<PAGE>   1
                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549



              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                      FOR THE QUARTER ENDED MARCH 31, 2001

                                       OR

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

                         COMMISSION FILE NUMBER 0-25040


                                  APPLIX, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)



         MASSACHUSETTS                                        04-2781676
(STATE OR OTHER JURISDICTION OF                            (I.R.S. EMPLOYER
 INCORPORATION OR ORGANIZATION)                          IDENTIFICATION NUMBER)


                112 TURNPIKE ROAD, WESTBORO, 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 X NO __

           INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S
CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE:

           REGISTRANT HAD 11,860,127 SHARES OF COMMON STOCK, $.0025 PAR VALUE,
OUTSTANDING AT MAY 9, 2001.
<PAGE>   2
                                  APPLIX, INC.

                                      INDEX

<TABLE>
<CAPTION>
                                                                                PAGE NO.
                                                                                --------
<S>                                                                             <C>
PART I - FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements:

     Unaudited Condensed Consolidated Balance Sheets as of
          March 31, 2001 and December 31, 2000                                      3


     Unaudited Condensed Consolidated Statements of Operations
          For the three months ended March 31, 2001 and 2000                        4


     Unaudited Condensed Consolidated Statements of Cash Flows
          For the three months ended March 31, 2001 and 2000                        5


     Notes to Unaudited Condensed Consolidated Financial Statements                6-9


Item 2. Management's Discussion and Analysis of Financial
        Condition and Results of Operations                                      10-13

Item 3. Quantitative and Qualitative Disclosures about Market Risk                 13

PART II - OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K                                           13

Signature                                                                          14
</TABLE>


                                      -2-
<PAGE>   3
PART I.  FINANCIAL INFORMATION
ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


                                  APPLIX, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                (UNAUDITED; IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                            MARCH 31,       DECEMBER 31,
                                                                              2001             2000
                                                                            ---------       ------------
<S>                                                                         <C>             <C>
ASSETS
Current assets:
     Cash and cash equivalents                                              $ 12,183          $ 12,546
     Accounts receivable, less allowance for doubtful accounts
          of $1,479 and $1,397, respectively                                  12,773            12,026
     Other current assets                                                      2,669             2,876
                                                                            --------          --------
          Total current assets                                                27,625            27,448

Property and equipment, at cost                                               15,529            15,475
Less accumulated amortization and depreciation                               (12,532)          (12,379)
                                                                            --------          --------
     Net property and equipment                                                2,997             3,096
Capitalized software costs, net of accumulated
       amortization of $1,095 and $886, respectively                             876               910
Goodwill, net of accumulated amortization of
       $923 and $915 respectively                                              2,188               370
Other assets                                                                   1,387             1,250
                                                                            --------         ---------
          Total assets                                                      $ 35,073          $ 33,074
                                                                            ========          ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable                                                       $  3,415          $  2,406
     Accrued liabilities                                                       8,092             7,145
     Deferred revenue                                                          5,464             4,222
     Net liabilities of discountinued operation                                1,771             1,067
                                                                            --------          --------
          Total current liabilities                                           18,742            14,840

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; 12,043,069 and 11,893,893 shares issued,
          respectively                                                            30                30
     Capital in excess of par value                                           49,002            48,249
     Accumulated deficit                                                     (29,861)          (27,268)
     Accumulated other comprehensive loss                                       (643)             (580)
     Notes receivable from stockholders                                       (1,120)           (1,120)
     Treasury stock, 306,198 shares, at cost                                  (1,077)           (1,077)
                                                                            --------          --------
          Total stockholders' equity                                          16,331            18,234
                                                                            --------          --------
          Total liabilities and stockholders' equity                        $ 35,073          $ 33,074
                                                                            ========          ========
</TABLE>

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


                                      -3-
<PAGE>   4
                                  APPLIX, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (UNAUDITED, IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                    THREE MONTHS ENDED
                                                                MARCH 31,         MARCH 31,
                                                                  2001              2000
                                                                --------          --------
<S>                                                             <C>               <C>
License Revenue                                                   $5,814            $5,095
Service revenue                                                    5,513             4,182
                                                                --------          --------
          Total revenue                                           11,327             9,277

Cost of license revenue                                              491               427
Cost of service revenue                                            3,968             3,570
                                                                --------          --------
          Gross margin                                             6,868             5,280

