##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the quarterly period ended June 30, 2005
 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 of
incorporation or organization)
    
    (I.R.S. Employer Identification
Number)
 289 Turnpike Road, Westborough, Massachusetts 01581
(Address of principal executive offices)
 (508) 870-0300
(Registrants telephone number)
 Indicate by check whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
 Indicate by check whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Securities Exchange Act of 1934). Yes o No þ
 As of August 4, 2005, the Registrant had 14,733,144 outstanding shares of common stock.




---



APPLIX, INC.
 Form 10-Q
 For the Quarterly Period Ended June 30, 2005
 Table of Contents
 PageNoPart I  Financial InformationItem 1. Financial Statements (Unaudited):Condensed Consolidated Balance Sheets as of June 30, 2005 and December 31, 2004
    
    
    3Condensed Consolidated Statements of Operations for the three and six months ended June 30,
2005 and 2004
    
    
    4Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2005 and 2004
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    23Item 4. Controls and Procedures
    
    
    23Part II  Other Information
    
    
    25Item 4. Submission of Matters to a Vote of Security Holders
    
    
    25Item 6. Exhibits
    
    
    26Signature
    
    
    27EX-31.1 Section 302 Certification of CEOEX-31.2 Section 302 Certification of CFOEX-32.1 Section 906 Cetification of CEOEX-32.2 Section 906 Certification of CFO
    2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
 Applix, Inc.
 
 Condensed Consolidated Balance Sheets
 (In thousands, except share and par value amounts)
 June 30,
    
    December 31,2005
    
    2004ASSETSCurrent assets:Cash and cash equivalents
    
    $
    18,448
    
    
    $
    15,924Short-term investments
    
    
    2,880
    
    
    
    Accounts receivable, less allowance for doubtful accounts of $299 and $227,
respectively
    
    
    5,247
    
    
    
    6,171Other current assets
    
    
    1,102
    
    
    
    1,207Deferred tax assets
    
    
    460
    
    
    
    496Total current assets
    
    
    28,137
    
    
    
    23,798Restricted cash
    
    
    500
    
    
    
    400Property and equipment, net
    
    
    637
    
    
    
    580Other assets
    
    
    645
    
    
    
    687Intangible asset, net of accumulated amortization of $1,062 and $938, respectively
    
    
    438
    
    
    
    562Goodwill
    
    
    1,158
    
    
    
    1,158TOTAL ASSETS
    
    $
    31,515
    
    
    $
    27,185LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    1,188
    
    
    $
    795Accrued expenses
    
    
    5,737
    
    
    
    5,177Accrued restructuring expenses, current portion
    
    
    46
    
    
    
    112Deferred revenues
    
    
    8,051
    
    
    
    8,421Total current liabilities
    
    
    15,022
    
    
    
    14,505Accrued restructuring expenses, long term portion
    
    
    217
    
    
    
    261Other long term liabilities
    
    
    133
    
    
    
    181Commitments and contingencies (Note 6)Stockholders equity:Preferred stock, $.01 par value; 1,000,000 shares authorized; none issued and
outstandingCommon stock, $.0025 par value; 30,000,000 shares authorized; 14,657,372 and
14,290,584 shares issued and outstanding, respectively
    
    
    37
    
    
    
    36Additional paid-in capital
    
    
    56,196
    
    
    
    54,348Accumulated deficit
    
    
    (38,364
    )
    
    
    (40,673
    )Accumulated other comprehensive loss
    
    
    (1,726
    )
    
    
    (1,473
    )Total stockholders equity
    
    
    16,143
    
    
    
    12,238TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    31,515
    
    
    $
    27,185
  3




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Applix, Inc.
 
