<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
For Annual and Transitional Reports Pursuant to Sections 13 or 15(d) of
The Securities Exchange Act of 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 0-25040
APPLIX, INC.
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2781676
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
112 Turnpike Road, Westboro, Massachusetts 01581-2831
------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(508) 870-0300
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Registrant's telephone number, including area code
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $.0025 par value per share
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]
On March 17, 1998, the aggregate market value of Common Stock held by
non-affiliates of the registrant was $57,890,270 based on the closing price of
the Common Stock on the Nasdaq National Market on March 17, 1998.
The number of shares of Common Stock outstanding as of March 18, 1998 was
10,146,401.
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DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENT PART FORM 10-K
Definitive Proxy Statement with respect to Part III
the Annual Meeting of Stockholders to be held on
May 8, 1998 to be filed with the Securities and
Exchange Commission
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\
PART I
ITEM 1. BUSINESS
GENERAL
Applix, Inc. ("Applix" or the "Company") develops, markets and supports
front-office software applications which allow organizations to become
"real-time" enterprises by improving decision making and corporate productivity.
Applix's product lines consist of Customer Interaction Software (CIS) products,
aimed at enabling and improving the management of internal and external customer
interactions, and a family of Decision Support Software (DSS) products, which
provide for real-time access and analysis of data. Both the CIS products and the
DSS products are available on a variety of UNIX, Windows/NT, Windows 95 and
Internet-enabled platforms and are available in English, French, German and
Japanese.
CIS SOLUTIONS
INDUSTRY BACKGROUND
In order for an organization to provide superior customer service and
engender loyalty among its customers, an organization must demonstrate to its
customers that the organization understands, can anticipate, and can respond
effectively to the needs of its customers. In order to achieve this goal, an
organization needs software solutions that allow members of the organization to
easily and effectively access, communicate and share information about that
organization's customers across many departments of that organization. The need
for such software solution has resulted in the development of "customer
interaction software," or CIS solutions. CIS solutions provide software
applications that enable users to organize and manage their customer-related
functions, such as sales, service and product development.
THE APPLIX CIS SOLUTION - APPLIX ENTERPRISE
The Company is a leading provider of Internet-enabled, object oriented CIS
solutions, sold under the name Applix Enterprise. The Applix Enterprise solution
is comprised of an easy-to-use family of products that can be easily customized
and rapidly deployed. Applix Enterprise products are based on an architecture
called Enterprise Solutions Platform (ESP), which provides the following
benefits:
INTEGRATION - Applix's Enterprise products share a common database,
permitting all departments and personnel to look at the same customer data so
the information is consistent across all work groups.
CONFIGURABILITY - The applications can be easily configured and customized
to adapt to the unique processes of an organization or department.
SCALABILITY - Applix Enterprise is based on a multi-tier architecture,
which allows the product to grow as the user's requirement grows.
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INTERNET INTEGRATION - Through the use of Java (a programming
environment), ESP enables the functionality of Applix Enterprise to be accessed
remotely using "thin client" technology such as Internet browsers.
RAPID CUSTOMIZATION AND DEPLOYMENT - The ESP platform enables Applix
Enterprise to be easily customized and rapidly deployed, thereby enabling users
to more quickly provide their customers with the benefits of the CIS solution.
Applix Enterprise consists of the following modules:
APPLIX SALES is a sales automation solution that enables customers to
manage every phase of their sales cycle -- from initial lead generation through
qualification, close and fulfillment. Applix Sales enables users to perform
functions including lead tracking, forecasting, quote generation and account
management.
APPLIX SERVICE is an application for service departments. It offers
resource allocation and auto-assignment features for the management of requests
received via telephone, the Internet, e-mail and fax; maintains information
about customer calls, resolutions, escalation status, and notifications;
provides customer feedback on product performance, function and features
directly to an organization's product development and quality assurance
departments; and displays customer history so customer service representatives
are always informed and ready to answer questions. Applix Service allows
customers of an organization to use the Internet to report problems and access
information to assist them in solving problems. The SupportLink interface
includes multi-media solution display, hypertext searching and case-based
decision trees.
