##### Table of Contents



UNITED
    STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
    20549
      Form 10-K
    ANNUAL REPORT PURSUANT TO SECTIONS 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934
  þ

ANNUAL REPORT PURSUANT TO
    SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2006o

TRANSITION REPORT PURSUANT TO
    SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from
    
    to   Commission File
    No. 0-25040
 Applix, Inc.
 (Exact name of registrant as
    specified in its charter)
  Massachusetts

04-2781676(State or other jurisdiction
    of

(I.R.S. Employerincorporation or
    organization)

Identification No.)289 Turnpike Road,
    Westborough, Massachusetts

01581-2831(Zip Code)(Address of principal executive
    offices)  Registrants telephone number, including area code:
 (508) 870-0300
 Securities registered pursuant to Section 12(b) of the
    Act:
 None
 Securities registered pursuant to Section 12(g) of the
    Act:
 Common Stock, $0.0025 par value
  o þ
  o þ
  Indicate by check mark whether the
    registrant: þ o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
 o þ o
  Rule 12b-2 o þ
      Documents
    Incorporated By Reference
  Document Part

Form 10-KPortions of the Registrants
    Definitive Proxy
    Statement for the Annual Stockholders Meeting to
    be held on June 7, 2007 to be filed with the United
    States Securities and Exchange Commission


Part III




---



##### 



APPLIX,
    INC.
  FORM 10-K
  TABLE OF CONTENTS
  PagePART IItem 1.


Business


3Item 1A


Risk
    Factors


8Item 1B.


Unresolved Staff
    Comments


12Item 2.


Properties


12Item 3.


Legal
    Proceedings


12Item 4.


Submission of
    Matters to a Vote of Security Holders


12PART IIItem 5.


Market for the
    Registrants Common Equity, Related Stockholder Matters and
    Issuer Purchases of Equity Securities


14Item 6.


Selected Financial
    Data


16Item 7.


Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


17Item 7A.


Quantitative and
    Qualitative Disclosures about Market Risk


29Item 8.


Financial
    Statements and Supplementary Data


30Item 9.


Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosures


30Item 9A.


Controls and
    Procedures


30Item 9B.


Other
    Information


33PART IIIItem 10.


Directors,
    Executive Officers and Corporate Governance


33Item 11.


Executive
    Compensation


33Item 12.


Security Ownership
    of Certain Beneficial Owners and Management and Related
    Stockholder Matters


33Item 13.


Certain
    Relationships and Related Transactions, and Director
    Independence


33Item 14.


Principal
    Accountant Fees and Services


33PART IVItem 15.


Exhibits


33Signatures


36Exhibit Index


67Ex-21.1 Subsidiaries of the RegistrantEx-23.1 Consent of Deloitte & Touche LLPEx-31.1 Section 302 Certification of the Chief Executive OfficerEx-31.2 Section 302 Certification of the chief Financial OfficeEx-32.1 Section 906 Certification of the Chief Executive OfficerEx-32.2 Section 906 Certification of the Chief Financial Officer      Form 10-K Form 10-K
 2




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##### Table of Contents



PART I  Item 1.
    Business  General
          
    Applix improved significantly its position on Gartner
    Inc.s Magic Quadrant for Corporate Performance Management
    Suites, 2006, with Gartner positioning Applix in the visionaries
    quadrant of their report.
    BPM Partners reported in its 2007 BPM Pulse Survey that Applix
    achieved the highest level of customer satisfaction of any of
    the core BPM vendors, outranking significantly larger vendors
    such as Business Objects, Cognos, and Hyperion.
    In The OLAP Survey 6, one of the industrys most
    comprehensive independent studies, Applix once again achieved
    highest ratings among the leading BI vendors such as Cognos and
    Hyperion. The Company took top spots in goals achieved and
    fewest deterrents to wider deployment, and rated among the top
    three vendors in performance  shown by this survey to
    be increasingly important in the achievement of business
    benefits  speed of deployment, and customer
    satisfaction.  Form 10-K. Form 10-K, Form 10-Q Form 8-K,
  Industry
    Background
   3




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##### Table of Contents



day-to-day
    Applix
    Products
    
    interactive planning, budgeting, forecasting and reporting
    applications;
    sales, marketing, supply chain and manufacturing and other
    analyses;
    human resource planning applications; and
    dashboarding, scorecarding and key performance indicators.  The
    Applix Platform
    
    Applixs core product, Applix TM1, its industry-leading
    analytics engine;
    Modules to accelerate deployment of performance management:
    planning, financial reporting, and consolidations; and
    A choice of self-service interfaces to perform analysis, view
    reports, and update data for non-financial and financial
    business users.   4




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##### Table of Contents




    Applix Planning enables businesses to develop their strategic
    business planning collaboratively with their budgeting and
    forecasting. They are able to monitor performance against the
    key indicators of their financial and operational plans,
    With financial reporting and analysis, users report and perform
    analysis on any type of data, produce any type of report, and
    deliver those reports to across the enterprise at any time.
    Applixs Consolidations shortens the financial close
    process, providing a single, centralized view of operational and
    financial data from any number of organizational units and any
    number of general ledgers.  on-the-fly
        
    Instant response times:  Because of Applix
    TM1s ability to quickly load vast data sets into memory,
    it is superior to other products that force the customer to
    pre-calculate and re-calculate consolidations and derived values
    before anyone can view the data. Because of Applix TM1s
    memory-based approach, users can instantly view the results of
    any updates and what-if analyses they perform.
    Rapid deployment: Applix TM1 typically builds complete
    applications for customers in a fraction of the time required by
    competing products.
    Familiar spreadsheet interface: Users access Applix TM1
    features and capabilities directly from Web or Excel interfaces.
    Scalability: Applix TM1s 64-bit capability,
    combined with its ability to support multiple servers, multiple
    cubes, multi-threaded processing and multi-user data updating,
    make it a logical choice for large-scale or highly complex
    operations.
    Complex business modeling: Applix TM1s unique
    architecture of multi-cubes, rules, a real-time engine, and
    workflow allow a business to manage its complex business models.
    Dynamic business workflow: This enables a business to map
    its processes with Applix TM1s workflow capabilities.
    Easy-to-use
    wizards help ensure compliance with organizational
    and regulatory processes.
    Efficient use of system resources: Because Applix TM1
    never resorts to pre-calculating data, it requires much less
    hardware and processing power than other products, which suffer
    from a common data explosion predicament. 5




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Sales
    and Marketing
          Customer
    Training, Maintenance Support, and Professional
    Services
        Software
    Product Development
   6




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Competition
        Intellectual
    Property and Proprietary Rights
           7




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##### Table of Contents



Employees
    Item 1A.
    Risk
    Factors    OUR
    STOCK PRICE MAY BE ADVERSELY AFFECTED BY SIGNIFICANT
    FLUCTUATIONS IN OUR QUARTERLY RESULTS.
    
    demand for and market acceptance of our products and services;
    the size and timing of customer orders, particularly large
    orders;
    introduction of products and services or enhancements by us and
    our competitors;
    competitive factors that affect our pricing;
    the mix of products and services we sell;
    the hiring and retention of key personnel;
    our expansion into international markets;
    the timing and magnitude of our capital expenditures, including
    costs relating to the expansion of our operations;
    the acquisition and retention of key partners;
    changes in generally accepted accounting policies, especially
    those related to the recognition of software revenue and the
    accounting for stock-based compensation; and
    new government legislation or regulation.    BECAUSE
    THE BUSINESS PERFORMANCE MANAGEMENT AND BUSINESS INTELLIGENCE
    MARKETS ARE HIGHLY COMPETITIVE, WE MAY NOT BE ABLE TO
    SUCCEED.
   8




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WE MAY
    NOT BE ABLE TO SUCCESSFULLY INTEGRATE TEMTEC INTO OUR BUSINESS
    AND OPERATIONS.
    