 Condensed Consolidated Statements of Operations
 (In thousands, except per share amounts)
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Revenues:Software license
    
    $
    5,026
    
    
    $
    3,692
    
    
    $
    8,473
    
    
    $
    7,459Professional services and maintenance
    
    
    4,406
    
    
    
    3,571
    
    
    
    8,607
    
    
    
    7,187Total revenues
    
    
    9,432
    
    
    
    7,263
    
    
    
    17,080
    
    
    
    14,646Cost of revenues
    
    
    1,021
    
    
    
    1,128
    
    
    
    2,002
    
    
    
    2,357Gross margin
    
    
    8,411
    
    
    
    6,135
    
    
    
    15,078
    
    
    
    12,289Operating expenses:Sales and marketing
    
    
    3,915
    
    
    
    2,645
    
    
    
    7,310
    
    
    
    5,158Product development
    
    
    1,294
    
    
    
    1,229
    
    
    
    2,445
    
    
    
    2,555General and administrative (includes $15 of
stock-based compensation for the three
months ended June 30, 2005 and 2004,
respectively, and $30 of stock-based
compensation for the six months ended June
30, 2005 and 2004, respectively)
    
    
    1,406
    
    
    
    1,488
    
    
    
    2,767
    
    
    
    3,096Restructuring
    
    
    
    
    
    
    (27
    )
    
    
    
    
    
    
    (27
    )Amortization of an acquired intangible asset
    
    
    62
    
    
    
    62
    
    
    
    125
    
    
    
    125Total operating expenses
    
    
    6,677
    
    
    
    5,397
    
    
    
    12,647
    
    
    
    10,907Operating income
    
    
    1,734
    
    
    
    738
    
    
    
    2,431
    
    
    
    1,382Non-operating income (expense):Interest and other income (expense), net
    
    
    114
    
    
    
    (181
    )
    
    
    94
    
    
    
    (34
    )Income before income taxes
    
    
    1,848
    
    
    
    557
    
    
    
    2,525
    
    
    
    1,348Provision for income taxes
    
    
    120
    
    
    
    88
    
    
    
    166
    
    
    
    115Income from continuing operations
    
    
    1,728
    
    
    
    469
    
    
    
    2,359
    
    
    
    1,233Discontinued operations:Loss from discontinued operations
    
    
    (30
    )
    
    
    (18
    )
    
    
    (50
    )
    
    
    (44
    )Net income
    
    $
    1,698
    
    
    $
    451
    
    
    $
    2,309
    
    
    $
    1,189Net income (loss) per share, basic and diluted:Continuing operations, basic
    
    $
    0.12
    
    
    $
    0.03
    
    
    $
    0.16
    
    
    $
    0.09Continuing operations, diluted
    
    $
    0.11
    
    
    $
    0.03
    
    
    $
    0.14
    
    
    $
    0.08Discontinued operations, basic and diluted
    
    $
    (0.00
    )
    
    $
    (0.00
    )
    
    $
    (0.00
    )
    
    $
    (0.00
    )Net income per share, basic
    
    $
    0.12
    
    
    $
    0.03
    
    
    $
    0.16
    
    
    $
    0.09Net income per share, diluted
    
    $
    0.11
    
    
    $
    0.03
    
    
    $
    0.14
    
    
    $
    0.08Weighted average number of shares outstanding:Basic
    
    
    14,627
    
    
    
    14,157
    
    
    
    14,542
    
    
    
    13,812Diluted
    
    
    16,129
    
    
    
    15,724
    
    
    
    16,284
    
    
    
    15,382
  4




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Applix, Inc.
 
 Condensed Consolidated Statements of Cash Flows
 (In thousands)
 Six Months EndedJune 30,2005
    
    2004Cash flows from operating activities:Net income
    
    $
    2,309
    
    
    $
    1,189Adjustments to reconcile net income to net cash provided
by (used in) operating activities:Depreciation
    
    
    143
    
    
    
    340Amortization
    
    
    125
    
    
    
    390Provision for doubtful accounts
    
    
    90
    
    
    
    (26
    )Deferred gain on sale of subsidiary
    
    
    
    
    
    
    (195
    )Non-cash stock compensation expense
    
    
    30
    
    
    
    30Non-cash restructuring credit
    
    
    
    
    
    
    (27
    )Changes in operating assets and liabilities:Decrease in accounts receivable
    
    
    467
    
    
    
    1,476Decrease in prepaid and other current assets
    
    
    56
    
    
    
    132Increase in other assets
    
    
    (5
    )
    
    
    Increase in accounts payable
    
    
    327
    
    
    
    294Increase (decrease) in accrued expenses
    
    
    761
    
    
    