Operating expenses:
          Selling and marketing                                    7,015             5,183
          Research and development                                 2,108             1,821
          General and administrative                               1,144               946
                                                                --------          --------
          Total operating expenses                                10,267             7,950
                                                                --------          --------

Operating loss                                                    (3,399)           (2,670)

Interest income, net                                                 133               355
                                                                --------          --------
Net loss from continuing operations before income taxes           (3,266)           (2,315)

Provision for (benefit from) income taxes                             44              (771)
                                                                --------          --------
Net loss from continuing operations                              ($3,310)          ($1,544)

Income from discontinued operation                                    --               747
Gain on disposal of discontinued operation                           718                --
                                                                --------          --------
Net Loss                                                         ($2,592)            ($797)
                                                                ========          ========

Basic and diluted income (loss) per share:
     Continuing Operations                                        ($0.28)           ($0.14)
     Discontinued Operations                                       $0.06             $0.07
                                                                --------          --------
          Total loss per share                                    ($0.22)           ($0.07)
                                                                ========          ========

Weighted average number of basic and
     diluted shares outstanding                                   11,689            11,043
</TABLE>

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


                                      -4-
<PAGE>   5
                                  APPLIX, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
           (UNAUDITED; IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                              THREE MONTHS ENDED
                                                                                        ---------------------------------
                                                                                        MARCH 31, 2001     MARCH 31, 2000
                                                                                        --------------     --------------
<S>                                                                                     <C>                <C>
Operating activities:
Net loss                                                                                    ($2,592)            ($797)
Adjustments to reconcile net loss to net cash
  provided by (used for) operating activities:
          Depreciation and amortization                                                         395               750
          Changes in operating assets and liabilities:
               (Increase) decrease in accounts receivable                                      (146)              337
               (Increase) decrease in other current assets                                      263              (293)
                Increase in accounts payable                                                    684               147
                Decrease in accrued liabilities                                              (1,473)             (878)
                Increase deferred revenue                                                       942               110
                                                                                           --------          --------
          Cash used for operating activities                                                 (1,927)             (624)

INVESTING ACTIVITIES:
          Purchase of property and equipment                                                    (40)             (824)
          Capitalized software costs                                                           (175)             (226)
          Proceeds from sale of discontinued operation                                        1,300                --
          Purchase of short-term investments                                                     --           (15,376)
          Maturities of short-term investments                                                   --            15,155
          Cash received from purchase of Dynamic Decisions Pty                                   17                --
                                                                                           --------          --------
  Cash provided by (used for) investing activities                                            1,102            (1,271)

FINANCING ACTIVITIES:
          Proceeds from exercise of incentive stock options and
             employee stock purchase plans                                                      526               576
                                                                                           --------          --------
          Cash provided by financing activities                                                 526               576
          Effect of exchange rate changes on cash                                               (64)              (22)
                                                                                           --------          --------
          Net decrease in cash and cash equivalents                                            (363)           (1,341)

Cash and cash equivalents at beginning of period                                             12,546            10,321
                                                                                           --------          --------
Cash and cash equivalents at end of period                                                 $ 12,183          $  8,980
                                                                                           ========          ========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for income taxes                                                     15                --
Stock issued for acquisition of Dynamic Decisions Pty                                           227                --
Note payable issued for acquisition of Dynamic Decisions Pty                                  1,549                --
</TABLE>

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


                                      -5-
<PAGE>   6
                                  APPLIX, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)


A.   NATURE OF BUSINESS

     Applix, Inc. ("Applix" or the "Company") develops, markets and supports a
suite of Internet-based software applications. The Company has one principal
business segment, its customer analytics and business planning software segment,
which is reported as continuing operations. The Company provides customer
relationship management and business planning software that enables customers to
automate their front office business operations including customer relationship
management and business planning. On March 30, 2001, the Company sold its
VistaSource business unit, previously reported as the Linux Division. This unit
has been reported as a discontinued operation since December 31, 2000 (note F).

B.   BASIS OF PRESENTATION

     The accompanying unaudited condensed consolidated financial statements have
been prepared by the Company in accordance with accounting principles generally
accepted in the United States for interim financial information. The preparation
of financial statements in conformity with accounting principles generally
accepted in the United States requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates. In the opinion of
management, the accompanying unaudited condensed consolidated financial
statements contain all adjustments, consisting only of those of a normal
recurring nature, necessary for a fair presentation of the Company's financial
position, results of operations and cash flows at the dates and for the periods
indicated. Certain prior period amounts have been reclassified to conform to
current period presentation. These financial statements do not include all of
the information and notes required by generally accepted accounting principles
for complete financial statements. The December 31, 2000 condensed consolidated
balance sheet data was derived from audited financial statements but does not
include all disclosures required by accounting principles generally accepted in
the United States. For further information, refer to the consolidated financial
statements and notes included in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2000 filed with the Securities and Exchange
Commission ("SEC") on April 2, 2001. The results of the three-month periods
ended March 31, 2000 are not necessarily indicative of the results to be
expected for the full fiscal year.

