<PAGE>   1


                                    FORM 10-Q


                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549



             [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                      FOR THE QUARTER ENDED MARCH 31, 1998

                                       OR

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

                         COMMISSION FILE NUMBER 0-25040


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



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


                112 TURNPIKE ROAD, WESTBORO, MASSACHUSETTS 01581
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

                                  (508)870-0300
                         (REGISTRANT'S TELEPHONE NUMBER)

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.  YES  X    NO  
                                        ---      ---

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

     REGISTRANT HAD 10,162,967 SHARES OF COMMON STOCK, $.0025 PAR VALUE,
OUTSTANDING AT MAY 11, 1998.




<PAGE>   2


                                  APPLIX, INC.


                                      INDEX





                                                                       Page No.
                                                                       --------

Part I -  Financial Information

Item 1.  Consolidated Financial Statements:

     Consolidated Balance Sheets as of
       March 31, 1998 (unaudited) and December 31, 1997                    3


     Unaudited Consolidated Statements of Operations
       for the three months ended March 31, 1998 and 1997                  4


     Unaudited Consolidated Statements of Cash Flows
       for the three months ended March 31, 1998 and 1997                  5


     Notes to Consolidated Financial Statements                            6-7


Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                               8-11


Part II - Other Information


Item 6.  Exhibits and Reports on Form 8-K                                 12


Signature                                                                 13


                                      -2-


<PAGE>   3


PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

                                  APPLIX, INC.

                           CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>

                                                                                          MARCH 31,           DECEMBER 31,
                                                                                            1998                  1997
                                                                                         (UNAUDITED)
                                                                                         -----------          ------------
                                    ASSETS                    
                                    ------
<S>                                                                                        <C>                 <C>     
Current assets:
     Cash and cash equivalents                                                             $  6,100            $  7,639
     Short-term investments                                                                  13,963              13,729
     Accounts receivable, less allowance for doubtful accounts
          of $452 and $531 at March 31, 1998 and
          December 31, 1997, respectively                                                    11,787              12,147
     Other current assets                                                                     3,024               2,872
     Deferred tax asset                                                                       2,623               2,623
                                                                                           --------            --------
          Total current assets                                                               37,497              39,010

Property and equipment, at cost                                                              11,716              11,279
Less accumulated amortization and depreciation                                               (7,719)             (7,268)
                                                                                           --------            --------
     Net property and equipment                                                               3,997               4,011
Capitalized software costs, net of accumulated
       amortization of $1,585 and $1,368 at March 31, 1998
     and December 31, 1997, respectively                                                        480                 478
Other assets                                                                                    822                 866
                                                                                           --------            --------

          Total assets                                                                     $ 42,796            $ 44,365
                                                                                           ========            ========

                     LIABILITIES AND STOCKHOLDERS' EQUITY
                     ------------------------------------

Current liabilities:
     Accounts payable                                                                             $            $  2,676
                                                                                                                  2,355
     Accrued liabilities                                                                      4,916               5,550
     Deferred revenue                                                                         7,122               8,152
                                                                                           --------            --------
          Total current liabilities                                                          14,393              16,378

Stockholders' equity:
     Preferred stock, $0.01 par value; 1,000,000 shares authorized Common stock,
     $.0025 par value; 30,000,000 shares
          authorized; 10,433,117 and 10,344,063 shares issued at
          March 31, 1998 and December 31, 1997, respectively                                     26                  26
     Capital in excess of par value                                                          41,332              40,959
     Accumulated deficit                                                                    (11,733)            (11,923)
     Treasury stock, 278,698 shares, at cost                                                   (933)               (933)
     Foreign currency translation adjustment                                                   (289)               (142)
                                                                                           --------            --------
          Total stockholders' equity                                                         28,403              27,987
                                                                                           --------            --------

          Total liabilities and stockholders' equity                                       $ 42,796            $ 44,365
                                                                                           ========            ========
</TABLE>

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


                                      -3-


<PAGE>   4


                                  APPLIX, INC.