    (861
    )Decrease in accrued restructuring expenses
    
    
    (110
    )
    
    
    (3,400
    )Decrease in other liabilities
    
    
    (55
    )
    
    
    (31
    )Decrease in deferred revenues
    
    
    (31
    )
    
    
    (733
    )Cash provided by (used in) operating activities
    
    
    4,107
    
    
    
    (1,422
    )Cash flows from investing activities:Property and equipment expenditures
    
    
    (65
    )
    
    
    (173
    )Proceeds from sale of subsidiary
    
    
    
    
    
    
    195(Increase) decrease in restricted cash
    
    
    (100
    )
    
    
    417Purchases of short-term investments
    
    
    (4,530
    )
    
    
    Sales of short-term investments
    
    
    1,650
    
    
    
    Cash (used in) provided by investing activities
    
    
    (3,045
    )
    
    
    439Cash flows from financing activities:Proceeds from issuance of common stock to affiliate
    
    
    
    
    
    
    3,000Proceeds from issuance of common stock under stock plans
    
    
    897
    
    
    
    1,494Proceeds from notes receivable
    
    
    892
    
    
    
    232Cash provided by financing activities
    
    
    1,789
    
    
    
    4,726Effect of exchange rate changes on cash
    
    
    (327
    )
    
    
    191Increase in cash and cash equivalents
    
    
    2,524
    
    
    
    3,934Cash and cash equivalents at beginning of period
    
    
    15,924
    
    
    
    9,241Cash and cash equivalents at end of period
    
    $
    18,448
    
    
    $
    13,175Supplemental disclosure of cash flow informationCash paid for income tax
    
    $
    252
    
    
    $
    408
  5




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APPLIX, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1. The Company
  2. Summary of Significant Accounting Policies
 Basis of Presentation
  Use of Estimates
  Reclassifications
  Revenue Recognition
  
    
    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;
 6




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
    
    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.
      7




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Cash and Cash Equivalents
  8




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Short-term Investments
  Stock-Based Compensation
   Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Net income as reported
    
    $
    1,698
    
    
    $
    451
    
    
    $
    2,309
    
    
    $
    1,189Add: Total stock-based
employee compensation
expense included in
reported net income, net
of related tax effects
    
    
    15
    
    
    
    15
    
    
    
    30
    
    
    
    30Deduct: Total stock-based
employee compensation
expense not included in
reported net income,
determined under fair
value based method for all
awards, net of related tax
effects
    
    
    (407
    )
    
    
    (172
    )
    
    
    (855
    )
    
    
    (744
    )Pro forma net income
    
    $
    1,306
    
    
    $
    294
    
    
    $
    1,484
    
    
    $
    475Net income per share:Basic  as reported
    
    $
    0.12
    
    
    $
    0.03
    
    
    $
    0.16
    
    
    $
    0.09Diluted  as reported
    
    $
    0.11
    
    
    $
    0.03
    
    
    $
    0.14
    
    
    $
    0.08Basic  pro forma
    
    $
    0.09
    
    
    $
    0.02
    
    
    $
    0.10
    
    
    $
    0.03Diluted  pro forma
    
    $
    0.08
    
    
    $
    0.02
    
    
    $
    0.09
    
    
    $
    0.03Pro forma weighted average
number of shares
outstanding:Basic
    
    
    14,627
    
    
    
    14,157
    
    
    
    14,542
    
    
    
    13,812Diluted
    
    
    15,747
    
    
    
    15,270
    
    
    
    15,747
    
    
    
    14,949
  2005
    
    2004Expected life (years)
    
    
    4
    
    
    
    4Expected stock price volatility
    
    
    89.9
    %
    
    
    79.4
    %Risk free interest rate
    
    
    3.90
    %
    
    
    3.47
    %
 New Accounting Pronouncements
 9




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##### Table of Contents



Share-Based Payment Accounting for Stock-Based Compensation, Accounting for Stock Issued to Employees,
  3. Net Income (Loss) Per Share
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004(In thousands, exceptper share data)Numerator:Income from continuing operations
    