C.   COMPUTATION OF NET LOSS PER COMMON SHARE

     Basic net loss per share is computed using the weighted average number of
common shares outstanding during the period. Dilutive net loss per share is
computed using the weighted average number of common shares outstanding during
the period, plus the dilutive effect of potential common shares which consists
of stock options and unvested shares of restricted stock.


                                      -6-
<PAGE>   7
                                  APPLIX, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (unaudited)


     Potential common shares were excluded from the calculation of net loss per
share for the periods ended March 31, 2001 and March 31, 2000 since their
inclusion would be antidilutive. Potential common shares excluded from the
calculation of diluted loss per share were 3,506,092 and 2,636,512 for the three
months ended March 31, 2001 and 2000, respectively.


D.   COMPREHENSIVE INCOME OR LOSS

     Other comprehensive income or loss includes foreign currency translation
adjustments.

<TABLE>
<CAPTION>
                                                 -----------------------------
                                                       Three Months Ended
(in thousands)                                              March 31
                                                 -----------------------------
                                                    2001               2000
                                                 ----------         ----------
<S>                                              <C>                <C>
Net income (loss)                                  ($2,592)             ($797)
Other comprehensive loss                               (63)               (22)
                                                 ----------         ----------
Total comprehensive income (loss)                  ($2,655)             ($819)
                                                 ==========         ==========
</TABLE>

E.   EFFECT OF RECENT ACCOUNTING PRONOUNCMENTS

     In June 1998, The Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which establishes accounting and
reporting standards for derivative instruments and hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at fair value.
The Company adopted SFAS No. 133 on January 1, 2001 without significant impact
to its results of operations or financial position.

F.   DISCONTINUED OPERATION

     In December 2000, the Board of Directors committed to a plan to dispose of
the operations of its VistaSource business. On March 30, 2001, the Company
completed the sale of the VistaSource business unit to Real Time International,
Inc. ("Real-Time"), a subsidiary of Parallex Capital Partners, LLC for $1.3
million and a 19% equity interest in Real-Time. The results of operations
including revenue, operating expenses, other income and expense and income taxes
of the VistaSource business unit for 2001 and 2000 have been reclassified in the
accompanying statements of operations as a discontinued operation. The Company's
balance sheets at March 31, 2001 and December 31, 2000 reflect the net
liabilities of the VistaSource business as net liabilities of discontinued
operation within current liabilities.


                                      -7-
<PAGE>   8
                                  APPLIX, INC.

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (unaudited)


     At December 31, 2000, the estimated net losses associated with the
disposition of the VistaSource business were approximately $3.6 million for
2000. These losses included approximately $367,000 in losses from operations for
the period from January 1, 2000 through the measurement date of December 17,
2000, $2.2 million relating to the removal of the net assets of the VistaSource
business, $1.1 million in estimated losses from operations from the measurement
date through the estimated date of disposal and $1.3 million in provisions for
employee severance and benefits, transaction costs, bank fees and other
contractual commitments. These losses were partially offset by anticipated
proceeds of $1.3 million from the divestiture.

     The VistaSource business generated an $870,000 loss from its operations in
the first quarter of 2001 compared to the estimated $1.1 loss recognized at
December 31, 2000. After adjustments for the actual results of operations of the
VistaSource business through the date of disposal, changes in net assets
delivered at closing, and changes in estimates of certain obligations, the net
loss on the disposal was $2,877,000.