                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
                      (IN THOUSANDS EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>

                                                        THREE MONTHS ENDED
                                                       ---------------------
                                                       MARCH 31,   MARCH 31,
                                                         1998        1997
                                                       --------    ---------
<S>                                                    <C>         <C>     
License revenue                                        $ 8,887     $  7,510
Service revenue                                          3,732        3,586
                                                       -------     --------

     Total revenue                                      12,619       11,096

Cost of license revenue                                    645          813
Cost of service revenue                                  1,964        1,535
                                                       -------     --------

     Gross margin                                       10,010        8,748

Operating expenses:
     Selling and marketing                               6,594        6,946
     Research and development                            2,293        2,263
     General and administrative                          1,093          857
                                                       -------     --------

     Total operating expenses                            9,980       10,066
                                                       -------     --------

Operating income (loss)                                     30       (1,318)
Interest income, net                                       272          230
                                                       -------     --------

Net income (loss) before income taxes                      302       (1,088)

Provision (benefit) for income taxes                       112         (407)
                                                       -------     --------

Net  income (loss)                                     $   190     $   (681)
                                                       =======     ========

Basic earnings (loss) per share (see Note C)           $  0.02     $  (0.07)
                                                       =======     ========
Diluted earnings (loss) per share (see Note C)         $  0.02     $  (0.07)
                                                       =======     ========

Weighted average common and common equivalent shares
  outstanding:
     Basic                                              10,117        9,933
                                                       =======     ========
     Diluted                                            10,984        9,933
                                                       =======     ========
</TABLE>


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


                                      -4-


<PAGE>   5


                                  APPLIX, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>

                                                                   THREE MONTHS ENDED
                                                                -----------------------
                                                                MARCH 31,     MARCH 31,
                                                                  1998          1997
                                                                --------      ---------
<S>                                                            <C>           <C>      
Operating activities:
Net income (loss)                                               $   190      $   (681)
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
     Depreciation                                                   451           446
     Amortization of capitalized software costs                     217           258
     Amortization of goodwill                                        30           125
     Provision for doubtful accounts                                (79)          (12)
     Changes in operating assets and liabilities:
     Accounts receivable                                            439         3,038
     Other assets                                                  (138)          112
     Accounts payable                                              (321)       (1,413)
     Accrued liabilities                                           (608)       (2,323)
     Deferred revenue                                            (1,030)           16
                                                                -------      --------

     Cash used in operating activities                             (849)         (434)

Investing activities:
     Purchase of property and equipment                            (437)         (360)
     Capitalized software costs                                    (219)         (258)
     Purchase of short-term investments                          (9,484)           --
     Maturities of short-term investments                         9,250         9,250
                                                                -------      --------

     Cash used in investing activities                             (890)         (618)

Financing activities:
     Proceeds from exercise of incentive stock options and
        employee stock purchase plans                               373           443
     Principal payments under capital lease obligations             (26)           --
                                                                -------      --------

     Cash provided by financing activities                          347           443

     Effect of exchange rate changes on cash                       (147)           42
                                                                -------      --------

     Net decrease in cash and cash equivalents                   (1,539)         (567)

Cash and cash equivalents at beginning of period                  7,639        19,882
                                                                -------      --------

Cash and cash equivalents at end of period                      $ 6,100      $ 19,315
                                                                =======      ========

Supplemental disclosure of cash flow information:

Cash paid during the period for taxes                           $    27      $     44
                                                                =======      ========
</TABLE>


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


                                      -5-


<PAGE>   6



                                   APPLIX, INC.

                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A. NATURE OF BUSINESS:

     Applix is a leading provider of software for front office business
applications in managing customer interaction, real time decision support and
office productivity across globally networked, extended enterprise environments.
The Company provides cross-platform client/server, network-centric, webtop and
thin-client computing solutions throughout its core offerings. The solution
offered within customer interaction software (CIS) is Applix Enterprise. The
Company offers the following array of solutions within decision support software
(DSS): Applix TM1, real time multi-dimensional analysis software for financial
decision support systems; Applixware, an open suite of desktop and development
tools for accessing, analyzing and communicating information in real time;
Applix Office for UNIX and Windows/NT and Anyware Office for Java-based
desktops; and Applix Anyware, an application development and deployment solution
that leverages Java to customize and deploy Applix's full suite of applications.

