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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended June 30, 2000

or

|/ / | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ----------------------------------------------------------------------------------------

For the transition period from  to

Commission file number 000-21959

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APEX INC.(Exact Name of Registrant as Specified in Its Charter)

Washington

91-1577634(State or Other Jurisdiction of

(I.R.S. Employer Identification Number)Incorporation or Organization)9911 Willows Road N.E.Redmond, Washington

98052(Address of Principal Executive Offices)

(Zip Code)


425-861-5858(Registrant's Telephone Number, Including Area Code)

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Indicate
by check mark whether the registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the preceding
12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past
90 days. Yes /x/  No / /

As
of June 30, 2000, the number of outstanding shares of the Company's Common Stock was 21,395,221.

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## 

APEX INC.       FORM 10-Q       JUNE 30, 2000       INDEX

|           |  |                       |  |                                                                                                                     |  | Page(s)
|---------- |  | --------------------- |  | ------------------------------------------------------------------------------------------------------------------- |  | -------
|Part I     |  | Financial Information |  |                                                                                                                    
|           |  | Item 1.               |  | Financial Statements                                                                                                |  |        
|           |  |                       |  | Consolidated Income Statements (unaudited) for the Three Months and Six Months Ended June 30, 2000 and July 2, 1999 |  | 3      
|           |  |                       |  | Consolidated Balance Sheets at June 30, 2000 (unaudited) and December 31, 1999                                      |  | 4      
|           |  |                       |  | Condensed Consolidated Statements of Cash Flows (unaudited) for the Six Months Ended June 30, 2000 and July 2, 1999 |  | 5      
|           |  |                       |  | Notes to Consolidated Financial Statements (unaudited)                                                              |  | 6-7    
|           |  | Item 2.               |  | Management's Discussion and Analysis of Financial Condition and Results of Operations                               |  | 8-11   
|Part II    |  | Other Information     |  |                                                                                                                    
|           |  | Item 1.               |  | Legal Proceedings                                                                                                   |  | 12     
|           |  | Item 4.               |  | Submission of Matters to a Vote of Security Holders                                                                 |  | 12     
|           |  | Item 6.               |  | Exhibits and Reports on Form 8-K                                                                                    |  | 12     
|Signatures |  | 13                   

2

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PART IFINANCIAL INFORMATION

Item 1.  Financial Statements

APEX INC.

CONSOLIDATED INCOME STATEMENTS

(In thousands, except per share data)

|                                                              |                          | For the three
months ended |        | For the six
months ended
|------------------------------------------------------------- | ------------------------ | -------------------------- | ------ | ------------------------
|
|
|Net sales                                                     |                          | $                          | 36,447 |                         
|Cost of sales                                                 |                          |                            | 19,648 |                         
|                                                              |                          |                            |        |                         
|                                                              | Gross profit             |                            |        | 16,799                  
|                                                              |                          |                            |        |                         
|Research and development                                      |                          |                            | 1,672  |                         
|Sales and marketing                                           |                          |                            | 3,187  |                         
|General and administrative                                    |                          |                            | 1,592  |                         
|                                                              |                          |                            |        |                         
|                                                              | Total operating expenses |                            |        | 6,451                   
|                                                              |                          |                            |        |                         
|Income from operations                                        |                          |                            | 10,348 |                         
|Interest income                                               |                          |                            | 1,072  |                         
|                                                              |                          |                            |        |                         
|Income before income taxes                                    |                          |                            | 11,420 |                         
|Provision for income taxes                                    |                          |                            | 3,880  |                         
|                                                              |                          |                            |        |                         
|Net income                                                    |                          | $                          | 7,540  |                         
|                                                              |                          |                            |        |                         
|Earnings per share:                                           |                          |                            |        |                         
|                                                              | Basic                    |                            | $      | 0.35                    
|                                                              |                          |                            |        |                         
|                                                              | Diluted                  |                            | $      | 0.34                    
|                                                              |                          |                            |        |                         
|Weighted average shares used in computing earnings per share: |                          |                            |        |                         
|                                                              | Basic                    |                            |        | 21,256                  
|                                                              |                          |                            |        |                         
|                                                              | Diluted                  |                            |        | 22,453                  
|                                                              |                          |                            |        |                         

See
notes accompanying these consolidated financial statements.