Summary operating results from the discontinued operation of the first quarter
in 2001 and 2000 are as follows:

<TABLE>
<CAPTION>
                                     THREE MONTHS ENDED      THREE MONTHS ENDED
(in thousands)                         MARCH 31, 2001          MARCH 31, 2000
                                     ------------------      ------------------
<S>                                  <C>                     <C>
Revenue                                    $1,666                  $3,144
Cost of Sales                                 249                     516
                                     ------------------      ------------------
Gross Margin                                1,417                   2,628
Operating Expenses                          2,287                   1,881
                                     ------------------      ------------------
Operating Income Net of
 Income Taxes                               ($870)                   $747
                                     ==================      ==================
</TABLE>

As a result of the disposition of the VistaSource business, $40,000 of allocated
operations expense and $261,000 of general and administrative expense has been
reclassified from income from discontinued operation to cost of goods sold and
general and administrative expense in continuing operations, respectively. This
increased the gain from discontinued operation to $747,000 from $446,000
reported on the Company's Annual Report on Form 10K for the year ended December
31, 2000.

     On March 30, 2001 the Company closed the sale of the VistaSource business
and received the purchase price of $1,300,000. The reserve balance for the
estimated costs associated with the disposition as of March 31, 2001 was $
1,771,000, consisting of estimated brokerage fees, legal fees, severance costs,
and audit fees. For the quarter ended March 31, 2001, the Company recognized a
gain of $718,000 in discontinued operations due to a favorable liquidation of
the net assets and liabilities of the VistaSource business.


                                      -8-
<PAGE>   9
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (unaudited)


G.   ACQUISITIONS

     On March 31, 2001, the Company acquired all of the outstanding capital
stock of Dynamic Decisions Pty Limited ("Dynamic Decisions") for a purchase
price consisting of approximately $5.7 million and 100,000 shares of the
Company's Common Stock. The cash portion of the purchase price is payable in
installments over a maximum of 30 months beginning on July 1, 2001. Certain of
the installment payments are contingent upon the continued employment of two key
executives of Dynamic Decisions. The transaction was accounted for under the
purchase method of accounting.

     A preliminary estimation of the value of the assets acquired in the
transaction was done on March 31, 2001. The Company is in the process of
completing a valuation of the intangible assets, which will be completed in the
second quarter. Goodwill (included in other assets on the balance sheet) was
recorded for the value of the acquired assets to the extent that the estimated
value exceeded the fair market value of the acquired assets and will be
amortized on a straight-line basis over six years. Contingent consideration of
up to $4,065,000 will be paid out over the next two years and will be accounted
for as compensation expense. The results of operations of Dymanic Decisions Pty
Limited are included in the financial statements presented from the date of
acquisition.

     Unaudited pro forma revenue, net loss, and loss per share shown below for
the three months ended March 31, 2001 assumes the acquisition of Dynamic
Decisions Pty Limited on January 1, 2001.

<TABLE>
<CAPTION>
                                               ----------------------
                                                 THREE MONTHS ENDED
(in thousands except for                         MARCH 31 (UNAUDITED)
     share amounts)                            ----------------------
                                                  2001         2000
                                               ----------------------
<S>                                            <C>           <C>
Revenue                                         $11,885      $10,058

Net loss                                        ($2,251)       ($185)

Total basic and diluted loss per share           ($0.19)      ($0.02)
</TABLE>


                                      -9-
<PAGE>   10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

OVERVIEW

     The Company was incorporated in 1983 to develop and market software
applications for the workstation market. In 1986, the Company introduced Alis,
its first office automation product, which accounted for substantially all of
the Company's revenue through 1990. Alis was replaced in 1991 by the Aster*x
product family, which represented the next generation of UNIX applications and
tools. In September 1993, the Company introduced its Applixware suite of desktop
and development tools for accessing, analyzing and communicating information in
real time, to replace the Company's Aster*x product family, on which it was
based.

     In October 1995, the Company acquired Target Systems Corporation, which
developed and marketed customer interaction software. In October 1996, the
Company acquired Sinper Corporation, doing business under the name TM1, which
developed and marketed software used for on-line analytical processing (OLAP).
These two acquisitions enabled Applix to expand its product offerings to include
front office business applications. The Company focuses on front office business
applications which include Applix iEnterprise, the Company's offering in the
customer relationship management (CRM) market, and Applix iTM1, the Company's
real time multi-dimensional analysis software for business intelligence
applications.

     In 1996, the Company introduced its Applix Anyware product line, an
application development and deployment solution that leverages Java to customize
and deploy Applixware's full suite of applications. Applix Anyware delivers the
functionality of Applixware, Applix iTM1 and Applix iEnterprise to "thin-client"
computing environments (i.e. systems running a Java-enabled browser such as
Netscape Navigator or Microsoft Explorer).

