##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549


FORM 10-Q

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

For the quarterly period ended March 31, 2003


OR

o 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 ofincorporation 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 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. Yesx Noo

Indicate by check whether the registrant is an accelerated filer (as defined in
Rule 12b-2 of the Exchange Act). Yes
oNox

As of
May 12, 2003, there were 12,524,110 shares of the Registrants common
stock, $0.0025 par value, outstanding.

1



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TABLE OF CONTENTS



|                                                 |                                                                                               |                                                      |  |  |  |  |  | 
|------------------------------------------------ | --------------------------------------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION                   
|                                                 | ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                                          
|                                                 |                                                                                               | Condensed Consolidated Balance Sheet                
|                                                 |                                                                                               | Condensed Consolidated Statements of Operations     
|                                                 |                                                                                               | Condensed Consolidated Statements of Cash Flows     
|                                                 |                                                                                               | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|                                                 | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                                 | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|                                                 | ITEM 4. CONTROLS AND PROCEDURES                                                              
|PART II. OTHER INFORMATION                      
|                                                 | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURE                                       
|CERTIFICATIONS                                  
|EXHIBIT INDEX                                   
|Ex-10.19 Change-in-Control Agreement            
|Ex-99.1 Certification of Chief Executive Officer
|Ex-99.2 Certification of Chief Financial Officer



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##### Table of Contents



APPLIX, INC.
Form 10-Q
For the Quarterly Period Ended March 31, 2003

Table of Contents

|                                                                                              |                                                                                                    |  |         |   | 
|--------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------- |  | ------- | - | 
|                                                                                              |                                                                                                    |  | PageNo.
|                                                                                              |                                                                                                    |  |        
|Part I  Financial Information                                                                |                                                                                                    |  |         |  
|Item 1. Condensed Consolidated Financial Statements (unaudited):                              |                                                                                                    |  |         |  
|                                                                                              | Condensed Consolidated Balance Sheets as of March 31, 2003 and December 31, 2002                   |  |         | 4 | 
|                                                                                              | Condensed Consolidated Statements of Operations for the three months ended March 31, 2003 and 2002 |  |         | 5 | 
|                                                                                              | Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2003 and 2002 |  |         | 6 | 
|                                                                                              | Notes to Condensed Consolidated Financial Statements                                               |  |         | 7 | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations |                                                                                                    |  | 16      |  
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                            |                                                                                                    |  | 30      |  
|Item 4. Controls and Procedures                                                               |                                                                                                    |  | 30      |  
|Part II  Other Information                                                                   |                                                                                                    |  | 30      |  
|Item 6. Exhibits and Reports on Form 8-K                                                      |                                                                                                    |  | 30      |  
|Signature                                                                                     |                                                                                                    |  | 32      |  
|Certifications                                                                                |                                                                                                    |  | 33      |  



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Applix and TM1
are registered trademarks of Applix, Inc. Applix Integra, Applix Interactive Planning and Applix Service
Analytics are trademarks of Applix, Inc. All other trademarks and company names
mentioned are the property of their respective owners. All rights reserved.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| | Certain information contained in this Quarterly Report on Form 10-Q is
forward-looking in nature. All statements included in this Quarterly Report on
Form 10-Q or made by management of Applix, Inc. (Applix or the Company) and
its subsidiaries, other than statements of historical facts, are
forward-looking statements. Examples of forward-looking statements include
statements regarding Applixs future financial results, operating results,
business strategies, projected costs, products, competitive positions and plans
and objectives of management for future operations. In some cases,
forward-looking statements can be identified by terminology such as may, 
will, should, would, expect, plan, anticipates, intend,
believes, estimates, predicts, potential, continue, or the negative
of these terms or other comparable terminology. Any expectations based on these
forward-looking statements are subject to risks and uncertainties and other
important factors, including those discussed in the section below entitled
Factors that May Affect Future Results. These and many other factors could
affect Applixs future financial and operating results, and could cause actual
results to differ materially from expectations based on forward-looking
statements made in this document or elsewhere by Applix or on its behalf.
Applix does not undertake an obligation to update its forward-looking
statements to reflect future events or circumstances.

2



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##### Table of Contents






PART I. FINANCIAL INFORMATION




ITEM 1. CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)

3



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Applix, Inc.




Condensed Consolidated Balance Sheet
( in thousands, except share and per share data)
(unaudited)


|                                                                                             |  |                                                                                                                    |                      |   |           |        |              |   |                       |        | 
|-------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------ | -------------------- | - | --------- | ------ | ------------ | - | --------------------- | ------ | 
|                                                                                             |  |                                                                                                                    |                      |   | March 31, |        | December 31,
|                                                                                             |  |                                                                                                                    |                      |   | 2003      |        | 2002        
|                                                                                             |  |                                                                                                                    |                      |   |           |        |              |   | (Restated-See Note I)
|                                                                                             |  |                                                                                                                    |                      |   |           |        |             
|ASSETS                                                                                       |  |                                                                                                                    |                      |   |           |        |              |  
|Current assets:                                                                              |  |                                                                                                                    |                      |   |           |        |              |  
|                                                                                             |  | Cash and cash equivalents                                                                                          |                      | $ | 11,171    |        |              | $ | 8,389                 |       
|                                                                                             |  | Accounts receivable, less allowance for doubtful
accounts of $2,114 and $2,098, respectively                       |                      |   | 4,403     |        |              |   | 5,810                 |       
|                                                                                             |  | Other current assets                                                                                               |                      |   | 2,370     |        |              |   | 1,906                 |       
|                                                                                             |  |                                                                                                                    |                      |   |           |        |              |  
|                                                                                             |  |                                                                                                                    | Total current assets |   |           | 17,944 |              |   |                       | 16,105 | 
|                                                                                            
|Restricted cash                                                                              |  |                                                                                                                    | 933                  |   |           |        | 933          |  
|Property and equipment, at cost                                                              |  |                                                                                                                    | 13,650               |   |           |        | 14,633       |  
|Less accumulated amortization and depreciation                                               |  |                                                                                                                    | (12,162              | ) |           |        | (12,758      | )
|                                                                                             |  |                                                                                                                    |                      |   |           |        |              |  
|                                                                                             |  |                                                                                                                    | 1,488                |   |           |        | 1,875        |  
|                                                                                             |  |                                                                                                                    |                      |   |           |        |              |  
|Capitalized software costs, net of accumulated amortization of
$609 and $2,733, respectively |  |                                                                                                                    | 1,231                |   |           |        | 1,460        |  
|Goodwill                                                                                     |  |                                                                                                                    | 1,187                |   |           |        | 1,187        |  
|Intangible assets, net of accumulated amortization of $500 and $438, respectively            |  |                                                                                                                    | 1,000                |   |           |        | 1,062        |  
|Other assets                                                                                 |  |                                                                                                                    | 902                  |   |           |        | 925          |  
|                                                                                             |  |                                                                                                                    |                      |   |           |        |              |   |                       |       
|TOTAL ASSETS                                                                                 |  | $                                                                                                                  | 24,685               |   |           | $      | 23,547       |  
|                                                                                             |  |                                                                                                                    |                      |   |           |        |              |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                         |  |                                                                                                                    |                      |   |           |        |              |  
|Current liabilities:                                                                         |  |                                                                                                                    |                      |   |           |        |              |  
|                                                                                             |  | Accounts payable                                                                                                   |                      | $ | 1,529     |        |              | $ | 2,296                 |       
|                                                                                             |  | Accrued expenses                                                                                                   |                      |   | 9,849     |        |              |   | 9,563                 |       
|                                                                                             |  | Deferred revenue                                                                                                   |                      |   | 5,437     |        |              |   | 8,703                 |       
|                                                                                             |  |                                                                                                                    |                      |   |           |        |              |  
|Total current liabilities                                                                    |  |                                                                                                                    | 16,815               |   |           |        | 20,562       |  
|                                                                                            
|Long term liabilities                                                                        |  |                                                                                                                    | 547                  |   |           |        | 566          |  
|Stockholders equity:                                                                        |  |                                                                                                                    |                      |   |           |        |              |  
|                                                                                             |  | Preferred stock, $.01 par value; 1,000,000 shares authorized; none issued                                          |                      |   |          |        |              |   |                      |       
|                                                                                             |  | Common stock, $.0025 par value; 30,000,000 shares authorized;
12,873,862 and 12,675,176 shares issued respectively |                      |   | 32        |        |              |   | 32                    |       
|                                                                                             |  | Additional paid in capital                                                                                         |                      |   | 49,798    |        |              |   | 49,600                |       
|                                                                                             |  | Accumulated deficit                                                                                                |                      |   | (40,304   | )      |              |   | (45,365               | )     
|                                                                                             |  | Accumulated other comprehensive loss                                                                               |                      |   | (842      | )      |              |   | (487                  | )     
|                                                                                             |  |                                                                                                                    |                      |   |           |        |              |  
|                                                                                             |  |                                                                                                                    | 8,684                |   |           |        | 3,780        |  
|                                                                                             |  | Less:
Treasury stock 357,627 and 306,198 shares, respectively                                                      |                      |   | (1,361    | )      |              |   | (1,361                | )     
|                                                                                             |  |                                                                                                                    |                      |   |           |        |              |  
|Total stockholders equity                                                                   |  |                                                                                                                    | 7,323                |   |           |        | 2,419        |  
|                                                                                             |  |                                                                                                                    |                      |   |           |        |              |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                   |  | $                                                                                                                  | 24,685               |   |           | $      | 23,547       |  
|                                                                                             |  |                                                                                                                    |                      |   |           |        |              |  

See accompanying notes to condensed consolidated financial statements.

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Applix, Inc.




Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)


|                                                      |                                                                              |                                |                          |       |                    |       |       |       |        |       | 
|----------------------------------------------------- | ---------------------------------------------------------------------------- | ------------------------------ | ------------------------ | ----- | ------------------ | ----- | ----- | ----- | ------ | ----- | 
|                                                      |                                                                              |                                |                          |       | Three Months Ended
|                                                      |                                                                              |                                |                          |       | March 31,         
|                                                      |                                                                              |                                |                          |       | 2003               |       | 2002 
|                                                      |                                                                              |                                |                          |       |                    |       |      
|Revenues:                                             |                                                                              |                                |                          |       |                    |       |       |      
|                                                      | Software license                                                             |                                | $                        | 2,691 |                    |       | $     | 4,603 |       
|                                                      | Professional services and maintenance                                        |                                |                          | 4,142 |                    |       |       | 4,904 |       
|                                                      |                                                                              |                                |                          |       |                    |       |       |      
|                                                      |                                                                              |                                | Total revenues           |       |                    | 6,833 |       |       |        | 9,507 | 
|Cost of revenues:                                     |                                                                              |                                |                          |       |                    |       |       |      
|                                                      | Software license                                                             |                                |                          | 412   |                    |       |       | 346   |       
|                                                      | Professional services and maintenance                                        |                                |                          | 1,734 |                    |       |       | 2,616 |       
|                                                      |                                                                              |                                |                          |       |                    |       |       |      
|                                                      |                                                                              |                                | Total cost of revenues   |       |                    | 2,146 |       |       |        | 2,962 | 
|                                                      |                                                                              |                                |                          |       |                    |       |       |      
|Gross margin                                          |                                                                              |                                | 4,687                    |       |                    |       | 6,545 |      
|Operating expenses:                                   |                                                                              |                                |                          |       |                    |       |       |      
|                                                      | Product development                                                          |                                |                          | 1,537 |                    |       |       | 1,081 |       
|                                                      | Sales and marketing                                                          |                                |                          | 2,707 |                    |       |       | 3,416 |       
|                                                      | General and administrative                                                   |                                |                          | 2,228 |                    |       |       | 1,325 |       
|                                                      | Compensation expenses and amortization of acquired intangible asset (Note 6) |                                |                          | 646   |                    |       |       | 578   |       
|                                                      |                                                                              |                                |                          |       |                    |       |       |      
|                                                      |                                                                              |                                | Total operating expenses |       |                    | 7,118 |       |       |        | 6,400 | 
|                                                      |                                                                              |                                |                          |       |                    |       |       |      
|                                                     
|Operating income (loss)                               |                                                                              |                                | (2,431                   | )     |                    |       | 145   |      
|Non-operating income:                                 |                                                                              |                                |                          |       |                    |       |       |      
|                                                      | Gain from sale of CRM business (Note 7)                                      |                                |                          | 8,000 |                    |       |       |      |       
|                                                      | Interest and other income, net                                               |                                |                          | 174   |                    |       |       | 49    |       
|                                                      |                                                                              |                                |                          |       |                    |       |       |      
|Income from continuing operations before income taxes |                                                                              |                                | 5,743                    |       |                    |       | 194   |      
|                                                      | Provision for income taxes                                                   |                                |                          | 649   |                    |       |       | 64    |       
|                                                      |                                                                              |                                |                          |       |                    |       |       |      
|Income from continuing operations                     |                                                                              |                                | 5,094                    |       |                    |       | 130   |      
|Loss from discontinued operations                     |                                                                              |                                | 33                       |       |                    |       |      |      
|                                                      |                                                                              |                                |                          |       |                    |       |       |       |       
|Net income                                            |                                                                              | $                              | 5,061                    |       |                    | $     | 130   |      
|                                                      |                                                                              |                                |                          |       |                    |       |       |      
|Net income (loss) per share, basic and diluted        |                                                                              |                                |                          |       |                    |       |       |      
|                                                      |                                                                              | Net income per share - basic   |                          | $     | 0.41               |       |       | $     | 0.01   |      
|                                                      |                                                                              | Net income per share - diluted |                          | $     | 0.40               |       |       | $     | 0.01   |      
|Weighted average number of shares outstanding:        |                                                                              |                                |                          |       |                    |       |       |      
|                                                      |                                                                              | Basic                          |                          |       | 12,453             |       |       |       | 12,115 |      
|                                                      |                                                                              | Diluted                        |                          |       | 12,649             |       |       |       | 12,376 |      

See accompanying notes to condensed consolidated financial statements.