APPLIX HELPDESK is an enterprise-wide incident management system which
helps manage customer problems, from initial log-in through resource allocation,
escalation, modification and resolution. The Applix Quick Solve resolution
technology allows customers to search multiple databases simultaneously. Like
Applix Service, Applix Helpdesk enables an organization's customers to report
problems and access solutions via the Internet, and it provides customer
feedback on product performance, function and features directly to an
organization's product development and quality assurance departments.
The Applix Enterprise applications listed above are typically bundled with
the following third-party applications:
KNOWLEDGE-PAKS (licensed from ServiceWare, Inc.) are pre-packaged
solutions to commonly asked questions/problems encountered by end users of many
of the applications used in today's business environment.
CRYSTAL REPORTS (licensed from Seagate Software Company) is an application
which gives help-desk or customer service managers the ability to report on
information within their support database.
WINBEEP (licensed from Integra Technology International, Inc.) is a
wireless messaging product which sends alphanumeric messages from a PC to either
alphanumeric pagers or mobile PCs with pager cards.
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The list price of licenses for each of Applix Sales, Applix Service and
Applix HelpDesk is $1,995 per concurrent user. The products are also available
in packaged versions (which include some training and consulting) ranging in
prices from $14,995 for a five-user system to $195,000 for a 100-user system.
The suggested price of licenses for the third-party applications listed above
range from $100 per concurrent user to $399 per concurrent user. Volume
discounts are available.
ENTERPRISE ANYWARE
Enterprise Anyware is a Java-enabled, thin-client version of the Company's
Applix Enterprise product line. Enterprise Anyware enables users to connect,
from any location worldwide, to server-based applications and information
resources, via Java-enabled Web browsers, thus providing real-time access to
important customer information from anywhere.
The list price of licenses for the Enterprise Anyware server is $14,995
and for the Enterprise Anyware client is $295 per concurrent user.
DECISION SUPPORT SOFTWARE
Applix's family of DSS products consists of Applix TM1, a real-time
multi-dimensional analysis tool for financial decision support; Applixware, an
open suite of desktop tools for accessing, analyzing and communicating
information in real-time; and Applix Anyware, a thin-client application
development and deployment solution that leverages Java to customize and deploy
Applixware applications.
APPLIX TM1
The Applix TM1 product line provides real-time analytical processing of
numerical data from multiple databases or from live data feeds. Applix TM1 is
based on a multi-dimensional database that is capable of calculating and storing
large amounts of rapidly changing data in multi-dimensional cubes, and allows
end-users to perform in-depth analysis as information changes, thereby enabling
faster decision making.
The Applix TM1 product line consists of the following modules:
TM1 SERVER is a scalable, high performance, multi-user OLAP (on-line
analytical processing) database server. TM1 Server's dynamic, on-demand
calculations deliver exceptional performance and up-to-the-minute results.
TM1 PERSPECTIVES is a high performance, single-user OLAP database server
with seamless integration to the spreadsheet in a stand-alone scalable OLAP
environment.
TM1 CLIENT is a spreadsheet-based interface that allows users to "slice,
dice, and rotate" data and "drill-down" to supporting detail data. It provides
intuitive ad hoc access to shared TM1 server data using either Microsoft Excel
or Lotus 1-2-3.
TM1 DATA CONTROL is a utility program that loads information from
relational databases into the Applix TM1 product.
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The suggested list prices for Applix TM1 products are as follows: TM1
Server (three-user system) is $14,990, TM1 Perspectives is $995 per concurrent
user, TM1 Client (bundle of five concurrent users) is $2,500, and TM1 Data
Control is $2,995 per concurrent user, subject to adjustment for volume
purchases.
APPLIXWARE
Applixware is an office productivity suite of applications that allows
customers to access, analyze, present and publish information from various data
sources. Such sources may include real-time information providers, such as
Reuters, major relational databases, legacy databases and multi-dimensional
databases. Information from various data sources can be dynamically integrated
and presented or published using Applixware product applications or other
vendors' applications.
Applixware includes the following modules:
APPLIX REAL TIME is a robust, secure, high performance gateway for
accessing real-time data using "live" data feeds to Applix Spreadsheets and
other Applixware products.
APPLIX DATA integrates data from one or more databases, such as Oracle,
Sybase or Informix, into other Applixware products.
APPLIX BUILDERS offers a rapid application development environment.
