##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended June 30, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 Commission File Number 0-25040
 APPLIX, INC.
 (Exact name of registrant as specified in its charter)
 MASSACHUSETTS
    
    04-2781676(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer Identification
Number)
 289 Turnpike Road, Westborough, Massachusetts 01581
(Address of principal executive offices)
 (508) 870-0300
(Registrants telephone number)
 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 þ No o
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated
filer in Rule 12b-2 of the Exchange Act. (Check one):
 Large accelerated filer o Accelerated filer þ Non-accelerated filer o
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Securities Exchange Act of 1934). Yes o No þ
 As of August 3, 2007, the Registrant had 16,047,975 outstanding shares of common stock, par
value $0.0025.




---



##### 



APPLIX, INC.
 Form 10-Q
 For the Quarterly Period Ended June 30, 2007
 Table of Contents
 Page No.Part I  Financial InformationItem 1. Condensed Consolidated Financial Statements (Unaudited):Condensed Consolidated Balance Sheets as of June 30, 2007 and December 31, 2006
    
    
    3Condensed Consolidated Statements of Income for the three and six months ended June 30, 2007
and 2006
    
    
    4Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2007 and 2006
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    11Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    18Item 4. Controls and Procedures
    
    
    18Part II  Other InformationItem 1A. Risk Factors
    
    
    19Item 4. Submission of Matters to a Vote of Security Holders
    
    
    23Item 6. Exhibits
    
    
    23Signature
    
    
    25EX-3.1 - Restated Articles of OrganizationEX-10.1 - 2003 Director Equity PlanEX-31.1 - Sec 302 Certification of CEOEX-31.2 - Sec 302 Certification of CFOEX-32.1 - Sec 906 Certification of CEOEX-32.2 - Sec 906 Certification of CFO




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 Applix, Inc.
 
 Condensed Consolidated Balance Sheets
(In thousands, except share and par value amounts)
 June 30,
    
    
    December 31,2007
    
    
    2006ASSETSCurrent assets:Cash and cash equivalents
    
    $
    33,977
    
    
    $
    23,487Short-term investments
    
    
    4,160
    
    
    
    3,723Accounts receivable, less allowances for doubtful accounts of $417 and $368,
respectively
    
    
    12,363
    
    
    
    13,582Other current assets
    
    
    2,001
    
    
    
    1,585Deferred tax assets, current
    
    
    663
    
    
    
    619Total current assets
    
    
    53,164
    
    
    
    42,996Restricted cash
    
    
    400
    
    
    
    400Property and equipment, net
    
    
    1,316
    
    
    
    1,313Intangible assets, net of accumulated amortization of $2,300 and $1,853, respectively
    
    
    5,030
    
    
    
    5,477Goodwill
    
    
    13,418
    
    
    
    13,341Deferred tax assets, long-term
    
    
    995
    
    
    
    1,876Other assets
    
    
    727
    
    
    
    684TOTAL ASSETS
    
    $
    75,050
    
    
    $
    66,087LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    2,134
    
    
    $
    2,068Accrued expenses
    
    
    8,447
    
    
    
    9,324Accrued restructuring expenses, current portion
    
    
    52
    
    
    
    51Current portion of debt
    
    
    2,167
    
    
    
    2,167Deferred revenues
    
    
    15,348
    
    
    
    11,052Total current liabilities
    
    
    28,148
    
    
    
    24,662Accrued restructuring expenses, non-current portion
    
    
    139
    
    
    
    161Long-term debt
    
    
    2,708
    
    
    
    3,792Other long-term liabilities
    
    
    739
    
    
    
    122Total liabilities
    
    
    31,734
    
    
    
    28,737Commitments and contingencies (Note 8)Stockholders equity:Preferred stock, $0.01 par value; 1,000,000 shares authorized; none issued and
outstanding
    
    
    
    
    
    
    Common stock, $0.0025 par value; 50,000,000 and 30,000,000 shares authorized,
respectively; 16,006,147 and 15,657,258 shares issued and outstanding,
respectively
    
    
    40
    
    
    
    39Additional paid-in capital
    
    
    66,382
    
    
    
    63,365Accumulated deficit
    
    
    (21,796
    )
    
    
    (24,604
    )Accumulated other comprehensive loss
    
    
    (1,310
    )
    
    
    (1,450
    )Total stockholders equity
    
    
    43,316
    
    
    
    37,350TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    75,050
    
    
    $
    66,087
  3




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##### Table of Contents



Applix, Inc.
 
 Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Revenues:Software license
    
    $
    9,424
    
    
    $
    8,192
    
    
    $
    16,529
    
    
    $
    12,619Professional services and maintenance
    
    
    8,016
    
    
    
    5,128
    
    
    
    14,806
    
    
    
    9,694Total revenues
    
    
    17,440
    
    
    
    13,320
    
    
    
    31,335
    
    
    
    22,313Cost of revenues:Software license
    
    
    120
    
    
    
    131
    
    
    
    226
    
    
    
    175Professional services and maintenance
    
    
    1,734
    
    
    
    1,149
    
    
    
    3,244
    
    
    
    2,165Amortization of an acquired intangible asset
    
    
    92
    
    
    
    
    
    
    
    185
    
    
    
    Total cost of revenues
    
    
    1,946
    
    
    
    1,280
    
    
    
    3,655
    
    
    
    2,340Gross margin
    
    
    15,494
    
    
    
    12,040
    
    
    
    27,680
    
    
    
    19,973Operating expenses:Sales and marketing
    
    
    7,706
    
    
    
    5,707
    
    
    
    14,249
    
    
    
    10,280Product development
    
    
    2,446
    
    
    
    1,739
    
    
    
    4,733
    
    
    
    3,307General and administrative
    
    
    2,081
    
    
    
    2,205
    
    
    
    4,454
    
    
    
    3,929Amortization of acquired intangible assets
    
    
    100
    
    
    
    62
    
    
    
    262
    
    
    
    125Total operating expenses
    
    
    12,333
    
    
    
    9,713
    
    
    
    23,698
    
    
    
    17,641Operating income
    
    
    3,161
    
    
    
    2,327
    
    
    
    3,982
    
    
    
    2,332Non-operating income (expense):Interest income
    
    
    356
    
    
    
    275
    
    
    
    660
    
    
    
    505Interest expense
    
    
    (131
    )
    
    
    (40
    )
    
    
    (275
    )
    
    
    (52
    )Other income (expense), net
    
    
    208
    
    
    
    88
    
    
    
    358
    
    
    
    (26
    )Income before income taxes
    
    
    3,594
    
    
    
    2,650
    
    
    
    4,725
    
    
    
    2,759Provision for income taxes
    
    
    1,465
    
    
    
    323
    
    
    
    1,837
    
    
    
    335Net income
    
    $
    2,129
    
    
    $
    2,327
    
    
    $
    2,888
    
    
    $
    2,424Net income per share, basic and diluted:Net income per share, basic
    
    $
    0.14
    
    
    $
    0.15
    
    
    $
    0.19
    
    
    $
    0.16Net income per share, diluted
    
    $
    0.12
    
    
    $
    0.14
    
    
    $
    0.16
    
    
    $
    0.15Weighted average number of shares outstanding:Basic
    
    
    15,671
    
    
    
    15,193
    
    
    
    15,609
    
    
    
    15,105Diluted
    
    
    18,335
    
    
    
    16,702
    
    
    
    18,155
    
    
    
    16,581
  4




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##### Table of Contents



Applix, Inc.
 
 Condensed Consolidated Statements of Cash Flows
 Six Months EndedJune 30,2007
    
    
    2006(in thousands)Cash flows from operating activities:Net income
    
    $
    2,888
    
    
    $
    2,424Adjustments to reconcile net income to net cash provided
by (used in) operating activities:Depreciation
    
    
    349
    
    
    
    239Amortization
    
    
    447
    
    
    
    125Provision for doubtful accounts
    
    
    42
    
    
    
    Stock-based compensation expense
    
    
    1,588
    
    
    
    1,045Deferred income taxes
    
    
    1,057
    
    
    
    Changes in operating assets and liabilities:Decrease (increase) in accounts receivable
    
    
    1,492
    
    
    
    (172
    )Increase in prepaids and other assets
    
    
    (512
    )
    
    
    (66
    )(Increase) decrease in other assets
    
    
    (26
    )
    
    
    131Increase in accounts payable
    
    
    163
    
    
    
    186(Decrease) increase in accrued expenses
    
    
    (784
    )
    
    
    723Decrease in accrued restructuring expenses
    
    
    (25
    )
    
    
    (23
    )Increase (decrease) in other liabilities
    
    
    618
    
    
    
