our forward-looking statements in
this Quarterly Report on Form 10-Q, and in any other public statements we make
may turn out to be wrong. They can be affected by inaccurate assumptions we
might make or by known or unknown risks and uncertainties. Many factors
mentioned in the discussion below are important in determining future results.
We undertake no obligation to publicly update any forward-looking statements,
whether as a result of new information, future events or otherwise. You are
advised, however, to consult any further disclosures we make in our reports
filed with the Securities and Exchange Commission.

OUR REVENUES ARE DEPENDENT UPON SALES OF A SINGLE PRODUCT.

     Our revenues are derived from sales of a single product, TeleVantage.
TeleVantage is a relatively new product in the emerging market for
software-based phone systems and it is difficult to predict when or if sales of
TeleVantage will increase substantially or at all. We face a substantial risk
that our sales will not cover our operating expenses and that we will continue
to incur operating losses. Our business will fail if we are unable to
substantially increase our revenues from sales of TeleVantage, whether as a
result of competition, technological change, price pressures or other factors.

WE HAVE A HISTORY OF LOSSES AND EXPECT TO INCUR FUTURE LOSSES.

     We had operating losses for the quarter ended March 31, 2002 and in each of
the last seven years, and negative cash flow from operating activities in three
out of the last seven fiscal years including the quarter and nine months ended
March 31, 2002. The Company intends to continue investing in the sales,
marketing and development of its software-based phone system, TeleVantage. The
Company expects operating expenditures for the remainder of fiscal year 2002 to
be lower than operating expenses incurred in the corresponding periods in fiscal
year 2001 due to headcount reductions implemented in April and September, 2001.

                                       13
<PAGE>
In particular, the Company anticipates reduced research and product development
expenses primarily as the result of headcount reductions implemented in
September 2001 following completion of the Company's joint development project
with Intel and Toshiba. However, we still expect to incur significant future
operating losses and negative cash flows. If our revenues do not increase
significantly or the reduction in our expenses is not as significant as
expected, we may never achieve profitability, on a sustained basis or at all, or
generate positive cash flow in the future. In that case our business will fail.

OUR OPERATING RESULTS VARY, MAKING FUTURE OPERATING RESULTS DIFFICULT TO
PREDICT.

     Our operating results have in the past fluctuated, and may in the future
fluctuate, from quarter to quarter, as a result of a number of factors
including, but not limited to: [Are the following bullets in descending order of
significance?]

*    the extent and timing of sales and operating expense increases and
     decreases;

*    changes in pricing policies or price reductions by us or our competitors;

*    variations in our sales channels or the mix of product sales;

*    the timing of new product announcements and introductions by us or our
     competitors;

*    the availability and cost of supplies;

*    the financial stability of major customers;

*    market acceptance of new products and product enhancements;

*    our ability to develop, introduce and market new products, applications and
     product enhancements;

*    our ability to control costs;

*    possible delays in the shipment of new products;

*    our success in expanding our sales and marketing programs;

*    deferrals of customer orders in anticipation of new products, product
     enhancements or operating systems;

*    changes in our strategy;

*    personnel changes; and

*    general economic factors.

     Our software products are generally shipped as orders are received and
accordingly, we have historically operated with little backlog. As a result,
sales in any quarter are dependent primarily on orders booked and shipped in
that quarter and are not predictable with any degree of certainty. Sales may
also be affected by the level of returns beyond those estimated and provided for
at any point in time. In addition, our expense levels are based, in part, on our
expectations as to future revenues. If revenue levels are below expectations,
operating results are likely to be adversely affected. Our net loss may be
disproportionately affected by a reduction in revenues because of fixed costs
related to generating our revenues. These or other factors may influence
quarterly results in the future and, accordingly, there may be significant
variations in our quarterly operating results. Our historical operating results
are not necessarily indicative of future performance for any particular period.
Due to all of the foregoing factors, it is possible that in some future quarter
our operating results may be below the expectations of public market analysts
and investors. In such event, the price of our common stock could be adversely
affected.

