##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

AMENDMENT NO. 2 TOFORM 10-Q/A

(XBOX)   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002

OR

(BOX)   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 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  (XBOX)   No  (BOX)

Indicate
by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange
Act).   Yes  (BOX)   No  (XBOX)

As of May 6, 2002, there were 12,186,106 shares of the Registrants common
stock, $0.0025 par value, outstanding.





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##### Table of Contents



Explanatory Note

This amendment No. 2 on Form 10-Q/A to the
Registrants Quarterly Report on Form 10-Q originally filed with
the Commission on May 15, 2002 and amended by amendment
No. 1 on Form 10-Q/A filed on March 31, 2003 is being filed for the purpose of
restating the Registrants Condensed Consolidated Financial
Statements as of March 31, 2002 and for the three months then
ended, and restating the related Notes to Condensed Consolidated
Financial Statements. 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. The
restatement revises the recognition of compensation expenses related
to certain acquisition-related contingent consideration payments, by recording them
beginning the quarter ended June 30, 2001 rather than the
quarter ended March 31, 2002. As a result, compensation expenses
related to the acquisition have been increased by $1,531,000 in 2001
and accrued expense has been increased by $1,601,000 at March 31,
2002, which includes the impact of foreign currency exchange
rate fluctuations from translating the Australian dollar to the U.S.
dollar. See Note 2 of the Notes to Condensed Consolidated Financial
Statements for a summary of the significant effects of the
restatement.

This amendment does
not reflect events occurring after the filing of the original
Quarterly Report on Form 10-Q on May 15, 2002, or modify or
update the disclosures presented in the original Quarterly Report on
Form 10-Q, except to reflect the revisions as described above.



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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
|PART II. OTHER INFORMATION   
|                              | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|                              |                                                                                               | SIGNATURE                                           
|                              |                                                                                               | CERTIFICATIONS                                      
|EX-99.1 906 CERTIFICATION    
|EX-99.2 906 CERTIFICATION    



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##### Table of Contents



APPLIX, INC.
Form 10-Q/A
For the Quarterly Period Ended March 31, 2002

Table of Contents

|                                                                                              |                                                                                                    |  |          |   | 
|--------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------- |  | -------- | - | 
|                                                                                              |                                                                                                    |  | Page No.
|                                                                                              |                                                                                                    |  |         
|Part I  Financial Information                                                                |                                                                                                    |  |          |  
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|                                                                                              |                                                                                                    |  |          |  
|                                                                                             
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|                                                                                             
|Item 1. Condensed Consolidated Financial Statements (unaudited):                              |                                                                                                    |  |          |  
|                                                                                             
|                                                                                             
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|                                                                                             
|                                                                                              |                                                                                                    |  |          |  
|                                                                                             
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|                                                                                             
|                                                                                              | Condensed Consolidated Balance Sheets as of
March 31, 2002 and December 31, 2001                   |  |          | 3 | 
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                              |                                                                                                    |  |          |  
|                                                                                             
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|                                                                                             
|                                                                                             
|                                                                                              | Condensed Consolidated Statements of Operations
for the three months ended March 31, 2002 and 2001 |  |          | 4 | 
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                              |                                                                                                    |  |          |  
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                              | Condensed Consolidated Statements of Cash Flows
for the three months ended March 31, 2002 and 2001 |  |          | 5 | 
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                              |                                                                                                    |  |          |  
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|                                                                                             
|                                                                                              | Notes to Condensed Consolidated Financial Statements                                               |  |          | 6 | 
|                                                                                             
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|                                                                                             
|Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations |                                                                                                    |  | 12       |  
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|Part II  Other Information                                                                   |                                                                                                    |  | 24       |  
|                                                                                             
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|                                                                                             
|                                                                                              |                                                                                                    |  |          |  
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|Item 6. Exhibits and Reports on Form 8-K                                                      |                                                                                                    |  | 24       |  
|                                                                                             
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|                                                                                             
|                                                                                             
|                                                                                              |                                                                                                    |  |          |  
|                                                                                             
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|                                                                                             
|                                                                                             
|Signature                                                                                     |                                                                                                    |  | 25       |  
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|Certifications                                                                                |                                                                                                    |  | 25       |  

Applix
is a registered trademark of Applix, Inc. Applix iTM1, Applix iEnterprise, Applix iCustomersight, Applix iHelpdesk
and Applix iService 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/A 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, operation 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
Risk Factors. 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




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

|                                                                                 |                                                                                                       |                  |         |            |       |              |         |         |       | 
|-------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------- | ---------------- | ------- | ---------- | ----- | ------------ | ------- | ------- | ----- | 
|                                                                                 |                                                                                                       |                  |         | March 31,  |       |             
|                                                                                 |                                                                                                       |                  |         | 2002       |       | December 31,
|                                                                                 |                                                                                                       |                  |         | (Restated) |       | 2001        
|                                                                                 |                                                                                                       |                  |         |            |       |             
|Assets                                                                           |                                                                                                       |                  |         |            |       |              |         |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Current assets:                                                                  |                                                                                                       |                  |         |            |       |              |         |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Cash and cash equivalents                                                                             |                  | $       | 8,320      |       |              | $       | 8,228   |      
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Accounts receivable, less allowance for doubtful
accounts of $1,462 and $1,446                        |                  |         | 7,013      |       |              |         | 7,202   |      
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Prepaid expenses and other current assets                                                             |                  |         | 1,834      |       |              |         | 1,672   |      
|                                                                                 |                                                                                                       |                  |         |            |       |              |         |        
|Total current assets                                                             |                                                                                                       |                  | 17,167  |            |       |              | 17,102  |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Restricted cash                                                                  |                                                                                                       |                  | 1,050   |            |       |              | 1,050   |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Property and equipment, at cost:                                                 |                                                                                                       |                  | 14,439  |            |       |              | 14,251  |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Less accumulated amortization and depreciation                                   |                                                                                                       |                  | (11,954 | )          |       |              | (11,722 | )      
|                                                                                 |                                                                                                       |                  |         |            |       |              |         |        
|                                                                                 |                                                                                                       |                  | 2,485   |            |       |              | 2,529   |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Capitalized software costs, net of accumulated amortization of
$1,796 and $1,598 |                                                                                                       |                  | 1,590   |            |       |              | 1,042   |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Goodwill, net of accumulated amortization
of $1,084                              |                                                                                                       |                  | 1,117   |            |       |              | 1,117   |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Intangible assets net of accumulated amortization of $250 and $186               |                                                                                                       |                  | 1,250   |            |       |              | 1,314   |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Other assets                                                                     |                                                                                                       |                  | 791     |            |       |              | 784     |        
|                                                                                 |                                                                                                       |                  |         |            |       |              |         |        
|Total assets                                                                     |                                                                                                       | $                | 25,450  |            |       | $            | 24,938  |        
|                                                                                 |                                                                                                       |                  |         |            |       |              |         |        
|Liabilities and stockholders equity                                             |                                                                                                       |                  |         |            |       |              |         |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Current liabilities:                                                             |                                                                                                       |                  |         |            |       |              |         |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 |                                                                                                       | Accounts payable |         | $          | 1,720 |              |         | $       | 2,137 | 
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 |                                                                                                       | Accrued expenses |         |            | 8,010 |              |         |         | 8,429 | 
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 |                                                                                                       | Deferred revenue |         |            | 7,949 |              |         |         | 6,711 | 
|                                                                                 |                                                                                                       |                  |         |            |       |              |         |        
|Total current liabilities                                                        |                                                                                                       |                  | 17,679  |            |       |              | 17,277  |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Long term liabilities                                                            |                                                                                                       |                  | 614     |            |       |              | 709     |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Commitments and contingencies (Note 11
)                                         |                                                                                                       |                  |        |            |       |              |        |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Stockholders equity:                                                            |                                                                                                       |                  |         |            |       |              |         |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Preferred stock, $.01 par value; 1,000,000 shares authorized; none issued                             |                  |         |           |       |              |         |        |      
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Common stock, $.0025 par value; 30,000,000 shares authorized;
12,468,598 and 12,320,096 shares issued |                  |         | 31         |       |              |         | 31      |      
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Additional paid in capital                                                                            |                  |         | 49,404     |       |              |         | 49,212  |      
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Treasury stock, 306,198 shares, at cost                                                               |                  |         | (1,077     | )     |              |         | (1,077  | )    
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Accumulated deficit                                                                                   |                  |         | (39,461    | )     |              |         | (39,591 | )    
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Accumulated other comprehensive loss                                                                  |                  |         | (620       | )     |              |         | (503    | )    
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Notes receivable from stockholders                                                                    |                  |         | (1,120     | )     |              |         | (1,120  | )    
|                                                                                 |                                                                                                       |                  |         |            |       |              |         |        
|Total stockholders equity                                                       |                                                                                                       |                  | 7,157   |            |       |              | 6,952   |        
|                                                                                 |                                                                                                       |                  |         |            |       |              |         |        
|Total liabilities and stockholders equity                                       |                                                                                                       | $                | 25,450  |            |       | $            | 24,938  |        
|                                                                                 |                                                                                                       |                  |         |            |       |              |         |        