    $
    1,728
    
    
    $
    469
    
    
    $
    2,359
    
    
    $
    1,233Loss from discontinued operations
    
    
    (30
    )
    
    
    (18
    )
    
    
    (50
    )
    
    
    (44
    )Net income
    
    $
    1,698
    
    
    $
    451
    
    
    $
    2,309
    
    
    $
    1,189Denominator:Denominator for basic net income per share Weighted average shares outstanding
    
    
    14,627
    
    
    
    14,157
    
    
    
    14,542
    
    
    
    13,812Dilutive effect of assumed exercise of stock options
    
    
    1,502
    
    
    
    1,567
    
    
    
    1,742
    
    
    
    1,570Denominator for diluted net income (loss) per share
    
    
    16,129
    
    
    
    15,724
    
    
    
    16,284
    
    
    
    15,382Basic net income (loss) per shareContinuing operations
    
    $
    0.12
    
    
    $
    0.03
    
    
    $
    0.16
    
    
    $
    0.09Discontinued operations
    
    $
    (0.00
    )
    
    $
    (0.00
    )
    
    $
    (0.00
    )
    
    $
    (0.00
    )Total net income per share
    
    $
    0.12
    
    
    $
    0.03
    
    
    $
    0.16
    
    
    $
    0.09Diluted net income (loss) per shareContinuing operations
    
    $
    0.11
    
    
    $
    0.03
    
    
    $
    0.14
    
    
    $
    0.08Discontinued operations
    
    $
    (0.00
    )
    
    $
    (0.00
    )
    
    $
    (0.00
    )
    
    $
    (0.00
    )Total net income per share
    
    $
    0.11
    
    
    $
    0.03
    
    
    $
    0.14
    
    
    $
    0.08
  4. Short-Term Investments
 10




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June 30, 2005(In thousands)Unrealized
    
    UnrealizedCost Basis
    
    Gains
    
    Losses
    
    Fair ValueDebt securities
    
    $
    2,882
    
    
    $
    
    
    
    $
    (2
    )
    
    $
    2,880Total
    
    $
    2,882
    
    
    $
    
    
    
    $
    (2
    )
    
    $
    2,880
  5. Comprehensive Income (Loss)
  Three Months
    
    Six MonthsEnded
    
    EndedJune 30,
    
    June 30,(In thousands)
    
    (In thousands)2005
    
    2004
    
    2005
    
    2004Net income
    
    $
    1,698
    
    
    $
    451
    
    
    $
    2,309
    
    
    $
    1,189Other comprehensive (loss) income
    
    
    (189
    )
    
    
    443
    
    
    
    (253
    )
    
    
    382Total comprehensive income
    
    $
    1,509
    
    
    $
    894
    
    

    $
    2,056
    
    
    $
    1,571
 6. Commitments and Contingencies
 Contingencies
    7. Restructuring Expenses
  11




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Balance at
    
    
    
    
    
    
    
    
    
    Balance atDecember 31,
    
    Restructuring
    
    
    
    
    
    June 30,2004
    
    Expenses
    
    Payments
    
    2005Facility exit costs
    
    $
    373,000
    
    
    
    
    
    
    $
    (110,000
    )
    
    $
    263,000Total
    
    $
    373,000
    
    
    
    
    
    
    $
    (110,000
    )
    
    $
    263,000
 8. Discontinued Operations
  9. Stockholders Equity
  10. Deferred Gain
  
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 OVERVIEW OF THE COMPANYS OPERATIONS
  12




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CRITICAL ACCOUNTING POLICIES AND ESTIMATES
   
    
    Revenue Recognition
    
    Accounts Receivable and Bad Debt
    
    Goodwill and Other Intangible Assets and Related Impairment
    
    Restructuring
    
    Deferred Income Taxes
  13




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##### Table of Contents



RESULTS OF OPERATIONS
 Three and Six Months Ended June 30, 2005 and 2004
 Revenues
 (In thousands, except percentages)Three Months Ended June 30,
    
    Six Months Ended June 30,Percent
    
    
    
    
    
    Percent
    
    
    
    
    
    Percent
    
    
    
    
    
    Percentof
    
    
    
    
    
    of
    
    
    
    
    
    of
    
    
    