    (58
    )Increase in deferred revenues
    
    
    3,889
    
    
    
    650Cash provided by operating activities
    
    
    11,186
    
    
    
    5,204Cash flows from investing activities:Acquisition, net of cash acquired
    
    
    (89
    )
    
    
    (11,138
    )Property and equipment additions
    
    
    (270
    )
    
    
    (348
    )Decrease in restricted cash
    
    
    
    
    
    
    100Maturities of short-term investments
    
    
    5,850
    
    
    
    4,530Purchases of short-term investments
    
    
    (6,287
    )
    
    
    (5,198
    )Cash used in investing activities
    
    
    (796
    )
    
    
    (12,054
    )Cash flows from financing activities:Proceeds from issuance of common stock under stock plans
    
    
    1,375
    
    
    
    777Proceeds from long-term debt, net of issuance costs
    
    
    
    
    
    
    6,451Principal payments on long-term debt
    
    
    (1,084
    )
    
    
    Cash provided by financing activities
    
    
    291
    
    
    
    7,228Effect of exchange rate changes on cash
    
    
    (191
    )
    
    
    349Increase in cash and cash equivalents
    
    
    10,490
    
    
    
    727Cash and cash equivalents at beginning of period
    
    
    23,487
    
    
    
    20,740Cash and cash equivalents at end of period
    
    $
    33,977
    
    
    $
    21,467Supplemental disclosure of cash flow informationCash paid for income taxes
    
    $
    463
    
    
    $
    266Cash paid for interest
    
    $
    247
    
    
    $
    31Supplemental 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).
  5




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##### Table of Contents



APPLIX, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1. The Company
  2. Summary of Significant Accounting Policies
 Basis of Presentation
  Use of Estimates
  Reclassifications
  New Accounting Pronouncements
 Fair
Value Measurement
 6




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##### Table of Contents



The Fair Value Option for Financial Assets
and Financial Liabilities-Including an amendment of FASB Statement No. 115
 3. Acquisition
  4. Stock-based Compensation
 Share-Based Payment
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Cost of revenues
    
    $
    26
    
    
    $
    19
    
    
    $
    47
    
    
    $
    35Sales and marketing
    
    
    312
    
    
    
    201
    
    
    
    576
    
    
    
    369Product development
    
    
    220
    
    
    
    142
    
    
    
    414
    
    
    
    262General and administrative
    
    
    292
    
    
    
    188
    
    
    
    551
    
    
    
    379Total
    
    $
    850
    
    
    $
    550
    
    
    $
    1,588
    
    
    $
    1,045
    7




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##### Table of Contents



Options OutstandingWeightedAverageNumber
    
    Exercise PriceOptions outstanding at January 1, 2007
    
    
    3,997,791
    
    
    $
    4.29Options granted
    
    
    549,250
    
    
    $
    12.59Options exercised
    
    
    (175,920
    )
    
    $
    3.62Options cancelled
    
    
    (45,983
    )
    
    $
    12.71Options outstanding at March 31, 2007
    
    
    4,325,138
    
    
    $
    5.28Options granted
    
    
    15,000
    
    
    $
    16.30Options exercised
    
    
    (121,129
    )
    
    $
    3.82Options cancelled
    
    
    (19,313
    )
    
    $
    8.96Options outstanding at June 30, 2007
    
    
    4,199,696
    
    
    $
    5.35Options exercisable at June 30, 2007
    
    
    2,406,330
    
    
    $
    3.22
   Three Months Ended
    
    Three Months EndedJune 30, 2007
    
    June 30, 2006Stock Option
    
    Purchase
    
    Stock Option
    
    PurchasePlans
    
    Plan
    
    Plans
    
    PlanExpected life (years)
    
    
    4.6
    
    
    
    .5
    
    
    
    4.6
    
    
    
    .5Expected stock price volatility
    
    
    50.9
    %
    
    
    29.2
    %
    
    
    56.4
    %
    
    
    32.5
    %Risk free interest rate
    
    
    4.9
    %
    
    
    5.2
    %
    
    
    5.10
    %
    
    
    4.60
    %
 Expected Term,
  5. Earnings Per Share
 Earnings Per Share
 8




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(In thousands, except per share data)Numerator:Net income
    
    $
    2,129
    
    
    $
    2,327
    
    
    $
    2,888
    
    
    $
    2,424Denominator:Denominator for basic net income per share
 Weighted average number of shares
outstanding
    