APPLIX REAL TIME DEVELOPER'S TOOLKIT is a tool that allows Applix
customers to create gateways to proprietary real time data sources, thus
creating a custom version of Applix Real Time.
APPLIX SPREADSHEETS is a customizable, graphical spreadsheet that is
capable of integrating and presenting large amounts of dynamic numerical data
and that supports "live-links" to other Applixware modules.
APPLIX WORDS is a customizable, graphical word processor that serves as
the underlying framework for compound documents. Applix Words includes Applix
Graphics, a full-feature drawing, charting and graphics editing package.
APPLIX MAIL and APPLIX OPENMAIL provide user and developer interfaces and
management functions for use with UNIX SendMail and HP OpenMail.
APPLIX FILTER PACKS, which are available in three sets, extend the
interoperability of Applix Words and Applix Graphics. The Words Pack supports
several popular word processor file formats, the Publishers Packs support
popular desktop publishing packages, and the Graphics Pack enables
interoperability with leading third-party graphic packages.
APPLIX HTML AUTHOR is an easy-to-use product for the creation of
World-Wide Web documents, and the conversion of documents to and from HTML
(HyperText Markup Language).
APPLIX PRESENTS is a full-feature, cross-platform presentation tool for
creating and viewing full-color presentations.
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APPLIX OFFICE BUNDLE is the combination of Applix Words, Applix
Spreadsheets, Applix Presents, Applix Mail and Applix Filter Packs.
Applix also offers Applixware for Linux, a "shrink-wrap" version of
Applixware for the Linux platform, a platform designed for academic and home
users.
The list prices of licenses for Applixware modules include $1,995 for
Applix Real Time, $995 for Applix Data, $2,495 for Applix Builders, $695 for
Applix Spreadsheets, $695 for Applix Office Bundle and $195 to $995 for other
module licenses, with volume discounts available. The Real Time Developer's
Toolkit is priced at $10,000.
APPLIX ANYWARE
The Applix Anyware product family is a suite of thin-client applications
that delivers the functionality of Applixware utilizing Java technology. Applix
Anyware enables users to access, from any location worldwide, server-based
applications and information resources, via any Java-enabled browser.
The list price of licenses for Anyware modules is $2,495 for Anyware
Innovators Workbench, $295 for Anyware Office, $195 for Anyware Web Data Gateway
and $995 for Anyware Web Real Time Gateway, with volume discounts available.
MARKETING AND SALES
The Company focuses its marketing efforts for its CIS products on growing,
mid-size companies that emphasize customer service and enhancing customer
relations. Applix concentrates its marketing efforts on companies located in the
financial services, high technology, health care and telecommunications
industries.
The Company has traditionally focused its marketing efforts for its DSS
products on four industry sectors: financial services, manufacturing/
engineering, telecommunications and the federal government. These sectors are
characterized by prevalent use of 32-bit client/server computing environments
and a dependence upon information analysis and dissemination, characteristics
for which the Company's DSS products are ideally suited.
An important part of the Company's marketing and sales strategy is to
continue to establish strategic marketing relationships with leading vendors and
systems integrators within targeted industry sectors who can assist the Company
in penetrating both new accounts within its existing markets and new market
segments.
The Company markets its CIS products worldwide primarily through a direct
sales organization operating out of its sales offices in a number of
metropolitan cities throughout the United States and in France, Germany, the
Netherlands, the United Kingdom and Singapore. The Company's direct sales
efforts in the CIS market are supplemented both domestically and abroad with
support from strategic marketing partners and resellers, such as Computer Data
Systems, the Interchange Group and Getronics. While the sales cycle for the
Company's CIS products varies substantially from customer to customer, it is
typically six to nine months.
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The Company markets its DSS products worldwide primarily through a network
of original equipment manufacturers (OEMs), value-added resellers (VARs) and
other distributors, including Comshare, Hyperion Software, IQ Software,
Motorolla and Red Hat Software (Applixware for Linux). The Company addresses the
federal government market primarily through resellers and systems integrators,
such as Loral Federal Systems Co., Computer Sciences Corp., World Wide
Technologies and IBM. Revenue from the federal government market typically comes
from orders under subcontract between the Company and the reseller or system
integrator acting as the prime contractor with the government agency. While the
sales cycle for the Company's DSS products varies substantially from customer to
customer, it typically requires three to six months.