    
    
    of2005
    
    Revenues
    
    2004
    
    Revenues
    
    2005
    
    Revenues
    
    2004
    
    RevenuesSoftware License Revenues
    
    $
    5,026
    
    
    
    53
    %
    
    $
    3,692
    
    
    
    51
    %
    
    $
    8,473
    
    
    
    50
    %
    
    $
    7,459
    
    
    
    51
    %Professional Services Revenues
    
    
    544
    
    
    
    6
    %
    
    
    356
    
    
    
    5
    %
    
    
    1,010
    
    
    
    6
    %
    
    
    821
    
    
    
    6
    %Maintenance Revenues
    
    
    3,862
    
    
    
    41
    %
    
    
    3,215
    
    
    
    44
    %
    
    
    7,597
    
    
    
    44
    %
    
    
    6,366
    
    
    
    43
    %Total Professional Services
and Maintenance Revenues
    
    
    4,406
    
    
    
    47
    %
    
    
    3,571
    
    
    
    49
    %
    
    
    8,607
    
    
    
    50
    %
    
    
    7,187
    
    
    
    49
    %Total Revenues
    
    $
    9,432
    
    
    
    100
    %
    
    $
    7,263
    
    
    
    100
    %
    
    $
    17,080
    
    
    
    100
    %
    
    $
    14,646
    
    
    
    100
    %
  Software License Revenues
   14




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Professional Services and Maintenance
  Cost of Revenues
 (In thousands, except percentages)Three Months Ended June 30,
   
    Six Months Ended June 30,2005
    
    
    
    
    
    2004

    
    
    
    
    
    2005
    
    
    
    
    
    2004Cost of Software
License Revenues
    
    $
    33
    
    
    
    
    
    
    $
    178
    
    
    
    
    
    
    $
    56
    
    
    
    
    
    
    $
    384Cost of Professional
Services Revenues and
Maintenance Revenues:Cost of Professional
Services Revenues
    
    
    379
    
    
    
    
    
    
    
    234
    
    
    
    
    
    
    
    789
    
    
    
    
    
    
    
    581Cost of Maintenance
Revenues
    
    
    609
    
    
    
    
    
    
    
    716
    
    
    
    
    
    
    
    1,157
    
    
    
    
    
    
    
    1,392Total
    
    
    988
    
    
    
    
    
    
    
    950
    
    
    
    
    
    
    
    1,946
    
    
    
    
    
    
    
    1,973Total Cost of Revenues
    
    $
    1,021
    
    
    
    
    
    
    $
    1,128
    
    
    
    
    
    
    $
    2,002
    
    
    
    
    
    
    $
    2,357Gross Margin:
    
    
    
    
    
    
    (A
    )
    
    
    
    
    
    
    (A
    )
    
    
    
    
    
    
    (A
    )
    
    
    
    
    
    
    (A
    )Software License
    
    $
    4,993
    
    
    
    99
    %
    
    $
    3,514
    
    
    
    95
    %
    
    $
    8,417
    
    
    
    99
    %
    
    $
    7,075
    
    
    
    95
    %Professional Services and
Maintenance:Professional Services
    
    
    165
    
    
    
    30
    %
    
    
    122
    
    
    
    34
    %
    
    
    221
    
    
    
    22
    %
    
    
    240
    
    
    
    29
    %Maintenance
    
    
    3,253
    
    
    
    84
    %
    
    
    2,499
    
    
    
    78
    %
    
    
    6,440
    
    
    
    85
    %
    
    
    4,974
    
    
    
    78
    %Total
    
    
    3,418
    
    
    
    78
    %
    
    
    2,621
    
    
    
    73
    %
    
    
    6,661
    
    
    
    77
    %
    
    
    5,214
    
    
    
    73
    %Total Gross Margin
    
    $
    8,411
    
    
    
    89
    %
    
    $
    6,135
    
    
    
    84
    %
    
    $
    15,078
    
    
    
    88
    %
    
    $
    12,289
    
    
    
    84
    %
 
 (A)
    
    Gross margins calculated as a percentage of related revenues. Cost of Software License Revenues
 15