    retain key Temtec personnel;
    integrate, both from an engineering and a sales and marketing
    perspective, Temtecs products and services into our suite
    of product and service offerings;
    coordinate research and development efforts;
    train and integrate sales forces;
    integrate our business processes and systems; and
    eliminate redundant costs and consolidate redundant facilities.    WE MAY
    NOT SUSTAIN PROFITABILITY OR BE ABLE TO FULFILL ANY FUTURE
    CAPITAL NEEDS.
      IF WE
    DO NOT INTRODUCE NEW PRODUCTS AND SERVICES IN A TIMELY MANNER,
    OUR PRODUCTS AND SERVICES WILL BECOME OBSOLETE, AND OUR
    OPERATING RESULTS WILL SUFFER.
   9




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ATTEMPTS
    TO EXPAND BY MEANS OF BUSINESS COMBINATIONS AND ACQUISITIONS MAY
    NOT BE SUCCESSFUL AND MAY DISRUPT OUR OPERATIONS OR HARM OUR
    REVENUES.
    
    difficulty in assimilating the operations, technology and
    personnel of acquired companies;
    disruption in our business because of the allocation of
    resources to consummate these transactions and the diversion of
    managements attention from our core business;
    difficulty in retaining key technical and managerial personnel
    from acquired companies;
    dilution of our stockholders, if we issue equity to fund these
    transactions;
    assumption of increased expenses and liabilities;
    our relationships with existing employees, customers and
    business partners may be weakened or terminated as a result of
    these transactions; and
    additional ongoing expenses associated with write-downs of
    goodwill and other purchased intangible assets.  WE
    RELY HEAVILY ON KEY PERSONNEL.
    WE MAY
    NOT BE ABLE TO MEET THE OPERATIONAL AND FINANCIAL CHALLENGES
    THAT WE ENCOUNTER IN OUR INTERNATIONAL OPERATIONS.
    
    we may have difficulty managing and administering a
    globally-dispersed business;
    fluctuations in exchange rates may negatively affect our
    operating results;
    we may not be able to repatriate the earnings of our foreign
    operations;
    we have to comply with a wide variety of foreign laws;
    we may not be able to adequately protect our trademarks overseas
    due to the uncertainty of laws and enforcement in certain
    countries relating to the protection of intellectual property
    rights;
    reductions in business activity during the summer months in
    Europe and certain other parts of the world could negatively
    impact the operating results of our foreign operations;
    export controls could prevent us from shipping our products into
    and from some markets; 10




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##### Table of Contents




    multiple and possibly overlapping tax structures could
    significantly reduce the financial performance of our foreign
    operations;
    changes in import/export duties and quotas could affect the
    competitive pricing of our products and services and reduce our
    market share in some countries; and
    economic or political instability in some international markets
    could result in the forfeiture of some foreign assets and the
    loss of sums spent developing and marketing those assets.  BECAUSE
    WE DEPEND IN PART ON THIRD-PARTY SYSTEMS INTEGRATORS TO
    PROMOTE, SELL AND IMPLEMENT OUR PRODUCTS, OUR OPERATING RESULTS
    WILL LIKELY SUFFER IF WE DO NOT DEVELOP AND MAINTAIN THESE
    RELATIONSHIPS.
    BECAUSE
    THE SALES CYCLE FOR OUR PRODUCTS CAN BE LENGTHY, IT IS DIFFICULT
    FOR US TO PREDICT WHEN OR WHETHER A SALE WILL BE
    MADE.
    OUR
    BUSINESS WILL BE HARMED IF WE ARE UNABLE TO PROTECT OUR
    TRADEMARKS FROM MISUSE BY THIRD PARTIES.
    OUR
    PRODUCTS MAY CONTAIN DEFECTS THAT MAY BE COSTLY TO CORRECT,
    DELAY MARKET ACCEPTANCE OF OUR PRODUCTS AND EXPOSE US TO
    LITIGATION.
     11




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##### Table of Contents



OUR
    FINANCIAL RESULTS MAY BE ADVERSELY IMPACTED BY HIGHER THAN
    EXPECTED TAX RATES OR EXPOSURE TO ADDITIONAL INCOME TAX
    LIABILITIES.
    Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties  3) S-Hertogenbosch,
  Item 3.
    Legal
    Proceedings    Item 4.
    Submission
    of Matters to a Vote of Security Holders      FOR

AGAINST


ABSTAIN


BROKER NON-VOTES6,638,141


2,426,541



61,198



0    12




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Directors
    and Executive Officers of the Registrant
    Name

Age

PositionJohn D. Loewenberg


66


Chairman of the Board of DirectorsBradley D. Fire


37


DirectorAlain J. Hanover


58


DirectorCharles F. Kane


49


DirectorPeter Gyenes


61


DirectorDavid C. Mahoney


62


President, Chief Executive Officer
    and DirectorMilton A. Alpern


55


Chief Financial Officer and
    TreasurerMichael A. Morrison


44


Chief Operating OfficerChanchal Samanta


53


Vice President, Research and
    Development         e-business
       13




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##### Table of Contents



PART II  Item 5.
    Market
    for Registrants Common Stock, Related Stockholder Matters
    and Issuer Purchases of Equity Securities    Fiscal 2006

High


LowFirst Quarter

$
8.57


$
5.85Second Quarter

$
8.20


$
6.85Third Quarter

$
9.07


$
6.65Fourth Quarter

$
11.85


$
8.41   Fiscal 2005

High


LowFirst Quarter

$
9.25


$
4.15Second Quarter

$
6.45


$
4.21Third Quarter

$
7.24


$
4.75Fourth Quarter

$
7.50


$
6.05   Dividends
    Holders
    Securities
    Authorized for Issuance Under Equity Compensation
    Plans
   14




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Comparative
    Stock Performance Graph
    COMPARISON
    OF 5 YEAR CUMULATIVE TOTAL RETURN*
 AMONG APPLIX, INC., THE NASDAQ COMPOSITE INDEX
 AND THE NASDAQ COMPUTER & DATA PROCESSING INDEX
  
  *
    $100 invested on 12/31/01 in stock or index-including
    reinvestment of dividends. Fiscal year ending December 31. 15




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##### Table of Contents



Item 6.
    Selected
    Financial Data  Years Ended December 31,2006(1)(2)


2005


2004


2003(3)


2002(In thousands, except per share data)Statement of Operations
    Data:Software license

$
30,105


$
19,488


$
16,228


$
13,222


$
16,050Professional services and
    maintenance


22,068



17,490



14,687



14,133



20,546Total revenues


52,173



36,978



30,915



27,355



36,596Total cost of revenues


5,446



4,005



4,039



7,120



12,029Gross margin


46,727



32,973



26,876



20,235



24,567Sales and marketing


24,822



15,337



10,588



10,747



15,311Product development


7,374



5,269



4,785



5,512



5,699General and administrative


8,793



5,095



6,217



7,653



5,249Contingent consideration and
    amortization of acquired intangible assets


466



250



250



833



2,405Write down of notes receivable


















964Restructuring expenses










577



3,238



381Operating income (loss)


5,272



7,022



4,459



(7,748
)


(5,442
)Net gain from sale of CRM assets










261



7,910



Income (loss) from continuing
    operations


9,430



6,838



4,808



167



(5,570
)Net income (loss)


9,331



6,738



4,702



(10
)


(5,774
)Per Share Data:Net income (loss) per share from
    continuing operations, basic

$
0.61


$
0.47


$
0.34


$
0.01


$
(0.46
)Net income (loss) per share from
    continuing operations, diluted

$
0.56


$
0.42


$
0.31


$
0.01


$
(0.46
)   As of December 31,2006


2005


2004


2003


2002(In thousands)Balance Sheet Data:Cash, cash equivalents and
    short-term investments