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Applix, Inc.




Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)


|                                                 |                                                                                             |   |                                                          |                                                 |   |                    |        |                |   |       |       | 
|------------------------------------------------ | ------------------------------------------------------------------------------------------- | - | -------------------------------------------------------- | ----------------------------------------------- | - | ------------------ | ------ | -------------- | - | ----- | ----- | 
|                                                 |                                                                                             |   |                                                          |                                                 |   | Three Months Ended
|                                                 |                                                                                             |   |                                                          |                                                 |   | March 31,         
|                                                 |                                                                                             |   |                                                          |                                                 |   | 2003               |        | 2002(Restated)
|                                                 |                                                                                             |   |                                                          |                                                 |   |                    |        |               
|Cash flows from operating activities:            |                                                                                             |   |                                                          |                                                 |   |                    |        |               
|                                                 | Net income                                                                                  |   | $                                                        | 5,061                                           |   |                    | $      | 130            |  
|                                                 | Adjustments to reconcile net income to net cash provided by
(used in) operating activities: |   |                                                          |                                                 |   |                    |        |                |  
|                                                 |                                                                                             |   | Depreciation                                             |                                                 |   | 265                |        |                |   | 232   |      
|                                                 |                                                                                             |   | Amortization                                             |                                                 |   | 291                |        |                |   | 262   |      
|                                                 |                                                                                             |   | Provision for doubtful accounts                          |                                                 |   | 16                 |        |                |   | 16    |      
|                                                 |                                                                                             |   | Gain on sale of CRM business                             |                                                 |   | (8,000             | )      |                |   |      |      
|                                                 | Changes in operating assets and liabilities:                                                |   |                                                          |                                                 |   |                    |        |                |  
|                                                 |                                                                                             |   | Decrease in accounts receivable                          |                                                 |   | 1,391              |        |                |   | 98    |      
|                                                 |                                                                                             |   | Sale of accounts receivables                             |                                                 |   |                   |        |                |   | 443   |      
|                                                 |                                                                                             |   | Increase
in prepaids and other assets                    |                                                 |   | (560               | )      |                |   | (176  | )    
|                                                 |                                                                                             |   | Decrease in accounts payable                             |                                                 |   | (651               | )      |                |   | (417  | )    
|                                                 |                                                                                             |   | Decrease in accrued liabilities                          |                                                 |   | (602               | )      |                |   | (620  | )    
|                                                 |                                                                                             |   | Increase in deferred revenue                             |                                                 |   | 328                |        |                |   | 1,238 |      
|                                                 |                                                                                             |   |                                                          |                                                 |   |                    |        |               
|                                                 |                                                                                             |   |                                                          | Cash (used in) provided by operating activities |   |                    | (2,461 | )              |   |       | 1,206 | 
|Cash flows from investing activities:            |                                                                                             |   |                                                          |                                                 |   |                    |        |               
|                                                 |                                                                                             |   | Property and equipment expenditures                      |                                                 |   | (37                | )      |                |   | (188  | )    
|                                                 |                                                                                             |   | Capitalized software costs                               |                                                 |   |                   |        |                |   | (746  | )    
|                                                 |                                                                                             |   | Net proceeds from sale of CRM business                   |                                                 |   | 5,525              |        |                |   |      |      
|                                                 |                                                                                             |   |                                                          |                                                 |   |                    |        |               
|                                                 |                                                                                             |   | Cash provided by (used in) investing activities          |                                                 |   | 5,488              |        |                |   | (934  | )    
|Cash flows from financing activities:            |                                                                                             |   |                                                          |                                                 |   |                    |        |               
|                                                 |                                                                                             |   | Proceeds from issuance of common stock under stock plans |                                                 |   | 198                |        |                |   | 192   |      
|                                                 |                                                                                             |   | Payment on short-term borrowing                          |                                                 |   | (216               | )      |                |   | (368  | )    
|                                                 |                                                                                             |   | Proceeds form short-term borrowing                       |                                                 |   |                   |        |                |   | 201   |      
|                                                 |                                                                                             |   |                                                          |                                                 |   |                    |        |               
|                                                 |                                                                                             |   | Cash (used in) provided by financing activities          |                                                 |   | (18                | )      |                |   | 25    |      
|Effect of exchange rate changes on cash          |                                                                                             |   | (227                                                     | )                                               |   |                    | (205   | )             
|                                                 |                                                                                             |   |                                                          |                                                 |   |                    |        |               
|Increase in cash and cash equivalents            |                                                                                             |   | 2,782                                                    |                                                 |   |                    | 92     |               
|Cash and cash equivalents at beginning of period |                                                                                             |   | 8,389                                                    |                                                 |   |                    | 8,228  |               
|                                                 |                                                                                             |   |                                                          |                                                 |   |                    |        |               
|Cash and cash equivalents at end of period       |                                                                                             | $ | 11,171                                                   |                                                 |   | $                  | 8,320  |               
|                                                 |                                                                                             |   |                                                          |                                                 |   |                    |        |               
|Supplemental disclosure of cash flow information |                                                                                             |   |                                                          |                                                 |   |                    |        |               
|                                                 |                                                                                             |   | Cash paid for income tax                                 |                                                 | $ | 62                 |        |                | $ | 44    |      

See accompanying notes to condensed consolidated financial statements.

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APPLIX, INC.




NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


1. The Company

Applix, Inc. (Applix or the Company) is a global provider of Business
Intelligence (BI) and Business Performance Management (BPM) solutions, focused
on interactive planning, budgeting and analytics. Historically, the Company
also provided customer relationship management (CRM) solutions. The Company
sold its CRM business in the first quarter of 2003 (See Note 7). The Companys operating
results reflect the CRM business up through the sale of the business, which
occurred on January 21, 2003, followed by a March 17, 2003
closing relating to the German CRM operations.
These combined products represented one principal business segment, which
Applix reports as its continuing operations.

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 for all periods presented.

On May
13, 2003, the Company announced that it had identified an error in
the timing of the recognition of certain compensation expenses
related to its March 31, 2001 acquisition of Dynamic Decisions Pty
Ltd. As a result, the Company has revised the recognition of
compensation expenses related to certain acquisition-related
contingent payments, by recording them beginning the quarter ended
June 30, 2001 rather than the quarter ended March 31, 2002. As a
result, the historical data at December 31, 2002 and for the three
months ended March 31, 2002 has been adjusted to reflect the
recognition of compensation expense of $1,531,000 in 2001 and an
amount in accrued expenses of $1,689,000, which includes the impact
of foreign currency exchange rate fluctuations from translating the
Australian dollar to the US dollar, at December 31, 2002.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States for interim financial information and pursuant to the
rules and regulations of the Securities and Exchange Commission (SEC)
including instructions for Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by accounting principles generally accepted in the United States for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended March 31,
2003 are not necessarily indicative of the results that may be expected for the
year ending December 31, 2003. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Companys Annual Report on Form 10-K for the year ended December 31, 2002.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of
the Company and all of its wholly owned subsidiaries. All intercompany accounts
and transactions have been eliminated.

Revenue Recognition

The Company generates revenues mainly from licensing the rights to use
its software products and providing services. The Company sells products
primarily through a direct sales force, indirect channel partners and Original
Equipment Manufactures (OEMs). The Company accounts for software revenue
transactions in accordance with Statement of Position (SOP) 97-2 (SOP
97-2) Software Revenue Recognition, as amended. Revenues from software
arrangements are recognized when:



| |  | 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.

The Company also uses the residual method under SOP 98-9 (SOP 98-9)
Modification of SOP 97-2, Software Revenue Recognition with Respect to Certain
Transactions. Under the residual method, the fair value of the undelivered
elements is

7



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deferred and the remaining portion of the arrangement fee is allocated to
the delivered elements and is recognized as revenue, assuming all other
conditions for revenue recognition have been satisfied. Substantially all of
the Companys product revenue is recognized in this manner. If the Company
cannot determine the fair value of any undelivered element included in an
arrangement, the Company will defer revenue until all elements are delivered,
until services are performed or until fair value of the undelivered elements
can be objectively determined. In circumstances where the Company offers
significant and incremental fair value discounts for future purchases of other
software products or services to its customers as part of an arrangement,
utilizing the residual method, the Company defers the value of the discount and
recognizes such discount to revenue as the related product or service is
delivered.

As part of an arrangement, end-user customers typically purchase
maintenance contracts as well as professional services from the Company.
Maintenance services include telephone and Web based support as well as rights
to unspecified upgrades and enhancements, when and if the Company makes them
generally available. Substantially all of the Companys software license
revenue is earned from perpetual licenses of off-the-shelf software requiring
no modification or customization. Therefore, professional services are deemed
to be non-essential to the functionality of the software and typically are for
implementation planning, loading of software, training, building simple
interfaces and running test data.

In those instances the services are
deemed to be essential to the functionality of the software, both license and service revenues are
recognized together on a percentage of completion basis utilizing hours
incurred to date as a percentage of total estimated hours to complete the
project.

Revenues from maintenance services are recognized ratably over the term of
the maintenance contract period, which is typically one year, based on vendor
specific objective evidence of fair value. Vendor specific objective evidence
of fair value is based upon the amount charged when maintenance is purchased
separately, which is typically the contracts renewal rate.

Revenues from professional services are generally recognized based on
vendor specific objective evidence of fair value when: (1) a non-cancelable
agreement for the services has been signed or a customers purchase order has
been received; and (2) the professional services have been delivered. Vendor
specific objective evidence of fair value is based upon the price charged when
these services are sold separately and is typically an hourly rate for
professional services and a per class rate for training. Revenues for
consulting services are generally recognized on a time and material basis as
services are delivered. Based upon the Companys experience in completing
product implementations, it has determined that these services are typically
delivered within 3 months or less subsequent to the contract signing.

The Companys license arrangements with its end-user customers and
indirect channel partners do not include any rights of return or price
protection, nor do arrangements with indirect channel partners include any
sell-through contingencies. In those instances where the Company has granted a
customer rights to when-and-if available additional products, the Company
recognizes the arrangement fee ratably over the term of the agreement.

Generally, the Companys arrangements with end-user customers and indirect
channel partners do not include any acceptance provisions. In those cases in
which significant uncertainties exist with respect to customer acceptance or in
which specific customer acceptance criteria are included in the arrangement,
the Company defers the entire arrangement fee and recognizes revenue, assuming
all other conditions for revenue recognition have been satisfied, when the
uncertainty regarding acceptance is resolved as generally evidenced by written
acceptance by the customer. The Companys arrangements with indirect channel
partners and end-user customers do include a standard warranty provision
whereby the Company will use reasonable efforts to cure material nonconformity
or defects of the software from the Companys published specifications. The
standard warranty provision does not provide the indirect channel partners or
end-user customer with the right of refund. In very limited instances, the
Company has granted the right to refund for an extended period if the
arrangement is terminated because the product does not meet the Companys
published technical specifications, and the Company is unable to reasonably
cure the nonconformity or defect. Generally, the Company determines that this
warranty provision is not an acceptance provision and therefore should be
accounted for as a warranty in accordance with SFAS No. 5.

At the time the Company enters into an arrangement, the Company assesses
the probability of collection of the fee and the payment terms granted to the
customer. For end-user customers and indirect channel partners, the Companys
typical payment terms are due within 30 days of invoice date. However, in those
cases where payment terms are greater than 30 days, the Company does not
recognize revenue from the arrangement fee unless the payment is due within 90
days. If the payment terms for the arrangement are considered extended (greater
than 90 days), the Company defers revenue under these arrangements and such
revenue is recognized, assuming all other conditions for revenue recognition
have been satisfied, when the payment of the arrangement fee becomes due.

In those instances in which indirect channel partners provide first level
maintenance services to the end-user customer and the Company provides second
level maintenance support to the indirect channel partner, the Company accounts
for amounts received in these arrangements in accordance with EITF 99-19,
Reporting Revenue Gross as a Principal versus Net as an Agent. In initial and
renewal years for which the Company receives a net fee from the indirect
channel partner to provide second level support to the indirect channel
partner, such amount is recorded as revenue over the term of the maintenance
period at the net amount

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received since the Company does not collect the fees from the end-user
customer, it does not have latitude in establishing the price paid by the
end-user customer for maintenance services, and it does not have the latitude
to select the supplier providing first level support. However, in those
circumstances where the Company renews maintenance contracts directly with the
end-user customers, receives payment for the gross amount of the maintenance
fee, has the ability to select the supplier for first level support, and the
Company believes that it is the primary obligor for first level support to the
end customer, the Company records revenue for the gross amounts received. In
such circumstances, the Company remits a portion of the payment received to the
indirect channel partner to provide first level support to the end-user
customer, and such amounts are capitalized and amortized over the maintenance
period.

Concentrations of Credit Risk, Accounts Receivable and Allowance for Doubtful
Accounts

The Companys financial instruments that are exposed to concentrations of
credit risk consist primarily of cash, cash equivalents and trade receivables.
The Company maintains cash and cash equivalents with high credit quality
financial institutions and monitors the amount of credit exposure to any one
financial institution.

The Company extends credit to its customers in the normal course of
business, resulting in trade receivables. The Companys normal credit terms are
30 days.

The Company performs continuing credit evaluations of its customers
financial condition and although the Company generally does not require
collateral, letters of credit may be required from its customers in certain
circumstances. An allowance for doubtful accounts is provided for accounts
which management believes may not be collected due to a customers financial
circumstance (e.g. bankruptcy), and for all accounts which are 180 days past
due, absent evidence which supports their collectibility.