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Cost of Professional Services and Maintenance Revenues
  Operating Expenses
 Three Months Ended June 30,
    
    Six Months Ended June 30,(In thousands, except percentages)Percent of
    
    
    
    
    
    Percent of
    
    
    
    
    
    Percent of
    
    
    
    
    
    Percent of2005
    
    Revenues
    
    2004
    
    Revenues
    
    2005
    
    Revenues
    
    2004
    
    RevenuesSales and marketing
    
    $
    3,915
    
    
    
    42
    %
    
    $
    2,645
    
    
    
    36
    %
    
    $
    7,310
    
    
    
    43
    %
    
    $
    5,158
    
    
    
    35
    %Product development
    
    
    1,294
    
    
    
    14
    %
    
    
    1,229
    
    
    
    17
    %
    
    
    2,445
    
    
    
    14
    %
    
    
    2,555
    
    
    
    17
    %General and administrative
    
    
    1,406
    
    
    
    15
    %
    
    
    1,488
    
    
    
    20
    %
    
    
    2,767
    
    
    
    16
    %
    
    
    3,096
    
    
    
    21
    %Restructuring
    
    
    
    
    
    
    
    %
    
    
    (27
    )
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    (27
    )
    
    
    
    %Amortization of acquired
intangible asset
    
    
    62
    
    
    
    1
    %
    
    
    62
    
    
    
    1
    %
    
    
    125
    
    
    
    1
    %
    
    
    125
    
    
    
    1
    %Total operating expenses
    
    $
    6,677
    
    
    
    71
    %
    
    $
    5,397
    
    
    
    74
    %
    
    $
    12,647
    
    
    
    74
    %
    
    $
    10,907
    
    
    
    74
    %
 Sales and Marketing Expenses
  16




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Product Development Expenses
   General and Administrative Expenses
  Restructuring
  Amortization of Acquired Intangible Asset
  Interest and Other Income (Expense), Net
 17




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Provision for Income Taxes
  LIQUIDITY AND CAPITAL RESOURCES
      18




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FACTORS THAT MAY AFFECT FUTURE RESULTS
 OUR STOCK PRICE MAY BE ADVERSELY AFFECTED BY SIGNIFICANT FLUCTUATIONS IN OUR QUARTERLY RESULTS.
  
    
    demand for and market acceptance of our products and services;
    
    the size and timing of customer orders, particularly large orders, during a particular quarter;
    
    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;
 19




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
    
    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 MAY NOT BE ABLE TO FULFILL ANY FUTURE CAPITAL NEEDS.
   IF WE DO NOT INTRODUCE NEW PRODUCTS AND SERVICES IN A TIMELY MANNER, OUR PRODUCTS AND SERVICES
WILL BECOME OBSOLETE, AND OUR OPERATING RESULTS WILL SUFFER.
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ATTEMPTS TO EXPAND BY MEANS OF BUSINESS COMBINATIONS AND ACQUISITIONS MAY NOT BE SUCCESSFUL AND
MAY DISRUPT OUR OPERATIONS OR HARM OUR REVENUES.
  
    
    difficulty in assimilating the operations, technology and personnel of acquired companies;
    
    disruption in our business because of the allocation of resources to consummate these transactions and the diversion of
managements attention from our core business;
    
    difficulty in retaining key technical and managerial personnel from acquired companies;
    
    dilution of our stockholders, if we issue equity to fund these transactions;
    
    assumption of increased expenses and liabilities;
    
    our relationships with existing employees, customers and business partners may be weakened or terminated as a result of
these transactions; and
    
    additional ongoing expenses associated with write-downs of goodwill and other purchased intangible assets.
 WE RELY HEAVILY ON KEY PERSONNEL.
  WE MAY NOT BE ABLE TO MEET THE OPERATIONAL AND FINANCIAL CHALLENGES THAT WE ENCOUNTER IN OUR
INTERNATIONAL OPERATIONS.
  