3

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APEX INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)

|                                           |                                                                                                                                                             | June 30,
2000              |         | December 31,
1999 |        
|------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------- | ----------------- | -------
|
|ASSETS                                     |                                                                                                                                                             |                            |         |                   |        
|Current assets:                            |                                                                                                                                                             |                            |         |                   |        
|                                           | Cash and cash equivalents                                                                                                                                   |                            | $       | 16,498            |        
|                                           | Investments maturing within one year                                                                                                                        |                            |         | 65,299            |        
|                                           |                                                                                                                                                             |                            |         |                   |        
|                                           |                                                                                                                                                             | Total cash and investments |         |                   | 81,797 
|                                           | Accounts receivable, less allowance for doubtful accounts                                                                                                   |                            |         | 27,117            |        
|                                           | Inventories                                                                                                                                                 |                            |         | 8,383             |        
|                                           | Prepaid expenses                                                                                                                                            |                            |         | 528               |        
|                                           | Deferred tax assets                                                                                                                                         |                            |         | 612               |        
|                                           |                                                                                                                                                             |                            |         |                   |        
|                                           |                                                                                                                                                             | Total current assets       |         |                   | 118,437
|Investments maturing after one year        |                                                                                                                                                             |                            | 3,289   |                   |        
|Property and equipment, net                |                                                                                                                                                             |                            | 1,722   |                   |        
|Other                                      |                                                                                                                                                             |                            | 2,776   |                   |        
|                                           |                                                                                                                                                             |                            |         |                   |        
|Total assets                               |                                                                                                                                                             | $                          | 126,224 |                   | $      
|                                           |                                                                                                                                                             |                            |         |                   |        
|LIABILITIES AND SHAREHOLDERS' EQUITY       |                                                                                                                                                             |                            |         |                   |        
|Current liabilities:                       |                                                                                                                                                             |                            |         |                   |        
|                                           | Accounts payable                                                                                                                                            |                            | $       | 1,192             |        
|                                           | Accrued compensation                                                                                                                                        |                            |         | 3,881             |        
|                                           | Income taxes                                                                                                                                                |                            |         | 1,064             |        
|                                           | Other accrued expenses                                                                                                                                      |                            |         | 2,357             |        
|                                           |                                                                                                                                                             |                            |         |                   |        
|                                           |                                                                                                                                                             | Total current liabilities  |         |                   | 8,494  
|                                           |                                                                                                                                                             |                            |         |                   |        
|Shareholders' equity                       |                                                                                                                                                             |                            |         |                   |        
|                                           | Preferred stock, 1,000 shares authorized, no shares issued and outstanding                                                                                  |                            |         |                  |        
|                                           | Common stock, no par value; 100,000 shares authorized at June 30, 2000 and December 31, 1999; 21,395 and 20,794 shares issued and outstanding, respectively |                            |         | 76,456            |        
|                                           | Accumulated other comprehensive loss                                                                                                                        |                            |         | (112              | )      
|                                           | Deferred compensation                                                                                                                                       |                            |         |                  |        
|                                           | Retained earnings                                                                                                                                           |                            |         | 41,386            |        
|                                           |                                                                                                                                                             |                            |         |                   |        
|                                           |                                                                                                                                                             | Total shareholders' equity |         |                   | 117,730
|                                           |                                                                                                                                                             |                            |         |                   |        
|Total liabilities and shareholders' equity |                                                                                                                                                             | $                          | 126,224 |                   | $      
|                                           |                                                                                                                                                             |                            |         |                   |        

See
notes accompanying these consolidated financial statements.