See accompanying notes to condensed consolidated financial statements.

-3-



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##### Table of Contents






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

|                                                                 |                                                                              |                               |       |                    |        |           |        |       |        |  
|---------------------------------------------------------------- | ---------------------------------------------------------------------------- | ----------------------------- | ----- | ------------------ | ------ | --------- | ------ | ----- | ------ | -
|                                                                 |                                                                              |                               |       | Three
Months Ended
|                                                                 |                                                                              |                               |       | March 31,          |        | March 31,
|                                                                 |                                                                              |                               |       | 2002               |        | 2001     
|                                                                 |                                                                              |                               |      
|                                                                 |                                                                              |                               |       |                    |        |          
|Revenues:                                                        |                                                                              |                               |       |                    |        |           |        |      
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Software license                                                             |                               | $     | 4,603              |        |           | $      | 5,814 |       
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Professional services and maintenance                                        |                               |       | 4,904              |        |           |        | 5,513 |       
|                                                                 |                                                                              |                               |       |                    |        |           |        |      
|                                                                 |                                                                              | Total revenues                |       |                    | 9,507  |           |        |       | 11,327 |  
|                                                                
|                                                                
|                                                                
|                                                                
|Cost of revenues:                                                |                                                                              |                               |       |                    |        |           |        |      
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Software license                                                             |                               |       | 346                |        |           |        | 211   |       
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Professional services and maintenance                                        |                               |       | 2,616              |        |           |        | 4,248 |       
|                                                                 |                                                                              |                               |       |                    |        |           |        |      
|                                                                 |                                                                              | Total cost of revenues        |       |                    | 2,962  |           |        |       | 4,459  |  
|                                                                
|                                                                
|                                                                
|                                                                
|Gross margin                                                     |                                                                              |                               | 6,545 |                    |        |           | 6,868  |      
|                                                                
|                                                                
|                                                                
|                                                                
|Operating expenses:                                              |                                                                              |                               |       |                    |        |           |        |      
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Product development                                                          |                               |       | 1,081              |        |           |        | 2,108 |       
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Sales and marketing                                                          |                               |       | 3,416              |        |           |        | 7,015 |       
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | General and administrative                                                   |                               |       | 1,325              |        |           |        | 1,123 |       
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Compensation
expenses and amortization of acquired intangible asset (Note 7) |                               |       | 578                |        |           |        |      |       
|                                                                 |                                                                              |                               |       |                    |        |           |        |      
|                                                                 |                                                                              | Total operating expenses      |       |                    | 6,400  |           |        |       | 10,246 |  
|                                                                
|                                                                
|                                                                
|                                                                
|Operating income (loss)                                          |                                                                              |                               | 145   |                    |        |           | (3,378 | )    
|                                                                
|                                                                
|                                                                
|                                                                
|Interest and other income, net                                   |                                                                              |                               | 49    |                    |        |           | 112    |      
|                                                                 |                                                                              |                               |       |                    |        |           |        |      
|Income (loss) from continuing operations before income taxes     |                                                                              |                               | 194   |                    |        |           | (3,266 | )    
|                                                                
|                                                                
|                                                                
|                                                                
|Provision for income taxes                                       |                                                                              |                               | 64    |                    |        |           | 44     |      
|                                                                 |                                                                              |                               |       |                    |        |           |        |      
|Income (loss) from continuing operations                         |                                                                              |                               | 130   |                    |        |           | (3,310 | )    
|                                                                
|                                                                
|                                                                
|                                                                
|Gain
from discontinued operations                                |                                                                              |                               |      |                    |        |           | 718    |      
|                                                                 |                                                                              |                               |       |                    |        |           |        |      
|Net income (loss)                                                |                                                                              | $                             | 130   |                    |        | $         | (2,592 | )    
|                                                                 |                                                                              |                               |       |                    |        |           |        |      
|Net income (loss) per share, basic and diluted                   |                                                                              |                               |       |                    |        |           |        |      
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Continuing operations                                                        |                               | $     | 0.01               |        |           | $      | (0.28 | )     
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Discontinued operations                                                      |                               |       |                   |        |           |        | 0.06  |       
|                                                                 |                                                                              |                               |       |                    |        |           |        |      
|                                                                 |                                                                              | Total
income (loss) per share |       | $                  | 0.01   |           |        | $     | (0.22  | )
|                                                                 |                                                                              |                               |       |                    |        |           |        |      
|                                                                 |                                                                              |                              
|Weighted average
number of shares outstanding, basic and diluted |                                                                              |                               |       |                    |        |           |        |      
|                                                                 |                                                                              | Basic                         |       |                    | 12,115 |           |        |       | 11,689 |  
|                                                                 |                                                                              | Diluted                       |       |                    | 12,373 |           |        |       | 11,689 |  

See accompanying notes to condensed consolidated financial statements.

-4-



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##### Table of Contents






Applix, Inc.
Condensed Consolidated Statements of Cash Flows
( in thousands)
(unaudited)