     The Company delivered a final version of TeleVantage CTM Suite to Intel in
May 2001 and has completed its development obligations under our agreement with
them. Although TeleVantage CTM Suite began shipping in August 2001, the Company
expects that significant revenues from the CTM Suite will be realized in

                                       14
<PAGE>
calendar year 2002. In addition, the Company's pricing of TeleVantage CTM Suite
varies based on configuration. There can be no guarantee that sales of Intel's
Converged Communication Platform will ship in sufficient volume or produce
revenues that meet the Company's expectations. Any significant delay or,
cancellation or termination of this arrangement with Intel will have a material
adverse affect on the Company's future results of operations.

IF WE ARE UNABLE TO COMPLY WITH THE CONTINUED LISTING REQUIREMENTS OF THE NASDAQ
NATIONAL MARKET, OUR COMMON STOCK COULD BE DELISTED FROM THE NASDAQ NATIONAL
MARKET.

     Our common stock trades on the Nasdaq National Market. In order to continue
trading on the Nasdaq National Market, we must satisfy the continued listing
requirements for that market. Last year, the Nasdaq National Market enacted
changes to its continued listing requirements. The changes are effective for
Artisoft on November 1, 2002. While we are presently in compliance with
continued listing requirements currently applicable to us, we are not in
compliance with the continued listing requirements which are effective in
November 1, 2002.

     Under the continued listing requirement standard currently utilized by
Artisoft, we are required to have minimum net tangible assets of $4.0 million.
Under the continued listing requirements applicable to Artisoft on November 1,
2002, the minimum net tangible asset requirement is replaced with a minimum
shareholders' equity requirement of $10.0 million. At March 31, 2002, we had
shareholders' equity of $6.8 million. If we do not satisfy the $10.0 million
shareholders' equity requirement and the other applicable continued listing
requirements as of November 1, 2002, our common stock may be delisted from the
Nasdaq National Market.

     A delisting of our common stock from the Nasdaq National Market would
materially reduce the liquidity of our common stock and result in a
corresponding material reduction in the price of our common stock. In addition,
any such delisting would materially adversely affect out access to the capital
markets, and the limited liquidity and reduced price of our common stock would
materially adversely affect our ability to raise capital through alternative
financing sources on terms applicable to us or at all.

WE MAY HAVE A NEED TO PROCURE ADDITIONAL THIRD PARTY FINANCING, BUT FINANCING
MAY NOT BE AVAILABLE WHEN NEEDED OR UPON TERMS ACCEPTABLE TO US. IF A FINANCING
IS CONSUMMATED, CURRENT STOCKHOLDERS MAY EXPERIENCE SUBSTANTIAL DILUTION OF
THEIR OWNERSHIP IN ARTISOFT.

     In the past, we have funded our continuing operations and working capital
requirements primarily through cash from operations and the sale of our
securities. In order to obtain the funds to continue our operations and meet our
working capital requirements, we may require additional equity financing or debt
financing. We may also from time to time seek additional equity financing or
debt financing in order to fund other business initiatives, including the
acquisition of other businesses. Additional financing may place significant
limits on our financial and operating flexibility, and any future financing
could result in substantial dilution to our stockholders. There can be no
assurance that any such additional equity financing or debt financing will be
available to us when needed or on terms acceptable to us. If we are not able to
successfully obtain additional equity financing or debt financing, if needed,
the business, financial condition and results of operations of Artisoft will be
materially and adversely affected.

OUR MARKET IS HIGHLY COMPETITIVE, AND WE MAY NOT HAVE THE RESOURCES TO COMPETE
ADEQUATELY.

     The computer telephony industry is highly competitive and is characterized
by rapidly evolving industry standards. We believe that the principal
competitive factors affecting the markets we serve include:

*    vendor and product reputation;

*    product architecture, functionality and features;

*    scalability, ease of use and performance;

*    quality of product and support;

*    price;

*    brand name recognition; and

                                       15
<PAGE>
*    effectiveness of sales and marketing efforts.