Intangible Asset

Amortization expense related to an intangible asset, the customer
relationships acquired in the Dynamic Decisions acquisition, totaled
$63,000 during the three months ended March 31, 2003 and 2002,
respectively. The estimated future
annual amortization expense for this intangible asset remaining as of March 31,
2003 is as follows:

|     |  |   |         | 
|---- |  | - | ------- | 
|2003 |  | $ | 187,000 | 
|2004 |  |   | 250,000 | 
|2005 |  |   | 250,000 | 
|2006 |  |   | 250,000 | 
|2007 |  |   | 63,000  | 

Impairment of Long-Lived Assets

The Company tests goodwill for impairment in accordance with Statement of
Financial Accounting Standard (SFAS) No. 142 Goodwill and Other Intangible
Assets (SFAS 142), which requires goodwill to be tested for impairment at
the reporting unit level at least annually and more frequently upon occurrence
of certain events, as defined by SFAS 142. Goodwill is tested for impairment
annually in a two-step process. First, the Company determines if the fair value
of its reporting unit exceeds the carrying amount of the reporting unit. If
the fair value does not exceed the carrying amount, goodwill of the reporting
unit is potentially impaired, and the Company must then measure the impairment
loss by comparing the implied fair value of the goodwill, as defined by SFAS
142, to its carrying amount. The fair value of the reporting unit is estimated
using the Income Approach, a present value technique.

In accordance with SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets (SFAS 144), the Company evaluates the
recoverability of long-lived assets, including intangible assets, for
impairment whenever events or changes in circumstances indicate that the
carrying value of an asset may not be recoverable based on expected
undiscounted cash flows attributable to that asset. The amount of any
impairment loss is measured as the difference between the carrying value and
the fair value of the impaired asset and charged to expense in the period
identified. Fair value is determined by either a quoted market price or a value
determined by a discounted cash flow technique, whichever is more appropriate
under the circumstances. The rates that would be utilized to discount net cash
flows to net present value would take into account the time value of money and
investment risk factor. Management believes that no such events have occurred.

Income Taxes

Deferred tax assets and liabilities are determined based on the
differences between financial reporting and tax bases of assets and liabilities
and are measured using enacted income tax rates and laws that will be in effect
when the temporary differences are expected to reverse. A valuation allowance
is established against net deferred tax assets if, based on the weighted
available evidence, it is more likely than not that some or all of the deferred
tax assets will not be realized.

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During the first quarter of 2003, the Company recorded a provision for
income taxes of $649,000 which includes $479,000 for United States ( U.S. )
and foreign income taxes related to the Companys sale of its CRM business.

Additionally, during the first quarter of 2003, the Company evaluated its
ability to utilize its net operating loss carryforwards and the impact of the
U.S. Internal Revenue Code Section 382 (Section 382), which provides
limitations on such loss carryforwards, including use of such loss carryforwards
on its U.S. taxable gain on the sale of its U.S. portion of the CRM business.
Section 382 provides certain annual limitations to the use
of net operating loss carryforwards against future taxable income in the event
of a change of ownership. The Company has not
completed a full analysis of these ownership changes, but the Company does not
believe that any changes in ownership will increase the Companys income tax
expense as a result of a limitation on its ability to use its net operating
loss carryforwards.

The Company has provided for potential amounts due in various foreign tax
jurisdictions. Judgment is required in determining the Companys worldwide
income tax expense provision. In the ordinary course of global business, there
are many transactions and calculations where the ultimate tax outcome is
uncertain. Some of these uncertainties arise as a consequence of cost
reimbursement arrangements among related entities. Although management believes
its estimates are reasonable, no assurance can be given that the final tax
outcome of these matters will not be different from that which is reflected in
the Companys historical income tax provisions and accruals. Such differences
could have a material impact on the Companys income tax provision and
operating results in the period in which such determination is made.

Translation of Foreign Currencies

The Company considers the functional currency of its foreign subsidiaries
to be the local currency, and accordingly, the financial statements of the
foreign subsidiaries are translated into U.S. dollars using exchange rates in
effect at the period end for assets and liabilities and average exchange rates
during each reporting period for the results of operations. Adjustments
resulting from translation of foreign subsidiary financial statements are
reported on the balance sheet in accumulated other comprehensive income (loss).
Transaction gains and losses that arise from exchange rate changes included in
other income (expense) are immaterial for all periods presented. The Companys
net results have not been materially impacted by foreign currency fluctuations.

The Company enters into foreign currency forward contracts that
economically hedge gains and losses generated by the remeasurement of certain
assets and liabilities denominated in a non-functional currency. Such exposures
result from the portion of the Companys operations, assets and liabilities
that are in currencies other than the U.S. dollar, primarily the European euro,
English pound, Swiss franc and Australian dollar as of March 31, 2003. These
foreign exchange contracts are entered into in the ordinary course of business,
and accordingly, are not speculative in nature. The Company typically hedges
intercompany and receivable balances for 90-day periods. The changes in the
fair value of these undesignated hedges are recognized in the statement of
operations immediately as an offset to the changes in fair value of the asset
or liability being hedged. The Company entered into one hedging contract in
2002 and did not have any open hedging contracts as of March 31, 2003. For the
three months ended March 31, 2003 and 2002, realized and unrealized gains and
losses were not material.

Use of Estimates

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.
Estimates and assumptions in these financial statements relate to, among other
items, the useful lives of fixed assets, capitalized software costs, intangible
assets, domestic and foreign income tax liabilities, valuation of deferred tax
assets, the allowance for doubtful accounts, accrued liabilities and certain
transaction costs related to the sale of the Companys CRM business.

Stock-Based Compensation

The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to the fair value of the shares at the date of
grant. The Company accounts for stock option grants in accordance with APB
Opinion No. 25, Accounting for Stock Issued to Employees (APB No. 25), and
related interpretations, and follows the disclosure-only requirements under
SFAS 123, Accounting for Stock Based Compensation (SFAS No. 123). APB No.
25 provides that compensation expense relative to the Companys employee stock
options is measured based on the intrinsic value of the stock options at the
measurement date. Accordingly, no stock-based employee compensation cost is
reflected in net income (loss), as all options granted under the plans had an
exercise price equal to the market value of the underlying common stock on the
date of grant. If compensation expense had been recorded consistent with SFAS
No. 123 based on the fair value of stock awards at the date of grant, the
Companys net income (loss) would have been adjusted to the pro forma amounts
presented below (thousands,

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except for per share data):

|                                                                                                                                            |  |                    |       |      |  |   |       |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ----- | ---- |  | - | ----- | -
|                                                                                                                                            |  | Three Months Ended
|                                                                                                                                            |  | March 31,         
|                                                                                                                                            |  |                   
|                                                                                                                                            |  | 2003               |       | 2002
|                                                                                                                                            |  |                    |       |     
|Net income as reported                                                                                                                      |  | $                  | 5,061 |      |  | $ | 130   |  
|Add: Stock-based employee compensation expense
included in reported net income, net of related
tax effects                                  |  |                    | 45    |      |  |   |      |  
|Deduct: Total stock-based employee compensation
expense determined under fair value based method
for all awards, net of related tax effects |  |                    | (757  | )    |  |   | (708  | )
|                                                                                                                                            |  |                    |       |      |  |   |       |  
|Pro
forma net income (loss)                                                                                                                 |  | $                  | 4,349 |      |  | $ | (578  | )
|                                                                                                                                            |  |                    |       |      |  |   |       |  
|Net
income (loss) per share:                                                                                                                |  |                    |       |      |  |   |       |  
|Basic as reported                                                                                                                          |  | $                  | 0.41  |      |  | $ | 0.01  |  
|Diluted  as reported                                                                                                                       |  | $                  | 0.40  |      |  | $ | 0.01  |  
|Basic  pro forma                                                                                                                           |  | $                  | 0.35  |      |  | $ | (0.05 | )
|Diluted pro forma                                                                                                                          |  | $                  | 0.34  |      |  | $ | (0.05 | )

New Accounting Pronouncements

In
January 2003, the Financial Accounting Standards Board issued Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities, which is an interpretation of
Accounting Research Bulletin No. 51, Consolidated Financial Statements. FIN
46 addresses consolidation by business enterprises of variable interest
entities and requires existing unconsolidated variable interest entities to be
consolidated by their primary beneficiaries if the entities do not effectively
disperse risks among parties involved. Variable interest entities that
effectively disperse risks will not be consolidated unless a single party holds
an interest or combination of interests that effectively recombines risks that
were previously dispersed. FIN 46 applies immediately to variable interest
entities created after January 31, 2003, and to variable interest entities in
which an enterprise obtains an interest after that date. FIN 46 applies in the
first fiscal year or interim period beginning after June 15, 2003 to variable
interest entities in which an enterprise holds a variable interest that it
acquired before February 1, 2003. FIN 46 applies to public enterprises as of
the beginning of the applicable interim or annual period. The Company does not
expect that the adoption of FIN 46 will have a material effect on its financial
position or results of operations.

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3. Net Income Per Share

Net income is computed in accordance with SFAS No. 128, Earnings Per
Share. Basic net income per share is computed by dividing net income by the
weighted average number of common shares outstanding during the period.
Dilutive net income is computed using the weighted average number of common
shares outstanding during the period, plus the dilutive effect, if any, of
potential common shares, which consists of stock options. The
following table sets forth the computation of basic and diluted net
income per share (in thousands, except net income per share).

|                             |                                                                          |   |                    |        |      |   |       |        | 
|---------------------------- | ------------------------------------------------------------------------ | - | ------------------ | ------ | ---- | - | ----- | ------ | 
|                             |                                                                          |   | Three Months Ended
|                             |                                                                          |   | March 31,         
|                             |                                                                          |   | 2003               |        | 2002
|                             |                                                                          |   |                    |        |     
|Numerator:                   |                                                                          |   |                    |        |      |   |       |       
|                             | Net income                                                               |   | $                  | 5,061  |      |   | $     | 130    | 
|                             |                                                                          |   |                    |        |      |   |       |       
|Denominator:                 |                                                                          |   |                    |        |      |   |       |       
|                             | Denominator
for basic net income per share - weighted shares outstanding |   |                    | 12,453 |      |   |       | 12,115 | 
|                             | Effect
of dilutive employee stock options                                |   |                    | 196    |      |   |       | 261    | 
|                             |                                                                          |   |                    |        |      |   |       |       
|                             | Denominator for diluted net income per share                             |   |                    | 12,649 |      |   |       | 12,376 | 
|                             |                                                                          |   |                    |        |      |   |       |       
|Basic net income per share   |                                                                          | $ | 0.41               |        |      | $ | 0.01  |       
|                             |                                                                          |   |                    |        |      |   |       |       
|Diluted net income per share |                                                                          | $ | 0.40               |        |      | $ | 0.01  |       
|                             |                                                                          |   |                    |        |      |   |       |       
|Antidilutive
options         |                                                                          |   | 3,445              |        |      |   | 3,442 |       

4. Comprehensive Income (Loss)

Components of comprehensive income include net income and certain
transactions that have generally been reported in the consolidated statement of
stockholders equity. Other comprehensive income (loss) includes foreign
currency translation adjustments.

|                           |  |                    |       |      |  |   |      |  
|-------------------------- |  | ------------------ | ----- | ---- |  | - | ---- | -
|                           |  | Three Months Ended
|                           |  | March 31,         
|                           |  |                   
|                           |  | 2003               |       | 2002
|                           |  | (in thousands)    
|                           |  |                   
|Net
income                 |  | $                  | 5,061 |      |  | $ | 130  |  
|Other comprehensive loss   |  |                    | (355  | )    |  |   | (117 | )
|                           |  |                    |       |      |  |   |      |  
|Total comprehensive income |  | $                  | 4,706 |      |  | $ | 13   |  
|                           |  |                    |       |      |  |   |      |  

5. Segment and Geographical Information

The Company and its subsidiaries are principally engaged in the design,
development, marketing and support of the Companys Business Intelligence and
Business Performance Management software products, which it considers to be a
single industry segment. Substantially all of the Companys revenues result
from the licensing of its software products and related professional services
and maintenance services. Financial information provided to the Companys key
operating decision maker is accompanied by disaggregated information about
revenues and expenses by geographic region for purposes of making operating
decisions and assessing each geographic regions financial performance.

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6. Acquisition

On March 31, 2001, the Company acquired all of the outstanding capital
stock of Dynamic Decisions Pty Limited (Dynamic Decisions), its primary Australian reseller, to
improve its market presence and increase the Companys sales in the Pac Rim
region. The total cost of $5,867,000 consists of maximum cash
consideration of $5,150,000, transaction costs of $490,000, and
100,000 shares of the Companys common stock, which had a fair market
value of $227,000 at the date of acquisition. The acquisition was accounted for under the purchase method of
accounting, and the purchase price was allocated based on the estimated fair
value of the assets acquired and liabilities assumed. An intangible asset,
acquired customer relationships of $1,500,000, was recorded based on the fair
value of the asset at the time of acquisition and is being amortized on a
straight-line basis over its estimated useful life of six years. The excess of
the purchase price over the fair value of the net assets acquired of $934,000
was recorded as goodwill. Goodwill is no longer amortized under the provision
of SFAS 142.