$
27,210


$
24,938


$
15,924


$
9,241


$
8,389Restricted cash


400



500



400



817



933Working capital (deficit)


18,334



18,312



9,293



(2,119
)


(4,457
)Long-term debt


5,959















Total assets


66,087



38,098



27,185



21,949



23,547Total stockholders equity


37,350



21,628



12,238



2,255



2,419    (1)
    In June 2006, the Company acquired all of the outstanding shares
    of Temtec International B.V.(2)
    Effective January 1, 2006, the Company adopted the provisions of
    SFAS No. 123, Share-based payment which requires the
    expensing of stock options.(3)
    In the first quarter of 2003, the Company sold certain assets
    relating to its CRM software solutions. 16




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##### Table of Contents



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  OVERVIEW
    OF THE COMPANYS OPERATIONS
        ADOPTION
    OF SFAS 123R
        Cost of revenues

$
70Sales and marketing


841Product development


595General and administrative


764Total

$
2,270    17




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##### Table of Contents



Form 10-K
  CRITICAL
    ACCOUNTING POLICIES AND ESTIMATES
      Revenue
    Recognition
  97-2, SOP 98-9 off-the-shelf
     18




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##### Table of Contents



Allowance
    for Doubtful Accounts
    Goodwill
    and Other Intangible Assets and Related Impairment
    Stock-based
    compensation
  Black-Scholes
  
    Expected volatility is based on the historical volatility of the
    Companys common stock.
    The risk-free interest rate is based on the U.S. Treasury
    rates on the date of grant for a term equivalent to the expected
    life of the options.
    The expected life was calculated using the method outlined in
    SEC Staff Accounting Bulletin Topic 14.D.2,
    Expected Term, which represents the average
    of the contractual life of the stock option and its graded
    vesting term, as the Companys historical experience does
    not provide a reasonable basis for the expected term of the
    option.
    No dividends payments as the Company intends to retain its
    earnings to finance future growth and therefore does not
    anticipate paying any cash dividends on its common stock in the
    foreseeable future.   19




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Restructuring
    Income
    Taxes
      RESULTS
    OF OPERATIONS
  Year
    Ended December 31, 2006 Compared to Year Ended
    December 31, 2005
  Revenues
  Year Ended December 31,Percent of





Percent of





Percent of2006


Revenue


2005


Revenue


2004


Revenue(In thousands, except percentages)Software License Revenues

$
30,105



58
%

$
19,488



53
%

$
16,228



52
%Professional Services Revenues


2,417



5
%


1,937



5
%


1,413



5
%Maintenance Revenues


19,651



37
%


15,553



42
%


13,274



43
%Total Professional Services and
    Maintenance Revenues


22,068



42
%


17,490



47
%


14,687



48
%Total Revenues

$
52,173



100
%

$
36,978



100
%

$
30,915



100
%    20




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##### Table of Contents



Software
    Licenses
        Professional
    Services and Maintenance
   21




---



##### Table of Contents



Cost of
    Revenues
  Year Ended December 31,2006





2005





2004(In thousands, except percentages)Cost of Software License Revenues

$
310






$
117






$
427Cost of Professional Services and
    Maintenance Revenues:Cost of Professional Services
    Revenues


2,265







1,573







1,036Cost of Maintenance Revenues


2,671







2,315







2,576Total


4,936







3,888







3,612Amortization of an acquired
    intangible asset


200















Total Cost of Revenues

$
5,446






$
4,005






$
4,039Gross Margin(A):Software License(B)

$
29,595



98%


$
19,371



99%


$
15,801



97%Professional Services and
    Maintenance:Professional Services


152



6%



364



19%



377



27%Maintenance


16,980



86%



13,238



85%



10,698



81%Total


17,132



78%



13,602



78%



11,075



75%Total Gross Margin

$
46,727



90%


$
32,973



89%


$
26,876



87%     (A)
    
    Gross margins calculated as a percentage of related revenues.(B)
    
    Software license gross margin calculated net of cost of software
    license revenues and amortization of an acquired intangible
    asset.  Cost
    of Software License Revenues
    Cost
    of Professional Services and Maintenance Revenues
    Amortization
    of an Acquired Intangible Asset
   22




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##### Table of Contents



Operating
    Expenses
  Year Ended December 31,Percent of





Percent of





Percent of2006


Revenue


2005


Revenue


2004


Revenue(In thousands, except percentages)Sales and marketing

$
24,822



47%


$
15,337



41%


$
10,588



34%Product development


7,374



14%



5,269



14%



4,785



15%General and administrative


8,793



17%



5,095



14%



6,217



20%Restructuring expense


















577



2%Amortization of acquired
    intangible asset


466



1%



250



1%



250



1%Total Operating Expenses

$
41,455



79%


$
25,951



70%


$
22,417



73%   Sales
    and Marketing
    Product
    Development
    General
    and Administrative
   23




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##### Table of Contents



Amortization
    of Acquired Intangible Assets
      Non-Operating
    Income (Expenses)
  Year Ended December 31,Percent of





Percent of





Percent of2006


Revenue


2005


Revenue


2004


Revenue(In thousands, except percentages)Interest income

$
1,048



2
%

$
596



2
%

$
184



1%Interest expense


(388
)


(1
)%


(54
)



%


(69
)


%Other income (expense), net


228



1
%


(369
)


(1
)%


198



1%Net gain from sale of CRM assets







%







%


261



1%Total

$
888



2
%

$
173



1
%

$
574



2%   Interest
    Income
    Interest
    Expense
    Other
    Income (Expense), Net
    (Benefit)
    Provision for Income Taxes
   24




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Year
    Ended December 31, 2005 Compared to Year Ended
    December 31, 2004
          12-month
   25




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26




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Liquidity
    and Capital Resources
             27




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Less Than








AfterTotal Years


1 Year


1-3 Years


4-5 Years


5 YearsNon-cancelable operating leases

$
4,595,000


$
1,341,000


$
2,437,000


$
817,000


$
Non-cancelable capital leases


48,000



25,000



23,000







Accrued restructurings expenses


212,000



51,000



148,000



13,000



Term loan


5,959,000



2,167,000



3,792,000







Total contractual cash obligations

$
10,814,000


$
3,584,000


$
6,400,000


$
830,000


$
   Off-Balance
    Sheet Arrangements
      New
    Accounting Pronouncements
   28




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##### Table of Contents



Accounting for Income
    Taxes.
      Item 7A.
    Quantitative
    and Qualitative Disclosures about Market Risk     29




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##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data  Supplemental
    Quarterly Financial Data
  Q1 2006


Q2 2006


Q3 2006


Q4 2006(Unaudited)(In thousands, except per share amounts)Revenue from continuing operations

$
8,993


$
13,320


$
13,825


$
16,035Gross margin from continuing
    operations

$
7,933


$
12,040


$
12,415


$
14,339Income from continuing operations

$
119


$
2,353


$
1,173


$
5,785Loss from discontinued operations

$
(22
)

$
(26
)

$
(26
)

$
(25
)Net income

$
97


$
2,327


$
1,147


$
5,760Net income per share, basic

$
0.01


$
0.15


$
0.07


$
0.37Net income per share, diluted

$
0.01


$
0.14


$
0.07


$
0.33Weighted average number of basic
    shares outstanding


15,024



15,193



15,563



15,628Weighted average number of diluted
    shares outstanding


16,467



16,702



17,073



17,632   Q1 2005


Q2 2005


Q3 2005


Q4 2005(Unaudited)(In thousands, except per share amounts)Revenue from continuing operations

$
7,648


$
9,432


$
8,814


$
11,084Gross margin from continuing
    operations

$
6,667


$
8,411


$
7,816


$
10,079Income from continuing operations

$
631


$
1,728


$
1,973


$
2,506Loss from discontinued operations

$
(20
)