     We compete with other phone system companies, many of which have
substantially greater financial, technological, production, sales and marketing
and other resources, as well as greater name recognition and larger customer
bases, than does Artisoft. As a result, these competitors may be able to respond
more quickly and effectively than can Artisoft to new or emerging technologies
and changes in customer requirements or to devote greater resources than can
Artisoft to the development, promotion, sales and support of their products. In
addition, our competitors could develop products compatible with the Intel
SoftSwitch Framework that could displace TeleVantage CTM Suite. Also, any new
product introductions by Artisoft may be subject to severe price and other
competitive pressures. Given the greater financial resources of many of our
competitors, there can be no assurance that our products will be successful or
even accepted. There can be no assurance that our products will be able to
compete successfully with other products offered presently or in the future by
other vendors.

IF SOFTWARE-BASED PHONE SYSTEMS DO NOT ACHIEVE WIDESPREAD ACCEPTANCE, WE MAY NOT
BE ABLE TO CONTINUE OUR OPERATIONS.

     Our sole product, TeleVantage, competes in the newly emerging
software-based phone system market. Software-based phone systems operate in
conjunction with and are affected by developments in other related industries.
These industries include highly developed product markets, such as personal
computers, personal computer operating systems and servers, proprietary private
branch exchanges and related telephone hardware and software products, and
telephone, data and cable transmission systems, as well as new emerging products
and industries, such as Internet communications and Internet Protocol telephony.
These industries and product markets are currently undergoing rapid changes,
market evolution and consolidation. The manner, in which these industries and
products evolve, including the engineering- and market-based decisions that are
made regarding the interconnection of the products and industries, will affect
the opportunities and prospects for TeleVantage. TeleVantage competes directly
with other software-based phone system solutions as well as existing
traditional, proprietary hardware solutions offered by companies such as Avaya
Communications, Nortel Networks Corporation and Siemens Corporation. There can
be no assurance that the markets will migrate toward software-based phone system
solutions. If software-based phone systems do not achieve widespread acceptance,
sales of TeleVantage will not increase and may decline and our revenues will
suffer.

WE SELL OUR PRODUCTS THROUGH DISTRIBUTORS AND VALUE-ADDED RESELLERS, WHICH LIMIT
OUR ABILITY TO CONTROL THE TIMING OF OUR SALES, AND THIS MAKES IT DIFFICULT TO
PREDICT OUR REVENUE.

     We are exposed to the risk of product returns and rotations from our
distributors and value-added resellers, which are estimated and recorded by us
as a reduction in sales. In addition, we are exposed to the risk of fluctuations
in quarterly sales if resellers and distributors purchase and hold excessive
amounts of inventory at any time or otherwise change there purchasing patterns.
Although we monitor our reseller and distributor inventories and current and
projected levels of sales, localized overstocking may occur with TeleVantage
because of rapidly evolving market conditions. In addition, the risk of product
returns may increase if the demand for TeleVantage were to rapidly decline due
to regional economic troubles or increased competition. All of these risks are
exacerbated as TeleVantage is our sole product and the market for TeleVantage
and similar products is newly emerging. There can be no assurance that actual
product returns will not exceed our allowances for these returns. Any
overstocking by resellers or distributors or any product returns in excess of
recorded allowances could adversely affect our revenues. For the quarter ended
March 31, 2002, the Company recorded a stock rotation reserve of $.8 million as
a reduction in revenue. The stock rotation was recorded based on the anticipated
amount of TeleVantage 4.0 inventory that Toshiba will rotate with the expected
release of TeleVantage 5.0 later this calendar year. For future Toshiba product
sales, the Company will defer revenue until the product is resold by Toshiba to
its customers. To the extent we may, in the future, introduce new products, the
predictability and timing of sales to end users and the management of returns to
us of unsold products by distributors and volume purchasers may become more
complex and could result in material fluctuations in quarterly sales and
operating results.

OUR MARKET IS SUBJECT TO CHANGING PREFERENCES AND TECHNOLOGICAL CHANGE; FAILURE
TO KEEP UP WITH THESE CHANGES WOULD RESULT IN OUR LOSING MARKET SHARE.

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

                                       16
<PAGE>
reasons, to develop and introduce new computer telephony products in a timely
manner in response to changing market conditions or customer requirements, our
market share would likely be reduced.