Per the terms of the
share purchase agreement, the total maximum cash
consideration relating to the purchase of Dynamic Decisions was $5,150,000
payable in 10 installments over a maximum of 30 months beginning on July 1,
2001. Of the 10 installments, two of the installments totaling
$1,267,000 were guaranteed, paid in 2001 and accounted for as purchase
price. The remaining eight installments were contingent upon the employment of
the two key employees, who were former shareholders of Dynamic
Decisions, and therefore were accounted for as compensation expense
within operating expenses. These eight installments were expensed ratably on a
straight-line basis over the employees contractual employment period, which commenced on April 1,
2001 and ended on March 31, 2003. The amounts that are recognized as
expenses and accrued are translated into U.S. dollars from Australian
dollars, resulting in foreign currency exchange fluctuations
to the Companys financial statements. Of these contingent payments, the
Company made one cash payment of $583,000 in 2003 and four cash
payments totaling $2,153,000 in 2002. As of March 31, 2003,
the remaining three contingent payments totaling $1,813,000 have been
accrued and will be paid in 2003.

The following table summarizes the estimated fair values of the assets
acquired and liabilities assumed at the date of the acquisition.

|                                                  |  |           |           | 
|------------------------------------------------- |  | --------- | --------- | 
|                                                  |  | At       
|                                                  |  | March 31,
|                                                  |  | 2001     
|                                                  |  |          
|Cash, cash equivalents and short-term investments |  | $         | 25,000    | 
|Accounts receivable                               |  |           | 611,000   | 
|Prepaid and other current assets                  |  |           | 154,000   | 
|Fixed assets                                      |  |           | 16,000    | 
|Intangible customer relationships                 |  |           | 1,500,000 | 
|Goodwill                                          |  |           | 935,000   | 
|Accounts payable                                  |  |           | 433,000   | 
|Accrued expenses                                  |  |           | 60,000    | 
|Deferred maintenance                              |  |           | 300,000   | 
|Deferred tax liabilities                          |  |           | 450,000   | 

7. Gain from Sale of CRM Business

In the first quarter of 2003, the Company completed the sale of certain of
its assets relating to its customer relationship management software solutions
(the CRM Business) to iET Acquisition, LLC (iET), a wholly-owned subsidiary
of Platinum Equity Holdings, LLC for $5,750,000 in cash consideration, of which
$225,000 was paid back to iET for net working capital adjustments and
$3,552,000 in net assumed liabilities. The sale excluded approximately $2.8
million in net accounts receivable generated from the sale of CRM products.

During the period of the initial closing and completion of the Companys
Germany subsidiary closing, iET paid $4,250,000 of the Purchase Price in cash
at the initial closing and paid an additional $1,500,000 in cash on March 17,
2003 upon the completion of the closing of certain of the assets of the
Companys Germany subsidiary, Applix GmbH. Applix GmbH continued to resell the
CRM software products sold to iET, provide professional services and
maintenance support under a resellers agreement between the Company and iET.

Included
in the Companys result for the three month period ending
March 31, 2003 are CRM revenues of $253,000 and $999,000 for
license, and professional
services and maintenance, respectively.

The Company recorded a net gain before tax of $8,000,000, which includes
net cash consideration of $5,525,000 and $3,552,000 of net liabilities assumed
by iET less transaction costs of $1,077,000. The purchase price is subject to
certain post closing adjustments relating to the net working capital as set
forth in the Asset Purchase Agreement between the Company and iET, dated
January 21, 2003.

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8. Commitments and Contingencies

On February 8, 2002, a customer of the Companys divested business unit
filed a claim in Germany against the Companys German subsidiary, Veriteam
GmbH. The claim alleges a breach of contract pertaining to software sold and
implemented by the divested business unit on behalf of the Company. The
customer is seeking repayment for the cost of the software and related services
of approximately $800,000. The Company has answered the customers claim,
denying the claims allegations. Due to the early nature of the claim, the
Company has been unable to fully assess the likely outcome of the claim,
however, the Company intends to vigorously defend its position and believes the
claim lacks substantial merit.

9. Restructuring Charges

In 2002, the Company adopted two plans of restructuring aimed at reducing
operating costs company-wide, strengthening the Companys financial position,
and reallocating resources to pursue the Companys future operating strategies.

In the second quarter of 2002, the Company adopted a plan of restructuring
to reduce operating costs. The plan included the reduction of headcount of five
non-management employees, four sales people and one administrative employee.
The plan also included the closure of two foreign offices. As a result of the
restructuring plan, the Company recorded a charge of $103,000 comprising of
$74,000 for workforce reduction and $29,000 for office closures. The
restructuring charge was fully paid as of December 31, 2002.

In the third quarter of 2002, the Company adopted a plan of restructuring
to further reduce operating costs. The plan included a reduction of headcount
of twenty-one non-management and three management employees, primarily
professional services, sales, marketing, and customer support personnel. The
plan also included the closure of one foreign office. As a result of the
restructuring plan, the Company recorded a charge of $398,000, which is
comprised of $372,000 for workforce reduction, $20,000 related termination
costs, and $6,000 for office closure. During the fourth quarter of 2002, the
Company recorded an adjustment to increase this charge by $20,000. In addition,
the Company adjusted the amounts within workforce, office closures and other
contractual obligations as changes in estimates but did not change the total
amount of the charge except as disclosed. These changes are not significant.
The remaining unpaid balance of $71,000 as of December 31, 2002 was paid in
full during the first quarter of 2003.

The components of the restructuring cash charges, as well as the Companys
2002 payments made against accruals are detailed as follows:

|                              |  |              |        |          |  |           |        |            |  |   |   | 
|----------------------------- |  | ------------ | ------ | -------- |  | --------- | ------ | ---------- |  | - | - | 
|                              |  | Balance at   |        |          |  |           |        | Balance at
|                              |  | December 31, |        | Payments |  | March 31,
|Cash charges                  |  | 2002         |        | made     |  | 2003     
|                              |  |              |        |          |  |          
|Restructuring                 |  |              |        |          |  |           |        |            |  |   |   | 
|Work force reduction          |  | $            | 52,000 |          |  | $         | 52,000 |            |  | $ |  | 
|Office closures               |  |              | 17,000 |          |  |           | 17,000 |            |  |   |  | 
|Other contractual obligations |  |              | 2,000  |          |  |           | 2,000  |            |  |   |  | 
|                              |  |              |        |          |  |           |        |            |  |   |   | 
|Total restructuring           |  | $            | 71,000 |          |  | $         | 71,000 |            |  | $ |  | 

10. 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 Parallax Capital Partners, LLC for
$1,300,000 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 was reclassified as a discontinued
operation. The Companys results of operations for the quarter ended March 31,
2003 included $33,000 in expenses primarily relating to certain defense costs
incurred from a claim filed against VistaSource (see Note 8).

11. Non-recourse Sale of Receivables

The Company has a non-recourse accounts receivable purchase arrangement
with a certain bank, which allows the Company from time to time to sell
qualifying accounts receivable to the bank, in an aggregate amount of up to $2
million outstanding, at a

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purchase price equal to the balance of the accounts less a discount rate
and a fee. During the first quarter of 2003, the Company did not sell any of
its accounts receivables. On or about December 31, 2002, the Company factored
certain accounts receivable to the bank pursuant to the purchase arrangement in
the amount of $905,000 resulting in a sale of accounts receivable of $668,000
for the three months ended December 31, 2002.

In accordance with SFAS No. 140, Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities (SFAS 140), the
Company recognized a sale for those account receivable balances for which there
was no future obligation to the customer in the amount of $668,000 for the
three months ended December 31, 2002. The Company concluded that these accounts
have been legally isolated, and accordingly, these amounts were excluded from
the Companys accounts receivable balance at December 31, 2002. The loss from
the sale of the financial assets and retained interest for cash collection were
not material to the Companys results of operations or financial position. At
December 31, 2002, the Company had recorded a net amount of $237,000 as a
financing transaction and recognized this amounts as a liability because the
sale of these receivables did not qualify to be recorded as a sale under SFAS
140.

12. Restricted Cash

On August 1, 2001, the Company established a $1,050,000 irrevocable
standby letter of credit in connection with executing an agreement to lease
certain office space. The irrevocable standby letter of credit is
collateralized by a restricted cash deposit of $1,050,000, which is drawn down
over the term of the lease, provided the Company has not defaulted on the
office lease. The irrevocable standby letter of credit and underlying security
deposit (restricted cash) requirement of $1,050,000 was reduced to $933,000 as
of December 31, 2002 and will be reduced starting the first day of the second lease
year as follows:

|                                      |  |                  |         | 
|------------------------------------- |  | ---------------- | ------- | 
|                                      |  | Reduction Amount
|                                      |  |                 
|Third lease year (December 31, 2003)  |  | $                | 116,667 | 
|Fourth lease year (December 31, 2004) |  | $                | 175,001 | 
|Fifth lease year (December 31, 2005)  |  | $                | 233,330 | 
|Sixth lease year (December 31, 2006)  |  | $                | 283,335 | 

At the end of the sixth year, the Company can reduce the letter of credit
to $125,000 or substitute $125,000 in cash in lieu of the letter of credit.

13. Executive Termination Costs

On February 27, 2003, the Company entered into a Severance Agreement with
an executive of the Company. Pursuant to this agreement, the Company has agreed
to pay the executive 15 months of salary and provide the executive certain
medical benefits during the 15-month period after his termination. In
addition, the Company forgave all outstanding principal and interest due under
a Secured Promissory Note dated July 30, 2001 in the principal amount of
$225,000, executed pursuant to the Companys Executive Stock Loan Purchase
Program. Pursuant to the Severance Agreement, the executive transferred to the
Company 51,429 shares of the Companys common stock, which was held by the Company in treasury as of March 31,
2003, which stock the executive had
purchased using the funds
loaned to the executive pursuant to such Secured Promissory Note. In the three months ended March 31, 2003, the Company recorded $356,000 in
costs related to the termination of employment of the executive. The
severance amounts
are to be paid in 15 equal installments, and the remaining unpaid balance as of
March 31, 2003 was $292,000.

14. Indemnifications

The Company frequently has agreed to indemnification provisions in
software license agreements with customers and in its real estate leases in the
ordinary course of its business.

With respect to software license agreements, these indemnifications
generally include provisions indemnifying the customer against losses,
expenses, and liabilities from damages that may be awarded against the customer
in the event the Companys software is found to infringe upon a patent or
copyright of a third party. The software license agreements generally limit the
scope of and remedies for such indemnification obligations in a variety of
industry-standard respects, including but not limited to certain
geography-based scope limitations, the right to replace or modify an infringing
product, and the right to terminate the license and refund a portion of the
original license fee within a defined period of time from the original licensing
date if a remedy is not commercially practical. The Company believes its
internal development processes and other policies and practices limit its

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exposure related to the indemnification provisions of the software license
agreements. In addition, the Company requires its employees to sign an
agreement, which assigns the rights to its employees development work to the
Company. To date, the Company has not had to reimburse any of its customers for
any losses related to these indemnification provisions.

With respect to real estate lease agreements, these indemnifications
typically apply to claims asserted against the landlord relating to personal
injury and property damage at the leased premises or to certain breaches of the
Companys contractual obligations. The term of these indemnification
provisions generally survive the termination of the agreement, although the
provision has the most relevance during the contract term and for a short
period of time thereafter. The maximum potential amount of future payments that
the Company could be required to make under these indemnification provisions is
unlimited. The Company has purchased insurance that reduces its monetary
exposure for landlord indemnifications. The Company has never paid any
amounts to defend lawsuits or settle claims related to these indemnification
provisions. Accordingly, the Company believes the estimated fair value of
these indemnification arrangements is minimal.




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

Overview of the Companys Operations

The Company is a global provider of business intelligence (BI) and
business performance management (BPM) solutions, focused on interactive
planning, budgeting and analytics. Historically, the Company also provided
customer relationship management (CRM) solutions. In the first quarter of 2003,
the Company completed the sale of certain of its assets relating to its customer
relationship management software solutions (the CRM Business) to iET
Acquisition, LLC (iET), a wholly-owned subsidiary of Platinum Equity Holdings,
LLC for $5,750,000 in cash consideration, of which $225,000 was paid back to iET
for net working capital adjustments and $3,552,000 in net assumed liabilities.
The Company recorded a gain of $8 million in the first quarter of 2003
after transaction costs. The sale excluded approximately $2.8 million in net accounts receivable
generated from the sale of CRM products.

iET paid $4,250,000 of the Purchase Price in cash at
the initial closing and paid an additional $1,500,000 in cash on March 17, 2003
upon the completion of the closing of the sale of certain of the assets of the Companys
German subsidiary, Applix GmbH. Applix GmbH was allowed to
continue to resell the CRM
software products sold to iET, and to provide professional services and maintenance
support under a resellers agreement between the Company and
iET, during the period from January 21, 2003 to March 17,
2003.

Included in the Companys result for the three month period ending
March 31, 2003 are CRM revenues of $253,000 and $999,000 for license, and professional
services and maintenance, respectively.

In December 2000, the Company 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 Parallax Capital Partners, LLC, for
$1,300,000 and a 19% equity interest in Real-Time. The Companys results of
operations for the quarter ended March 31, 2003 included $33,000 in expenses
recorded as discontinued operations primarily relating to certain defense
costs incurred from a claim filed against VistaSource. See Note 8 and Note 10
to the unaudited condensed consolidated financial statements.

On March 31, 2001, the Company acquired all of the outstanding capital stock
of Dynamic Decisions, its primary Australian reseller, to improve
its market presence and increase the Companys sales in the Pac
Rim region. The total cost of $5,867,000 consists of maximum cash
consideration of $5,150,000, transaction costs of $490,000, and
100,000 shares of the Companys common stock, which had a fair
market value of $227,000 at the date of acquisition. The acquisition
was accounted for under the purchase method of accounting, and the purchase
price was allocated based on the estimated fair value of the assets acquired and
liabilities assumed. An intangible asset, acquired customer relationships of
$1,500,000, was recorded based on the fair value of the asset at the time of
acquisition and is being amortized on a straight-line basis over its estimated
useful life of six years. The excess of the purchase price over the fair value
of the net assets acquired of $934,000 was recorded as goodwill. Goodwill is no
longer amortized under the provision of SFAS 142. The purchase price exceeded
the fair market value of the net assets purchased due in part to the revenues,
profitability and expected future cash flow from established customer base.