B. BASIS OF PRESENTATION:
                            
     The accompanying unaudited consolidated financial statements have been
prepared by the Company in accordance with generally accepted accounting
principles. The preparation of financial statements in conformity with generally
accepted accounting principles 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 revenues and expenses during the
reporting period. Actual results could differ from those estimates. In the
opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments, consisting only of those of a normal
recurring nature, necessary for a fair presentation of the Company's financial
position, results of operations and cash flows at the dates and for the periods
indicated. While the Company believes that the disclosures presented are
adequate to make the information not misleading, these financial statements
should be read in conjunction with the audited consolidated financial statements
and related notes included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1997.

     The results of the three month period ended March 31, 1998 are not
necessarily indicative of the results to be expected for the full fiscal year.

C. COMPUTATION OF NET INCOME PER COMMON SHARE

     For the year ended December 31, 1997, the Company adopted Statement of
Accounting Standards No. 128 ("FAS 128") which requires the presentation of
Basic and Diluted earnings per share, which replaces primary and fully diluted
earnings per share. Earnings per share have been restated for all periods
presented to reflect the adoption of FAS 128. Basic net income (loss) per share
is computed using the weighted average number of common shares outstanding
during the period. Diluted net earnings per share is computed using the weighted
average number of common shares outstanding during the period, plus the dilutive
effect of common stock equivalents. Common stock equivalent shares consists of
stock options. The dilutive computations do not include common stock equivalents
for the quarter ended March 31, 1997 as their inclusion would be antidilutive.

D. SHORT-TERM INVESTMENTS

     All short-term investments are classified as available-for-sale, and are in
liquid high grade commercial paper. Those investments that are part of the
Company's cash management portfolio with original maturities of three months or
less are reported as cash equivalents.


                                      -6-


<PAGE>   7


                                  APPLIX, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

E. CHANGES IN ACCOUNTING PRINCIPLES
 
     Effective January 1, 1998, Applix adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income." This Statement requires
that all items recognized under accounting standards as components of
comprehensive earnings be reported in an annual financial statement that is
displayed with the same prominence as other annual financial statements. This
statement also requires that an entity classify items of other comprehensive
earnings by their nature in an annual financial statement. Other comprehensive
income or loss will include foreign currency translation adjustments.

                                          THREE MONTHS ENDED MARCH 31
                                          ---------------------------
                                              1998           1997
                                          ---------------------------

Net income (loss)                             $190          $(681)
Other comprehensive (loss) income             (147)            42
                                              ----          -----

Total comprehensive income (loss)             $ 43          $(639)
                                              ====          =====


F. CHANGES IN EQUITY

     For the quarter ended March 31, 1997, the basic and diluted earnings per
share calculation is the same due to a net loss for the quarter.

     For the quarter ended March 31, 1998 (in thousands except per share data)

                                                                  Per Share
                                       Income         Shares        Amount
                                       ------         ------      ---------

     Basic EPS                          $190          10,117         $0.02
     Effect of Dilutive Securities
      common stock options                --             867
                                        ----          ------         -----
     Diluted EPS
     Income available to common
      stockholders                      $190          10,984         $0.02
                                        ====          ======         =====

G. RECENTLY ISSUED ACCOUNTING STANDARD

     In June 1997, the Financial Accounting Standard Board also issued Statement
of Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS No. 131). SFAS No. 131 specifies new
guidelines for determining a company's operating segments and related
requirements for disclosure. The Company is in the process of evaluating the
impact of the new standard on the presentation of the financial statements and
the disclosures therein. The Statement will become effective for fiscal years
beginning after December 13, 1997. The Company will adopt the new standard for
the fiscal year ending December 31, 1998.


                                      -7-


<PAGE>   8


                                  APPLIX, INC.