    
    15,671
    
    
    
    15,193
    
    
    
    15,609
    
    
    
    15,105Dilutive effect of assumed exercise of
stock options and contingently returnable
shares
    
    
    2,664
    
    
    
    1,509
    
    
    
    2,546
    
    
    
    1,476Denominator for diluted net income per share
    
    
    18,335
    
    
    
    16,702
    
    
    
    18,155
    
    
    
    16,581Basic net income per share
    
    $
    0.14
    
    
    $
    0.15
    
    
    $
    0.19
    
    
    $
    0.16Diluted net income per share
    
    $
    0.12
    
    
    $
    0.14
    
    
    $
    0.16
    
    
    $
    0.15
  6. Comprehensive Income
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(In thousands)
    
    
    (In thousands)Net income
    
    $
    2,129
    
    
    $
    2,327
    
    
    $
    2,888
    
    
    $
    2,424Other comprehensive income (loss) items:Foreign currency translation adjustments
    
    
    46
    
    
    
    46
    
    
    
    140
    
    
    
    217Unrealized (gain) loss on short-term investments
    
    
    (1
    )
    
    
    2
    
    
    
    
    
    
    
    2Other comprehensive income
    
    
    45
    
    
    
    48
    
    
    
    140
    
    
    
    219Total comprehensive income
    
    $
    2,174
    
    
    $
    2,375
    
    
    $
    3,028
    
    
    $
    2,643
 7. Income Taxes
  Accounting for Uncertainty in Income Taxes Accounting for Income Taxes
 9




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##### Table of Contents



8. Commitments and Contingencies
 Contingencies
  9. Restructuring Expenses
   FacilityExit CostsBalance at January 1, 2007
    
    $
    212,000Payments
    
    
    (25,000
    )Foreign currency translation adjustments
    
    
    4,000Balance at June 30, 2007
    
    $
    191,000
 FacilityExit CostsBalance at January 1, 2006
    
    $
    230,000Payments
    
    
    (23,000
    )Foreign currency translation adjustments
    
    
    17,000Balance at June 30, 2006
    
    $
    224,000
 10




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##### Table of Contents



10. Stockholders Equity
   11. Subsequent Events
   
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 OVERVIEW OF THE COMPANYS OPERATIONS
    CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  11




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##### Table of Contents




    
    Revenue Recognition
    
    Allowance for Doubtful Accounts
    
    Goodwill and Other Intangible Assets and Related Impairment
    
    Stock-based Compensation
    
    Restructuring
    
    Income Taxes
 Accounting for Uncertainty in Income Taxes
 RESULTS OF OPERATIONS
 Three and Six Months Ended June 30, 2007 and 2006
 Revenues
 (In thousands, except percentages)Three Months Ended June 30,
    
    
    Six Months Ended June 30,Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percentof
    
    
    
    
    
    
    of
    
    
    
    
    
    
    of
    
    
    
    
    
    
    of2007
    
    
    Revenue
    
    
    2006
    
    
    Revenue
    
    
    2007
    
    
    Revenue
    
    
    2006
    
    
    RevenueSoftware License Revenues
    
    $
    9,424
    
    
    
    54
    %
    
    $
    8,192
    
    
    
    62
    %
    
    $
    16,529
    
    
    
    53
    %
    
    $
    12,619
    
    
    
    57
    %Professional Services
Revenues
    
    
    1,234
    
    
    
    7
    %
    
    
    592
    
    
    
    4
    %
    
    
    2,309
    
    
    
    7
    %
    
    
    1,023
    
    
    
    4
    %Maintenance Revenues
    
    
    6,782
    
    
    
    39
    %
    
    
    4,536
    
    
    
    34
    %
    
    
    12,497
    
    
    
    40
    %
    
    
    8,671
    
    
    
    39
    %Total Professional Services
and Maintenance Revenues
    
    
    8,016
    
    
    
    46
    %
    
    
    5,128
    
    
    
    38
    %
    
    
    14,806
    
    
    
    47
    %
    
    
    9,694
    
    
    
    43
    %Total Revenues
    
    $
    17,440
    
    
    
    100
    %
    
    $
    13,320
    
    
    
    100
    %
    
    $
    31,335
    
    
    
    100
    %
    
    $
    22,313
    
    
    