Per the terms of the share purchase agreement, the total maximum cash
consideration relating to the purchase of Dynamic Decisions was $5,150,000
payable in 10 installments over a maximum of 30 months beginning on July 1,
2001. Of the 10 installments, two of the installments totaling $1,267,000 were guaranteed, paid in 2001 and accounted for as purchase
price. The remaining eight installments were contingent upon the employment of
the two key employees, who were former shareholders of Dynamic
Decisions, and therefore were accounted for as compensation expense
within operating expenses. These eight installments were expensed ratably on a
straight-line basis over the employees contractual employment period, which commenced on April 1,
2001 and ended on March 31, 2003. The amounts that are
recognized as
expense and accrued are translated into U.S. dollars from
Australian dollars, resulting in foreign currency exchange fluctuations
to the Companys financial statements. Of these contingent payments, the Company made one cash payment of $583,000 in 2003 and four cash
payments totaling $2,153,000 in 2002. As of March 31, 2003,
the remaining three contingent payments totaling $1,813,000 have been
accrued and will be paid in 2003.

In December 2002, the Company sold the stock of its Dutch subsidiary, a
remote sales office, for $362,000 and recorded a net gain of $141,000. The
transaction included substantially all of the subsidiarys assets and
liabilities and an amendment to the existing distribution agreement between the
Company and the purchaser to provide the purchaser the exclusive rights to
resell the Companys CRM products in the Netherlands.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

This Managements Discussion and Analysis of Financial Condition and
Results of Operations discusses the Companys condensed consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of these financial
statements requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Management bases
its estimates and assumptions on expected or known trends or events, historical
experience and various other factors that are believed to be reasonable under
the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates
under different assumptions or conditions.

Management believes the following critical accounting policies, among
others, involve the more significant judgments and estimates used in the
preparation of its consolidated financial statements.

Revenue Recognition

Revenue from software licensing and service fees is recognized in
accordance with Statement of Position (SOP) 97-2, Software Revenue
Recognition, and SOP 98-9 Software Revenue Recognition with Respect to
Certain Transactions. Substantially all of the Companys product license
revenue is earned from licenses of off-the-shelf software requiring no
customization. Accordingly, the Company recognizes revenue from software
licensing when all of the following criteria are met: (1) persuasive evidence
of an arrangement exists via a signed agreement or purchase order; (2) delivery
has occurred including authorization keys; (3) the fee is fixed or determinable
representing amounts that are due unconditionally with no future obligations
under customary payment terms; and (4) collectibility is probable.

Revenue from consulting and training is recognized at the time the
services are rendered. For contracts with multiple obligations (e.g.,
deliverable and undeliverable products, support obligations, consulting, and
training services), the Company allocates revenue to each element of the
contract based on vendor specific objective evidence (VSOE) of the fair value
of the elements. The Company has determined fair value based upon prices it
charges customers when these elements are sold separately. Maintenance
contracts are generally sold with the initial licenses. The related maintenance
revenue is deferred based upon VSOE, which is determined by the renewal price
of the annual maintenance contract, and is recognized ratably over the
maintenance contract period. The Company recognizes consulting and training
service revenues, including those sold with license fees, as the services are
performed based upon their established VSOE. The Company determines the amount
of revenue to allocate to the licenses sold with services or maintenance using
the residual method of accounting. Under the residual method, the Company
allocates the total value of the arrangement first to the undelivered elements
based on their VSOE and the remainder to the delivered element, the software
license.

In those instances the services are deemed to be essential to the
functionality of the software, both license and service revenues are recognized together on a
percentage of completion basis utilizing hours incurred to date as a percentage
of total estimated hours to complete the project.

In those instances in which indirect channel partners provides certain
support services under the maintenance support contracts to the end-user
customer, the Company accounts for amounts received in these arrangements in
accordance with Emerging Issues Task Force 99-19, Reporting Revenue Gross as a
Principal versus Net as an Agent. The Company must make certain judgments in
these types of arrangements including whether the Company or the indirect
channel partners is in the principal obligor in the arrangement with the
end-user customer.

Accounts Receivable and Bad Debt

The Company maintains allowances for doubtful accounts for estimated
losses resulting from the inability of its customers to make required payments.
The Company continuously monitors collections and payments from its customers
and determines the allowance for doubtful accounts based upon analysis of aged
accounts receivable, historical experience and specific customer collection
issues. An allowance for doubtful accounts is provided for accounts which
management believes may not be collected due to a customers financial
circumstance (e.g. bankruptcy), and for all accounts which are over 180 days
past due, absent evidence which supports their collectibility. If the financial
condition of the Companys customers were to deteriorate, resulting in an
impairment of their ability to make payments, or the Companys overdue
receivables balance were to increase significantly, additional allowances may
be required. The Company generally invoices the customer in the same local
currency as to be paid by the customer. The Company does not hedge its foreign
customer receivables due to the relatively small exposure from foreign currency
rate fluctuations.

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Software Development Costs

The Company accounts for software development costs in accordance with
SFAS No. 86, Accounting for the Costs of Computer Software to Be Sold, Leased,
or Marketed (SFAS 86). SFAS 86 specifies that software development costs
incurred internally should be expensed as incurred until technological
feasibility has been established. Once technological feasibility has been
established, all software development costs should be capitalized until the
product is available for general release to customers. Judgment is required in
determining when the technological feasibility of products is established. The
Company considers technological feasibility to be achieved when a product
design and working model of the software product have been completed and the
software product is ready for initial customer testing. Capitalized software
development costs are amortized as a cost of software license revenue over the
estimated product life. Development costs not capitalized under the policy are
classified as a development expense in the same period as incurred. If
management determines that the recoverability of these unamortized capitalized
software costs is not probable based on its cash flow estimates, these costs
may require adjustment to their net realizable value, which could affect the
results of the reporting period.

Goodwill and Other Intangible Assets and Related Impairment

During 2001, the Company completed its acquisition of Dynamic Decisions
and recorded goodwill in the amount of $934,000 associated with the excess
purchase price over the fair value of the net assets acquired and identifiable
intangible assets of $1,500,000 assigned to identified customer relationships.
The amounts assigned to the identifiable assets and liabilities acquired in
connection with the acquisition were based on estimated fair values at the date
of acquisition. The fair values were determined by the Companys management,
based in part upon information supplied by the management of the acquired
business and a valuation prepared by an independent appraiser. The valuation of
identified customer relationships has been based primarily upon future cash
flow projections discounted to present value using a risk-adjusted discount
rate.

In assessing the recoverability of the Companys goodwill and other
intangible assets, the Company must make assumptions regarding estimated future
cash flows and other factors including legal factors, market conditions and
operational performance of its acquired businesses to determine the fair value
of the respective assets. If these estimates or their related assumptions
change in the future, the Company may be required to record impairment charges
for these assets not previously recorded. If events change and the Company has
overestimated the economic life of its intangible asset, the Company will begin
to amortize the remaining unamortized carrying value of this asset over the
newly estimated life, which may result in additional amortization expense.

Restructuring

During 2002 and 2001, the Company recorded charges in connection with its
restructuring programs. These charges include estimates pertaining to employee
separation costs and the settlements of contractual obligations resulting from
the Companys actions. Although the Company does not anticipate significant
changes, the actual costs may differ from these estimates, which would result
in adjustments to the original estimates.

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Income Taxes

The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 Accounting for Income Taxes (SFAS
109) which requires that deferred tax assets and liabilities be recognized
using enacted tax rates for the effect of temporary differences between the
book and tax bases of recorded assets and liabilities. SFAS 109 also requires
that deferred tax assets be reduced by a valuation allowance if it is more
likely than not that some portion or all of the deferred tax asset will not be
realized. The Company evaluates quarterly the realizability of its deferred tax
assets by assessing its valuation allowance and by adjusting the amount of such
allowance, if necessary. At March 31, 2003 and December 31,
2002, the
Companys deferred tax assets were fully reserved. In the event the Company
were to determine in the future that it would be able to realize its deferred
tax assets in excess of its net-recorded amount, an adjustment to the deferred
tax asset would increase income in the period such determination was made.

During the first quarter of 2003, the Company evaluated its ability to
utilize its net operating loss carryforwards and the impact of the U.S,
Internal Revenue Code Section 382 (Section 382), limitations of loss
carryovers, including use of such loss carry forward on its U.S. taxable gain
of U.S. portion of its CRM business. Under Section 382, certain annual
limitations apply to the use of net operating loss carryforwards against future
taxable income in the event of a change of ownership, as defined by Section
382. The Company has not completed a full analysis of these ownership changes
but does not believe that changes in ownership will impact its ability to use
its net operating loss carryforwards.

The Company has provided for potential amounts due in various foreign tax
jurisdictions. Judgment is required in determining the Companys worldwide
income tax expense provision. In the ordinary course of global business, there
are many transactions and calculations where the ultimate tax outcome is
uncertain. Some of these uncertainties arise as a consequence of cost
reimbursement arrangements among related entities. Although management believes
its estimates are reasonable, no assurance can be given that the final tax
outcome of these matters will not be different from that which is reflected in
the Companys historical income tax provisions and accruals. Such differences
could have a material impact on the Companys income tax provision and
operating results in the period in which such determination is made.

Results of Operations

For The Three Months Ended March 31, 2003 and 2002

Revenues

|                                      |             |   |                              |           |         |  |            |    |         |   |           |           |            |  |     |    |  
|------------------------------------- | ----------- | - | ---------------------------- | --------- | ------- |  | ---------- | -- | ------- | - | --------- | --------- | ---------- |  | --- | -- | -
|                                      |             |   | Three Months Ended March 31,
|                                      |             |   |                             
|                                      |             |   |                              |           |         |  | Percent of |    |         |   |           |           | Percent of
|                                      |             |   | 2003                         |           | Revenue |  | 2002       |    | Revenue
|                                      |             |   |                              |           |         |  |            |    |        
|Software License                      |             | $ | 2,691,000                    |           |         |  | 39         | %  |         | $ | 4,603,000 |           |            |  | 48  | % 
|Professional Services and Maintenance |             |   |                              |           |         |  |            |    |         |   |           |           |            |  |     |   
|                                      | Consulting  |   |                              | 1,169,000 |         |  |            | 17 | %       |   |           | 1,525,000 |            |  |     | 16 | %
|                                      | Maintenance |   |                              | 2,973,000 |         |  |            | 44 | %       |   | $         | 3,379,000 |            |  |     | 36 | %
|                                      |             |   |                              |           |         |  |            |    |         |   |           |           |            |  |     |   
|                                      |             |   | 4,142,000                    |           |         |  | 61         | %  |         |   | 4,904,000 |           |            |  | 52  | % 
|                                      |             |   |                              |           |         |  |            |    |         |   |           |           |            |  |     |   
|Total Revenues                        |             | $ | 6,833,000                    |           |         |  | 100        | %  |         | $ | 9,507,000 |           |            |  | 100 | % 
|                                      |             |   |                              |           |         |  |            |    |         |   |           |           |            |  |     |   

Total revenues for the quarter ended March 31, 2003 decreased to
$6,833,000 from $9,507,000 for the quarter ended March 31, 2002. The total
revenues decrease was primarily due the Companys sale of its CRM business,
consisting of the sale of its CRM technology and related products on January
21, 2003 followed by a March 17, 2003 closing relating to the
German CRM operations. The
decrease in revenue from the CRM sale was partially offset by a 15% increase in
Business Intelligence/Business Performance Management revenue of $5,581,000 for the quarter ended March 31, 2003, compared to
$4,845,000 for the quarter ended March 31, 2002.

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Software License

The following table sets forth the revenues by market:

|                                                 |                                             |                        |   |                              |           |        |  |            |     |   |   |           |           |            |  |     |     |  
|------------------------------------------------ | ------------------------------------------- | ---------------------- | - | ---------------------------- | --------- | ------ |  | ---------- | --- | - | - | --------- | --------- | ---------- |  | --- | --- | -
|                                                 |                                             |                        |   | Three Months Ended March 31,
|                                                 |                                             |                        |   | 2003                         |           | 2002  
|                                                 |                                             |                        |   |                              |           |       
|                                                 |                                             |                        |   |                              |           |        |  | Percent of |     |   |   |           |           | Percent of
|Market                                           |                                             | Amount                 |   | Revenue                      |           | Amount |  | Revenue   
|                                                 |                                             |                        |   |                              |           |        |  |           
|Software license revenues:                       |                                             |                        |   |                              |           |        |  |            |     |   |   |           |           |            |  |    
|                                                 |                                             | BPM and BI             |   | $                            | 2,438,000 |        |  |            | 91  | % |   | $         | 2,457,000 |            |  |     | 53  | %
|                                                 |                                             | CRM                    |   |                              | 253,000   |        |  |            | 9   | % |   |           | 2,146,000 |            |  |     | 47  | %
|                                                 |                                             |                        |   |                              |           |        |  |            |     |   |   |           |           |            |  |    
|                                                 |                                             | Total software license |   |                              | 2,691,000 |        |  |            | 100 | % |   |           | 4,603,000 |            |  |     | 100 | %
|Professional services and maintenances revenues: |                                             |                        |   |                              |           |        |  |            |     |   |   |           |           |            |  |    
|                                                 |                                             | BPM and BI             |   |                              | 3,143,000 |        |  |            | 76  | % |   |           | 2,388,000 |            |  |     | 49  | %
|                                                 |                                             | CRM                    |   |                              | 999,000   |        |  |            | 24  | % |   |           | 2,516,000 |            |  |     | 51  | %
|                                                 |                                             |                        |   |                              |           |        |  |            |     |   |   |           |           |            |  |    
|                                                 | Total professional services and maintenance |                        |   | 4,142,000                    |           |        |  | 100        | %   |   |   | 4,904,000 |           |            |  | 100 | %  
|Total revenues:                                  |                                             |                        |   |                              |           |        |  |            |     |   |   |           |           |            |  |    
|                                                 |                                             | BPM and BI             |   |                              | 5,581,000 |        |  |            | 82  | % |   |           | 4,845,000 |            |  |     | 51  | %
|                                                 |                                             | CRM                    |   |                              | 1,252,000 |        |  |            | 18  | % |   |           | 4,662,000 |            |  |     | 49  | %
|                                                 |                                             |                        |   |                              |           |        |  |            |     |   |   |           |           |            |  |    
|                                                 | Total revenues                              |                        | $ | 6,833,000                    |           |        |  | 100        | %   |   | $ | 9,507,000 |           |            |  | 100 | %  

Software license revenues decreased $1,912,000 to $2,691,000 for the three
months ended March 31, 2003 from $4,603,000 for the three months ended March
31, 2002 or 39% of total revenue compared to 48% of the total revenue for the
three months ended March 31, 2002. Software license revenue from BPM and BI was
flat for the three months ended March 31, 2003 as compared to the same period
ended March 31, 2002. The decrease in software license revenue was primarily
due to the sales of CRM business including CRM technology and products on
January 21, 2003.