|                                                     |                                                                                                    |                                              |                                                              |                                                                      |  |                   |        |        |   |        |       | 
|---------------------------------------------------- | -------------------------------------------------------------------------------------------------- | -------------------------------------------- | ------------------------------------------------------------ | -------------------------------------------------------------------- |  | ----------------- | ------ | ------ | - | ------ | ----- | 
|                                                     |                                                                                                    |                                              |                                                              |                                                                      |  | Three
Month Ended
|                                                     |                                                                                                    |                                              |                                                              |                                                                      |  | March
31,        
|                                                     |                                                                                                    |                                              |                                                              |                                                                      |  | 2002              |        | 2001  
|                                                     |                                                                                                    |                                              |                                                              |                                                                      |  | (Restated)       
|                                                     |                                                                                                    |                                              |                                                              |                                                                      |  |                   |        |       
|Cash flows from operating activities:                |                                                                                                    |                                              |                                                              |                                                                      |  |                   |        |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Net
income (loss)                                                                                  |                                              | $                                                            | 130                                                                  |  |                   | $      | (2,592 | )
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities: |                                              |                                                              |                                                                      |  |                   |        |        |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                                    |                                              | Depreciation                                                 |                                                                      |  | 232               |        |        |   | 154    |      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                                    |                                              | Amortization                                                 |                                                                      |  | 262               |        |        |   | 241    |      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                                    |                                              | Provision for doubtful accounts                              |                                                                      |  | 16                |        |        |   | 53     |      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                                    | Changes in operating assets and liabilities: |                                                              |                                                                      |  |                   |        |        |   |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                                    |                                              | (Increase) in accounts receivable                            |                                                                      |  | 98                |        |        |   | (199   | )    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                                    |                                              | Sale
of accounts receivable                                  |                                                                      |  | 443               |        |        |   |        |      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                                    |                                              | (Increase) decrease in other assets                          |                                                                      |  | (176              | )      |        |   | 263    |      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                                    |                                              | Increase (decrease) in accounts payable                      |                                                                      |  | (417              | )      |        |   | 684    |      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                                    |                                              | (Decrease) in accrued liabilities                            |                                                                      |  | (620              | )      |        |   | (1,473 | )    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                                    |                                              | Increase in deferred revenue                                 |                                                                      |  | 1,238             |        |        |   | 942    |      
|                                                     |                                                                                                    |                                              |                                                              |                                                                      |  |                   |        |       
|                                                     |                                                                                                    |                                              | Cash (used in) provided by operating activities              |                                                                      |  | 1,206             |        |        |   | (1,927 | )    
|                                                    
|Cash flows from investing activities:                |                                                                                                    |                                              |                                                              |                                                                      |  |                   |        |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                                    |                                              | Property and equipment expenditures                          |                                                                      |  | (188              | )      |        |   | (40    | )    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                                    |                                              | Capitalized software costs                                   |                                                                      |  | (746              | )      |        |   | (175   | )    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                                    |                                              | Cash received from purchase of Dynamic Decisions Pty Limited |                                                                      |  |                  |        |        |   | 17     |      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                                    |                                              | Net proceeds from sale of discontinued operation             |                                                                      |  |                  |        |        |   | 1,300  |      
|                                                     |                                                                                                    |                                              |                                                              |                                                                      |  |                   |        |       
|                                                     |                                                                                                    |                                              |                                                              | Cash provided by (used in) investing                                 |  |                   | (934   | )      |   |        | 1,102 | 
|                                                    
|Cash
flows from financing activities:                |                                                                                                    |                                              |                                                              |                                                                      |  |                   |        |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                                    |                                              | Proceeds from issuance of stock under stock plans            |                                                                      |  | 192               |        |        |   | 526    |      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                                    |                                              | Proceeds
from short-term borrowing                           |                                                                      |  | 201               |        |        |   |       |      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                                    |                                              | Payment
on short-term borrowing                              |                                                                      |  | (368              | )      |        |   |        |      
|                                                     |                                                                                                    |                                              |                                                              |                                                                      |  |                   |        |       
|                                                     |                                                                                                    |                                              |                                                              | Cash provided by financing activities                                |  |                   | 25     |        |   |        | 526   | 
|                                                     |                                                                                                    |                                              |                                                              |                                                                      |  |                  
|                                                    
|                                                    
|                                                    
|                                                    
|Effect of exchange rate changes on cash              |                                                                                                    |                                              | (205                                                         | )                                                                    |  |                   | (64    | )     
|                                                     |                                                                                                    |                                              |                                                              |                                                                      |  |                   |        |       
|Net increase (decrease) in cash and cash equivalents |                                                                                                    |                                              | 92                                                           |                                                                      |  |                   | (363   | )     
|                                                    
|                                                    
|                                                    
|                                                    
|Cash and cash equivalents at beginning of period     |                                                                                                    |                                              | 8,228                                                        |                                                                      |  |                   | 12,546 |       
|                                                     |                                                                                                    |                                              |                                                              |                                                                      |  |                   |        |       
|Cash and cash equivalents at end of period           |                                                                                                    | $                                            | 8,320                                                        |                                                                      |  | $                 | 12,183 |       
|                                                     |                                                                                                    |                                              |                                                              |                                                                      |  |                   |        |       
|Supplemental disclosure of cash flow information     |                                                                                                    |                                              |                                                              |                                                                      |  |                   |        |       
|                                                     |                                                                                                    |                                              |                                                              | Stock
issued for acquisition of Dynamic Decisions Pty Limited        |  | $                 |       |        |   | $      | 227   | 
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                                    |                                              |                                                              | Note
payable issued for acquisition of Dynamic Decisions Pty Limited |  | $                 |       |        |   | $      | 1,549 | 

See accompanying notes to condensed consolidated financial statements.

-5-



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##### Table of Contents






APPLIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)



|1. |  | The Company
|-- |  | -----------

Applix, Inc. (Applix or the Company) is a global provider of
enterprise performance management solutions that include interactive planning,
customer relationship management (CRM) and analytics and business intelligence.
These combined products represent one principal business segment,
which Applix reports as its continuing operations. The Companys
iCRM and iTM1 applications
are designed and developed to allow businesses to capture information from
across the extended enterprise and enable continual marketplace responsiveness.
These applications are adaptable, scalable, and real-time and support unique,
complex and disparate business processes, providing analysis, planning,
measurement and response to changing customer requirements and business
dynamics. 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. The Company is currently
developing a new integrated product known as Applix Integra. Through the Companys
extensive product development efforts, Applix Integra will combine its two existing
products lines, Applix iCRM and Applix iTM1, to provide a single analytics solution for both
the back-office and front-office to its customers.

2.    Revision of Financial
Statements to Account for Contingent Payments to Employees of Dynamic Decisions

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. (Dynamic Decisions). As discussed in
Note 7, a portion of the purchase price paid by the Company for
Dynamic Decisions was payable in 10 installments. Of the
10 installments, two of the installments were guaranteed and
accounted for as purchase price. The remaining eight
installments are contingent upon the employment of two key
employees, who are the former shareholders of Dynamic Decisions, and
therefore are being accounted for as compensation expense. The
compensation expense relating to these eight
installments was initially recognized during the period in which the
contingent payments were made, but should have been expensed
ratably on a straight-line basis over the employees contractual employment period,
which commenced on April 1, 2001 and ends on March 31,
2003. As a result the Company is restating its financial statements
to record $1,531,000 in compensation expenses relating to the
contingent payments for the year ended December 31, 2001 and
$1,601,000 has been recorded in accrued expenses at March 31, 2002,
which includes, the
impact of foreign currency exchange rate fluctuations for translating the
Australian dollar to the US dollar.

A summary of the significant
effects of the revision is as follows (in thousands):



|                                           |  |                |         |  
|------------------------------------------ |  | -------------- | ------- | -
|                                           |  | March 31, 2002
|                                           |  |               
|Accrued expenses as previously reported    |  | $              | 6,409   |  
|                                          
|                                          
|                                          
|                                          
|Accrued expenses as restated               |  |                | 8,010   |  
|                                          
|                                          
|                                          
|                                          
|Accumulated deficit as previously reported |  | $              | (37,930 | )
|                                          
|                                          
|                                          
|                                          
|Accumulated deficit as restated            |  | $              | (39,461 | )



|3. |  | Summary of Significant
Accounting Policies
|-- |  | ------------------------------------------

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
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 generally accepted accounting
principles (GAAP) 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, 2002 are not necessarily
indicative of the results that may be expected for the year ended December 31,
2002. 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, 2001.

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) (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 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.

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
reasonably to 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 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.

-6-



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##### Table of Contents



Capitalized Software Costs

Costs related to research, design and development of computer software are
charged to research and development expense as incurred. The Company
capitalizes eligible software costs incurred between the time that the
products technological feasibility is established and the general release of
the product to customers. Such capitalized costs are then amortized on a
product-by-product basis generally over one to two years.