    100
    %
  12




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##### Table of Contents



Software License Revenues
    Professional Services and Maintenance
  Cost of Revenues
 (In thousands, except percentages)Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    
    
    
    
    2006
    
    
    
    
    
    
    2007
    
    
    
    
    
    
    2006Cost of Software License Revenues
    
    $
    120
    
    
    
    
    
    
    $
    131
    
    
    
    
    
    
    $
    226
    
    
    
    
    
    
    $
    175Cost of Professional Services
Maintenance Revenues:Cost of Professional Services
Revenues
    
    
    992
    
    
    
    
    
    
    
    474
    
    
    
    
    
    
    
    1,776
    
    
    
    
    
    
    
    885
 13




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##### Table of Contents



(In thousands, except percentages)Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    
    
    
    
    2006
    
    
    
    
    
    
    2007
    
    
    
    
    
    
    2006Cost of Maintenance Revenues
    
    
    742
    
    
    
    
    
    
    
    675
    
    
    
    
    
    
    
    1,468
    
    
    
    
    
    
    
    1,280Total
    
    
    1,734
    
    
    
    
    
    
    
    1,149
    
    
    
    
    
    
    
    3,244
    
    
    
    
    
    
    
    2,165Amortization of an acquired
intangible asset
    
    
    92
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    185
    
    
    
    
    
    
    
    Total Cost of Revenues
    
    $
    1,946
    
    
    
    
    
    
    $
    1,280
    
    
    
    
    
    
    $
    3,655
    
    
    
    
    
    
    $
    2,340Gross Margin (A):Software License (B)
    
    $
    9,212
    
    
    
    98
    %
    
    $
    8,061
    
    
    
    98
    %
    
    $
    16,118
    
    
    
    98
    %
    
    $
    12,444
    
    
    
    99
    %Professional Services and Maintenance:Professional Services
    
    
    242
    
    
    
    20
    %
    
    
    118
    
    
    
    20
    %
    
    
    533
    
    
    
    23
    %
    
    
    138
    
    
    
    13
    %Maintenance
    
    
    6,040
    
    
    
    89
    %
    
    
    3,861
    
    
    
    85
    %
    
    
    11,029
    
    
    
    88
    %
    
    
    7,391
    
    
    
    85
    %Total
    
    
    6,282
    
    
    
    78
    %
    
    
    3,979
    
    
    
    78
    %
    
    
    11,562
    
    
    
    78
    %
    
    
    7,529
    
    
    
    78
    %Total Gross Margin
    
    $
    15,494
    
    
    
    89
    %
    
    $
    12,040
    
    
    
    90
    %
    
    $
    27,680
    
    
    
    88
    %
    
    $
    19,973
    
    
    
    90
    %
 
 (A)
    
    Gross margin 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
  Operating Expenses
 (In thousands, except percentages)Three Months Ended June 30,
    
    
    Six Months Ended June 30,Percent of
    
    
    
    
    
    
    Percent of
    
    
    
    
    
    
    Percent of
    
    
    
    
    
    
    Percent of2007
    
    
    Revenues
    
    
    2006
    
    
    Revenues
    
    
    2007
    
    
    Revenues
    
    
    2006
    
    
    RevenuesSales and marketing
    
    $
    7,706
    
    
    
    44
    %
    
    $
    5,707
    
    
    
    43
    %
    
    $
    14,249
    
    
    
    46
    %
    
    $
    10,280
    
    
    
    46
    %Product development
    
    
    2,446
    
    
    
    14
    %
    
    
    1,739
    
    
    
    13
    %
    
    
    4,733
    
    
    
    15
    %
    
    
    3,307
    
    
    
    15
    %General and administrative
    
    
    2,081
    
    
    
    12
    %
    
    
    2,205
    
    
    
    17
    %
    
    
    4,454
    
    
    
    14
    %
    
    
    3,929
    
    
    
    18
    %Amortization of acquired
intangible assets
    
    
    100
    
    
    
    1
    %
    
    
    62
    
    
    
    
    %
    
    
    262
    
    
    
    1
    %
    
    
    125
    
    
    
    1
    %Total operating expenses
    
    $
    12,333
    
    
    
    71
    %
    
    $
    9,713
    
    
    
    73
    %
    
    $
    23,698
    
    
    
    76
    %
    
    $
    17,641
    
    
    
    79
    %
 14




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##### Table of Contents



Sales and Marketing Expenses
  Product Development Expenses
  General and Administrative Expenses
  Amortization of Acquired Intangible Assets
  15