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

RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE
MONTHS ENDED MARCH 31, 1997
                   
     License revenue increased 18% to $8,887,000 for the quarter ended March 31,
1998 from $7,510,000 for the quarter ended March 31, 1997. Domestic license
revenue decreased 16% to $4,029,000 from $4,824,000 as compared to the same
period in 1997. International license revenue increased 81% to $4,858,000 from
$2,686,000 for the same period in 1997. For the three months ended March 31,
1998 license revenue from the DSS product lines increased 21% to $6,883,000 (or
77% of total license revenue) from $5,710,000 (or 76% of total license revenue)
in 1997 and license revenue from the CIS product line increased 11% to
$2,004,000 (or 23% of total license revenue) from $1,800,000 (or 24% of total
license revenue) during the same period. The increase in the DSS license revenue
was due to an increase in TM1 revenue. License revenue from the financial
services sector decreased 9% to $2,438,000 from $2,669,000 for the quarter ended
March 31, 1997. License revenue from the government sector decreased 41% TO
$1,089,000 from $1,851,000 for the quarter ended March 31, 1997. Revenue from
the government sector has fluctuated significantly in the past, and the Company
expects fluctuations to continue. The Company's future operating results will be
dependent in significant part on increased acceptance and success of the
customer interaction software (CIS) which consists of Applix Enterprise.
                    
     Service revenue increased 4% to $3,732,000 (or 30% of total revenues) from
$3,586,000 (or 32% of total revenues) for the same period in 1997. This increase
was due to increased maintenance revenue from the Company's growing customer
base offset by a decrease in consulting revenue from the Applixware product
line.
                   
     Of the total revenue for the quarter ended March 31, 1998, 74% was derived
from the DSS product line, and 26% was derived from the CIS product line which
is consistent with the revenue mix for the quarter ended March 31, 1997.
                   
     Gross margin remained constant at 79% for the quarters ended March 31, 1998
and March 31, 1997. License revenue gross margin increased to 93% from 89% for
the same period in 1997 primarily due to a decrease in the costs of
documentation, royalties and capitalized software amortization. Service revenue
gross margin decreased to 47% for the quarter ended March 31, 1998 from 57% for
the quarter ended March 31, 1997, due to an increase in the number of support
employees servicing the growing customer base and the cost of outside
consultants used for the CIS product line.
                   
Selling and marketing expenses, which include domestic sales and marketing
expenses and the cost of the Company's international operations, decreased 5% to
$6,594,000 for the quarter ended March 31, 1998 from $6,946,000 for the quarter
ended March 31, 1997. The expense decrease was primarily due to a reduction in
headcount and a decrease in expenditures on marketing programs. These expenses
decreased as a percentage of total revenues to 52% for quarter ended March 31,
1998 from 63% for quarter ended March 31, 1997. The Company has refocused its
marketing investments on the emerging segments of the CIS and DSS product lines
during 1997. The Company expects to maintain the current investment levels in
these emerging segments for the remainder of 1998.
                   
     Research and development expenses, which consist primarily of employee
salaries, benefits and related expenses, increased 1% to $2,293,000 for the
quarter ended March 31, 1998 from $2,263,000 for the quarter ended March 31,
1997, but decreased as a percentage of total revenues to 18% for the quarter
ended March 31, 1998 from 20% for the quarter ended March 31, 1997. The increase
in these expenses was primarily due to increased cost of personnel. Total
research and development 


                                      -8-


<PAGE>   9


expenditures, including capitalized software costs, were $2,512,000, including
$219,000 in capitalized software development costs, or 20% of total revenues for
the quarter ended March 31, 1998 compared to $2,521,000, including $258,000 in
capitalized software development costs, or 23% of total revenues for the quarter
ended March 31, 1997.

     General and administrative expenses, which include the costs of the
finance, human resources and administrative functions, increased 28% to
$1,093,000 for the quarter ended March 31, 1998 from $857,000 for the same
period in 1997, and increased as a percentage of total revenues between these
periods to 9% from 8%. The increase in these expenses was primarily due an
increase in legal fees relating to certain recently concluded litigation.

     Interest income increased to $272,000 from $230,000 due to higher cash
balances available for investments. Cash, cash equivalents and short-term
investments were $20,063,000 as of March 31, 1998 which represents a decrease of
$1,304,000 from December 31, 1997.

     The Company recorded a provision for income taxes for the quarter ended
March 31, 1998 of $112,000 based on the Company's estimated annual effective tax
rate of 37%, compared to a benefit of $407,000 or 37% of net loss for the same
period in 1997.