$
(30
)

$
(20
)

$
(30
)Net income

$
611


$
1,698


$
1,953


$
2,476Net income per share, basic

$
0.04


$
0.12


$
0.13


$
0.17Net income per share, diluted

$
0.04


$
0.11


$
0.12


$
0.15Weighted average number of basic
    shares outstanding


14,456



14,627



14,744



14,845Weighted average number of diluted
    shares outstanding


16,417



16,129



16,534



16,672   Financial
    Statements
  Form 10-K
  Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Evaluation
    of disclosure controls and procedures
  Rules 13a-15(e) 15d-15(e)
 30




---



##### Table of Contents



Managements
    Report on Internal Control Over Financial
    Reporting
  Rule 13a-15(f) 15d-15(f)
  
    Pertain to the maintenance of records that in reasonable detail
    accurately and fairly reflect the transactions and dispositions
    of the assets of the Company;
    Provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of financial statements in
    accordance with generally accepted accounting principles, and
    that receipts and expenditures of the Company are being made
    only in accordance with authorizations of management and
    directors of the Company; and
    Provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use or disposition of the
    Companys assets that could have a material effect on the
    financial statements.          Changes
    in internal control over financial reporting
  Rules 13a-15(f) 15d-15(f)
 31




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
   To the
    Board of Directors and Stockholders of Applix, Inc.:
  Internal Control 
    Integrated Framework
        Internal
    Control  Integrated Framework Internal Control  Integrated
    Framework
    
    32




---



##### Table of Contents



Item 9B.
    Other
    Information   PART III  Item 10.
    Directors
    and Executive Officers of the Registrant  Form 10-K,
  Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence    Item 14.
    Principal
    Accountant Fees and Services   PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules  (a) The following are filed as part of this Annual
    Report on
    Form 10-K.
  Consolidated Financial Statements.
  Form 10-K.
 33




---



##### Table of Contents



Consolidated Financial Statement Schedules.
    Exhibits.
  Form 10-K
  2
.1(1)



Share Purchase Agreement of the
    Shares in the Capital of Temtec International B.V. by and among
    Applix, Inc., the Sellers (as defined therein) and Temtec
    International B.V., dated June 15, 2006.3
.1(2)



Restated Articles of Organization.3
.2(3)



Amended and Restated By-laws.4
.1(4)



Form of Rights Agreement, dated as
    of September 18, 2000, between the Registrant and American
    Stock Transfer & Trust Company, which includes as
    Exhibit A the terms of the Series A Junior
    Participating Preferred Stock, as Exhibit B the Form of
    Rights Certificate, and as Exhibit C the Summary of Rights
    to Purchase Preferred Stock.4
.2(5)



First Amendment to Form of Rights
    Agreement, dated February 27, 2004, between the Registrant
    and American Stock Transfer & Trust Company.10
.1(6)



Applix, Inc. 1994 Equity Incentive
    Plan, as amended.10
.2(7)



Applix, Inc. 2000 Director
    Stock Option Plan, as amended.10
.3(8)



Applix, Inc. 2001 Employee Stock
    Purchase Plan.10
.4(9)



Applix, Inc. 2003 Director
    Equity Plan, as amended.10
.5(10)



Form of Stock Option Agreement for
    2003 Director Equity Plan.10
.6(11)



Applix, Inc. 2004 Equity Incentive
    Plan, as amended.10
.7(12)



Applix, Inc. 2006 Stock Incentive
    Plan.10
.8(12)



Form of Incentive Stock Option
    Agreement for the 2006 Stock Incentive Plan.10
.9(13)



2006 Executive Officer Bonus Plan.10
.10(14)



2007 Executive Officer Bonus Plan.10
.11(15)



Form of Retention Agreement.10
.12(9)



Summary of Compensation Policy for
    Directors of Applix, Inc.10
.13(16)



Letter Agreement between Applix,
    Inc. and Craig Cervo, dated October 26, 2005.10
.14(17)



Loan and Security Agreement, dated
    March 19, 2004 between the Registrant and Silicon Valley
    Bank.10
.15(18)



First Loan Modification Agreement
    by and between Applix, Inc. and Silicon Valley Bank, dated
    April 14, 2005.10
.16(1)



Second Loan Modification Agreement
    by and between Applix, Inc. and Silicon Valley Bank, dated
    June 15, 2006.10
.17(19)



Single Tenant Commercial Lease by
    and between Westborough Land Realty Trust and the Registrant,
    dated January 23, 2001.10
.18(17)



Letter of Intent Single Tenant
    Commercial Lease by and between Westborough Land Realty Trust
    and the Registrant, dated December 12, 2003.10
.19(17)



First Amendment of Single Tenant
    Commercial Lease by and between Westborough Land Realty Trust
    and the Registrant dated December 31, 2003.10
.20(17)



Second Amendment of Single Tenant
    Commercial Lease by and between Westborough Land Realty Trust
    and the Registrant dated January 22, 2004.21
.1



Subsidiaries of the Registrant.23
.1



Consent of Independent Registered
    Public Accounting Firm.31
.1



Certification Pursuant to
    Rule 13a-14(a)
    and
    15d-14(a) of
    the Exchange Act, as Adopted Pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002 (Chief Executive Officer). 34




---



##### Table of Contents



31
.2



Certification Pursuant to
    Rule 13a-14(a)
    and
    15d-14(a) of
    the Exchange Act, as Adopted Pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002 (Chief Financial Officer).32
.1



Certification Pursuant to
    18 U.S.C. Section 1350 (Chief Executive Officer).32
.2



Certification Pursuant to
    18 U.S.C. Section 1350 (Chief Financial Officer).     1.
    
    Incorporated by reference from the Registrants Current
    Report on Form
    8-K, as
    filed with the Commission on June 21, 2006.2.
    
    Incorporated by reference from the Registrants
    Registration Statement on
    Form S-1
    (File
    No. 33-85688).3.
    
    Incorporated by reference to the Registrants Annual Report
    on
    Form 10-K
    for the fiscal year ended December 31, 2004, as filed with
    the Commission on March 31, 2005.4.
    
    Incorporated by reference to the Registrants Registration
    Statement on
    Form 8-A
    dated September 20, 2000.5.
    
    Incorporated by reference to the Registrants Current
    Report on Form
    8-K/A, as
    filed with the Commission on March 4, 2004.6.
    
    Incorporated by reference to the Registrants Proxy
    Statement on Schedule 14A, as filed with the Commission on
    April 3, 2001.7.
    
    Incorporated by reference to the Registrants Report on
    Form 10-Q
    for the fiscal quarter ended June 30, 2002, as filed with
    the Commission on August 14, 2002.8.
    
    Incorporated by reference to the Registrants Quarterly
    Report on Form
    10-Q for the
    fiscal quarter ended June 30, 2001, as filed with the
    Commission on August 13, 2001.9.
    
    Incorporated by reference to the Registrants Annual Report
    on
    Form 10-K
    for the fiscal year ended December 31, 2005, as filed with
    the Commission on March 31, 2006.10.
    
    Incorporated by reference to the Registrants Quarterly
    Report on Form
    10-Q for the
    fiscal quarter ended September 30, 2004, as filed with the
    Commission on November 15, 2004.11.
    
    Incorporated by reference to the Registrants Current
    Report on
    Form 8-K,
    as filed with the Commission on June 15, 2005.12.
    
    Incorporated by reference to the Registrants Current
    Report on
    Form 8-K,
    as filed with the Commission on December 1, 2006.13.
    
    Incorporated by reference to the Registrants Current
    Report on
    Form 8-K,
    as filed with the Commission on March 1, 2006.14.
    
    Incorporated by reference to the Registrants Current
    Report on
    Form 8-K,
    as filed with the Commission on February 13, 2007.15.
    