The following table sets forth the software license revenues by sales
office geography:

|                             |                                 |   |           |           |         |  |            |     |         |   |           |           |            |  |    |     |  
|---------------------------- | ------------------------------- | - | --------- | --------- | ------- |  | ---------- | --- | ------- | - | --------- | --------- | ---------- |  | -- | --- | -
|                             |                                 |   | March 31,
|                             |                                 |   |          
|                             |                                 |   | 2003      |           | 2002   
|                             |                                 |   |           |           |        
|                             |                                 |   |           |           |         |  | Percent of |     |         |   |           |           | Percent of
|                             |                                 |   | Amount    |           | Revenue |  | Amount     |     | Revenue
|                             |                                 |   |           |           |         |  |            |     |        
|North America                |                                 | $ | 731,000   |           |         |  | 27         | %   |         | $ | 2,706,000 |           |            |  | 59 | %  
|PacRim                       |                                 |   | 578,000   |           |         |  | 21         | %   |         |   | 471,000   |           |            |  | 10 | %  
|Europe                       |                                 |   | 1,382,000 |           |         |  | 51         | %   |         |   | 1,426,000 |           |            |  | 31 | %  
|                             |                                 |   |           |           |         |  |            |     |         |   |           |           |            |  |    |    
|Total International revenues |                                 |   | 1,960,000 |           |         |  | 73         | %   |         |   | 1,897,000 |           |            |  | 41 | %  
|                             |                                 |   |           |           |         |  |            |     |         |   |           |           |            |  |    |    
|                             | Total software license revenues |   | $         | 2,691,000 |         |  |            | 100 | %       |   | $         | 4,603,000 |            |  |    | 100 | %
|                             |                                 |   |           |           |         |  |            |     |         |   |           |           |            |  |    |    

Domestic license revenue decreased $1,975,000 to $731,000 for the quarter
ended March 31, 2003 from $2,706,000 for the same period in 2002. The decline
was primarily due to the sale of the CRM business, which occurred in two
closings on January 21, 2003 and March 17, 2003, and weakness in North American
license sales. International license revenue increased $64,000 to $1,960,000
for the quarter ended March 31, 2003 from $1,897,000 for the same period in
2002 primarily due to continuing growth of the Asian Pacific market.

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The Company markets its products through its direct sales force and
indirect partners. The Company continues to focus on complementing the direct
sales force with the indirect channel partners, which consist of Original
Equipment Manufacturers (OEMs), Value Added Resellers (VARS), independent
distributors and sales agents.

Professional Services and Maintenance

Professional services and maintenance revenues decreased for the three
months ended March 31, 2003 to $4,142,000, or 61% of total revenue, compared to
$4,904,000, or 52% of total revenues for the same period in 2002. For the three
months ended March 31, 2003, maintenance revenues decreased 12% to $2,973,000
as compared to $3,379,000 for the three months ended March 31,
2002, and consulting and training revenue decreased 23% to $1,169,000 as compared to
$1,525,000 for the three months ended March 31, 2002. The decrease in
maintenance revenues is primarily due to the sale of the CRM business. The
Company expects the maintenance revenues as a component of total professional
service and maintenance revenues to continue to increase due to strong customer
renewal rates, the greater use of authorized Applix partners for professional
services and the increase in BPM implementations.

The following two tables set forth the professional services and
maintenance revenues generated by domestic and international market:

|                                                          |  |           |           |          |  |            |     |          |  |   |           |            |  |  |     |  
|--------------------------------------------------------- |  | --------- | --------- | -------- |  | ---------- | --- | -------- |  | - | --------- | ---------- |  |  | --- | -
|                                                          |  | March 31,
|                                                          |  |          
|                                                          |  | 2003      |           | 2002    
|                                                          |  |           |           |         
|                                                          |  |           |           |          |  | Percent of |     |          |  |   |           | Percent of
|                                                          |  | Amount    |           | Revenues |  | Amount     |     | Revenues
|                                                          |  |           |           |          |  |            |     |         
|North America                                             |  | $         | 1,273,000 |          |  |            | 31  | %        |  | $ | 1,910,000 |            |  |  | 39  | %
|PacRim                                                    |  |           | 644,000   |          |  |            | 16  | %        |  |   | 562,000   |            |  |  | 11  | %
|Europe                                                    |  |           | 2,225,000 |          |  |            | 54  | %        |  |   | 2,432,000 |            |  |  | 50  | %
|                                                          |  |           |           |          |  |            |     |          |  |   |           |            |  |  |     |  
|Total International professional services and maintenance |  |           | 2,869,000 |          |  |            | 69  | %        |  |   | 2,994,000 |            |  |  | 61  | %
|                                                          |  |           |           |          |  |            |     |          |  |   |           |            |  |  |     |  
|Total professional services and maintenance revenues      |  | $         | 4,142,000 |          |  |            | 100 | %        |  | $ | 4,904,000 |            |  |  | 100 | %
|                                                          |  |           |           |          |  |            |     |          |  |   |           |            |  |  |     |  

|
|
|
|
|
|
|
|
|
|
|
|

Domestic service revenues decreased 33% to $1,273,000 for the three months
ended March 31, 2003 from $1,910,000 for the three months ended March 31, 2002.
International service revenues decreased by 4% to $2,869,000 in the three
months ended March 31, 2003 from $2,994,000 for the three months ended March
31, 2002.

Cost of Revenues

21



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##### Table of Contents



Cost of Software License Revenue

|                                                                                     |                              |                       |                    |         |                              |           |             |    |            |   |             |           |           |           |            |    |   |  | 
|------------------------------------------------------------------------------------ | ---------------------------- | --------------------- | ------------------ | ------- | ---------------------------- | --------- | ----------- | -- | ---------- | - | ----------- | --------- | --------- | --------- | ---------- | -- | - |  | 
|                                                                                     |                              |                       |                    |         | Three Months Ended March 31,
|                                                                                     |                              |                       |                    |         |                             
|                                                                                     |                              |                       |                    |         |                              |           |             |    | Percent of |   |             |           |           |           | Percent of
|                                                                                     |                              |                       |                    |         | 2003                         |           | Revenue (A) |    | 2002       |   | Revenue (A)
|                                                                                     |                              |                       |                    |         |                              |           |             |    |            |   |            
|Cost of software license revenues                                                    |                              | $                     | 412,000            |         |                              |           | 15          | %  |            | $ | 346,000     |           |           |           | 8          | % 
|Cost of professional services and maintenance revenues
Cost of professional services |                              |                       | 983,000            |         |                              |           | 84          | %  |            |   | 1,566,000   |           |           |           | 103        | % 
|                                                                                     | Cost of maintenance revenues |                       |                    | 751,000 |                              |           |             | 25 | %          |   |             | 1,050,000 |           |           |            | 31 | %
|                                                                                     |                              |                       |                    |         |                              |           |             |    |            |   |             |           |           |           |            |   
|                                                                                     |                              |                       | 1,734,000          |         |                              |           |             |    |            |   | 2,616,000   |           |           |           |            |   
|                                                                                     |                              |                       |                    |         |                              |           |             |    |            |   |             |           |           |           |            |   
|Total cost of revenues                                                               |                              | $                     | 2,146,000          |         |                              |           |             |    |            | $ | 2,962,000   |           |           |           |            |   
|                                                                                     |                              |                       |                    |         |                              |           |             |    |            |   |             |           |           |           |            |   
|Gross margin
Software license                                                        |                              | $                     | 2,279,000          |         |                              |           |             |    |            | $ | 4,257,000   |           |           |           |            |   
|                                                                                     |                              | Professional services |                    |         | 186,000                      |           |             |    |            |   |             |           | (41,000   | )         |            |    |   | 
|                                                                                     |                              | Maintenance           |                    |         | 2,222,000                    |           |             |    |            |   |             |           | 2,329,000 |           |            |    |   | 
|                                                                                     |                              |                       |                    |         |                              |           |             |    |            |   |             |           |           |           |            |   
|                                                                                     |                              |                       | Total gross margin |         | $                            | 4,687,000 |             |    |            |   |             |           | $         | 6,545,000 |            |    |   |  | 
|                                                                                     |                              |                       |                    |         |                              |           |             |    |            |   |             |           |           |           |            |   

|(A) Percentage represent: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|------------------------- |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 

---

|(i)   |  | Cost of software license revenues as a percentage of software license revenues;         
|----- |  | ----------------------------------------------------------------------------------------
|     
|(ii)  |  | Cost of professional services revenues as a percentage of professional service revenues;
|     
|(iii) |  | Cost of maintenance revenues as percentage of maintenance revenues.                     

Cost of
software licenses revenue consists primarily of third-party
software royalties, cost of product packaging and documentation materials,
order fulfillment, employees and amortization of capitalized software costs.
The amortization of capitalized software costs begins upon general release of
the software to customers. Cost of software license revenues was $412,000 for
the three months ended March 31, 2003, compared to $346,000 for the three
months ended March 31, 2002. As a percentage of software license revenue, cost
of software license revenue increased to 15% in the three months ended March
31, 2003, as compared to 8% for the three months ended March 31, 2002. Cost
of software license revenues increased primarily due to an increase in
amortization of capitalized software development costs related to the Companys
new product development and third-party royalties. The increase as a
percentage of software license revenue was also due to the decline in total
software license revenue primarily due to the sale of the CRM business in
quarter ended March 31, 2003.

Cost of Professional Services and Maintenance Revenue

The cost of professional services and maintenance revenues consists
primarily of personnel salaries and benefits, facilities and system costs
incurred to provide consulting, training and customer support and payments to
indirect channel partners to provide first level support to end-user customers,
which payments are generally capitalized and amortized over the 12-month
maintenance support period of the underlying contract with the end-user
customer. Cost of professional services and maintenance revenue decreased to
$1,734,000 for the three months ended March 31, 2003 from $2,616,000 for the
three months ended March 31, 2002. As a percentage of professional services and
maintenance revenue, these costs were 42% in the first quarter of 2003 as
compared to 53% in the first quarter of 2002. Professional services and
maintenance revenue gross margin as a percentage of professional services
revenue improved to 58% for the three months ended March 31, 2003 as compared
to 47% for the three months ended March 31, 2002. The improvement in
professional services and maintenance revenue gross margin is due to higher
consulting utilization and a change in revenue mix from lower margin consulting
revenues to higher margin maintenance revenues. This gross margin improvement
on maintenance and services is a direct reflection of the Companys focus on
services margin improvements and the higher reliance of indirect channel
partners in providing product implementation.

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##### Table of Contents



Operating Expenses

|                                                                    |                          |   |                              |           |         |  |            |     |         |   |           |           |            |  |    |    |  
|------------------------------------------------------------------- | ------------------------ | - | ---------------------------- | --------- | ------- |  | ---------- | --- | ------- | - | --------- | --------- | ---------- |  | -- | -- | -
|                                                                    |                          |   | Three Months Ended March 31,
|                                                                    |                          |   |                             
|                                                                    |                          |   |                              |           |         |  | Percent of |     |         |   |           |           | Percent of
|                                                                    |                          |   | 2003                         |           | Revenue |  | 2002       |     | Revenue
|                                                                    |                          |   |                              |           |         |  |            |     |        
|Sales and marketing                                                 |                          | $ | 2,707,000                    |           |         |  | 40         | %   |         | $ | 3,416,000 |           |            |  | 36 | % 
|Product development                                                 |                          |   | 1,537,000                    |           |         |  | 22         | %   |         |   | 1,081,000 |           |            |  | 11 | % 
|General and administrative                                          |                          |   | 2,228,000                    |           |         |  | 33         | %   |         |   | 1,325,000 |           |            |  | 14 | % 
|Compensation expenses and
amortization of acquired
intangible asset |                          |   | 646,000                      |           |         |  | 9          | %   |         |   | 578,000   |           |            |  | 6  | % 
|                                                                    |                          |   |                              |           |         |  |            |     |         |   |           |           |            |  |    |   
|                                                                    | Total Operating Expenses |   | $                            | 7,118,000 |         |  |            | 104 | %       |   | $         | 6,400,000 |            |  |    | 67 | %
|                                                                    |                          |   |                              |           |         |  |            |     |         |   |           |           |            |  |    |   

Product Development

Product development expenses include costs associated with the development
of new products, enhancements of existing products and quality assurance
activities, and consist primarily of employee salaries and benefits, consulting
costs and the cost of software development tools. The Company capitalizes
product development costs during the required capitalization period once the
Company has reached technological feasibility through general release of its
software products. The Company considers technological feasibility to be
achieved when a product design and working model of the software product have
been completed and the software product is ready for initial customer testing.
Capitalized software development costs are then amortized on a
product-by-product basis over the estimated product life of between one to two
years and are included in the cost of software license revenue. Product
development costs not meeting the requirements of capitalization are expensed
as incurred. Applix product development utilizes a total quality management
(TQM) approach to software development and participates in a self-management
process measurement using Carnegie Mellon Software Engineering Institutes
Capability Maturity Model (self-assessment only).