     The Company acquired Cosource.com in December 1999 to expand its
VistaSource Division into Internet accessibility and into a collaborative open
source software web environment, in a transaction accounted for under the
purchase method of accounting. In December 2000 the board of directors decided
to dispose of VistaSource. As a result of this decision, VistaSource was
classified as a discontinued operations as of December 31, 2000. On March 30,
2001, the Company sold the VistaSource unit to Real-Time International, Inc. a
subsidiary of Parallex Capital Partners, LLC. The financial losses of
VistaSource for the first quarter of 2001 were estimated and accrued for and are
reflected on the balance sheet at December 31, 2000 as a current liability. In
the first quarter of 2001, the Company experienced better results of operations
from the VistaSource division than that estimated at December 31, 2000, which
are reflected in the income statement as income from discontinued operation.

     On March 31, 2001, the Company acquired Dynamic Decisions Pty Limited of
Australia in an effort to expand its superior customer analytics and business
planning software across the globe. Applix plans to build upon Dynamic
Decisions' strong customer base and to continue to offer the highest quality
customer analytics and business planning software and support services to all of
the Company's customers.

     The following information should be read in conjunction with the unaudited
condensed consolidated financial statements and notes thereto included in this
Quarterly Report and with the Financial Statements and Management's Discussion
and Analysis of Financial Condition and Results of Operations contained in the
Company's 2000 Annual Report on Form 10-K filed with the Securities and Exchange
Commission on April 2, 2001.


                                      -10-
<PAGE>   11
     Any statements in this report expressing the beliefs and expectations of
management regarding the Company's future results and performance are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are based on
current expectations that involve a number of risks and uncertainties. The
Company wishes to caution readers not to place undue reliance on any such
forward looking statements, which speak only as of the date made.

     Such forward looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from
historical earnings and those presently anticipated or projected. Such risks and
uncertainties are described in the Company's 2000 Annual Report on Form 10-K
filed with the Securities and Exchange Commission on April 2, 2001.


RESULTS OF CONTINUING OPERATIONS

THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
2000

     Total revenue from continuing operations increased 22% to $11,327,000 for
the quarter ended March 31, 2001 from $9,277,000 for the quarter ended March 31,
2000.

     License revenue from continuing operations increased 14% to $5,814,000 for
the quarter ended March 31, 2001 from $5,095,000 for the quarter ended March 31,
2000. The increase was partially due to improved lead generation, qualification,
and higher sales representatives in the first quarter of 2001 compared to the
same period in 2000. The Company expects license revenue to continue to increase
throughout the remainder of 2001. However, the Company's future license revenue
growth will be particularly dependent on the continued acceptance of the
Company's iCRM and iPlanning product offerings on a global basis.

     Service revenue from continuing operations increased in the quarter to
$5,513,000, or 49% of total revenue, compared to $4,182,000, or 45% of total
revenue in the same quarter last year representing a 32% increase. The Company
expects service revenue from continuing operations to decrease as a percent of
total revenue in the future.

     Domestic license revenue from continuing operations increased 60% to
$2,304,000 for the quarter ended March 31, 2001 from $1,435,000 for the same
period in the prior year. Domestic service revenue from continuing operations
increased 25% to $1,965,000 from $1,575,000 in the same quarter last year.

     International license revenue from continuing operations decreased 4% to
$3,510,000 for the quarter ended March 31, 2001 from $3,660,000 for the same
period in 2000 primarily due to a decrease in international sales of the
Company's iCRM and iPlanning products. International service revenues increased
by 36% to $3,548,000 in the first quarter of 2001 from $2,607,000 in the same
quarter last year.

     Gross margin from continuing operations increased to 61% for the three
months ended March 31, 2001 from 57% for the same period in 2000. License
revenue gross margins from continuing operations stayed level at 92% for the
quarter ended March 31, 2001 and 2000. Service gross margins from continuing
operations improved to 28% for the first quarter of 2001 from 15% in the same
period last year due to lower outside contractor cost and improved inside
consultant utilization levels.


                                      -11-
<PAGE>   12
     Selling and marketing expenses from continuing operations, which include
domestic sales and marketing expenses and the cost of the Company's
international operations, increased 35% to $7,015,000 for the quarter ended
March 31, 2001 from $5,183,000 for the quarter ended March 31, 2000. Selling and
marketing expenses increased as a percentage of total revenue to 62% for the
quarter ended March 31, 2001 from 56% for the quarter ended March 31, 2000. The
increase was primarily due to increased staffing levels associated with hiring
additional sales representatives and additional spending for marketing programs
as compared to the first quarter in 2000.