    Incorporated by reference to the Registrants Current
    Report on
    Form 8-K,
    as filed with the Commission on January 31, 2007.16.
    
    Incorporated by reference to the Registrants Current
    Report on Form
    8-K, as
    filed with the Commission on October 31, 2005.17.
    
    Incorporated by reference to the Registrants Annual Report
    on
    Form 10-K
    for the fiscal year ended December 31, 2003, as filed with
    the Commission on March 30, 2004.18.
    
    Incorporated by reference to the Registrants Quarterly
    Report on Form
    10-Q for the
    fiscal quarter ended March 31, 2005, as filed with the
    Commission on May 16, 2005. 35




---



##### Table of Contents



SIGNATURES      By:
    /s/  David
    C. Mahoney   President and Chief Executive Officer
    Signature

Title

Date/s/  David
    C. MahoneyDavid
    C. Mahoney

President and Chief Executive
    Officer (Principal Executive Officer)

March 16, 2007/s/  Milton
    A. AlpernMilton
    A. Alpern

Chief Financial Officer and
    Treasurer (Principal Financial and
    Accounting Officer)

March 16, 2007/s/  John
    D.
    LoewenbergJohn
    D. Loewenberg

Chairman of the Board of Directors

March 16, 2007/s/  Bradley
    D. FireBradley
    D. Fire

Director

March 16, 2007/s/  Peter
    GyenesPeter
    Gyenes

Director

March 16, 2007/s/  Alain
    J. HanoverAlain
    J. Hanover

Director

March 16, 2007/s/  Charles
    F. KaneCharles
    F. Kane

Director

March 16, 2007  36




---



##### Table of Contents



Index
    to Consolidated Financial Statements
  PageReport of
    Deloitte & Touche LLP, Independent Registered Public
    Accounting Firm.


38Consolidated
    Balance Sheets at December 31, 2006 and 2005


39Consolidated
    Statements of Income for the years ended December 31, 2006,
    2005 and 2004


40Consolidated
    Statements of Stockholders Equity and Comprehensive Income
    for the years ended December 31, 2006, 2005 and
    2004


41Consolidated
    Statements of Cash Flows for the years ended December 31,
    2006, 2005 and 2004


42Notes to
    Consolidated Financial Statements


43  37




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM            Internal Control 
    Integrated Framework
  Deloitte &
    Touche LLP
    38




---



##### Table of Contents



APPLIX,
    INC.
  CONSOLIDATED BALANCE SHEETS
 (In thousands, except share and par value amounts)
  December 31,2006


2005ASSETSCurrent assets:Cash and cash equivalents

$
23,487


$
20,740Short-term investments


3,723



4,198Accounts receivable, less
    allowance for doubtful accounts of $368 and $231, respectively


13,582



8,066Other current assets


1,585



1,295Deferred tax assets, current


619



164Total current assets


42,996



34,463Restricted cash


400



500Property and equipment, net


1,313



953Intangible assets, net of
    accumulated amortization of $1,853 and $1,188, respectively


5,477



312Goodwill


13,341



1,158Deferred tax assets, long-term


1,876



Other assets


684



712TOTAL ASSETS

$
66,087


$
38,098LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
2,068


$
1,504Accrued expenses


9,324



5,460Accrued restructuring expenses,
    current portion


51



44Current portion of debt


2,167



Deferred revenues


11,052



9,143Total current liabilities


24,662



16,151Accrued restructuring expenses,
    long term portion


161



186Long-term debt


3,792



Other long term liabilities


122



133Total liabilities


28,737



16,470Commitments and contingencies
    (Note 17)Stockholders equity:Preferred stock, $.01 par
    value; 1,000,000 shares authorized; none issued and
    outstanding






Common stock, $.0025 par
    value; 30,000,000 shares authorized; 15,657,258 and
    14,923,894 shares issued and outstanding, respectively


39



37Additional paid-in capital


63,365



57,178Accumulated deficit


(24,604
)


(33,935
)Accumulated other comprehensive
    loss


(1,450
)


(1,652
)Total stockholders equity


37,350



21,628TOTAL LIABILITIES AND
    STOCKHOLDERS EQUITY

$
66,087


$
38,098    39




---



##### Table of Contents



APPLIX,
    INC.
  CONSOLIDATED STATEMENTS OF INCOME
 (In thousands, except per share amounts)
  Years Ended December 31,2006


2005


2004Revenues:Software license

$
30,105


$
19,488


$
16,228Professional services and
    maintenance


22,068



17,490



14,687Total revenues


52,173



36,978



30,915Cost of revenues:Software license


310



117



427Professional services and
    maintenance (includes $70 of stock-based compensation for the
    year ended December 31, 2006)


4,936



3,888



3,612Amortization of an acquired
    intangible asset


200







Total cost of revenues


5,446



4,005



4,039Gross margin


46,727



32,973



26,876Operating expenses:Sales and marketing (includes $841
    of stock-based compensation for the year ended December 31,
    2006)


24,822



15,337



10,588Product development (includes $595
    and $155 of stock-based compensation for the years ended
    December 31, 2006 and 2005, respectively)


7,374



5,269



4,785General and administrative
    (includes $764, $60 and $60 of stock-based compensation for the
    years ended December 31, 2006, 2005 and 2004, respectively)


8,793



5,095



6,217Restructuring










577Amortization of acquired
    intangible assets


466



250



250Total operating expenses


41,455



25,951



22,417Operating income


5,272



7,022



4,459Non-operating income
    (expenses):Interest income


1,048



596



184Interest expense


(388
)


(54
)


(69
)Other income (expense), net


228



(369
)


198Net gain from sale of CRM assets










261Income before taxes


6,160



7,195



5,033Benefit (provision) for income
    taxes


3,270



(357
)


(225
)Income from continuing
    operations


9,430



6,838



4,808Discontinued
    operations:Loss from discontinued operations


(99
)


(100
)


(106
)Net income

$
9,331


$
6,738


$
4,702Net income (loss) per share,
    basic and diluted:Continuing operations, basic

$
0.61


$
0.47


$
0.34Continuing operations, diluted

$
0.56


$
0.42


$
0.31Discontinued operations

$
(0.01
)

$
(0.01
)

$
(0.01
)Net income per share, basic

$
0.61


$
0.46


$
0.33Net income per share, diluted

$
0.55


$
0.41


$
0.30Weighted average number of
    shares outstanding:Basic


15,348



14,669



14,038Diluted


16,986



16,451



15,482    40




---



##### Table of Contents



APPLIX,
    INC.
  CONSOLIDATED STATEMENTS OF STOCKHOLDERS
    EQUITY
 AND COMPREHENSIVE INCOME
 (In thousands, except share amounts)
  AccumulatedOtherAdditional





Comprehensive





TotalCommon


Paid-In


Accumulated


(Loss)


Treasury


Stockholders


ComprehensiveStock


Capital


Deficit


Income


Stock


Equity


IncomeBalance, January 1,
    2004

$
33


$
50,497


$
(45,375
)

$
(1,539
)

$
(1,361
)

$
2,255Net income










4,702











4,702


$
4,702Foreign currency exchange
    translation adjustment














66







66



66Total comprehensive income

























$
4,768Stock issued under stock plans
    (769,367 shares)


2



1,993















1,995Sale of common stock to affiliates
    (657,894 shares)


2



2,987















2,989Executive loans settlement






179











52



231Redesignation of treasury shares


(1
)


(1,308
)










1,309



Balance, December 31,
    2004


36



54,348



(40,673
)


(1,473
)






12,238Net income










6,738











6,738


$
6,738Foreign currency exchange
    translation adjustment














(178
)






(178
)


(178
)Unrealized gain on short-term
    investments














(1
)






(1
)