The Company evaluates the net realizable value of capitalized software on
an ongoing basis, relying on a number of factors including demand for a
product, operating results, business plans, and economic projections. In
addition, the Companys evaluation considers nonfinancial data such as market
trends, product development cycles, and changes in managements market
emphasis.

Intangible Assets and Goodwill

The
Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No. 141
Business Combinations (SFAS 141) and SFAS No. 142 Goodwill and
Other Intangible Assets (SFAS 142) in July 2001. SFAS 141 requires
that all business combinations be accounted for using the purchase
method. SFAS 141 also specifies criteria for recognizing and
reporting intangible assets apart from goodwill. SFAS 142 requires
that goodwill not be amortized but instead tested for impairment in
accordance with the provisions of SFAS 142 at least annually and more
frequently upon the occurrence of certain events. SFAS 142 also
requires that intangible assets with an indefinite life should not be
amortized until their life is determined to be finite and all other
intangible assets must be amortized over their useful life.

The Company adopted the provisions of SFAS 141 and
SFAS 142 effective January 1, 2002. SFAS 141 and SFAS 142 requires
the Company to perform the following as of January 1, 2002: (i)
review goodwill and intangible assets for possible reclasses; (ii)
reassess the lives of intangible assets; and (iii) perform a
transitional goodwill impairment test. The Company has reviewed its
goodwill and intangible assets for possible reclasses of which there
were none and has reviewed the useful lives of its identifiable intangible
assets and determined that the originals estimated lives remain appropriate.
The Company will evaluate its goodwill for impairment under the provisions of SFAS
142 during the second quarter of 2002, but does expect a material
impact on its results of operations or financial position.

Prior to January 1, 2002, the Company amortized
goodwill associated with its acquisitions prior to July 1, 2001 over
six years using the straight-line method. Identifiable
intangibles (customer relationships) are currently being amortized over six
years using the straight-line method.

-7-



---



##### Table of Contents



Translation of Foreign Currencies

The functional currency for all of the locations in which the Company has
a foreign operation is the applicable local currency. Assets and liabilities of
all foreign subsidiaries are translated at period-end rates of exchange.
Revenues and expenses are translated at average exchange rates during the
period. The resulting translation adjustments are included in other
comprehensive income. Transaction gains and losses that arise from exchange
rate changes included in income are immaterial for all periods presented.

Use of Estimates

The preparation of financial statements in conformity with GAAP 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 and intangible assets, valuation of
deferred tax assets, the allowance for doubtful accounts and accrued
liabilities.



|4. |  | Net Income (Loss) Per Share
|-- |  | ---------------------------

Net income (loss) is computed in accordance with
SFAS No. 128, Earnings Per Share. Basic net income
(loss) per share is computed by dividing net income (loss) available to common
stockholders by the weighted average number of common shares outstanding
during the period. Dilutive net income (loss) 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.

For
the quarters ended March 31, 2002 and 2001, the Company excluded
dilutive potential common shares of 261,225 and 282,665,
respectively, from its calculation of net income (loss) per share. The
Company had an additional 3,442,232 and 2,972,546 of antidilutive
common stock equivalents outstanding for the quarters ended March 31, 2002 and 2001,
respectively, which would not be included in the fully dilutive
calculation of net income (loss) per share had the Company reported
net income as the stock option exercise price exceeded the average
market price for the respective periods.



|5. |  | Comprehensive Income (Loss)
|-- |  | ---------------------------

Components
of comprehensive income (loss) include net income (loss) 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 EndedMarch 31(in thousands)
|                                  |  |                                         
|                                  |  | 2002                                     |      | 2001
|                                  |  |                                          |      |     
|Net
income (loss)                 |  | $                                        | 130  |      |  | $ | (2,592 | )
|                                 
|                                 
|                                 
|                                 
|Other
comprehensive loss          |  |                                          | (117 | )    |  |   | (63    | )
|                                  |  |                                          |      |      |  |   |        |  
|Total
comprehensive income (loss) |  | $                                        | 13   |      |  | $ | (2,655 | )
|                                  |  |                                          |      |      |  |   |        |  

-8-





---



##### Table of Contents





|6. |  | Segment and Geographical Information
|-- |  | ------------------------------------

The Company and its subsidiaries are principally engaged in the design,
development, marketing and support of the Companys customer relationship
management and analytics and business intelligence applications.
Substantially all its revenues result from the licensing of the Companys
software products and related professional services and maintenance services.
The Company reviews its financial information, which is presented on a
consolidated basis. The financial information 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. The
Company considers itself to be in a single industry segment, the licensing,
implementation and support of its software products.



|7. |  | Acquisition
|-- |  | -----------

On March 31, 2001, the Company acquired all of the outstanding capital
stock of Dynamic Decisions Pty Limited, 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 totalling
$1,267,000 were guaranteed, paid in 2001 and accounted for
as purchase price. The remaining eight installments are
contingent upon the employment of two key employees, who were
the former shareholders of Dynamic Decisions, and
therefore are being accounted for as compensation expense within operating
expenses. These eight installments are being expensed ratably on a
straight-line basis over the key employees contractual employment period, which commenced on
April 1, 2001 and ends on March 31, 2003. The Company has
recorded compensation expense, which includes the impact of foreign
currency exchange rate fluctuations from translating the Australian dollar
to the U.S. dollar, related to these contingent payments of
$515,000 for the three months ended March 31, 2002, $0 for the
three months ended March 31, 2001 and
$1,531,000 for the year ended December 31, 2001. In addition,
the company made the first of the required contingent payments
totaling $515,000 during 2002.

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                                          |  |           | 934,000   | 
|Accounts
payable                                  |  |           | 433,000   | 
|Accrued
expenses                                  |  |           | 60,000    | 
|Deferred
maintenance                              |  |           | 300,000   | 
|Deferred
tax liabilities                          |  |           | 450,000   | 

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

|                                           |  |                    |        |  
|------------------------------------------ |  | ------------------ | ------ | -
|                                           |  | Three Months Ended
|                                           |  | March 31          
|                                           |  | 2001              
|                                           |  |                   
|                                           |  | (Unaudited)       
|                                           |  |                   
|(In thousands, except per share amounts)   |  |                    |        |  
|Revenue                                    |  | $                  | 11,885 |  
|                                          
|                                          
|                                          
|                                          
|Net loss                                   |  | $                  | (2,251 | )
|                                           |  |                    |        |  
|Total
basic and diluted net loss per share |  | $                  | (0.19  | )
|                                           |  |                    |        |  

-9-



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##### Table of Contents





|8. |  | Restructuring Charges
|-- |  | ---------------------

In 2001, the Company adopted several plans of restructuring aimed at
reducing operating costs company-wide, strengthening the Companys financial
positions and to reallocating resources to pursue the Companys future
operating strategies.

In the second quarter of 2001, the Company adopted a plan of
restructuring aimed at reducing current operating costs company-wide. In connection with this plan, 28 non-management employees,
primarily sales, marketing, and administrative personnel, and 2 executive level
employees were terminated. The Companys restructuring plan also included the
closure of the Companys sales office in France. As a result of the
restructuring plan, the Company recorded a restructuring charge of $512,000 for
the three months ended June 30, 2001. The restructuring charge consisted of
$449,000 for severance costs and $63,000 for the loss on disposal of the
Companys French subsidiary, which was sold on June 30, 2001. In connection
with the sale, the Company paid $100,000 to the purchaser, which is included in
the restructuring charge. No amounts remain accrued at March 31, 2002.