4

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APEX INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

|                                                                                  |                                                            | For the six months ended                            |                                          
|--------------------------------------------------------------------------------- | ---------------------------------------------------------- | --------------------------------------------------- | -----------------------------------------
|
|
|Cash flows from operating activities:                                             |                                                            |                                                     |                                          
|Net income                                                                        |                                                            | $                                                   | 13,541                                   
|                                                                                  |                                                            |                                                     |                                          
|Adjustments to reconcile net income to net cash provided by operating activities: |                                                            |                                                     |                                          
|                                                                                  | Depreciation and amortization                              |                                                     |                                          
|                                                                                  | Amortization of deferred compensation                      |                                                     |                                          
|                                                                                  | Deferred taxes                                             |                                                     |                                          
|                                                                                  | Changes in:                                                |                                                     |                                          
|                                                                                  |                                                            | Accounts receivable, net                            |                                          
|                                                                                  |                                                            | Inventories, net                                    |                                          
|                                                                                  |                                                            | Prepaid expenses                                    |                                          
|                                                                                  |                                                            | Other assets                                        |                                          
|                                                                                  |                                                            | Accounts payable                                    |                                          
|                                                                                  |                                                            | Accrued compensation                                |                                          
|                                                                                  |                                                            | Income taxes                                        |                                          
|                                                                                  |                                                            | Other accrued expenses                              |                                          
|                                                                                  |                                                            |                                                     |                                          
|                                                                                  |                                                            |                                                     | Total adjustments                        
|                                                                                  |                                                            |                                                     |                                          
|                                                                                  |                                                            |                                                     | Net cash provided by operating activities
|                                                                                  |                                                            |                                                     |                                          
|Cash flows from investing activities:                                             |                                                            |                                                     |                                          
|                                                                                  | Purchases of investments                                   |                                                     |                                          
|                                                                                  | Maturities of investments                                  |                                                     |                                          
|                                                                                  | Deferred acquisition costs                                 |                                                     |                                          
|                                                                                  | Purchases of property and equipment                        |                                                     |                                          
|                                                                                  | Other comprehensive loss                                   |                                                     |                                          
|                                                                                  |                                                            |                                                     |                                          
|                                                                                  |                                                            | Net cash provided by (used in) investing activities |                                          
|                                                                                  |                                                            |                                                     |                                          
|Cash flows from financing activities:                                             |                                                            |                                                     |                                          
|                                                                                  | Proceeds from employee stock plans and related tax benefit |                                                     |                                          
|                                                                                  |                                                            |                                                     |                                          
|                                                                                  |                                                            | Net cash provided by financing activities           |                                          
|                                                                                  |                                                            |                                                     |                                          
|Net increase in cash and cash equivalents                                         |                                                            |                                                     | 712                                      
|Cash and cash equivalents at beginning of period                                  |                                                            |                                                     | 15,786                                   
|                                                                                  |                                                            |                                                     |                                          
|Cash and cash equivalents at end of period                                        |                                                            | $                                                   | 16,498                                   
|                                                                                  |                                                            |                                                     |                                          

See
notes accompanying these consolidated financial statements.

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APEX INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, in thousands)

Note 1.  Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in conformity with generally accepted accounting principles and reflect all
adjustments consisting of normal recurring adjustments which, in the opinion of management, are necessary for a fair presentation of the results for the periods shown. The results of operations for
such periods are not necessarily indicative of the results expected for the full fiscal year or for any future period. The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions.

The
accompanying unaudited consolidated financial statements should be read in conjunction with our audited consolidated financial statements for the year ended December 31,
1999 and the related notes contained in our Annual Report on Form 10-K for the year ended December 31, 1999, on file with the Securities and Exchange Commission.

We
report our annual results based on years ending December 31. We report our quarterly results for the first three interim periods ending on Friday closest to the calendar
month ends of March, June and September and for the fourth interim period ending on December 31.

Our
financial statements are consolidated and include the accounts of Apex Inc. (formerly Apex PC Solutions, Inc.) and our wholly-owned subsidiaries. Significant
intercompany transactions and balances have been eliminated.