(1
)Total comprehensive income

























$
6,559Stock issued under stock plans
    (633,310 shares)


1



1,783















1,784Executive loans settlement






892















892Stock-based compensation related
    to severance






155















155Balance, December 31,
    2005


37



57,178



(33,935
)


(1,652
)






21,628Net income










9,331











9,331


$
9,331Foreign currency exchange
    translation adjustment














202







202



202Total comprehensive income

























$
9,533Stock issued under stock plans
    (403,112 shares)


1



1,455















1,456Stock issued in connection with
    Temtec acquisition (330,252 shares)


1



2,537















2,538Stock-based compensation






2,195















2,195Balance, December 31,
    2006

$
39


$
63,365


$
(24,604
)

$
(1,450
)

$



$
37,350   41




---



##### Table of Contents



APPLIX,
    INC.
  CONSOLIDATED STATEMENTS OF CASH FLOWS
  Years Ended December 31,2006


2005


2004(In thousands)Cash flows from operating
    activities:Net income

$
9,331


$
6,738


$
4,702Adjustments to reconcile net
    income to net cash provided by (used in) operating activities:Depreciation


591



335



573Amortization


666



250



515Provision for bad debts


121



27



79Net gain on sale of CRM assets










(261
)Loss on disposal of property and
    equipment


7



4



99Share-based compensation expense


2,270



215



60Deferred income taxes


(3,956
)


221



(496
)Changes in operating assets and
    liabilities:Increase in accounts receivable


(3,386
)


(2,554
)


(223
)Decrease (increase) in other assets


279



(255
)


955Increase (decrease) in accounts
    payable


38



653



(309
)Increase (decrease) in accrued
    expenses


1,714



565



(1,612
)Decrease in accrued restructuring
    expenses


(47
)


(143
)


(3,027
)Increase (decrease) in other
    liabilities


75



(33
)


(304
)Increase in deferred revenue


50



1,291



385Cash provided by operating
    activities


7,753



7,314



1,136Cash flows from investing
    activities:Acquisition, net of cash acquired


(12,433
)






Property and equipment expenditures


(857
)


(578
)


(321
)Decrease (increase) in restricted
    cash


100



(100
)


417Proceeds from sale of subsidiary










195Purchases of short-term investments


(9,780
)


(10,923
)


Maturities of short-term
    investments


10,255



6,725



Cash (used in) provided by
    investing activities


(12,715
)


(4,876
)


291Cash flows from financing
    activities:Proceeds from issuance of common
    stock under stock plans


1,396



1,724



1,935Proceeds from long-term debt


6,500







Payments of debt issuance costs


(49
)






Principal payments on long-term
    debt


(541
)






Proceeds from issuance of common
    stock to affiliate










2,989Proceeds from settlement of
    executive loans






892



231Cash provided by financing
    activities


7,306



2,616



5,155Effect of exchange rate changes on
    cash


403



(238
)


101Increase in cash and cash
    equivalents


2,747



4,816



6,683Cash and cash equivalents at
    beginning of period


20,740



15,924



9,241Cash and cash equivalents at
    end of period

$
23,487


$
20,740


$
15,924Supplemental disclosure of cash
    flow informationCash paid for income tax

$
483


$
380


$
949Cash paid for interest

$
281


$
15


$
43Supplemental disclosure of
    non-cash financing activityIn June 2006, the Company issued
    330,252 shares of common stock valued at approximately
    $2.5 million in connection with the acquisition of Temtec
    International B.V. (Note 3)    42




---



##### Table of Contents



APPLIX,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
  1.
    THE
    COMPANY    2.
    SIGNIFICANT
    ACCOUNTING POLICIES  Principles
    of Consolidation
    Use of
    Estimates
    Revenue
    Recognition
  97-2,
  
    Persuasive evidence of an arrangement exists, which is typically
    when a non-cancelable sales and software license agreement has
    been signed, or purchase order has been received;
    Delivery has occurred. If the assumption by the customer of the
    risks and rewards of its licensing rights occurs upon the
    delivery to the carrier (FOB Shipping Point), then delivery
    occurs upon shipment (which is typically the case). If
    assumption of such risks and rewards occurs upon delivery to the
    customer (FOB Destination), then delivery occurs upon receipt by
    the customer. In all instances, delivery includes electronic
    delivery of authorization keys to the customer;
    The customers fee is deemed to be fixed or determinable
    and free of contingencies or significant uncertainties;
    Collectibility is probable; and
    Vendor specific objective evidence of fair value exists for all
    undelivered elements, typically maintenance and professional
    services.  SOP 98-9, SOP 97-2,
 43




---



##### Table of Contents



APPLIX,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    off-the-shelf
          99-19,
 44




---



##### Table of Contents



APPLIX,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Cash
    Equivalents and Short-Term Investments
    Restricted
    Cash
    Concentrations
    of Credit Risk, Accounts Receivable and Allowance for Doubtful
    Accounts
       45




---



##### Table of Contents



APPLIX,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
     2006


2005


2004Balance, beginning of year

$
231


$
227


$
252Provision for bad debts


121



27



79Write-offs and other


16



(23
)


(104
)Balance, end of year

$
368


$
231


$
227   Fair
    Value of Financial Instruments
    Property
    and Equipment, net
    EstimatedUseful LifeAsset Type

(In Years)Office furniture

4 to 6Leasehold improvement

5


(or life of underlying lease, whichever is shorter
)Equipment

3Computer equipment

3Software

2 to 5     December 31,2006


2005(In thousands)Computer equipment and software

$
2,217


$
2,100Furniture, equipment and leasehold
    improvements


1,721



1,394$
3,938


$
3,494Less: accumulated depreciation and
    amortization


(2,625
)


(2,541
)$
1,313


$
953   Product
    Development Costs
  product-by-product
 46




---



##### Table of Contents



APPLIX,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
       Goodwill,
    Intangible Assets and Long-lived Assets
      Stock-Based
    Compensation
     47




---



##### Table of Contents



APPLIX,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
        Stock Option


PurchasePlans


PlanExpected life (years)


4.6



0.5Expected stock price volatility


55.3
%


51.1
%Risk free interest rate


4.6
%


4.8
%   Expected
    Term,
  true-up
       48




---



##### Table of Contents



APPLIX,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Year Ended December 31,2005


2004Net income, as reported

$
6,738


$
4,702Add: Stock-based employee
    compensation expense included in reported net income


215



60Deduct: Total stock-based employee
    compensation expense determined under fair value method


(1,941
)


(1,291
)Pro forma net income

$
5,012


$
3,471Net income per share:Basic  as reported

$
0.46


$
0.33Diluted  as reported

$
0.41


$
0.30Basic  pro forma

$
0.34


$
0.25Diluted  pro forma

$
0.31


$
0.23Weighted average number of shares
    outstanding:Basic


14,669



14,038Diluted


16,027



15,187     2005


2004Expected life (years)


4



4Expected stock price volatility


74.9
%


80.0
%Risk free interest rate


4.34
%


3.00
%   Income
    Taxes
    Net
    Income (Loss) Per Share
   49




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##### Table of Contents



APPLIX,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Year Ended December 31,2006


2005


2004(In thousands, except per share amounts)Numerator:Income from continuing operations

$
9,430


$
6,838


$
4,808Loss from discontinued operations


(99
)


(100
)


(106
)Net income

$
9,331


$
6,738


$
4,702Denominator:Denominator for basic net income
    per share  Weighted shares outstanding


15,348



14,669



14,038Diluted effect of assumed exercise
    of stock options and contingently returnable shares


1,638



1,782



1,444Denominator for diluted net income
    per share


16,986



16,451



15,482Basic net income (loss) per
    share
    Continuing operations

$
0.61


$
0.47


$
0.34Discontinued operations

$
(0.01
)

$
(0.01
)