In
the third quarter of 2001, the Company adopted a plan of
restructuring to further reduce current operating costs company-wide
through headcount reductions.
In connection with this plan, the Company recorded an additional restructuring
charge of $438,000 for severance related to the termination of 26
non-management employees, primarily sales, marketing, and administrative
personnel. Subsequent to the initial recording of the charge, adjustments
totaling $90,000 were recorded, reducing the charge to $348,000. No amounts remain accrued at March 31, 2002.

In the fourth quarter of 2001, the Company adopted a plan of
restructuring to further reduce current operating costs. The plan included the further reduction of headcount of one
senior level executive and 16 non-management employees, primarily professional
services, sales, and administrative personnel. The plan also included the
closure of several domestic offices and the consolidation of space within one
European office and the abandonment of leasehold improvements and support
assets associated with these locations, which were removed from service shortly
after the implementation of the plan. As a result of the restructuring plan,
the Company recorded a charge of $840,000 which included $92,000 in
non-cash charges relating to impaired assets. The components of the fourth
quarter cash charges, as well as the Companys payments made against accruals are
detailed as follows:

|                              |  |          |         |          |  |              |         |          |  |            |         |  |  |   |          |   |  |   |         | 
|----------------------------- |  | -------- | ------- | -------- |  | ------------ | ------- | -------- |  | ---------- | ------- |  |  | - | -------- | - |  | - | ------- | 
|                              |  |          |         |          |  | Balance at   |         |          |  | Balance at
|                              |  | Charges  |         | Payments |  | December 31, |         | Payments |  | March 31, 
|Cash charges                  |  | incurred |         | made     |  | 2001         |         | made     |  | 2002      
|                              |  |          |         |          |  |              |         |          |  |           
|Work force reduction          |  | $        | 363,000 |          |  | $            | (52,000 | )        |  | $          | 311,000 |  |  | $ | (232,000 | ) |  | $ | 79,000  | 
|Office closures               |  |          | 274,000 |          |  |              |        |          |  |            | 274,000 |  |  |   | (4,000   | ) |  |   | 270,000 | 
|Other contractual obligations |  |          | 111,000 |          |  |              |        |          |  |            | 111,000 |  |  |   | (4,000   | ) |  |   | 107,000 | 
|                              |  |          |         |          |  |              |         |          |  |            |         |  |  |   |          |   |  |   |         | 
|Total                         |  | $        | 748,000 |          |  | $            | (52,000 | )        |  | $          | 696,000 |  |  | $ | (240,000 | ) |  | $ | 456,000 | 
|                              |  |          |         |          |  |              |         |          |  |            |         |  |  |   |          |   |  |   |         | 

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|9. |  | Discontinued Operations
|-- |  | -----------------------

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 for 2001 have been reclassified in the accompanying statements of
operations as a discontinued operation. The Companys balance sheets at March
31, 2002 and December 31, 2001 reflect the net liabilities of the VistaSource
business as net liabilities of discontinued operation within current
liabilities. The
Company recorded a gain of $718,000 on the disposal of the
discontinued operations in the first quarter of 2001 due to the
actual results of operations through the date of disposal, changes in
the net assets delivered at closing and changes in estimates of
certain obligations.



|10. |  | Non-recourse Sale of Receivables
|--- |  | --------------------------------

The Company has a non-recourse accounts receivable purchase arrangement
with a certain bank, pursuant to which the Company and the bank may agree from
time to time for the Company 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. On
or about March 31, 2002, the Company factored certain accounts receivable to
the bank pursuant to the purchase arrangement in the amount of $644,000.

In accordance with SFAS 140, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities, the Company recognized a
sale for those account receivable balances for which there was no future
obligation to the customer in the amount of $443,000. The Company has concluded
that these accounts have been legally isolated, and accordingly, this amount
has been derecognized from the Companys accounts receivable balance at
March 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. The remainder of $201,000 has been recorded
as a financing transaction and recognized as a liability at
March 31, 2002 because the sale of these receivables do not
qualify to be recorded as a sale under FAS No. 148.

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|11. |  | 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.



|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. The funds can be 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 will be reduced starting the first day
of the second lease year as follows:

|                                      |  |                  |        
|------------------------------------- |  | ---------------- | -------
|                                      |  | Reduction
Amount
|                                      |  |                 
|Second lease year (December 31, 2002) |  | $                | 116,667
|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.




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

Overview of the Companys Operations

Applix, Inc. (Applix or the Company) is a global provider of
enterprise performance management solutions that include interactive planning,
customer relationship management (CRM) and analytics and business intelligence.
These combined products represent one principal business segment, which it
reports as its continuing operations. The Companys iCRM and iTM1 applications
are designed and developed to capture information from across the extended
enterprise and enable continual marketplace responsiveness. The applications
are adaptable, scalable, and real-time and support unique, complex and
disparate business processes, providing analysis, planning, measurement and
response to changing customer requirements and business dynamics.

The Companys iCRM and iTM1 applications owe their adaptability
to Applix iEnterprise and Applix iTM1 technology platforms that power them. Applix continues to
enhance these platforms and the integration between them, in order to continue
providing software that best supports companies unique, competitive business
processes.

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 for 2001 have been reclassified in the
accompanying statements of operations as a discontinued operation. The
Companys balance sheets at March 31, 2002 and 2001 reflect the net liabilities
of the VistaSource business as net liabilities of discontinued operation within
current liabilities.

On
March 31, 2001, the Company acquired all of the outstanding
capital stock of Dynamic Decisions Pty Limited (Dynamic
Decisions). 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 the acquisition.
The acquisition was accounted for under the purchase method of
accounting, and the purchase price was allocated based on the
estimated fair market value of the assets acquired and the
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 provisions of SFAS 142.

Per
the terms of the sale purchase agreement, total maximum cash
consideration relating to the purchase of Dynamic Decisions was
$5,150,000 payable in installments over a maximum of 30 months beginning
on July 1, 2001. Of the 10 installments, two of the installments
totalling of $1,267,000 were guaranteed, paid in 2001 and
accounted for as purchase price. The remaining eight
installments are contingent upon the employment of two key employees,
who were the former shareholders of Dynamic Decisions, and therefore are
being accounted for as compensation expense within operating
expenses. These eight installments are being expensed ratably on a
straight-line basis over the key employees contractual employment period,
which commenced on April 1, 2001 and ends on March 31,
2003. The Company has recorded compensation expenses, which includes
the impact of foreign currency exchange rate fluctuations from translating the Australian dollar
to the U.S. dollar,
related to these contingent payments of $515,000 and $0 for the three months
ended March 31, 2002 and 2001, respectively. In addition, the
Company has made the first of the required contingent payments of $515,000 in 2002.

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##### Table of Contents



Results of Continuing Operations For The Three Months Ended March 31, 2002 and 2001