SOFTWARE ERRORS MAY SERIOUSLY HARM OUR BUSINESS AND DAMAGE OUR REPUTATION,
CAUSING LOSS OF CUSTOMERS AND REVENUES.

     Software products as complex as TeleVantage may contain undetected errors.
There can be no assurance that, despite testing by the Company and by current
and potential customers, errors will not be found in TeleVantage or any new
products after commencement of commercial shipments, resulting in loss of or
delay in market acceptance or the recall of such products. We provide customer
support for most of our products. We may in the future offer new products. If
these products are flawed, or are more difficult to use than TeleVantage,
customer support costs could rise and customer satisfaction levels could fall.

WE RELY ON THIRD-PARTY TECHNOLOGY AND HARDWARE PRODUCTS; IF THIS TECHNOLOGY IS
NOT AVAILABLE OR CONTAINS UNDETECTED ERRORS, OUR BUSINESS MAY SUFFER.

     Our computer telephony software requires the availability of certain
hardware. Specifically, the TeleVantage software-based phone system operates on
voice processing boards manufactured by Intel. To the extent that these boards
become unavailable or in short supply we could experience delays in shipping
software-based phone systems to our customers, which may have a material adverse
affect on our future operating results. In addition, we are dependent on the
reliability of this hardware and to the extent the hardware has defects it will
affect the performance of our own software-based phone system. If the hardware
becomes unreliable or does not perform in a manner that is acceptable to our
customers, sales of TeleVantage could fall. Such delays or quality problems if
encountered could also cause damage to our reputation. TeleVantage currently
runs only on Microsoft Windows NT servers. In addition, our products use other
Microsoft Corporation technologies, including the Microsoft Data Engine (MSDE).
A decline in market acceptance for Microsoft technologies or the increased
acceptance of other server technologies could cause us to incur significant
development costs and could have a material adverse effect on our ability to
market our current products. There can be no assurance that businesses will
adopt Microsoft technologies as anticipated or will not migrate to other
competing technologies that our telephony products do not currently support.
Additionally, since the operation of our software-based phone system solution is
dependent upon Microsoft technologies, there can be no assurances that, in the
event of a price increase by Microsoft, we will be able to sell and market our
software-based phone system.

     Our TeleVantage CTM Suite software operates on voice processing hardware,
computer hardware, CT Media software, and SoftSwitch Framework software
manufactured by Intel. To the extent that these technologies become unavailable
or in short supply we could experience delays in shipping TeleVantage CTM Suite
to our customers, which may have a material adverse affect on our future
operating results. In addition, we are dependent on the reliability of these
technologies and to the extent they have defects it will affect the performance
of our own software. If the Intel technologies become unreliable or do not
perform in a manner that is acceptable to our customers, sales of TeleVantage
CTM Suite could fall. Such delays or quality problems if encountered could also
cause damage to our reputation. Additionally, there can be no assurances that,
in the event of a price increase by Intel, we will be able to sell and market
our software-based phone system.

ANY FAILURE BY US TO PROTECT OUR INTELLECTUAL PROPERTY COULD HARM OUR BUSINESS
AND COMPETITIVE POSITION.

     Our success is dependent upon our software code base, our programming
methodologies and other intellectual properties. To protect our proprietary
technology, we rely primarily on a combination of trade secret laws and
nondisclosure, confidentiality, and other agreements and procedures, as well as
copyright and trademark laws. These laws and actions may afford only limited
protection. There can be no assurance that the steps taken by us will be
adequate to deter misappropriation of our proprietary information, or to prevent
the successful assertion of an adverse claim to software utilized by us, or that
we will be able to detect unauthorized use and take effective steps to enforce
our intellectual property rights. We own United States and foreign trademark
registrations for certain of our trademarks. In selling our products, we rely
primarily on "shrink wrap" licenses that are not signed by licensees and,
therefore, may be unenforceable under the laws of some jurisdictions. In
addition, the laws of some foreign countries provide substantially less
protection to our proprietary rights than do the laws of the United States.
Trademark or patent challenges in these foreign countries could, if successful,
materially disrupt or even terminate our ability to sell our products in those
markets. There can be no assurance that our means of protecting our proprietary
rights will be adequate or that our competitors will not independently develop
similar technology. Although we believe that our services and products do not
infringe on the intellectual property rights of others, claims to that effect
have been and in the future may be asserted against us. The failure of Artisoft
to protect its proprietary property, or the infringement of its proprietary
property on the rights of others, could harm its business and competitive
position.