Note 2.  Inventories

Inventories consisted of the following at:

June 30,
2000

December 31,
1999Raw materials

$
1,059

$
1,126Work-in-process


1,834


2,633Finished goods


5,490


7,724$
8,383

$
11,483


Note 3.  Accumulated other comprehensive loss

We record unrealized gains and losses on our available-for-sale securities as accumulated other comprehensive income (loss), which is
included as a separate component of shareholders' equity. For the three months ended June 30, 2000, total comprehensive loss amounted to ($112). For the first six months of 2000, total
comprehensive loss amounted to ($112).

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Note 4.  Earnings per share

|                                                                                   |  | For the three
months ended |        | For the six
months ended
|---------------------------------------------------------------------------------- |  | -------------------------- | ------ | ------------------------
|
|Net income                                                                         |  | $                          | 7,540  |                         
|                                                                                   |  |                            |        |                         
|Weighted average shares used in computing basic earnings per share                 |  |                            | 21,256 |                         
|Dilutive effect of employee stock options after application of the treasury method |  |                            | 1,197  |                         
|                                                                                   |  |                            |        |                         
|Weighted average shares used in computing diluted earnings per share               |  |                            | 22,453 |                         
|                                                                                   |  |                            |        |                         

Note 5.  Subsequent event

On July 1, 2000, we merged with Cybex Computer Products Corporation ("Cybex"), a leading manufacturer of console switching equipment, to form Avocent
Corporation. According to the terms of the merger agreement, each share of Apex Common Stock has been converted into 1.0905 shares of Avocent Common Stock, and each share of Cybex Common Stock has
been converted into one share of Avocent Common Stock. For accounting purposes, the merger will be treated as a purchase of Cybex by Apex, for a total purchase price of $827,106. The acquisition will
be recorded using the purchase method of accounting, and the purchase price will be allocated based upon the estimated fair values of the assets acquired.

A
summary of the purchase consideration is as follows:

Common Stock

$
718,113Outstanding options


72,633Assumed liabilities and acquisition costs


36,360Total purchase consideration

$
827,106


7

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

THE INFORMATION IN THIS ITEM 2"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" CONTAINS FORWARD-LOOKING STATEMENTS,
INCLUDING, WITHOUT LIMITATION, STATEMENTS RELATING TO OUR REVENUES, EXPENSES, MARGINS, LIQUIDITY AND CAPITAL NEEDS. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN
OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999, "BUSINESSRISK FACTORS."

Overview

We design, manufacture and sell stand-alone switching systems and remote access products for the client/server computing market. Network administrators in
client/server environments have increasingly complex and growing server populations, and our switching systems and remote access products help network administrators manage multiple servers from a
single keyboard, video monitor and mouse configuration (a "console"), which may be at a remote location. Specifically, our products reduce personnel, space, energy, depreciation, and maintenance costs
that organizations face when adopting or expanding client/server architecture.

We
provide comprehensive "plug and play" switching systems for many network administration, management and storage problems faced by customers using client/server architecture. Our
switching products, includingOutLook®,ViewPoint® and Emerge, help network administrators
access multiple servers from one or more centralized or remote consoles, consolidate hardware
requirements, and provide direct hardwired connections between the switch and the attached servers to facilitate access to those servers, even when the network is down.

A
substantial portion of our sales are concentrated among a limited number of original equipment manufacturers who purchase our switching systems on a private-label basis ("OEMs" and
"OEM customers"). Sales to our OEM customers represented approximately 63% of our net sales for 1999, 60% of our net sales for 1998 and 65% of our net sales for 1997.

We
are increasing the mix of sales of branded switching products to other manufacturers of servers and related networking products, who integrate and sell Apex-brand
switches with their own products. We do not have contracts with any of these customers, who are obligated to purchase products from us only pursuant to binding purchase orders.

With
recent industry-wide initiatives to reduce all channel inventories and to shorten lead times, trends with our major customers are, generally, to reduce the number of
weeks of forward-committed firm orders. This factor is currently affecting our business with certain OEMs and other server manufacturers, and we believe that it will make our sales more
difficult to predict and inventory levels more difficult to manage.

We
are currently experiencing increased price competition in both the market for stand-alone switching systems and the market for integrated server cabinet systems, and we expect that
pricing pressures will increase in the future.