The following table sets forth the consolidated statement of operations
data for the three months ended March 31, 2002 and 2001, expressed as a
percentage of total revenues:

|                                              |                                                                     |  |                    |       |           |  |       |       |  
|--------------------------------------------- | ------------------------------------------------------------------- |  | ------------------ | ----- | --------- |  | ----- | ----- | -
|                                              |                                                                     |  | Three
months ended
|                                              |                                                                     |  |                   
|                                              |                                                                     |  | March
31,          |       | March
31,
|                                              |                                                                     |  | 2002               |       | 2001     
|                                              |                                                                     |  |                    |       |          
|Software license revenue                      |                                                                     |  | 48.4               | %     |           |  | 51.3  | %    
|                                             
|                                             
|                                             
|                                             
|Professional services and maintenance         |                                                                     |  | 51.6               | %     |           |  | 48.7  | %    
|                                              |                                                                     |  |                    |       |           |  |       |      
|                                              | Total revenue                                                       |  |                    | 100.0 | %         |  |       | 100.0 | %
|                                             
|                                             
|                                             
|                                             
|Cost of software license revenue              |                                                                     |  | 3.6                | %     |           |  | 1.9   | %    
|                                             
|                                             
|                                             
|                                             
|Cost of professional services and maintenance |                                                                     |  | 27.5               | %     |           |  | 37.5  | %    
|                                              |                                                                     |  |                    |       |           |  |       |      
|                                              | Gross margin                                                        |  |                    | 68.8  | %         |  |       | 60.6  | %
|                                             
|                                             
|                                             
|                                             
|Operating expenses                            |                                                                     |  |                    |       |           |  |       |      
|                                             
|                                             
|                                             
|                                             
|                                              | Product development                                                 |  |                    | 11.4  | %         |  |       | 18.6  | %
|                                             
|                                             
|                                             
|                                             
|                                              | Sales and marketing                                                 |  |                    | 35.9  | %         |  |       | 61.9  | %
|                                             
|                                             
|                                             
|                                             
|                                              | General and administrative                                          |  |                    | 13.9  | %         |  |       | 9.9   | %
|                                             
|                                             
|                                             
|                                             
|                                              | Compensation
expenses and amortization of acquired intangible asset |  |                    | 6.1   | %         |  |       | 0.0   | %
|                                              |                                                                     |  |                    |       |           |  |       |      
|                                              | Total operating expenses                                            |  |                    | 67.3  | %         |  |       | 90.5  | %
|                                              |                                                                     |  |                    |       |           |  |       |      
|Operating income (loss)                       |                                                                     |  | 1.5                | %     |           |  | (29.8 | )%   
|                                             
|                                             
|                                             
|                                             
|Interest income, net                          |                                                                     |  | 0.1                | %     |           |  | 0.1   | %    
|                                             
|                                             
|                                             
|                                             
|Provision
for income taxes                    |                                                                     |  | 0.1                | %     |           |  | 0.4   | %    
|                                              |                                                                     |  |                    |       |           |  |       |      
|Income (loss) for continuing operations       |                                                                     |  | 1.0                | %     |           |  | (29.2 | )%   
|                                             
|                                             
|                                             
|                                             
|Discontinued operations                       |                                                                     |  |                   |       |           |  | 6.3   | %    
|                                              |                                                                     |  |                    |       |           |  |       |      
|Net income (loss)                             |                                                                     |  | 1.0                | %     |           |  | (22.9 | )%   
|                                              |                                                                     |  |                    |       |           |  |       |      

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Revenues

Revenue
from continuing operations decreased 16% to $9,507,000 for the
quarter ended March 31, 2002 from $11,327,000 for the quarter ended March 31,
2001. Revenues decreased primarily due to a weakening economy,
continued slowdown in information technology spending and seasonal
weakness in Europe.

Software License

Software
license revenue from continuing operations decreased 21% to
$4,603,000 for the three months ended March 31, 2002 from $5,814,000 for the
three months ended March 31, 2001 or 48% of total revenue compared to 51% of
the total revenue for the three months ended March 31, 2001. Software license
revenue decreased primarily due to the progressively weakening economy,
and the continued slowdown in information technology spending which in turn led to the
Companys customers delaying their purchasing decisions. Despite these
slowdowns during the quarter ended March 31, 2002, the Company continued to
increase its customer base with 65 new customers. This represents the highest
number of new customers added in the past four quarters.

Domestic
license revenue from continuing operations increased 17% to
$2,706,000 for the quarter ended March 31, 2002 from $2,304,000 for the same
period in 2001 due to an increase in the number of licenses of the Companys
application sold to new and existing customers.

International license revenue from continuing operations decreased 46% to
$1,897,000 for the quarter ended March 31, 2002 from $3,510,000 for the same
period in 2001 primarily due to a greater than expected seasonal weakness in
Europe and continued decline in information technology spending world-wide.

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 revenue from continuing operations
decreased for the three months ended March 31, 2002 to
$4,904,000, or 52% of
total revenue, compared to $5,513,000, or 49% of total revenue, for the three
months ended March 31, 2001 representing a 11% decrease. For the three months
ended March 31, 2002, maintenance revenues increased 33% to $3,379,000 as
compared to $2,535,000 for the three months ended March 31, 2001, while
consulting and training revenue decreased 49% to $1,525,000 as compared to
$2,978,000 for the three months ended March 31, 2001. The
increase in maintenance revenue is primarily due to growth in the
installed base of customers receiving maintenance and a greater number
of customers electing renewal of their maintenance support contracts. The
Company expects the maintenance revenue as a component of total professional
service and maintenance revenue to continue to increase due to continuing
improvement in maintenance renewals from existing customers as they choose to
extend their maintenance support contracts. The Company expects professional
service revenue to decrease as a percentage of total professional services and
maintenance revenue due to the Companys increasing reliance on external
consultants as the Company continues to control its costs.

Domestic service revenue from continuing operations decreased 3% to
$1,910,000 for the three months ended March 31, 2002 from $1,965,000 for the
three months ended March 31, 2001.

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##### Table of Contents



International service revenues decreased by 16% to $2,994,000 in the three
months ended March 31, 2002 from $3,548,000 for the three months ended March
31, 2001.

Cost of Revenues

Cost of Software License Revenue

Cost of software license revenue consists primarily of third-party
software royalties, cost of product packaging and documentation materials, 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 $346,000 for the three months ended March 31,
2002, compared to $211,000 for the three months ended March 31, 2001. As a
percentage of software license revenue, cost of software license revenue
increased to 4% in the three months ended March 31, 2002, as
compared to 2%
for the three months ended March 31, 2001.

Cost of Professional Services and Maintenance Revenue

The
cost of professional services and maintenance revenue consists
primarily of personnel, facilities and system costs incurred to provide
consulting, customer support under the maintenance agreements and training.
Cost of professional services and maintenance revenue from continuing
operations decreased to $2,616,000 for the three months ended March 31, 2002
from $4,248,000 for the three months ended March 31, 2001. As a percentage of
professional services and maintenance revenue, these costs were 53% in the
first quarter of 2002 as compared to 77% in the first quarter of 2001.
Professional services and maintenance revenue gross margin as a percentage of
professional services revenue improved to 47% for the three months ended March
31, 2002 as compared to 23% for the three months ended March 31,
2001. 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 margin improvement
and the results of rebalancing the Companys cost structure.

Operating Expenses

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, 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 met
once it has completed a working model that has met certain performance
criteria. Product development costs not meeting the requirements for
capitalization are expensed as incurred.

Product
development from continuing operations decreased 49% to $1,081,000
for the three months ended March 31, 2002 from $2,108,000 for the three months
ended March 31, 2001. This represents 11% of total revenue for the three
months ended March 31, 2002 compared to 19% of total revenue for the three

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##### Table of Contents



months ended March 31, 2001. The decrease is primarily due to decreased
employee and outside consulting costs and capitalization of product development
costs consisting primarily of salaries, benefits and related indirect overhead
costs of $746,000 in the three months ended March 31, 2002, as a result of the
Companys extensive product development efforts pertaining to the Companys new
Integra platform. The Company anticipates that it will continue to invest
substantial resources in the new product development, primarily the Applix Integra
platform and new versions of the existing products and additional modules for
its existing products. The Company anticipates that it will capitalize
development costs associated with the Integra platform until its commercial
release, which is expected to be in 2002.