The Company's marketing programs consist of direct mail and seminars,
ongoing customer communications programs and web banner advertising. These
efforts are supplemented by listings in relevant trade directories, exhibitions
at trade shows and industry conference appearances.
Delivery lead times for the Company's products are short, and
consequently, the majority of the Company's product revenue in each quarter
results from orders received in that quarter. Accordingly, the Company believes
that its order backlog at any given point in time is neither a reliable
indicator of future sales and earnings nor material to an understanding of the
Company's business. The absence of significant backlog may contribute to
unpredictability of the Company's results of operations.
CUSTOMER TRAINING, SUPPORT AND CONSULTING SERVICES
The Company believes that superior consulting services and customer
support is a critical part of the Company's sales and marketing efforts,
particularly in the CIS market. Many of the Company's customers use the
Company's products to develop and support "mission critical" applications, and
the Company recognizes that quality training, support and consulting services
are therefore especially important to its customers.
The Company's consultants assist in the sales process by helping customers
understand the benefits of the Company's products. In addition, the Company's
consultants work directly with customer personnel in information technology
departments and in the functional areas relevant to the application to assist
them in planning and deploying solutions.
The Company offers several training programs, which are available at the
Company's headquarters in Westboro, MA, and in its Vienna, VA office and at
certain of its foreign subsidiaries, either directly or via resellers. On-site
customer training is also offered.
The Company provides product support from its Westboro, MA headquarters
and its wholly-owned subsidiaries. Certain of the Company's resellers provide
various levels of customer support, depending upon the terms of their agreements
with the Company. Customers may choose from a variety of maintenance plans for a
fixed annual fee that is generally 15% to 18% of the license fee for covered
products. Included in all maintenance plans are free product upgrades and
interim fixes to reported problems. In 1997, maintenance accounted for
approximately 69% of the Company's service revenue.
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RESEARCH AND DEVELOPMENT
The Company believes that its future success will depend upon its ability
to continue to enhance and broaden its product lines. The Company's total
product development expenses (including capitalized software development costs)
in 1995, 1996 and 1997 were $4,714,000, $7,551,000 and $9,476,000, respectively.
Capitalized software development costs are amortized over the estimated life of
the product (generally one and one half to three years) and amounts amortized
are included in the cost of license revenue.
COMPETITION
The market for the Company's products is highly competitive and subject to
rapid change. The Company faces competition from product offerings of other
companies, as well as customers' internal development efforts. In the CIS
market, the Company's products compete principally with offerings from Siebel
Systems, Vantive and Clarify. In the DSS market, the Company faces competition
principally from Lotus, Microsoft, Oracle, Arbor Software and MIS A.G. In some
cases, potential customers may undertake an in-house system integration effort
with point products from Microsoft rather than purchasing a solution such as
Applixware.
The Company believes that it competes principally on the basis of product
features and functionality (including cross-platform availability,
interoperability, integration and extensibility), product price, reliability,
ease of use and supportability. Most of the Company's competitors have
significantly greater financial, technological and marketing resources than the
Company. No assurance can be given that the Company will be able to compete
successfully against current and future competition or that the competitive
pressures faced by the Company will not adversely affect its financial
performance.
PROPRIETARY RIGHTS
The Company relies primarily on a combination of copyright law and trade
secret law to protect its proprietary technology. The Company has internal
policies and systems to ensure limited access to and the confidential treatment
of its trade secrets. The Company generally distributes its products under
"shrink-wrap" software license agreements, which contain various provisions to
protect the Company's ownership of and the confidentiality of the underlying
technology. The Company also requires its employees and other parties with
access to its confidential information to execute agreements prohibiting the
unauthorized use or disclosure of the Company's technology. Despite these
precautions, it may be possible for a third party to misappropriate the
Company's technology or to independently develop similar technology. In
addition, effective copyright and trade secret protection may not be available
in every foreign country in which the Company's products are distributed, and
"shrink-wrap" licenses, which are not signed by the customer, may be
unenforceable in certain jurisdictions.
Certain technologies used in the Company's products are licensed from
third parties. The Company generally pays royalties on such technologies on a
percentage of revenue basis (the amount of which is not material to the
Company). The Company believes that if the license for any such third-party
technology were terminated, it would be able to develop such technology
internally or license equivalent technology from another vendor without
significant expense. If the Company's
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rights to distribute such third-party technologies were terminated, sales of the
Applix products could be adversely affected.