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WE NEED QUALIFIED PERSONNEL TO MAINTAIN AND EXPAND OUR BUSINESS.

     Our future performance depends in significant part upon key technical and
senior management personnel. We are dependent on our ability to identify, hire,
train, retain and motivate high quality personnel, especially highly skilled
engineers involved in the ongoing research and development required to develop
and enhance our software products and introduce enhanced future products. A high
level of employee mobility and aggressive recruiting of skilled personnel
characterize our industry. There can be no assurance that our current employees
will continue to work for us or that we will be able to hire additional
employees on a timely basis or at all. We expect to grant additional stock
options and provide other forms of incentive compensation to attract and retain
key technical and executive personnel. These additional incentives will lead to
higher compensation costs in the future and may adversely affect our future
results of operations. These difficulties could lead to higher compensation
costs and may adversely affect our future results of operations.

POSSIBLE ACQUISITIONS OR DIVESTITURES BY US INVOLVE RISKS THAT MAY HARM OUR
BUSINESS.

From time to time,  we may  consider  acquisitions  of or  alliances  with other
companies that could complement our existing business, including acquisitions of
complementary  product lines.  Although we may  periodically  discuss  potential
transactions with a number of companies, there can be no assurance that suitable
acquisition,  alliance or purchase  candidates  can be  identified,  or that, if
identified,  acceptable  terms can be agreed  upon or  adequate  and  acceptable
sources will be available to finance these transactions.  Even if an acquisition
or alliance is  consummated,  there can be no assurance  that we will be able to
integrate  successfully  acquired  companies or product  lines into our existing
operations,  which could  increase  our  operating  expenses in the  short-term.
Moreover,   acquisitions  by  Artisoft  could  result  in  potentially  dilutive
issuances  of  equity   securities,   the  incurrence  of  additional  debt  and
amortization of expenses related to goodwill and intangible assets, all of which
could  adversely  affect our  ability to  achieve  profitability.  Acquisitions,
alliances and divestitures  involve numerous risks, such as the diversion of the
attention  of our  management  from other  business  concerns,  the  entrance of
Artisoft  into  markets  in  which  it has  had no or only  limited  experience,
unforeseen  consequences  of exiting from product markets and the potential loss
of key employees of the acquired COMPANY

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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

                          PART II - OTHER INFORMATION

ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K

     a. Exhibits

     The Exhibits filed as part of this Quarterly Report on Form 10-Q are listed
on the Exhibit Index immediately preceding such Exhibits, which Exhibit Index is
incorporated herein by reference. Documents listed on such Exhibit Index, except
for documents identified by footnotes, are being filed as exhibits herewith.
Documents identified by footnotes are not being filed herewith and, pursuant to
Rule 12b-32 under the Securities Exchange Act of 1934, reference is made to such
documents as previously filed as exhibits filed with the Securities and Exchange
Commission. Artisoft's file number under the Securities Exchange Act of 1934 is
000-19462.

     b. Reports on Form 8-K

     On January 24, 2002, Artisoft filed a Current Report on Form 8-K dated
January 24, 2002 for the purpose of filing under Item 5 (Other Events) with the
Securities and Exchange Commission as an exhibit thereto Artisoft's press
release dated January 24, 2002, announcing certain financial results for the
second quarter of the fiscal year 2002, ended December 31, 2001.

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                                   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, 2002                      By /s/ Steven G. Manson
                                           -------------------------------------
                                           Steven G. Manson
                                           President and Chief Executive Officer
Date: May 15, 2002                      By /s/ Michael J. O'Donnell
                                           -------------------------------------
                                           Michael J. O'Donnell
                                           Chief Financial Officer

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                                  EXHIBIT INDEX

No exhibits are filed with this Current Report on Form 10-Q.

                                       20