$
(0.01
)Net income per share

$
0.61


$
0.46


$
0.33Diluted net income (loss) per
    share
    Continuing operations

$
0.56


$
0.42


$
0.31Discontinued operations

$
(0.01
)

$
(0.01
)

$
(0.01
)Net income per share

$
0.55


$
0.41


$
0.30     Foreign
    Currency Translation
   50




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##### Table of Contents



APPLIX,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
   Comprehensive
    Income
    Advertising
    Expense
    New
    Accounting Pronouncements
    Accounting for Income
    Taxes.
      3.
    ACQUISITION   51




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##### Table of Contents



APPLIX,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Cash

$
11,455Common stock (330,252 shares)


2,538Direct acquisition costs


1,343Total

$
15,336          52




---



##### Table of Contents



APPLIX,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
     AtJune 15,2006Cash and cash equivalents

$
317Accounts receivable


1,438Prepaid and other current assets


243Deferred tax assets


179Property and equipment


133Accounts payable


(536
)Accrued expenses


(984
)Deferred revenue


(1,196
)Assumed Temtec payroll-related
    liability


(545
)Deferred tax liabilities


(1,726
)Amortizable intangible assets:Existing technology


1,850Customer relationships


3,980Total amortizable intangible assets


5,830Goodwill


12,183Total purchase price

$
15,336         Year Ended


Year EndedDecember 31, 2006


December 31, 2005(In thousands, except per share amounts)Revenues

$
54,856


$
42,945Net income

$
8,630


$
5,039Net income per share, basic

$
0.56


$
0.34Net income per share, diluted

$
0.50


$
0.30  53




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##### Table of Contents



APPLIX,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  4.
    INTANGIBLE
    ASSETS AND GOODWILL    GrossCarrying


Accumulated


Net BookAmount


Amortization


ValueExisting technology

$
1,850


$
(200
)

$
1,650Customer relationships


5,480



(1,653
)


3,827Total

$
7,330


$
(1,853
)

$
5,477     GrossCarrying


Accumulated


Net BookAmount


Amortization


ValueCustomer relationships

$
1,500


$
(1,188
)

$
312Total

$
1,500


$
(1,188
)

$
312     (In thousands)2007

$
8312008


7682009


7682010


7682011


568     5.
    SHORT-TERM
    INVESTMENTS    December 31, 2006Unrealized


UnrealizedCost Basis


Gains


Losses


Fair ValueDebt securities

$
3,723


$



$



$
3,723   December 31, 2005Unrealized


UnrealizedCost Basis


Gains


Losses


Fair ValueDebt securities

$
4,199


$



$
(1
)

$
4,198    54




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##### Table of Contents



APPLIX,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
     6.
    LONG-TERM
    DEBT AND CREDIT FACILITY      2007

$
2,1672008


2,1672009


1,625Total

$
5,959   7.
    ACCRUED
    EXPENSES    2006


2005Income taxes

$
972


$
756Sales and value added taxes


1,432



977Compensation and benefits


4,308



2,260Other


2,612



1,467Total

$
9,324


$
5,460   8.
    INCOME
    TAXES    2006


2005


2004Domestic

$
4,527


$
6,750


$
3,875Foreign


1,633



445



1,158Total

$
6,160


$
7,195


$
5,033  55




---



##### Table of Contents



APPLIX,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    2006


2005


2004Current:Federal and state

$
190


$
95


$
(98
)Foreign


492



12



819Total Current


682



107



721Deferred:Federal and state


(3,965
)






Foreign


13



250



(496
)Total Deferred


(3,952
)


250



(496
)Total Income Tax (Benefit)
    Provision

$
(3,270
)

$
357


$
225     2006


2005Deferred tax assets:Net operating loss carryforwards

$
4,280


$
6,610Accounts receivable


88



75Accrued expenses


280



279Accrued compensation and benefits


251



222Property and equipment


130



83Stock-based compensation


220



Tax credit carryforwards


3,231



3,405Total deferred tax assets


8,480



10,674Deferred tax liabilities:Basis differences of intangible
    asset


(1,621
)


(94
)Total deferred tax liabilities


(1,621
)


(94
)Valuation allowance


(4,364
)


(10,510
)Net deferred tax asset

$
2,495


$
70  56




---



##### Table of Contents



APPLIX,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    2006


2005


2004U.S. federal statutory rate

$
2,061


$
2,446


$
1,711Foreign tax rate differentials


(8
)


110



217Permanent items


673



72



34State income taxes


82







30Other


(13
)


95



32Release in valuation allowance


(3,965
)






Change in valuation allowance


(2,100
)


(2,366
)


(1,799
)Income tax (benefit) provision

$
(3,270
)

$
357


$
225         Reported in the statement of
    operations

$
2,811Reported in capital in excess of
    par


1,553$
4,364    57




---



##### Table of Contents



APPLIX,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
       9.
    STOCKHOLDERS
    EQUITY  Preferred
    Stock
    Common
    Stock
      Treasury
    Stock
    Common
    Stock Purchase Rights
   58




---



##### Table of Contents



APPLIX,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
            59




---



##### Table of Contents



APPLIX,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
   Stock
    Option Plans
               60




---



##### Table of Contents



APPLIX,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
      Options OutstandingWeighted AverageNumber


Exercise PriceBalance at January 1, 2004


3,691,040


$
3.44Options granted


1,125,500


$
4.08Options exercised


(617,915
)

$
2.64Options cancelled


(712,510
)

$
7.50Balance at December 31, 2004


3,486,115


$
2.96Options granted


738,000


$
5.35Options exercised


(513,378
)

$
2.59Options cancelled


(242,925
)

$
3.96Balance at December 31, 2005


3,467,812


$
3.46Options granted


1,058,000


$
6.94Options exercised


(320,091
)

$
2.90Options cancelled


(207,930
)

$
6.01Balance at December 31, 2006


3,997,791


$
4.29     Options OutstandingWeighted Average





Options ExercisableNumber


Remaining


Weighted Average


Number


Weighted AverageRange of Exercise Prices

Outstanding


Contractual Life


Exercise Prices


Exercisable


Exercise Prices$  .63-$  .94


625



1.76


$
0.63



625


$
0.63$  .95-$1 .42


275,608



2.03


$
1.33



275,608


$
1.33$ 1.43-$ 2.14


1,129,801



3.08


$
1.79



1,050,693


$
1.80$ 2.15-$ 3.22


59,438



0.99


$
2.44



58,938


$
2.44$ 3.23-$ 4.84


862,492



4.15


$
4.21



528,746


$
4.18$ 4.85-$ 7.27


1,136,377



5.41


$
5.61



324,984


$
5.44$ 7.28-$10.92


494,750



6.24


$
8.19



43,437


$
7.75$10.93-$16.40


32,700



0.02


$
13.73



32,700


$
13.73$16.41-$18.06


6,000



0.01


$
18.06



6,000


$
18.063,997,791



4.23


$
4.29



2,321,731


$
3.13    61




---



##### Table of Contents



APPLIX,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
            Employee
    Stock Purchase Plan
    Notes Receivable
    from Stock Purchase Agreements
  00-23,
  EITF 95-16,
 62




---



##### Table of Contents



APPLIX,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    10.
    EMPLOYEE
    BENEFIT PLAN    11.
    MAJOR
    CUSTOMER AND GEOGRAPHIC SEGMENT INFORMATION      2006


2005


2004Revenue from continuing operations
    United States

$
19,890


$
13,190


$
10,764Europe


25,169



16,858



15,334Pacific Rim


7,114



6,930



4,817Total revenue from continuing
    operations

$
52,173


$
36,978


$
30,915     At December 31, 2006Total


United States


Europe


Pacific RimProperty and equipment, net

$
1,313


$
1,021


$
232


$
60Other assets


684



33



651



   At December 31, 2005Total


United States


Europe


Pacific RimProperty and equipment, net

$
953


$
835


$
95


$
23Other assets


712



79



633



   12.
    SALE OF
    SUBSIDIARY   63




---



##### Table of Contents



APPLIX,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
   13.
    NET GAIN
    FROM SALE OF CRM ASSETS    14.
    RESTRUCTURING
    EXPENSES      FacilityExit CostsBalance at January 1, 2004