Product development expenses increased 42% to $1,537,000 for the three
months ended March 31, 2003 from $1,081,000 for the three months ended March
31, 2002. This represents 22% of total revenue for the three months ended March
31, 2003 compared to 11% of total revenue for the three months ended March 31,
2002. The increase is primarily due the Company not capitalizing any software
development costs, partially offset by a reduction in product development
salaries and benefits from those employees transferred in connection with the
sale of the CRM business in the quarter ended March 31, 2003. The
capitalization of product development costs was $0 for the three months ended
March 31, 2003 compared to $746,000 for the three months ended March 31, 2002.
The Company anticipates that it will continue to devote substantial resources
to develop new products, new versions of its existing products including Applix
Integra, Applix TM1 and related Applix Integra applications.

Sales and Marketing

Sales
and marketing expenses consist primarily of salaries and benefits, commissions
and bonuses for the Companys sales and marketing personnel, field office
expenses, travel and entertainment,
promotional and advertising expenses and the cost of the Companys
international operations. Sales and marketing expenses decreased 21% to
$2,707,000 for the three months ended March 31, 2003 from $3,416,000 for the
three months ended March 31, 2002. The decrease was primarily attributable to
the decrease in sales commissions that resulted from a decrease in the
Companys license revenues and a reduction in sales and marketing salaries and
benefits from those employees transferred in connection with the sale of the
CRM business in the quarter ended March 31, 2003. Selling and marketing
expenses increased as a percentage of total revenue to 40% for the three months
ended March 31, 2003 from 36% for the three months ended March 31, 2002. The
increase was primarily due to the implementation of selling and marketing
initiatives in support of future revenue opportunities. The Company expects to
continue to closely monitor discretionary expenditures and to continue its cost
control initiatives.

General and Administrative Expenses

General
and administrative expenses consist primarily of salaries and
benefits and
occupancy costs for administrative, executive and finance, information
technology (IT) and human resource personnel. General and administrative
expenses increased $903,000 to $2,228,000 for the three months ended March 31,
2003 from $1,325,000 for the three months ended March 31, 2002. The increase
was primarily due to executive severance costs, costs associated with the
Companys financial restatement, and legal and auditing fees.

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##### Table of Contents



Compensation Expenses and Amortization of Acquired Intangible Asset

Compensation expenses and amortization of acquired intangibles consists
primarily of contingent cash consideration relating to the Companys March 2001
acquisition of Dynamic Decisions and the amortization of identified
intangible asset, consisting of customer relationships, associated with the
acquisition. Per the terms of the share purchase agreement, total maximum cash
consideration relating to the purchase of Dynamic Decisions was $5,150,000
payable in 10 installments over a maximum of 30 months beginning on July 1,
2001.

Of the
10 installments, two of the installments paid in 2001 totaling
$1,267,000 were guaranteed, paid in 2001 and accounted for as purchase
price, and the remaining eight installments were contingent upon the employment of
the two key employees, who were former shareholders of Dynamic
Decisions, and therefore were accounted for as compensation expense
within operating expenses. These eight installments were being expensed ratably on a
straight-line basis over the key employees employment period, which commenced on April 1,
2001 and ended on March 31, 2003. Of these contingent
payments, the Company made one cash payment of $583,000 in 2003 and four payments
totaling $2,153,000 in 2002. As of March 31, 2003,
the remaining three contingent payments for $1,813,000 have been
accrued and are expected to be paid in 2003.

For three months ended March 31, 2003 and 2002, the amortization expense
for the customer relationships associated with the Dynamic Decisions acquisition
was $63,000, respectively.

Restructuring Expense

In 2002, the Company adopted two plans of restructuring aimed at reducing
operating costs company-wide, strengthening the Companys financial positions
and reallocating resources to pursue the Companys future operating strategies.

In the second quarter of 2002, the Company adopted a plan of restructuring
to reduce operating costs. The plan included the reduction of headcount of five
non-management employees, four sales people and one administrative employee.
The plan also included the closure of two foreign offices. As a result of the
restructuring plan, the Company recorded a charge of $103,000 comprising of
$74,000 for workforce reduction and $29,000 for office closures. The
restructuring charge was fully paid as of December 31, 2002.

In the third quarter of 2002, the Company adopted a plan of restructuring
to further reduce operating costs. The plan included a reduction of headcount
of twenty-one non-management and three management employees, primarily
professional services, sales, marketing, and customer support personnel. The
plan also included the closure of one foreign office. As a result of the
restructuring plan, the Company recorded a charge of $398,000, which is
comprised of $372,000 for workforce reduction, $20,000 related termination
costs, and $6,000 for office closure. During the fourth quarter of 2002, the
Company recorded an adjustment to increase this charge by $20,000. In addition,
the Company adjusted the amounts within workforce, office closures and other
contractual obligations as changes in estimates but did not change the total
amount of the charge except as disclosed. These changes are not significant.
The remaining unpaid balance of $71,000 as of December 31, 2002 was paid in
full during the first quarter of 2003.

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##### Table of Contents



Non-Operating Income

|                                         |  |                              |           |         |  |            |     |         |  |  |        |            |  |  |   |  
|---------------------------------------- |  | ---------------------------- | --------- | ------- |  | ---------- | --- | ------- |  |  | ------ | ---------- |  |  | - | -
|                                         |  | Three Months Ended March 31,
|                                         |  |                             
|                                         |  |                              |           |         |  | Percent of |     |         |  |  |        | Percent of
|                                         |  | 2003                         |           | Revenue |  | 2002       |     | Revenue
|                                         |  |                              |           |         |  |            |     |        
|Interest and other income (expense), net |  | $                            | 174,000   |         |  |            | 3   | %       |  |  | 49,000 |            |  |  | 1 | %
|Net gain from sale of CRM business       |  |                              | 8,000,000 |         |  |            | 117 | %       |  |  |       |            |  |  |  |  

Interest and Other Income

Interest and other income increased to $174,000 for the three months ended
March 31, 2003, compared to $49,000 for the three months ended March 31, 2002.
The increase is primarily attributable to the decrease in deferred financing
costs relating to the Companys credit facilities, an increase in interest
income from an increase in the average cash and cash equivalent balance due to
the funds received from the sale of the CRM Business, and the impact of foreign
currency fluctuations.

Gain on Sale of CRM Business

In the first quarter of 2003, the Company completed the sale of certain of
its assets relating to its customer relationship management software solutions
(the CRM Business) to iET Acquisition, LLC (iET), a wholly-owned subsidiary
of Platinum Equity Holdings, LLC for $5,750,000 in cash consideration, of which
$225,000 was paid back to iET for net working capital adjustments. The sale
excluded approximately $2.8 million in net accounts receivable generated from
the sale of CRM products.

The Company recorded a net gain before tax of $8,000,000, which includes
net cash consideration of $5,525,000 and $3,552,000 of net liabilities assumed
by iET less transaction costs of $1,077,000. The purchase price is subject to
certain post closing adjustments relating to the net working capital as set
forth in the Asset Purchase Agreement between the Company and iET, dated
January 21, 2003.

During the period of the initial closing and completion of the Companys
Germany subsidiary closing, iET paid $4,250,000 of the Purchase Price in cash
at the initial closing and paid an additional $1,500,000 in cash on March 17,
2003 upon the completion of the closing of certain of the assets of the
Companys Germany subsidiary, Applix GmbH. Applix GmbH continued to resell the
CRM software products provide professional services and maintenance support
under a resellers agreement between the Company and iET. Included in the
Companys result for the three month period ending March 31, 2003, CRM revenue
were $253,000 and $999,000 for license and professional services and
maintenance revenues respectively.

Provision for Income Taxes

The provision for income taxes represents the Companys state and foreign
income tax obligations and amortization of a deferred tax liability. The
Company recorded a provision for income taxes of $649,000 for the three months
ended March 31, 2003 as compared to $64,000 for the three months ended March
31, 2002. Additionally, the provision for income taxes for the three months
ended March 31, 2003 includes $479,000 for US and foreign income taxes related
to the Companys sale of its CRM business including sale of related US and
foreign assets and transferred liabilities.

Liquidity and Capital Resources

The Company derives it liquidity and capital resources primarily from the
Companys cash flow from operating activities and from working capital. The
Companys cash and cash equivalent balance, including restricted cash of
$933,000, was $12,104,000 and $9,322,000 as of March 31, 2003 and December 31,
2002, respectively. The Companys days sales outstanding (DSO) in accounts
receivable was 58 days as of March 31, 2003, compared with 53 days as of
December 31, 2002. The Company has a non-recourse accounts receivable purchase
arrangement with a certain bank, which allows the Company from time to time to
sell qualifying accounts receivable to the bank, in an aggregate amount of up
to $2 million outstanding, at a purchase price equal to the balance of the
accounts less a discount rate and a fee. The Company did not factor any
accounts receivables to the bank for the three months ended March 31, 2003,
compared to $905,000 on or about December 31, 2002. Certain of those accounts
receivables sold at or around December 31, 2002 qualified as a sale and
decreased the Companys DSO by approximately 6 days. In conjunction with the
Companys sale of its CRM business in the first quarter of 2003 with iET, the
sale agreement does allow for post closing adjustments to be made which is based upon
finalization of the net working capital delivered as defined by the Asset Purchase
Agreement. This could result in the Company paying back a portion of the cash
consideration received from iET. The Company does not have any off-balance-sheet
arrangements with

25



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##### Table of Contents



unconsolidated entities or related parties, and as such, the
Companys liquidity and capital resources are not subject to off-balance-sheet
risks from unconsolidated entities.

Cash
used in the Companys operating activities was $2,461,000 for the
quarter ended March 31, 2003 compared to cash provided by operating activities
of $1,206,000 for the same period in the prior year. The net income of
$5,061,000 for the first quarter of 2003 was primarily due to the net gain of
$8,000,000 generated from the sale of the CRM business and was partially offset by the
decrease in operating assets of $831,000 and the decrease in operating
liabilities of $925,000.

Cash provided by investing activities totaled $5,488,000 for the quarter
ended March 31, 2003 compared to cash used in investing activities of $934,000
for the quarter ended March 31, 2002. The increase in cash provided in
investing activities is primarily a result of the net cash proceeds of
$5,525,000 from sale of the CRM business.

Cash used in financing activities totaled $18,000 for the quarter ended
March 31, 2003, which consisted of proceeds from the issuance of stock under
stock plans, offset by net payments of $216,000 owed to a certain bank from
the accounts receivable factoring arrangement. No
receivables were factored during the quarter ended March 31,
2003. This compares to
total cash provided by financing activities of $25,000 for the quarter
ended March 31, 2002.

In connection with the Companys acquisition of Dynamic Decisions, the
Company expects to pay out additional contingent cash consideration of
$1,813,000 in three quarterly installments between April 1, 2003 and October 1,
2003, all of which is accrued at March 31, 2003.

As of March 31, 2003, the Company had future cash commitments for the cash
payments pertaining to its obligation under its non-cancelable leases. The
Companys future minimum lease payments for its operating lease payments for
its office facilities and certain equipment are:

|                             |  |                  |            | 
|---------------------------- |  | ---------------- | ---------- | 
|                             |  | Operating
leases
|                             |  |                 
|2003                         |  | $                | 1,412,000  | 
|2004                         |  |                  | 1,875,000  | 
|2005                         |  |                  | 1,832,000  | 
|2006                         |  |                  | 1,834,000  | 
|2007                         |  |                  | 1,834,000  | 
|2008
and after               |  |                  | 9,963,000  | 
|                             |  |                 
|Total
minimum lease payments |  | $                | 18,750,000 | 
|                             |  |                 

The Company currently expects to attempt to sublease space at its
headquarters. In the event that space is sublet and not used by the Company,
dependent on market rates at the time, the Company could incur a loss. If all
space the Company expects to sublease were vacated and were subleased, the
Company could incur a loss of $1,750,000, which is based upon the aggregate
difference over the remaining eleven-year term between the Companys committed
lease rate and the estimated market rates at March 31, 2003 of a prospective
sublease arrangement.

The Company has no commitments or specific plans for any significant
capital expenditures in the next 12 months.

The Company has incurred losses
for the last several years. As of March 31, 2003, the Company had an accumulated deficit
of $40.3 million.
Operating losses and negative cash flows may continue because of costs and
expenses relating to brand development, marketing and other promotional
activities, continued development of the Companys information technology
infrastructure, expansion of product offerings and development of relationships
with other businesses. Managements plans include increasing revenue and
generating positive cash flows from operations. Additionally, the Company improved its first
quarter 2003 cash flow and improved its cash position at March 31, 2003 due to
the sale of the CRM business in that quarter. The Company currently expects
that the principal sources of funding for its operating expenses, capital
expenditures and other liquidity needs will be a combination of its available
cash balances, funds generated from operations and its available credit
facilities. The Company believes that its currently available sources of funds
will be sufficient to fund its operations for at least the next 12 months.
However, there are a number of factors that may negatively impact the Companys
available sources of funds. The amount of cash generated from operations will
be dependent upon such factors as the successful execution of the Companys
business plan, the successful market acceptance of Applix Integra and worldwide
economic conditions. Should the Company not meet its plans to generate
sufficient revenue or positive cash flows, it may need to raise additional
capital or reduce spending. Failure to do so could have an adverse effect on
the Companys ability to continue as a going concern.