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##### Table of Contents



Non-operating Income (Expense)
 (In thousands, except percentages)Three Months Ended June 30,
    
    
    Six Months Ended June 30,Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percentof
    
    
    
    
    
    
    of
    
    
    
    
    
    
    of
    
    
    
    
    
    
    of2007
    
    
    Revenue
    
    
    2006
    
    
    Revenue
    
    
    2007
    
    
    Revenue
    
    
    2006
    
    
    RevenueInterest income
    
    $
    356
    
    
    
    2
    %
    
    $
    275
    
    
    
    2
    %
    
    $
    660
    
    
    
    2
    %
    
    $
    505
    
    
    
    2
    %Interest income
    
    
    (131
    )
    
    
    (1
    %)
    
    
    (40
    )
    
    
    
    %
    
    
    (275
    )
    
    
    (1
    %)
    
    
    (52
    )
    
    
    
    %Other income (expense), net
    
    
    208
    
    
    
    1
    %
    
    
    88
    
    
    
    
    %
    
    
    358
    
    
    
    1
    %
    
    
    (26
    )
    
    
    
    %Total
    
    $
    433
    
    
    
    2
    %
    
    $
    323
    
    
    
    2
    %
    
    $
    743
    
    
    
    2
    %
    
    $
    427
    
    
    
    2
    %
 Interest Income
  Interest Expense
  Other Income (Expense), Net
  Provision for Income Taxes
  16




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
          17




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   
 ITEM 4. CONTROLS AND PROCEDURES
   18




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##### Table of Contents



PART II. OTHER INFORMATION
 
 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.
 19




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##### Table of Contents



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.
    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;
 20




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##### Table of Contents




    
    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;
    
    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.
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##### Table of Contents



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.
   OUR FINANCIAL RESULTS MAY BE ADVERSELY IMPACTED BY HIGHER THAN EXPECTED TAX RATES OR EXPOSURE TO
ADDITIONAL INCOME TAX LIABILITIES.
  22




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##### Table of Contents



ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
  1)
    
    Election of two Class I Directors for a term of three years:
 FOR
    
    WITHHELDBradley D. Fire
    
    
    14,107,442
    
    
    
    350,541John Loewenberg
    
    
    14,106,692
    
    
    
    351,291
   2)
    
    Amend the Companys Restated Articles of Organization, as amended, to increase the
number of authorized shares of common stock from 30,000,000 shares to 50,000,000 shares:
 FOR
    
    AGAINST
    
    ABSTAIN
    
    NON-VOTES13,847,427
    
    591,661
    
    18,895
    
    0
 3)
    
    Amend the Companys 2003 Director Equity Plan to increase the number of shares of
common stock authorized for issuance thereunder from 300,000 shares to 600,000 shares:
 FOR
    
    AGAINST
    
    ABSTAIN
    
    NON-VOTES6,628,184
    
    3,448,534
    
    43,670
    
    4,337,505
 4)
    
    Ratify the selection of Deloitte & Touche LLP as the Companys independent registered
public accounting firm for the fiscal year ending December 31, 2007:
 FOR
    
    AGAINST
    
    ABSTAIN
    
    NON-VOTES14,255,014
    
    138,736
    
    64,233
    
    0
 
 ITEM 6. EXHIBITS
 (a) Exhibits
 ExhibitNumber
    
    Description3.1
    
    Restated Articles of Organization, as amended.10.1
    
    Applix, Inc. 2003 Director Equity Plan, as amended.31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/Rule 15d-14(a)
of the Securities Exchange Act of 1934, as amended.31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/Rule 15d-14(a)
of the Securities
 23




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##### Table of Contents



ExhibitNumber
    
    DescriptionExchange Act of 1934, as amended.32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 24




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##### Table of Contents



SIGNATURE
  APPLIX, INC.Date: August 9, 2007
    /s/ Milton A. AlpernMilton A. AlpernChief Financial Officer and Treasurer
(Duly Authorized Officer and Principal Financial and
Accounting Officer) 25




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description3.1
    
    Restated Articles of Organization, as amended.10.1
    
    Applix, Inc. 2003 Director Equity Plan, as amended.31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/Rule
15d-14(a) of the Securities Exchange Act of 1934, as amended.31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/Rule
15d-14(a) of the Securities Exchange Act of 1934, as amended.32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.32.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
 26