On
March 8, 1999, we began a five-year lease of approximately 117,000 square feet in an industrial office building in Redmond, Washington. The initial base rent
under the lease is approximately $90,000 per month, plus taxes, insurance and maintenance. Portions of the rent are allocated to cost of sales and to general and administrative expense. The 117,000
square foot leased premises has approximately

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35,000 more square feet than we currently need, and we have subleased the excess space until we need it for planned expansion.

Kevin
J. Hafer, our former Chairman, President and Chief Executive Officer, has exercised stock options for our Common Stock, and as of June 30, 2000 he holds 435,486 shares
of, and has vested and unexercised options totaling 152,875 shares of, our Common Stock. Since November 1997, Mr. Hafer has been selling (and/or making gifts of) approximately 30,000 to
180,000 shares of our Common Stock each quarter. Subsequent to quarter end, Mr. Hafer has retired from his position and is no longer an officer of the company, and Mr. Hafer has informed
us that he intends to continue a disciplined selling program. Mr. Hafer has also informed us that, in order to diversify his investments and to provide liquidity, on one or more occasions over
the next year or two he is likely to substantially increase the number of shares of our Common Stock that he sells over and above the number he sells on a regular basis. Other executive officers have
vested in significant amounts of our Common Stock and continue to vest in additional shares on a monthly basis. These officers have informed us that they have sold and may sell additional shares of
our Common Stock to provide liquidity and diversify their portfolios.

On
July 1, 2000, we merged with Cybex Computer Products Corporation ("Cybex"), a leading manufacturer of console switching equipment, to form Avocent Corporation. According to the
terms of the merger agreement, each share of Apex Common Stock has been converted into 1.0905 shares of Avocent Common Stock, and each share of Cybex Common Stock has been converted into one share of
Avocent Common Stock. For accounting purposes, the merger will be treated as a purchase of Cybex by Apex, for a total purchase price of $827,106. The acquisition will be recorded using the purchase
method of accounting, and the purchase price will be allocated based upon the estimated fair values of the assets acquired.

Results of Operations

The following table sets forth selected unaudited statement of operations data expressed as a percentage of net sales:

|                           |                          | For the three months ended |      | For the six months ended |     
|-------------------------- | ------------------------ | -------------------------- | ---- | ------------------------ | ----
|
|Net sales                  |                          | 100.0                      | %    | 100.0                    | %   
|Cost of sales              |                          | 53.9                       |      | 53.3                     |     
|                           |                          |                            |      |                          |     
|Gross margin               |                          | 46.1                       |      | 46.7                     |     
|                           |                          |                            |      |                          |     
|Research and development   |                          | 4.6                        |      | 6.5                      |     
|Sales and marketing        |                          | 8.7                        |      | 7.5                      |     
|General and administrative |                          | 4.4                        |      | 6.3                      |     
|                           |                          |                            |      |                          |     
|                           | Total operating expenses |                            | 17.7 |                          | 20.3
|                           |                          |                            |      |                          |     
|Income from operations     |                          | 28.4                       |      | 26.3                     |     
|Interest income            |                          | 2.9                        |      | 2.7                      |     
|                           |                          |                            |      |                          |     
|Income before income taxes |                          | 31.3                       |      | 29.0                     |     
|Provision for income taxes |                          | 10.6                       |      | 10.0                     |     
|                           |                          |                            |      |                          |     
|Net income                 |                          | 20.7                       | %    | 19.0                     | %   
|                           |                          |                            |      |                          |     

Net sales.Our net sales consist of sales of stand-alone switching systems, remote-access products and integrated
cabinet solutions. Our net sales increased 37% to $36.4 million for the second quarter of 2000 from $26.6 million for the second quarter of 1999, due primarily to increased demand for
private-label products, and to a lesser extent, increased sales to private-label OEM customers. Apex-brand product sales increased 69% to $16.3 million in the second quarter of 2000
from

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$9.6 million a year ago. Private-label OEM sales represented 55% of our net sales for the second quarter of 2000 compared to 64% of our net sales for the second quarter of 1999.
Apex-brand products represented 45% of our net sales for the second quarter of 2000 compared to 36% of our net sales for the second quarter of 1999.
2000 year-to-date net sales increased 37% to $64.7 million from $47.3 million year-to-date in 1999 primarily due to increased
demand for private-label products, and, to a lesser extent, increased sales to private-label OEM customers. Apex-brand product sales represented 44% of our net sales
year-to-date in 2000 compared to 37% of our net sales year-to-date in 1999. Private-label OEM sales represented 56% of our net sales
year-to-date in 2000 compared to 63% of our net sales year-to-date in 1999.