The Company believes that, due to the rapid pace of technological
innovation for software applications, the Company's ability to establish and
maintain a position of technology leadership in the industry is dependent more
upon the skills of its development personnel than upon the legal protections
afforded its existing technology.
The Company is not engaged in any material disputes with other parties
with respect to the ownership or use of the Company's proprietary technology.
However, there can be no assurance that other parties will not assert technology
infringement claims against the Company in the future. The litigation of such a
claim may involve significant expense and management time. In addition, if any
such claim were successful, the Company could be required to pay monetary
damages and may also be required to either refrain from distributing the
infringing product or obtain a license from the party asserting the claim (which
license may not be available on commercially reasonable terms).
EMPLOYEES
As of December 31, 1997, the Company had 299 employees, including 62 in
sales and marketing, 38 in customer services/support, 78 in product development,
36 in finance, administration and facilities, and 85 in the Company's
international subsidiaries. None of the Company's employees is represented by a
labor union, and the Company believes that its employee relations are good.
ITEM 2. PROPERTIES
The Company's headquarters are located in Westboro, MA with 54,600 square
feet leased under lease agreements which expire on December 31, 2001. The
Company also leases smaller facilities in a number of metropolitan areas within
the United States and in the United Kingdom, France, Germany, Canada, Singapore
and The Netherlands. The Company believes its existing facilities are adequate
for its current needs and that suitable additional or substitute space will be
available as needed.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to various claims, legal actions and complaints in
connection with the operation of its business. Although no assurances can be
given as to the outcome of such matters, the Company does not currently believe
that any such matters will result in a material adverse effect on the Company's
financial position or results of operation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the names, ages and positions of all
executive officers of the Company.
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<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Jitendra S. Saxena 52 Chairman and Chief Executive Officer
James J. Waldron 40 President and Chief Operating Officer
Patrick J. Scannell, Jr. 44 Executive Vice President, Finance &
Administration, Chief Financial Officer
and Treasurer
Craig Cervo 51 Vice President, Product Development
Barry M. Zane 42 Vice President, Technology
</TABLE>
Mr. Saxena, a founder of the Company, has been Chief Executive Officer
and a director of the Company since its inception in 1983. Mr. Saxena has
served as Chairman of the Company since April 1997 and served as its
President from its inception until April 1997.
Mr. Waldron joined the Company in 1995 as Vice President of International
Sales and was elected Executive Vice President, Product and Market Development
in January 1997. He was elected as President and Chief Operating Officer of the
Company in April 1997 and elected to the board in May 1997. Prior to joining the
Company, Mr. Waldron served as Vice President of New Business Development at
MicroTouch Systems, Inc. from 1993 to 1995. From 1986 to 1993, Mr. Waldron
worked for Visage, Inc., first as Vice President of Engineering and later as
President and Chief Executive Officer.
Mr. Scannell joined the Company in September 1992 as Vice President,
Finance & Administration and was elected Executive Vice President, Finance &
Administration in January 1997. He was elected Chief Financial Officer and
Treasurer in April 1993.
Mr. Cervo joined the Company in October 1992 as Vice President,
Research & Development and was elected Vice President, Product Development in
October 1994.
Mr. Zane has been with the Company in a number of product development
capacities since 1983. Mr. Zane was elected Vice President, Technology in
April 1991.
There are no family relationships among any of the executive officers.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET PRICE AND DIVIDENDS
The Common Stock is quoted on the Nasdaq National Market under the symbol
"APLX."
The following table sets forth, for the periods indicated, the high and
low prices per share of the Common Stock as reported on the Nasdaq National
Market between January 1, 1996 and December 31, 1997.
<TABLE>
<CAPTION>
QUARTER ENDED HIGH LOW
<S> <C> <C>
March 31, 1996 41 3/4 21
June 30, 1996 42 1/2 25 1/8
September 30, 1996 36 1/8 20 1/4
December 31, 1996 40 18 1/8
March 31, 1997 26 1/2 5 7/8
June 30, 1997 9 3 1/8
September 30, 1997 12 1/2 5 1/2
December 31, 1997 10 1/4 4 11/16
</TABLE>
The number of holders of record of the Common Stock on March 17, 1998 was
237.