Sales and Marketing

Sales and marketing expenses consist primarily of salaries, commissions
and bonuses and the cost of the Companys international
operations earned by sales and marketing personnel, field office expenses,
travel and entertainment, and promotional and advertising expenses
and the cost of the Companys international operations. Sales and
marketing expenses from continuing operations
decreased 51% to $3,416,000 for the three months ended March 31, 2002 from
$7,015,000 for the three months ended March 31, 2001. Selling and marketing
expenses decreased as a percentage of total revenue to 36% for the three months
ended March 31, 2002 from 62% for the three months ended March 31, 2001. The
decrease was primarily due to the Companys decreased staffing levels
associated with the Companys 2001 restructuring initiatives, reduced sales
commissions and bonuses, and managements further implementation of cost
control initiatives, including reductions in advertising, travel and other
discretionary expenditures. 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 occupancy costs for administrative,
executive and finance, information technology (IT) and
human resource personnel, and bad debt expense. General and
administrative expenses from continuing operations increased 18% to
$1,325,000 for the three months ended March 31, 2002 from
$1,123,000 for the three months ended March 31, 2001. The increase was primarily due
to increases in the Company's operating costs which included rent and
related costs of its new corporate headquarters. General and administrative expenses increased as a percentage
of total revenue to 14% for the three months ended March 31, 2002
from 10% for the three months ended March 31, 2001.

Restructuring Expenses

In 2001, the Company adopted several 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 2001, the Company adopted
a plan of restructuring aimed at reducing current operating costs
company-wide. In connection with this plan, 28 non-management
employees, primarily sales, marketing, and administrative personnel,
and 2 executive level employees, were terminated. The Companys
restructuring plan also included the closure of the Companys
sales office in France. As a result of the restructuring plan, the
Company recorded a restructuring charge of $512,000 for the three
months ended June 30, 2001. The restructuring charge consisted
of $449,000 for severance costs and $63,000 for the loss on disposal
of the Companys French subsidiary, which was sold on
June 30, 2001. In connection with the sale, the Company paid
$100,000 to the purchaser, which is included in the restructuring
charge. No amounts remain accrued at March 31, 2002.

In the third quarter of 2001, the Company adopted a
plan of restructuring to further current operating costs company-wide
through headcount reductions. In connection with this plan, the
Company recorded an additional restructuring charge of $438,000 for
severance related to the termination of 26 non-management employees,
primarily sales, marketing, and administrative personnel. Subsequent
to the initial recording of the charge, adjustments totaling $90,000
were recording, reducing the charge to $348,000. No amounts remain
accrued at March 31, 2002.

In the fourth quarter of 2001, the Company adopted
a plan of restructuring to further reduce current operating costs.
The plan included the further reduction of headcount of one senior
level executive and 16 non-management employees, primarily
professional services, sales, and administrative personnel. The plan
also included the closure of several domestic offices and the
consolidation of space within one European office and the abandonment
of leasehold improvements and support assets associated with these
locations, which were removed from service shortly after the
implementation of the plan. As a result of the restructuring plan,
the Company recorded a charge of $840,000, which included $92,000 in
non-cash charges relating to impaired assets. The
components of the fourth quarter cash charges, as well as the
Companys payments made against accruals are detailed as follows:



|                              |  |                 |         |             |  |                            |         |             |  |                         |         |  |  |   |          |   |  |   |         | 
|----------------------------- |  | --------------- | ------- | ----------- |  | -------------------------- | ------- | ----------- |  | ----------------------- | ------- |  |  | - | -------- | - |  | - | ------- | 
|Cash charges                  |  | Chargesincurred |         | Paymentmade |  | Balance atDecember 31,2001 |         | Paymentmade |  | Balance
atMarch 31,2002 |        
|                              |  |                 |         |             |  |                            |         |             |  |                         |        
|Work force reduction          |  | $               | 363,000 |             |  | $                          | (52,000 | )           |  | $                       | 311,000 |  |  | $ | (232,000 | ) |  | $ | 79,000  | 
|                             
|                             
|                             
|                             
|Office closures               |  |                 | 274,000 |             |  |                            |        |             |  |                         | 274,000 |  |  |   | (4,000   | ) |  |   | 270,000 | 
|                             
|                             
|                             
|                             
|Other contractual
obligations |  |                 | 111,000 |             |  |                            |        |             |  |                         | 111,000 |  |  |   | (4,000   | ) |  |   | 107,000 | 
|                              |  |                 |         |             |  |                            |         |             |  |                         |         |  |  |   |          |   |  |   |         | 
|Total                         |  | $               | 748,000 |             |  | $                          | (52,000 | )           |  | $                       | 696,000 |  |  | $ | (240,000 | ) |  | $ | 456,000 | 
|                              |  |                 |         |             |  |                            |         |             |  |                         |         |  |  |   |          |   |  |   |         | 

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 assets, 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 totalling
$1,267,000, were guaranteed, paid in 2001 and accounted for
as purchase price. The remaining eight installments are contingent
upon the employment of the two key employees, who are the former
shareholders of Dynamic Decisions, and therefore are being
accounted for as compensation expense within operating expenses.
These eight installments are being expensed ratably on a straight-line
basis over the key employees contractual employment period, which commenced on April 1,
2001 and ends on March 31, 2003. The Company recorded compensation
expense, which includes the impact of foreign currency exchange rate fluctuations
of translating the Australian dollar to the U.S. dollar, related to these contingent payments of
$515,000 and $0 for the three months ended
March 31, 2002 and 2001, respectively. In addition, the Company
has made the first of the required contingent payments totaling
$515,000 in 2002.

For
three months ended March 31, 2002 and 2001, the amortization
expense for the customer relationships associated with the Dynamic
Decisions acquisition was $63,000 and $62,000, respectively.

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Interest and Other Income, Net

Interest
income decreased to $49,000 for the three months ended March 31,
2002, compared to $112,000 for the three months ended March 31, 2001. The
decrease is primarily due to fewer funds invested and lower interest rates.

Provision for Income Taxes

The Company recorded a provision from income taxes of $64,000 for the
three months ended March 31, 2002, compared to $44,000 for the three months
ended March 2001. The provision for income taxes represents the Companys
state and foreign income tax obligations.

Operating Income (loss) and Operating Margin

Operating
loss from continuing operations was $3,378,000 for the three
months ended March 31, 2001, compared to operating income of $145,000 for the three months ended
March 31, 2002. Additionally, operating loss as a percentage of total revenue
was 30% for the three months ended March 31, 2001, compared to
an operating income as a percentage of total revenue of 2%
the three months ended March 31, 2002. The total revenue decrease of
$1,820,000 was significantly offset by the Companys cost control initiatives
including 2001 restructuring initiatives.

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 was $9,370,000 and $9,278,000 as of March 31,
2002 and December 31, 2001, respectively, which included restricted cash of $1,050,000. The
Companys days sales outstanding (DSO) in accounts receivable was 70 days as
of December 31, 2001, compared with 66 days as of March 31, 2002. The Company
sold $729,000 in accounts receivables as of December 31, 2001, compared to
$644,000 as of March 31, 2002 under its non-recourse accounts receivable
purchase agreement with a bank. The sale had an immaterial impact on the
Companys DSO by reducing approximately 3 days as of December 31, 2001 and 6
days as of March 31, 2002. The Company does not have any off-balance-sheet
arrangements with 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
provided by the Companys operating activities was $1,206,000 for the quarter
ended March 31, 2002 compared to cash used in operating activities of
$1,927,000 for the same period in the prior year. The net income of $130,000 for the
first quarter of 2002 was partially offset by the increase in
operating assets and liabilities of $566,000, which was primarily due to an increase of in
deferred revenue of $1,238,000.

Cash used in investing activities totaled $934,000 for the quarter ended
March 31, 2002 compared to cash provided by investing activities of $1,102,000
for the quarter ended March 31, 2001. The increase in cash used in investing
activities primarily resulted from the increase of capitalized software cost of
$746,000 and property and equipment expenditure of $188,000.