Gross margin.Gross margin is affected by a variety of factors, including: the ratio of OEM sales to branded sales, as
OEM sales typically have lower gross margins than branded sales; product mix, including the percentage of integrated server cabinet solution sales, which generally have lower gross margins than sales
of stand-alone switching systems; raw materials and labor costs; new product introductions by us and by our competitors; and the level of our outsourcing of manufacturing and assembly services. The
gross margin percentage improved slightly in 2000 due to the overall increase in sales spreading fixed costs over greater levels of production, and to the increase of Apex-branded sales in
the sales mix.

Research and development expenses.Research and development expenses include compensation for engineers and materials
costs and are expensed as they are incurred. Research and development expenses were $1.7 million, or 4.6% of net sales, in the second quarter of 2000 compared to $1.7 million, or 6.5% of
net sales, for the second quarter of 1999. The consistent level of spending includes increased compensation expense associated with increased staffing levels, offset by decreased project spending
related to timing of product development, as there was significant project spending related to new products introduced in 1999. The decrease in research and development spending as a percentage of
sales is due to the growth in sales. 2000 year-to-date research and development expenses decreased to $3.1 million from $3.3 million
year-to-date in 1999, due to the same reasons noted for the second quarter. As a percentage of net sales, year-to-date research and development expenses
decreased to 4.8% from 7.1%. We believe that the timely development of innovative products and enhancements to existing products is essential to maintaining our competitive position and we expect
research and development expenditures to increase in absolute dollars and possibly as a percentage of net sales.

Sales and marketing expenses.Sales and marketing expenses include advertising, promotional material, trade show
expenses and sales and marketing personnel costs, including sales commissions and travel. Sales and marketing expenses were $3.2 million, or 8.7% of net sales, for the second quarter of 2000
compared to $2.0 million, or 7.5% of net sales, for the second quarter of 1999. The increase in absolute dollars and as a percentage of sales was due primarily to increased advertising and
promotional expenses, and to increased compensation expense associated with increased staffing levels. 2000 year-to-date sales and marketing expenses increased to
$5.6 million, or 8.6% from $3.5 million, or 7.4% year-to-date in 1999, due to the same reasons noted for the second quarter. We expect sales and marketing
expenditures to increase in absolute dollars and possibly as a percentage of net sales as we continue our efforts to increase branded sales and international sales.

General and administrative expenses.General and administrative expenses include personnel costs for administration,
finance, human resources and general management, as well as rent, utilities and legal and accounting expenses, and provision for Washington State's gross receipts tax. General and administrative
expenses were $1.6 million, or 4.4% of net sales, for the second quarter of 2000 compared to $1.7 million, or 6.3% of net sales, for the second quarter of 1999. The decrease in absolute
dollars and as a percentage of sales was due to decreased cost associated with our relocation in Q2 1999, partially offset by increased compensation expense associated with increased staffing levels,
and
increased rent related to our new facilities. 2000 year-to-date general and administrative expenses increased to $3.3 million from $3.0 million
year-to-date in 1999, due to increased compensation expense

10

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associated with increased staffing levels, and to increased rent related to our new facilities, partially offset by a decrease in relocation expense and a decrease in patent litigation expenses. As a
percentage of net sales, year-to-date general and administrative expenses decreased to 5.1% from 6.3%. We expect general and administrative expenses to increase in absolute
dollars and possibly as a percentage of net sales to support the growth of the operations and sales functions.