LIQUIDITY AND CAPITAL RESOURCES

     The Company used funds from operations of $849,000 for the three months
ended March 31, 1998. An additional $890,000 was used in investing activities
for the purchase of equipment, short-term investments and in capitalized
software costs. The proceeds generated from the exercise of incentive stock
options and the employee stock purchase plan were $373,000. As of March 31,
1998, the Company had cash, cash equivalents and short-term investments of
$20,063,000 and working capital of $23,104,000.

     The Company believes that the funds currently available will be sufficient
to fund the Company's operations at least through the next twelve months. The
Company has no commitments or specific plans for any significant capital
expenditures in 1998.

     To date, inflation has not had a material adverse effect on the Company's
operating results.

FACTORS AFFECTING FUTURE OPERATING RESULTS

     This Form 10-Q contains a number of forward-looking statements. Any
statements contained herein (including statements to the effect that the Company
or its management "believes", "expects", "anticipates", "plans", and similar
expressions) that are not statements relating to historical matters should be
considered forward-looking statements. There are a number of important factors
that could cause actual events or the Company's actual results to differ
materially from those indicated by such forward-looking statements. These
factors include, without limitation, those set forth below.

     During the past several years, the Company has derived the substantial
majority of its revenue from its Applixware product family; however, Applixware
sales have been declining in recent quarters. The Company has recently expanded
its product offerings with the introduction of Applix Enterprise, based on
technology acquired in its acquisition of Target Systems Corporation in late
1995, and Applix TM1, acquired through its acquisition of Sinper Corporation, in
late 1996. In addition, the Company has recently developed and introduced the
Applix Anyware product line, which delivers the functionality of Applixware,
Applix TM1 and Applix Enterprise to "thin-client" computing environments (i.e.,
systems running a Java-enabled browser such as Netscape Navigator or Microsoft
Explorer). The future success of the Company is substantially dependent upon
these newer product lines, and there can be no assurance that these new product
lines will achieve the sales levels anticipated by the Company. In addition, the
short-term financial performance of the Company will be largely contingent on
its ability to continue to generate substantial revenue and profit from its
Applixware product line until its newer product lines achieve greater revenue
and profitability, and there can be no assurance that the Company will be able
to do so. Moreover, the existence of a number of different product lines
presents management, sales and 


                                      -9-


<PAGE>   10


marketing, and product development challenges, and there can be no assurance
that the Company will be successful in addressing these challenges.

     The Company's DSS product line is marketed as real time decision support
solutions. Accordingly, the Company's future success is substantially dependent
upon the growth of the demand for real time decision support solutions in a
number of industry sectors and the Company's ability to identify this demand,
develop solutions for the industry-specific needs and successfully market its
products to customers requiring such solutions. In addition, the Company's
success within any particular market for real time decision support applications
is dependent in large part upon its ability to establish strategic marketing
relationships with leading vendors within that market.
                   
     The Company's financial performance will also depend significantly on sales
of the Applix Enterprise product line, which addresses the CIS market. The
Company believes this market is growing rapidly, but the Company is a relatively
new entrant into this market and faces intense competition from larger companies
such as Remedy Corporation, Vantive Corporation, Clarify, Inc., Siebel Systems,
Inc. and others.
                   
     Substantially all of the Applixware licenses sold by the Company are for
use on UNIX operating systems. As a result, the Company's financial performance
is significantly dependent upon the continued market acceptance of this
operating system and continued sales of UNIX-based workstations, particularly by
Sun Microsystems. With newer operating systems that permit 32 bit processing on
the desktop, such as Microsoft Windows/NT and Windows 95, the Company is now
competing directly with vendors of PC software applications such as Microsoft,
Lotus and Corel. In addition, the Company's Applix TM1 product line competes
with product offerings from Oracle Corporation and Arbor Software. This
represents a more competitive environment than the Company has historically
faced in its UNIX market and will likely result in lower prices and lower gross
margins for the Company's products.
                   