     Research and development expenses from continuing operations, which consist
primarily of employee salaries, benefits and related expenses, increased 16% to
$2,108,000 for the quarter ended March 31, 2001 from $1,821,000 for the quarters
ended March 31, 2000 and were 19% of total revenue for the quarter ended March
31, 2001 versus 20% of total revenue for the quarter ended March 31, 2000. The
increase in total spending is attributable to increased staffing and the cost of
outside consultants in iCRM and iPlanning as well as increased investment in the
product development of the iCRM and iPlanning initiatives. Total research and
development expenses from continuing operations, including capitalized software
costs, increased to $2,262,000 due to continuing work on foreign translations of
our iCRM and iPlanning products, including $154,000 in capitalized software
development costs, or 20% of total revenues for the quarter ended March 31, 2001
from $1,964,000, including $143,000 in capitalized software development costs,
or 21% of total revenue for the quarter ended March 31, 2000. We expect research
and development expenses to continue to increase in absolute dollars but not as
a percentage of sales.

     General and administrative expenses from continuing operations, which
include the costs of the finance, human resources and administrative functions,
increased 21% to $1,144,000 for the quarter ended March 31, 2001 from $946,000
for the same period in 2000. This was principally due to increased travel, legal
and audit fees, personnel reclassification, and higher investor relationship
activity. General and administrative expenses remained at 10% of total revenue
for the quarter ended March 31, 2001 and March 31, 2000. We expect general and
administrative expenses to continue to increase in absolute dollars but not as a
percentage of sales.

     Interest income decreased to $135,000 from $355,000 due to fewer funds
invested during the three months ended March 31, 2001 versus the same period
last year.

    The Company recorded a provision from income taxes for the quarter ended
March 31, 2001 of $44,000 based on the Company's foreign income tax obligations.
Given the Company's recurring losses, a valuation allowance has been established
for any tax benefits associated with these losses because management believes
that these tax benefits will not be realized.


LIQUIDITY AND CAPITAL RESOURCES

     As of March 31, 2001, the Company had cash and cash equivalents of
$12,183,000 as compared to $12,546,000 as of December 31, 2000. Cash used in the
Company's operations was $1,927,000 for the three months ended March 31, 2001.
The net loss of $2,592,000 was partially offset by the decrease in operating
assets and liabilities of $270,000 and by depreciation and amortization of
$395,000.

     Cash provided by investing activities totaled $1,102,000 for the three
months ended March 31, 2001 resulting from capital expenditures of $40,000 and
capitalized software development costs of $175,000. In addition, the Company
received proceeds of $1,300,000 from the sale of VistaSource.


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<PAGE>   13
     Cash provided from finance activities totaled $526,000 for the three months
ended March 31, 2001 which consisted of proceeds received from the exercise of
incentive stock options and the Company's employee stock purchase plan of
$526,000.

     The Company believes that the funds currently available will be sufficient
to fund the Company's operations at least through the next twelve months. The
Company has no commitments or specific plans for any significant capital
expenditures in the next twelve months. To date, inflation has not had a
material adverse effect on the Company's operating results.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company exports products to diverse geographic areas. Most of the
Company's international sales through subsidiaries are denominated in foreign
currencies. To date, foreign currency fluctuations have not had a material
effect on the Company's operating results. The Company has engaged in hedging
transactions to cover its currency exposure on intercompany balances for the
purpose of mitigating the effect of foreign currency fluctuations.

     At March 31, 2001, the Company held $7,214,000 in cash equivalents
consisting of commercial paper and money market funds. Cash equivalents are
classified as available for sale and valued at amortized cost, which
approximates fair market value. A hypothetical 10 percent increase in interest
rates would not have a material impact on the fair market value of these
instruments due to their short maturity and the Company's intention that all the
securities will be sold within one year. There have been no significant changes
since December 31, 2000.


PART II.  OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(A)  EXHIBITS

     None


(B)  REPORTS ON FORM 8-K

     The Company filed no reports on Form 8-K during the quarter for which this
report was filed.


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<PAGE>   14
                                    SIGNATURE


     Pursuant to the requirements of Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                               APPLIX, INC.


                                               By: /s/ Edward Terino
                                                   -----------------
                                                   Edward Terino
                                                   Chief Financial Officer
                                                   (duly authorized officer and
                                                   principal financial officer)


Date:  May 11, 2001


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