Liquidity and Capital Resources

As of June 30, 2000, our principal sources of liquidity consisted of approximately $85.1 million in cash, cash equivalents and investments, an
increase of $24.1 million from $61.0 million at December 31, 1999. In addition, we have a combined line of credit and letter of credit facility with a bank with aggregate
borrowing capacity of $5.0 million at prime. Under the line of credit, we may borrow up to a specified amount based upon our accounts receivable. Under the letter of credit arrangement, the
bank will issue commercial letters of credit up to an aggregate of $5.0 million (less any amounts outstanding under the line of credit). The combined line of credit and letter of credit
facility has a maturity date in September 2000.

Our
operating activities generated cash of approximately $17.1 million in the first six months of 2000, compared to $9.2 million in the first six months of 1999. The
increase in cash flow from operations in 2000, when compared with the first six months of 1999, resulted primarily from increased net income and changes in accounts receivable and inventory, partially
offset by decreased accounts payable due to timing.

Inventory
levels decreased in the second quarter of 2000 because of improved inventory management at customer-mandated warehouse locations near the manufacturing locations of these
customers. The decrease in receivables from December 31, 1999 is a result of the timing of sales and of our collections. At June 30, 2000, our OEM customers accounted for approximately
52% of the accounts receivable.

We
believe that existing cash balances, cash generated from operations and the funds available to us under credit facilities will be sufficient to fund our operations through 2001.

Year 2000

We experienced no material impact from the Year 2000 problem. Our products performed without fault with respect to the Year 2000 problem, and we experienced no
issues with our internal computing and IT systems. We are also not aware of any Year 2000 issues experience by our customers, suppliers, vendors or service providers that may have a material effect on
us.

Quantitative and Qualitative Disclosures about Market Risks.

The market risk inherent in our financial instruments represents the potential loss arising from adverse changes in interest rates. We are exposed to market
risk in the area of interest rate changes impacting the fair value of our investment securities. Our investment policy is to manage our investment portfolio to preserve principal and liquidity while
maximizing the return on the portfolio through the investment of available funds. We diversify the investment portfolio by investing in a variety of highly-rated investment-grade securities and
through the use of different investment managers. Our marketable securities portfolio is primarily invested in short-term securities with at least an investment grade rating to minimize
interest rate and credit risk as well as to provide for an immediate source of funds. Market risk is estimated as the potential change in fair value in the investment portfolio resulting from a
hypothetical 10 percent change in interest rates, which is not material at June 30, 2000. We generally hold investments until maturity and carry the securities at amortized cost, which
approximates fair market value. We also hold investments that are considered available-for-sale, which we mark to market and record unrealized gains and losses as accumulated
other comprehensive income (loss), which is included in a separate component of shareholders' equity.

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PART IIOTHER INFORMATION

Item 1.  Legal Proceedings.

See description of legal proceedings in our Annual Report on Form 10-K for the year ended December 31, 1999, on file with the
Securities and Exchange Commission.

Item 4.  Submission of Matters to a Vote of Security Holders

The Company held a Special Meeting of Shareholders on June 30, 2000. At the Special Meeting, the shareholders voted to ratify our merger with Cybex
Computer Products Corporation and the Agreement and Plan of Reorganization dated March 8, 2000, by the following votes:

Number of Shares

%For

17,931,014

84.33
%Against

32,340

0.15
%Abstain

37,458

0.18
%Not voted

3,263,027

15.35
%Total

21,263,839

100.0
%


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

On
July 10, 2000, Avocent Corporation filed a Current Report on Form 8-K with the Securities and Exchange Commission relating to our merger with Cybex
Computer Products Corporation, which was effected on July 1, 2000. Apex and Cybex are now wholly-owned subsidiaries of Avocent.

ITEMS
2, 3 and 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED.

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## 

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.



|Date: August 11, 2000  | /s/ Barry L. HarmonBarry L. Harmon
Chief Operating Officer, Chief Financial Officer and Treasurer             
|---------------------- | --------------------------------------------------------------------------------------------------------------
|Date:  August 11, 2000 | /s/ Samuel F. SaracinoSamuel F. Saracino
Vice President of Business Development, General Counsel and Secretary

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