     For the Company's Applix TM1 product line, the Company relies significantly
on original equipment manufacturers (OEMs) to distribute products. The Company's
revenue is dependent, among other things, upon the ability of the OEMs to sell
the Company's products to end-users. Factors affecting the ability of these
distribution channels to develop and sell their products include competition,
their ability to offer products that meet user requirements at acceptable prices
and overall economic conditions in both the United States and foreign markets.
In addition, there can be no assurance that OEMs currently using the Company's
software in their products will continue to use the Company's products and will
not select third party's software products to replace that of the Company. The
Company's business, results of operations and financial condition would be
materially and adversely affected if the Company's OEMs are unsuccessful in
selling their products or discontinue using the Company's software in their
products.
                   
     The Company remains dependent to a significant degree on revenue from
domestic and international customers in the securities trading industry, which
has been the first industry to embrace real time decision support solutions.
License revenue from the financial services sector comprised 27% of the
Company's total license revenue during the three months ended March 31, 1998 and
36% for the three months ended March 31, 1997, and the Company believes that the
substantial majority of its financial services sector revenue was derived from
companies engaged in the trading of securities. The financial performance of the
securities trading industry is volatile as a result of its dependence upon
unpredictable factors such as economic conditions and securities market
conditions. The Company's financial performance will be subject to, and may be
adversely affected by, factors affecting the economic performance and capital
expenditure levels of the securities trading industry.
                   
     The Company's quarterly operating results have varied and may continue to
vary significantly depending on factors such as the timing of significant
orders, the timing of new product introductions and upgrades by the Company and
its competitors, and the mix of distribution channels through which the products
are sold. Revenues are particularly difficult to predict because of the sales
cycle of the Company's products, which varies substantially from customer to
customer and industry to industry. A majority of the Company's license revenue
in a quarter is derived from orders received in that quarter. Accordingly,
delays in orders are likely to result in the associated revenue not being
realized by the 


                                      -10-


<PAGE>   11


Company in that period. Moreover, the Company's expense levels are based in part
on expectations of future revenue levels, and a shortfall in the expected
revenue could therefore have a disproportionate adverse effect on the Company's
net income.
                   
     Most of the Company's international sales through subsidiaries are
denominated in foreign currencies. Accordingly, a decrease in the value of
foreign currencies relative to the U.S. dollar could result in a significant
decrease in U.S. dollar revenue received by the Company for its international
sales. Due to the number of currencies involved in the Company's international
sales and the volatility of foreign currency exchange rates, the Company cannot
predict the effect of exchange rate fluctuations on future operating results. To
date, foreign currency fluctuations have not had a material effect on the
Company's operating results. The Company has engaged in hedging transactions to
cover its currency translation exposure on intercompany balances for the purpose
of mitigating the effect of foreign currency fluctuations. The international
portion of the Company's business is also subject to a number of inherent risks,
including difficulties in building and managing foreign operations and foreign
reseller networks, difficulties or delays in translating products into foreign
languages, import/export duties and quotas, and unexpected regulatory, economic
or political changes in foreign markets.
                   
     License revenue from sales (directly or indirectly) to branches or agencies
of the U.S. Government represented approximately 12% and 25% of total license
revenue during the three months ended March 31, 1998 and 1997, respectively. The
Company typically derives its government contract revenue from a relatively
small number of subcontract awards which tend to be significant in amount for a
company of Applix's size. Consequently, the Company's government contract
revenue is likely to continue to fluctuate significantly from period to period,
and any failure to obtain a particular subcontract award, or any delay on the
part of the government agency in making the award or ordering products under an
awarded contract, could have a material adverse effect on the financial
performance of the Company within a given period.


                                      -11-


<PAGE>   12


PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(A) EXHIBITS
          
The exhibit filed as a part of this Form 10-Q is the following:

EXHIBIT 27.1: Financial Data Schedule






                                      -12-


<PAGE>   13


                                    SIGNATURE


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



                                  APPLIX, INC.



                                  By: /s/ Patrick J. Scannell, Jr.
                                      ----------------------------
                                      Patrick J. Scannell, Jr.
                                      Executive Vice President
                                      Chief Financial Officer and Treasurer


Date: May 14, 1998


                                      -13-