Cash
provided by financing activities totaled $25,000 for the quarter
ended March 31, 2002, which consisted of net payments from factoring of
receivables to a certain bank of $167,000 from the accounts
receivable factoring arrangement for the amounts owned to the bank at March 31, 2002 which
were not accounted for as a sale and

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proceeds from issuance of stock under stock plans of $192,000. This
compares to total cash provided by financing activities of $526,000 for the
same quarter ended March 31, 2001.

In connection with the Companys acquisition of Dynamic Decisions, the
Company expects to pay out additional contingent cash consideration of
$3,735,000 in seven quarterly installments between April 1, 2002
and October 1,
2003.

The Company has secured two revolving credit facilities,
providing for loans and other financial accommodations, with a bank totaling
approximately $5 million. During the first quarter of 2002, the Company had no
amounts outstanding under these credit facilities. Because the
Company is currently in default under certain covenants with the
bank, the Company currently has no availability to borrow under either of these
facilities. The facilities expire on December 5,
2002.

The Company has a non-recourse accounts receivable purchase arrangement
with a certain bank, pursuant to which the Company and the bank may agree from
time to time for the Company 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. On
or about March 31, 2002, the Company factored certain accounts receivable to
the bank pursuant to the purchase arrangement in the amount of $644,000.

In accordance with SFAS 140, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities, the Company recognized a
sale for those account receivable balances for which there was no future
obligation to the customer in the amount of $443,000. The Company has concluded
that these accounts have been legally isolated, and accordingly, this amount
has been derecognized from the Companys accounts receivable balance at
March 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. The remainder of $201,000 has been recorded
as a financing transaction and recognized as a liability at March 31, 2002.

As of March 31, 2002, 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   
|                             |  |          
|2002                         |  | $         | 2,550,000  | 
|                            
|                            
|                            
|                            
|2003                         |  |           | 2,407,000  | 
|                            
|                            
|                            
|                            
|2004                         |  |           | 2,139,000  | 
|                            
|                            
|                            
|                            
|2005                         |  |           | 2,014,000  | 
|                            
|                            
|                            
|                            
|2006                         |  |           | 1,796,000  | 
|                            
|                            
|                            
|                            
|2007 and thereafter          |  |           | 11,674,000 | 
|                             |  |           |            | 
|Total minimum lease payments |  | $         | 22,580,000 | 
|                             |  |           |            | 

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

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The Company has incurred losses from continuing operations for the last
several years. As of March 31, 2002, the Company had an accumulated deficit of
$39,461,000. 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. The Company made
progress during the quarter ended March 31, 2002 towards decreasing operating losses on a quarterly
sequential basis. Additionally, the Company improved its first quarter 2002
cash flow and improved its cash position at March 31, 2002. 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 introduction 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.

RISK FACTORS

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;
|
| |  |  | 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;                                    
|
| |  |  | changes in generally accepted accounting policies, especially those
related to the recognition of software revenue; and                               

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| |  |  | 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 has been announced only recently and has not
yet begun commercial shipments, we cannot yet assess its market acceptance or
predict with accuracy the amount of revenue it will generate.

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 customer analytics and business planning software markets 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.

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 increasingly scarce, 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.

FUTURE CAPITAL NEEDS.

We believe, based upon our current business plan, that our current cash
and cash equivalents, funds generated from operations and available credit
lines should be sufficient to fund our operations as

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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. Such funds, whether from equity or debt financing or other
sources, may not be available, or available on terms acceptable to us.

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. The loss of
any of our 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;        

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| |  |  | we have to comply with a wide variety of foreign laws;                                                                                                                                          
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | we may not be able to adequately protect our trademarks overseas due
to the uncertainty of laws and enforcement in certain countries relating
to the protection of intellectual property rights;
|
| |  |  | reductions in business activity during the summer months in Europe
and certain other parts of the world could negatively impact the
operating results of our foreign operations;                
|
| |  |  | export controls could prevent us from shipping our products into and
from some markets;                                                                                                         
|
| |  |  | multiple and possibly overlapping tax structures could significantly
reduce the financial performance of our foreign operations;                                                                
|
| |  |  | changes in import/export duties and quotas could affect the
competitive pricing of our products and services and reduce our market
share in some countries; and                                 
|
| |  |  | economic or political instability in some international markets could
result in the forfeiture of some foreign assets and the loss of sums
spent developing and marketing those assets.         

BECAUSE THE CUSTOMER ANALYTICS AND BUSINESS PLANNING MARKETS ARE HIGHLY
COMPETITIVE, WE MAY NOT BE ABLE TO SUCCEED.

If we fail to compete successfully in the highly competitive and rapidly
changing customer analytics and business planning markets, we may not be able
to succeed. We face competition primarily from customer relationship management
software firms, Internet customer interaction software vendors and computer
telephony software companies. 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.

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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.

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.

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PART II.  OTHER INFORMATION




ITEM 6.  EXHIBITS AND REPORTS ON
FORM 8-K



|Exhibit Number |  | Description                                                                                                                                      
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|              
|10.1*          |  | Termination Agreement, dated January 14, 2002 by
and among the Company, Applix GMbH and Michael Schieb                                           
|              
|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

|    |  |                                                                                                                                                             
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|*   |  | Previously filed with the registrants Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31,
2002, filed with the Commission on May 15,
2002.
|   
|(b) |  | Reports on Form 8-K.
The Company filed no reports on Form 8-K during the quarter for which this report was filed.                                           

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SIGNATURE

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

APPLIX, INC.

|                   |                                                                                                                            |                
|------------------ | -------------------------------------------------------------------------------------------------------------------------- | ---------------
|Date: May 19, 2003 |                                                                                                                            | /s/ Walt Hilger
|                   |                                                                                                                           
|                   | Walt Hilger
Chief Financial Officer and Treasurer
(Duly Authorized Officer and
Principal Financial and Accounting Officer)




CERTIFICATIONS

I, David Mahoney, certify that:

1.  I have reviewed this
quarterly report on Form 10-Q, as amended, of Applix,
Inc.;

2.  Based on my
knowledge, the quarterly report, as amended, 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 the quarterly report, as
amended;

3.  Based on my
knowledge, the financial statements, and other financial information
included in the quarterly report, as amended, fairly     present
in all material respects the financial condition, results of
operation and cash flows of the registrant as of, and for, the
periods     presented in this quarterly report as amended.

|                    |                                          |                     
|------------------- | ---------------------------------------- | --------------------
|Dated: May 19, 2003 |                                          | /s/ David C. Mahoney
|                    |                                         
|                    | David C. Mahoney
Chief Executive Officer

CERTIFICATIONS

I, Walt Hilger, certify that:

1.  I have reviewed this
quarterly report on Form 10-Q, as amended, of Applix,
Inc.;

2.  Based on my
knowledge, the quarterly report, as amended, 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 the quarterly report, as
amended;

3.  Based on my
knowledge, the financial statements, and other financial information
included in the quarterly report, as amended, fairly
     present in all material respects the financial condition, results of
operation and cash flows of the registrant as of, and for, the

     periods presented in this quarterly report as amended.

|                    |                                     |                
|------------------- | ----------------------------------- | ---------------
|Dated: May 19, 2003 |                                     | /s/ Walt Hilger
|                    |                                    
|                    | Walt Hilger
Chief Financial Officer

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EXHIBIT INDEX


|Exhibit Number |  | Description                                                                                                                                      
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|              
|10.1*          |  | Termination Agreement, dated January 17,
2002, by and among the Company, Applix GMbH and Michael Schieb                                          
|              
|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

|  |  |                                                                                                                                                             
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
|* |  | Previously filed with the registrants
Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31,
2002, filed with the Commission on May 15,
2002.

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