    
    we may have difficulty managing and administering a globally-dispersed business;
    
    fluctuations in exchange rates may negatively affect our operating results;
    
    we may not be able to repatriate the earnings of our foreign operations;
    
    we have to comply with a wide variety of foreign laws;
    
    we may not be able to adequately protect our trademarks overseas due to the uncertainty of laws and enforcement in certain
countries relating to the protection of intellectual property rights;
    
    reductions in business activity during the summer months in Europe and certain other parts of the world could negatively
impact the operating results of our foreign operations;
    
    export controls could prevent us from shipping our products into and from some markets;
    
    multiple and possibly overlapping tax structures could significantly reduce the financial performance of our foreign
operations;
 21




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
    
    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.
   BECAUSE WE DEPEND IN PART ON THIRD-PARTY SYSTEMS INTEGRATORS TO PROMOTE, SELL AND IMPLEMENT OUR
PRODUCTS, OUR OPERATING RESULTS WILL LIKELY SUFFER IF WE DO NOT DEVELOP AND MAINTAIN THESE
RELATIONSHIPS.
  BECAUSE THE SALES CYCLE FOR OUR PRODUCTS CAN BE LENGTHY, IT IS DIFFICULT FOR US TO PREDICT WHEN
OR WHETHER A SALE WILL BE MADE.
  OUR BUSINESS WILL BE HARMED IF WE ARE UNABLE TO PROTECT OUR TRADEMARKS FROM MISUSE BY THIRD
PARTIES.
  22




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OUR PRODUCTS MAY CONTAIN DEFECTS THAT MAY BE COSTLY TO CORRECT, DELAY MARKET ACCEPTANCE OF OUR
PRODUCTS AND EXPOSE US TO LITIGATION.
   
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   
 ITEM 4. CONTROLS AND PROCEDURES
  23




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24




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
  1)
    
    Election of two Class II Directors for a term of three years:
 FOR
    
    WITHHELDAlain J. Hanover
    
    
    13,218,807
    
    
    
    660,679Charles F. Kane
    
    
    13,587,443
    
    
    
    292,053
   2)
    
    Amend the Companys 2004 Equity Incentive Plan to increase the number of shares of
common stock authorized for issuance from 1,000,000 to 2,000,000 shares:
 FOR
    
    AGAINST
    
    ABSTAIN
    
    BROKER NON-VOTES4,173,223
    
    
    2,756,992
    
    
    
    47,373
    
    
    
    6,901,898
 3)
    
    Ratify the selection of Deloitte & Touche LLP as the Companys independent
registered public accountants for the fiscal year ending December 31, 2005:
 FOR
    
    AGAINST
    
    ABSTAIN
    
    BROKER NON-VOTES13,843,616
    
    
    15,265
    
    
    
    20,605
    
    
    
    0
 25




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##### Table of Contents



ITEM 6. EXHIBITS
 (a) Exhibits
 ExhibitNumber
    
    Description10.1*
    
    Applix, Inc. 2004 Equity Incentive Plan, as amended.31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/Rule
15d-14(a) of the Securities Exchange Act of 1934, as amended.31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/Rule
15d-14(a) of the Securities Exchange Act of 1934, as amended.32.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(b)/Rule
15d-14(b) of the Securities Exchange Act of 1934, as amended.32.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(b)/Rule
15d-14(b) of the Securities Exchange Act of 1934, as amended.
 *  Incorporated by
reference from the Registrant's Current Report on Form 8-K, as filed
with the Securities and
Exchange                   
              Commission on June 15, 2005.


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##### Table of Contents



SIGNATURE
  APPLIX, INC.Date: August 12, 2005
    /s/ Milton A. AlpernMilton A. AlpernChief Financial Officer and Treasurer (Duly
Authorized Officer and Principal Financial and
Accounting Officer) 27




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description10.1*
    
    Applix, Inc. 2004 Equity Incentive Plan, as amended.31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/Rule
15d-14(a) of the Securities Exchange Act of 1934, as amended.31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/Rule
15d-14(a) of the Securities Exchange Act of 1934, as amended.32.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(b)/Rule
15d-14(b) of the Securities Exchange Act of 1934, as amended.32.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(b)/Rule
15d-14(b) of the Securities Exchange Act of 1934, as amended.
 *  Incorporated by
reference from the Registrant's Current Report on Form 8-K, as filed
with the Securities and
Exchange                   
              Commission on June 15, 2005.


28