Artisoft, Inc. Releases Results for the Second Quarter of Fiscal 1999; Computer Telephony Group Experiences Significant Growth.

CAMBRIDGE, Mass.--(BUSINESS WIRE)--Jan. 21, 1999--Artisoft(R), Inc. (NASDAQ:ASFT) reported net sales of $5.4 million and a net loss of $230,000, or $.02 per share, for the second quarter of fiscal year 1999, ended December 31, 1998. These results compare to net sales of $5.1 million and a net loss of $332,000, or $.02 per share, for the prior quarter ended September 30, 1998. During the second quarter of fiscal year 1998, the company reported net sales of $6.8 million and a net loss of $102,000, or $.01 per share, before extraordinary and non-recurring items.

The computer telephony group revenues increased by 30% to finish the second quarter of fiscal year 1999 with reported revenues of $1.6 million. These results compare with reported computer telephony group revenues of $1.35 million for the prior quarter ended September 30, 1998, and $1.2 million reported for the second quarter of fiscal year 1998.

The gross profit margin for the second quarter of fiscal year 1999 was 70% compared with the gross profit margin of 73% in the prior quarter and 73% in the second quarter a year ago. The company's operating expenses were $4.3 million, compared to $4.3 million in the prior quarter and $4.9 million in the second quarter of fiscal year 1998.

"I am very pleased with the company and specifically the computer telephony group's record-setting performance this quarter," said president and CEO T. Paul Thomas. "The increase in CT revenues reflects a doubling of TeleVantage sales since the first quarter of 1999, another solid proof-point to reinforce our business strategy hits the mark."

Artisoft accomplished several business goals during the second quarter. The TeleVantage(R) distribution channel expanded considerably with nearly 200 value added resellers using and selling the product domestically. Also, a recent partnership with Hudson Telecom launched TeleVantage's international distribution to include Asia.

In addition, TeleVantage was selected #1 product of the year by Computer Telephony Magazine, a leading industry publication. Upon review of thousands of products, the magazine selected TeleVantage for its broad range of enhanced and practical computer telephony features. TeleVantage also received Product of the Year Awards from CTI Magazine and Teleconnect Magazine, a leading interconnect-focused publication.

About Artisoft

Artisoft, Inc. (NASDAQ:ASFT) of Cambridge, Mass., is a recognized leader in providing easy-to-use, affordable computer telephony and communications software solutions for small-to medium-sized businesses. Artisoft's innovative software products have received more than 100 industry awards including "Product of the Year", "Best of Show" and "Editors' Choice" by PC Magazine, VARBusiness, CT Magazine and CTI Magazine among others. The company distributes its products in more than 100 countries around the world. For more information, please call Artisoft at 800-914-9985 or visit http://www.artisoft.com.

Artisoft, TeleVantage, Visual Voice and LANtastic are registered trademarks of Artisoft, Inc. All other company and product names mentioned may be trademarks or registered trademarks of the respective companies with which they are associated.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995:

This release may contain forward-looking statements that involve risks and uncertainties. Among the important factors which could cause actual results to differ materially from those in the forward-looking statements are the impact of competitive products and pricing, product demand and market acceptance risks, the presence of competitors with greater financial resources, product development and commercialization risks, costs associated with integration and administration of acquired operations, capacity and supply constraints or difficulties, the results of financing efforts and other factors detailed in the Company's filings with the Securities and Exchange Commission including its recent filings on Forms 10-K and 10-Q. -0-

                    Artisoft, Inc. and Subsidiaries
                      CONSOLIDATED BALANCE SHEETS
               (in thousands, except per share amounts)

ASSETS                               Dec. 31, 1998  June 30, 1998
                                      (unaudited)
Current assets:
 Cash and cash equivalents             $ 17,491      $ 18,514
Receivables:
 Trade accounts, net                      1,897         2,813
 Other receivables                          179           279
Inventories                                 787           917
Prepaid expenses                            394           283
   Total current assets                  20,748        22,806

Property and equipment                    5,866         5,333
 Less accumulated depreciation
  and amortization                       (4,535)       (4,198)
   Net property and equipment             1,331         1,135

Other assets                              1,326         1,567
                                       $ 23,405      $ 25,508

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Accounts payable                       $    923      $  1,598
Accrued liabilities                       1,919         1,670
Accrued restructuring costs                 434         1,536
Current portion of capital
 lease obligations                          510           464
   Total current liabilities              3,786         5,268

Capital lease obligations,
 net of current portion                    --             289

Commitments and contingencies              --            --

Shareholders' equity:
Preferred stock, $1.00 par value
 Authorized 11,433,600 shares;
 none issued                               --            --

Common stock, $.01 par value
 Authorized 50,000,000 shares;
 issued  28,076,311 shares at
 December 31, 1998 and 27,980,602
 shares at June 30, 1998                    280           279

Additional paid-in capital               96,715        96,486
Accumulated deficit                      (7,592)       (7,030)
Less treasury stock, at cost,
 13,320,500 shares at
 December 31, 1998 and June 30, 1998    (69,784)      (69,784)

   Total shareholders' equity            19,619        19,951
                                       $ 23,405      $ 25,508

                    Artisoft, Inc. and Subsidiaries
                 CONSOLIDATED STATEMENTS OF OPERATIONS
               (in thousands, except per share amounts)

                             Three Months Ended      Six Months Ended
                                December 31,           December 31,
                               1998       1997       1998      1997
                                (unaudited)            (unaudited)

Net Sales                   $  5,402  $  6,761    $ 10,496  $ 13,486
Cost of sales                  1,608     1,851       2,964     3,305
Gross profit                   3,794     4,910       7,532    10,181

Operating Expenses:
Sales and marketing            2,014     2,332       4,144     5,030
Product development            1,199     1,823       2,441     3,614
General and administrative     1,049       861       1,928     1,655
Restructuring cost             --         (127)        --       (264)
 Total operating expenses      4,262     4,889       8,513    10,035

Income (loss) from
 operations                     (468)       21        (981)      146

Other income, net                238     1,386         419     1,499


Income (loss) before
 extraordinary item             (230)    1,407        (562)    1,645

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


Net income (loss)           $   (230) $  1,298    $   (562) $  1,536

Net income (loss)
 per common share-basic
 and diluted                $   (.02) $    .09    $   (.04) $    .11

Weighted average common
 shares outstanding           14,686    14,612      14,711    14,568