$
Restructuring


604,000Adjustment


Payments and write-offs


(231,000
)Foreign currency translation
    adjustments


Balance at December 31, 2004


373,000Payments and write-offs


(133,000
)Foreign currency translation
    adjustments


(10,000
)Balance at December 31, 2005


230,000Payments and write-offs


(47,000
)Foreign currency translation
    adjustments


29,000Balance at December 31, 2006

$
212,000     15.
    DISCONTINUED
    OPERATIONS   64




---



##### Table of Contents



APPLIX,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
   16.
    RELATED
    PARTY TRANSACTIONS        17.
    COMMITMENTS
    AND CONTINGENCIES  Contingencies
            Indemnifications
   65




---



##### Table of Contents



APPLIX,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
       Commitments
    (In thousands)2007

$
1,3412008


1,2462009


1,1912010


7632011


54Total minimum lease payments

$
4,595    66




---



##### Table of Contents



EXHIBIT INDEX  2
.1(1)



Share Purchase Agreement of the
    Shares in the Capital of Temtec International B.V. by and among
    Applix, Inc., the Sellers (as defined therein) and Temtec
    International B.V., dated June 15, 2006.3
.1(2)



Restated Articles of Organization.3
.2(3)



Amended and Restated By-laws.4
.1(4)



Form of Rights Agreement, dated as
    of September 18, 2000, between the Registrant and American
    Stock Transfer & Trust Company, which includes as
    Exhibit A the terms of the Series A Junior
    Participating Preferred Stock, as Exhibit B the Form of
    Rights Certificate, and as Exhibit C the Summary of Rights
    to Purchase Preferred Stock.4
.2(5)



First Amendment to Form of Rights
    Agreement, dated February 27, 2004, between the Registrant
    and American Stock Transfer & Trust Company.10
.1(6)



Applix, Inc. 1994 Equity Incentive
    Plan, as amended.10
.2(7)



Applix, Inc. 2000 Director
    Stock Option Plan, as amended.10
.3(8)



Applix, Inc. 2001 Employee Stock
    Purchase Plan.10
.4(9)



Applix, Inc. 2003 Director
    Equity Plan, as amended.10
.5(10)



Form of Stock Option Agreement for
    2003 Director Equity Plan.10
.6(11)



Applix, Inc. 2004 Equity Incentive
    Plan, as amended.10
.7(12)



Applix, Inc. 2006 Stock Incentive
    Plan.10
.8(12)



Form of Incentive Stock Option
    Agreement for the 2006 Stock Incentive Plan.10
.9(13)



2006 Executive Officer Bonus Plan.10
.10(14)



2007 Executive Officer Bonus Plan.10
.11(15)



Form of Retention Agreement.10
.12(9)



Summary of Compensation Policy for
    Directors of Applix, Inc.10
.13(16)



Letter Agreement between Applix,
    Inc. and Craig Cervo, dated October 26, 2005.10
.14(17)



Loan and Security Agreement, dated
    March 19, 2004 between the Registrant and Silicon Valley
    Bank.10
.15(18)



First Loan Modification Agreement
    by and between Applix, Inc. and Silicon Valley Bank, dated
    April 14, 2005.10
.16(1)



Second Loan Modification Agreement
    by and between Applix, Inc. and Silicon Valley Bank, dated
    June 15, 2006.10
.17(19)



Single Tenant Commercial Lease by
    and between Westborough Land Realty Trust and the Registrant,
    dated January 23, 2001.10
.18(17)



Letter of Intent Single Tenant
    Commercial Lease by and between Westborough Land Realty Trust
    and the Registrant, dated December 12, 2003.10
.19(17)



First Amendment of Single Tenant
    Commercial Lease by and between Westborough Land Realty Trust
    and the Registrant dated December 31, 2003.10
.20(17)



Second Amendment of Single Tenant
    Commercial Lease by and between Westborough Land Realty Trust
    and the Registrant dated January 22, 2004.21
.1



Subsidiaries of the Registrant.23
.1



Consent of Independent Registered
    Public Accounting Firm.31
.1



Certification Pursuant to
    Rule 13a-14(a)
    and
    15d-14(a) of
    the Exchange Act, as Adopted Pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002 (Chief Executive Officer).31
.2



Certification Pursuant to
    Rule 13a-14(a)
    and
    15d-14(a) of
    the Exchange Act, as Adopted Pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002 (Chief Financial Officer).32
.1



Certification Pursuant to
    18 U.S.C. Section 1350 (Chief Executive Officer).32
.2



Certification Pursuant to
    18 U.S.C. Section 1350 (Chief Financial Officer).     1.
    
    Incorporated by reference from the Registrants Current
    Report on Form
    8-K, as
    filed with the Commission on June 21, 2006. 67




---



##### Table of Contents



2.
    
    Incorporated by reference from the Registrants
    Registration Statement on
    Form S-1
    (File
    No. 33-85688).3.
    
    Incorporated by reference to the Registrants Annual Report
    on
    Form 10-K
    for the fiscal year ended December 31, 2004, as filed with
    the Commission on March 31, 2005.4.
    
    Incorporated by reference to the Registrants Registration
    Statement on
    Form 8-A
    dated September 20, 2000.5.
    
    Incorporated by reference to the Registrants Current
    Report on Form
    8-K/A, as
    filed with the Commission on March 4, 2004.6.
    
    Incorporated by reference to the Registrants Proxy
    Statement on Schedule 14A, as filed with the Commission on
    April 3, 2001.7.
    
    Incorporated by reference to the Registrants Report on
    Form 10-Q
    for the fiscal quarter ended June 30, 2002, as filed with
    the Commission on August 14, 2002.8.
    
    Incorporated by reference to the Registrants Quarterly
    Report on Form
    10-Q for the
    fiscal quarter ended June 30, 2001, as filed with the
    Commission on August 13, 2001.9.
    
    Incorporated by reference to the Registrants Annual Report
    on
    Form 10-K
    for the fiscal year ended December 31, 2005, as filed with
    the Commission on March 31, 2006.10.
    
    Incorporated by reference to the Registrants Quarterly
    Report on Form
    10-Q for the
    fiscal quarter ended September 30, 2004, as filed with the
    Commission on November 15, 2004.11.
    
    Incorporated by reference to the Registrants Current
    Report on
    Form 8-K,
    as filed with the Commission on June 15, 2005.12.
    
    Incorporated by reference to the Registrants Current
    Report on
    Form 8-K,
    as filed with the Commission on December 1, 2006.13.
    
    Incorporated by reference to the Registrants Current
    Report on
    Form 8-K,
    as filed with the Commission on March 1, 2006.14.
    
    Incorporated by reference to the Registrants Current
    Report on
    Form 8-K,
    as filed with the Commission on February 13, 2007.15.
    
    Incorporated by reference to the Registrants Current
    Report on
    Form 8-K,
    as filed with the Commission on January 31, 2007.16.
    
    Incorporated by reference to the Registrants Current
    Report on Form
    8-K, as
    filed with the Commission on October 31, 2005.17.
    
    Incorporated by reference to the Registrants Annual Report
    on
    Form 10-K
    for the fiscal year ended December 31, 2003, as filed with
    the Commission on March 30, 2004.18.
    
    Incorporated by reference to the Registrants Quarterly
    Report on Form
    10-Q for the
    fiscal quarter ended March 31, 2005, as filed with the
    Commission on May 16, 2005. 68