FACTORS THAT MAY AFFECT FUTURE RESULTS

OUR STOCK PRICE MAY BE ADVERSELY AFFECTED BY SIGNIFICANT FLUCTUATIONS IN
OUR QUARTERLY RESULTS.

We expect to experience significant fluctuations in our future results of
operations due to a variety of factors, many of which are outside of our
control, including:



| |  |  | demand for and market acceptance of our products and services;                                                                                        
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the size and timing of customer orders, particularly large orders, some of which represent more than 10% of total revenue during a particular quarter;

26



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| |  |  | 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
|
| |  |  | new government legislation or regulation.                                                                              

We typically receive a majority of our orders in the last month of each
fiscal quarter because our customers often delay purchases of products until
the end of the quarter and our sales organization and our individual sales
representatives strive to meet quarterly sales targets. As a result, any delay
in anticipated sales is likely to result in the deferral of the associated
revenue beyond the end of a particular quarter, which would have a significant
effect on our operating results for that quarter. In addition, most of our
operating expenses do not vary directly with net sales and are difficult to
adjust in the short term. As a result, if net sales for a particular quarter
were below expectations, we could not proportionately reduce operating expenses
for that quarter, and, therefore, that revenue shortfall would have a
disproportionate adverse effect on our operating results for that quarter. If
our operating results are below the expectations of public market analysts and
investors, the price of our common stock may fall significantly.

OUR FUTURE SUCCESS IS DEPENDENT IN LARGE PART ON THE SUCCESS OF APPLIX
INTEGRA.

We have devoted a substantial amount of resources to the development and
marketing of our new Applix Integra product. We believe that our future
financial performance will be dependent in large part on the success of Applix
Integra. Because Applix Integra just became available for commercial shipments
on October 21, 2002, we cannot yet assess its market acceptance or predict with
accuracy the amount of revenue it will generate.

WE MAY NOT BE ABLE TO FULFILL ANY FUTURE CAPITAL NEEDS.

We have incurred losses from continuing operations for the last several
years. Operating losses and negative cash flows may continue because of costs
and expenses relating to brand development, marketing and other promotional
activities, continued development of our information technology infrastructure,
expansion of product offerings and development of relationships with other
businesses. Although we made progress throughout 2002 towards decreasing
operating losses as compared to 2001, there can be no assurance that we will
achieve a profitable level of operations in the future.

We believe, based upon our current business plan, that our current cash
and cash equivalents, funds expected to be generated from operations and
available credit lines should be sufficient to fund our operations as planned
for at least the next twelve months. However, we may need additional funds
sooner than anticipated if our performance deviates significantly from our
current business plan or if there are significant changes in competitive or
other market factors. If we elect to raise additional operating funds, such
funds, whether from equity or debt financing or other sources, may not be
available, or available on terms acceptable to us.

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.

The business performance management and business intelligence markets,
including in interactive planning, budgeting and analytics are characterized by
rapid technological change, frequent new product enhancements, uncertain
product life cycles, changes in customer demands and evolving industry
standards. Our products could be rendered obsolete if products based on new
technologies are introduced or new industry standards emerge.

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Enterprise computing environments are inherently complex. As a result, we
cannot accurately estimate the life cycles of our products. New products and
product enhancements can require long development and testing periods, which
requires us to hire and retain technically competent personnel. Significant
delays in new product releases or significant problems in installing or
implementing new products could seriously damage our business. We have, on
occasion, experienced delays in the scheduled introduction of new and enhanced
products and may experience similar delays in the future.

Our future success depends upon our ability to enhance existing products,
develop and introduce new products, satisfy customer requirements and achieve
market acceptance. We may not successfully identify new product opportunities
and develop and bring new products to market in a timely and cost-effective
manner.

ATTEMPTS TO EXPAND BY MEANS OF BUSINESS COMBINATIONS AND ACQUISITIONS MAY
NOT BE SUCCESSFUL AND MAY DISRUPT OUR OPERATIONS OR HARM OUR REVENUES.

We have in the past, and may in the future, buy businesses, products or
technologies. In the event of any future purchases, we will face additional
financial and operational risks, including:



| |  |  | 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 rely heavily on key personnel throughout the organization. We recently
engaged David Mahoney, one of our directors, to serve as President and Chief
Executive Officer. The transition of these positions to Mr. Mahoney may result
in the distraction of management and a delay in our ability to execute our
business strategies. The loss of any of our other members of management, or any
of our staff of sales and development professionals, could prevent us from
successfully executing our business strategies. Any such loss of technical
knowledge and industry expertise could negatively impact our success. Moreover,
the loss of any critical employees or a group thereof, particularly to a
competing organization, could cause us to lose market share, and the Applix
brand could be diminished.

WE MAY NOT BE ABLE TO MEET THE OPERATIONAL AND FINANCIAL CHALLENGES THAT
WE ENCOUNTER IN OUR INTERNATIONAL OPERATIONS.

Due to the Companys significant international operations, we face a
number of additional challenges associated with the conduct of business
overseas. For example:



| |  |  | 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;                

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| |  |  | 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.

BECAUSE THE BUSINESS PERFORMANCE MANAGEMENT AND BUSINESS INTELLIGENCE
MARKETS ARE HIGHLY COMPETITIVE, WE MAY NOT BE ABLE TO SUCCEED.

If we fail to compete successfully in the highly competitive and rapidly
changing business performance management and business intelligence markets, we
may not be able to succeed. We face competition primarily from business
intelligence firms. We also face competition from traditional call center
technology providers, large enterprise application software vendors,
independent systems integrators, consulting firms and in-house IT departments.
Because barriers to entry into the software market are relatively low, we
expect to face additional competition in the future.

Many of our competitors can devote significantly more resources to the
development, promotion and sale of products than we can, and many of them can
respond to new technologies and changes in customer preferences more quickly
than we can. Further, other companies with resources greater than ours may
attempt to gain market share in the customer analytics and business planning
markets by acquiring or forming strategic alliances with our competitors.

BECAUSE WE DEPEND ON THIRD-PARTY SYSTEMS INTEGRATORS TO SELL OUR PRODUCTS,
OUR OPERATING RESULTS WILL LIKELY SUFFER IF WE DO NOT DEVELOP AND MAINTAIN
THESE RELATIONSHIPS.

We rely in part on systems integrators to promote, sell and implement our
solutions. If we fail to maintain and develop relationships with systems
integrators, our operating results will likely suffer. In addition, if we are
unable to rely on systems integrators to install and implement our products, we
will likely have to provide these services ourselves, resulting in increased
costs. As a result, our results of operation may be harmed. In addition,
systems integrators may develop, market or recommend products that compete with
our products. Further, if these systems integrators fail to implement our
products successfully, our reputation may be harmed.

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.

The timing of our revenue is difficult to predict in large part due to the
length and variability of the sales cycle for our products. Companies often
view the purchase of our products as a significant and strategic decision. As a
result, companies tend to take significant time and effort evaluating our
products. The amount of time and effort depends in part on the size and the
complexity of the deployment. This evaluation process frequently results in a
lengthy sales cycle, typically ranging from three to six months. During this
time we may incur substantial sales and marketing expenses and expend
significant management efforts. We do not recoup these investments if the
prospective customer does not ultimately license our product.

OUR BUSINESS WILL BE HARMED IF WE ARE UNABLE TO PROTECT OUR TRADEMARKS
FROM MISUSE BY THIRD PARTIES.

Our collection of trademarks is important to our business. The protective
steps we take or have taken may be inadequate to deter misappropriation of our
trademark rights. We have filed applications for registration of some of our
trademarks in the United States. Effective trademark protection may not be
available in every country in which we offer or intend to offer our products
and services. Failure to protect our trademark rights adequately could damage
our brand identity and impair our ability to compete effectively. Furthermore,
defending or enforcing our trademark rights could result in the expenditure of
significant financial and managerial resources.

OUR PRODUCTS MAY CONTAIN DEFECTS THAT MAY BE COSTLY TO CORRECT, DELAY
MARKET ACCEPTANCE OF OUR PRODUCTS AND EXPOSE US TO LITIGATION.

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Despite testing by Applix and our customers, errors may be found in our
products after commencement of commercial shipments. If errors are discovered,
we may have to make significant expenditures of capital to eliminate them and
yet may not be able to successfully correct them in a timely manner or at all.
Errors and failures in our products could result in a loss of, or delay in,
market acceptance of our products and could damage our reputation and our
ability to convince commercial users of the benefits of our products.

In addition, failures in our products could cause system failures for our
customers who may assert warranty and other claims for substantial damages
against us. Although our license agreements with our customers typically
contain provisions designed to limit our exposure to potential product
liability claims, it is possible that these provisions may not be effective or
enforceable under the laws of some jurisdictions. Our insurance policies may
not adequately limit our exposure to this type of claim. These claims, even if
unsuccessful, could be costly and time-consuming to defend.




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a multinational corporation, the Company is exposed to market risk,
primarily from changes in foreign exchange rates. These exposures may change
over time and could have a material adverse impact on the Companys financial
results. Most of the Companys international sales through its subsidiaries are
denominated in foreign currencies. Relative to foreign currency exposures
existing at March 31, 2003, a 10% unfavorable movement in foreign exchange
rates would not expose the Company to significant losses in earnings or cash
flows. To date, foreign currency fluctuations have not had a material effect on
the Companys operating results.

At March 31, 2003, the Company held $12,104,000 in cash and cash
equivalents, including $933,000 of restricted cash, consisting primarily of
money market funds. Cash and cash equivalents are classified as available for
sale and carried at fair value, which approximates cost. A hypothetical 10%
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 in cash and cash equivalents since March 31, 2003.




ITEM 4. CONTROLS AND PROCEDURES



| | 1. |  | Evaluation of disclosure controls and procedures. Based on their
evaluation of the Companys disclosure controls and procedures (as
defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange
Act of 1934) as of a date within 90 days of the filing date of this
Quarterly Report on Form 10-Q, the Companys chief executive officer and
chief financial officer have concluded that the Companys disclosure
controls and procedures are designed to ensure that information required
to be disclosed by the Company in the reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the SECs rules and forms and are
operating in an effective manner.
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Changes in internal controls.There were no significant changes in the
Companys internal controls or in other factors that could significantly
affect these controls subsequent to the date of their most recent
evaluation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                




PART II. OTHER INFORMATION




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

|        |  |                                                                                                                                                  
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                  
|Number  |  | Description                                                                                                                                      
|        |  |                                                                                                                                                  
|10.19   |  | Executive Change-in-Control Agreement between the Registrant and Craig Cervo, dated April 9, 2003                                                
|        |  |                                                                                                                                                  
|99.1    |  | 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

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|        |  |                                                                                                                                                  
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                  
|Number  |  | Description                                                                                                                                      
|        |  |                                                                                                                                                  
|99.2    |  | 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



|(b) |  | Reports on Form 8-K.The Company filed a Current Report on Form 8-K on February 5, 2003 relating to the sale of the CRM business.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report on Form 10-Q to be signed on its behalf
by the undersigned thereunto duly authorized.

APPLIX, INC.

|                   |  |                                                                                                                                          
|------------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------
|Date: May 15, 2003 |  | /s/ Walt Hilger
Walt Hilger
Chief Financial Officer and Treasurer (Duly Authorized
Officer andPrincipal Financial and Accounting Officer)

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CERTIFICATIONS

I, David C. Mahoney, certify that:



| | 1. | I have reviewed this quarterly report on Form 10-Q of Applix, Inc.;                                                                                                                                                                                                                                                           
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. | Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the
period covered by this quarterly report;
|
| | 3. | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|
| | 4. | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:                                                                                                     



| | a. |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report; and                                                                                                                          
|
| | c. |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of March 9, 2003;                                                                                                                              



| | 5. | The registrants other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a. |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material weaknesses
in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



| | 6. | The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                    |  |                                                              
|------------------- |  | -------------------------------------------------------------
|Dated: May 15, 2003 |  | /s/ David C. Mahoney
David C. Mahoney
Chief Executive Officer

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CERTIFICATIONS

I, Walt Hilger, certify that:



| | 1. | I have reviewed this quarterly report on Form 10-Q of Applix, Inc.;                                                                                                                                                                                                                                                           
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. | Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the
period covered by this quarterly report;
|
| | 3. | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|
| | 4. | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:                                                                                                     



| | a. |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report; and                                                                                                                          
|
| | c. |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of March 9, 2003;                                                                                                                              



| | 5. | The registrants other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a. |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material weaknesses
in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



| | 6. | The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                    |  |                                                    
|------------------- |  | ---------------------------------------------------
|Dated: May 15, 2003 |  | /s/ Walt Hilger
Walt Hilger
Chief Financial Officer

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EXHIBIT INDEX

|        |  |                                                                                                                                                  
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                  
|Number  |  | Description                                                                                                                                      
|        |  |                                                                                                                                                  
|10.19   |  | Executive Change-in-Control Agreement between the Registrant and Craig Cervo, dated April 9, 2003                                                
|        |  |                                                                                                                                                  
|99.1    |  | 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
|        |  |                                                                                                                                                  
|99.2    |  | 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

35