The Company has never paid cash dividends on its Common Stock. The Company
currently intends to retain any earnings for future growth and therefore does
not anticipate paying any cash dividends on its Common Stock in the foreseeable
future.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated by reference from EXHIBIT A attached hereto.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Incorporated by reference from EXHIBIT B attached hereto.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated by reference from EXHIBIT C attached hereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The response to this item is contained in part under the caption
"Executive Officers of the Company" in Part I of this Annual Report on Form
10-K, and in part in the Company's Proxy Statement for the Annual Meeting of
Stockholders to be held on May 8, 1998 (the "1998 Proxy Statement") in the
sections entitled "Election of Directors" and "Other Matters -- Section 16(a)
Beneficial Ownership Reporting Compliance," which sections are incorporated
herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The response to this item is contained in the 1998 Proxy Statement in the
sections entitled "Election of Directors - Compensation of Directors" and
"- Executive Compensation," which sections are incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The response to this item is contained in the 1998 Proxy Statement in the
section entitled "Beneficial Ownership of Voting Stock," which section is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Index to Consolidated Financial Statements.
1. The following documents are filed as Exhibit C hereto and are
included as part of this Annual Report on Form 10-K.
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Report of Independent Accountants.
Consolidated Balance Sheets as of December 31, 1996 and
1997.
Consolidated Statements of Operations for the years
ended December 31, 1995, 1996 and 1997.
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1995, 1996 and 1997.
Consolidated Statements of Cash Flows for the years
ended December 31, 1995, 1996 and 1997.
Notes to Consolidated Financial Statements.
2. The following documents are filed as part of this Annual
Report on Form 10-K.
Financial Statement Schedules:
All schedules for which provision is made in the
applicable accounting regulations of the Securities and
Exchange Commission (the "Commission") are not required
under the related instructions or are inapplicable and
therefore have been omitted.
3. The Exhibits filed as a part of this Annual Report on Form
10-K are the following:
*3.1 -- Restated Articles of Organization.
*3.2 -- By-laws.
*+10.1 -- 1994 Equity Incentive Plan.
*+10.2 -- 1984 Stock Option Plan.
**10.3 -- Commercial Lease between the Registrant and
Westboro II-III, Inc. dated January 5, 1996.
**10.4 -- Commercial Lease between the Registrant and
Westboro I Real Estate Corp. dated
January 15, 1996.
**10.5 -- 1996 Director Stock Option Plan.
11.1 -- Statement regarding computation of earnings
per share (included in Notes to Consolidated
Financial Statements).
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21.1 -- Subsidiaries of the Registrant.
23.1 -- Consent of Coopers & Lybrand L.L.P.
27.1 -- Financial Data Schedule.
27.2 -- Restated Financial Data Schedule relating to
the Registrant's Form 10-Q for the period
ended September 30, 1997, as filed with the
Commission on November 14, 1997.
27.3 -- Restated Financial Data Schedule relating to
the Registrant's Form 10-Q for the period
ended June 30, 1997, as filed with the
Commission on August 13, 1997.
27.4 -- Restated Financial Data Schedule relating to
the Registrant's Form 10-Q for the period
ended March 31, 1997, as filed with the
Commission on May 15, 1997.
27.5 -- Restated Financial Data Schedule relating to
the Registrant's Form 10-K for the period
ended December 31, 1996, as filed with the
Commission on April 4, 1997.
27.6 -- Restated Financial Data Schedule relating to
the Registrant's Form 10-Q for the period
ended September 30, 1996, as filed with the
Commission on November 14, 1996.
27.7 -- Restated Financial Data Schedule relating to
the Registrant's Form 10-Q for the period
ended June 30, 1996, as filed with the
Commission on August 14, 1996.
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* Incorporated by reference from the Company's Registration Statement on
Form S-1 (File no. 33-85688).
** Incorporated by reference to the Registrant's Report on Form 10-K for the
fiscal year ended December 31, 1995, as filed with the Commission on April
1, 1996.
+ Management contract or compensatory plan.
(b) Reports on Form 8-K.
The Company filed no Reports on Form 8-K during the last quarter of the period
covered by this report.
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<PAGE> 16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf as of March 30, 1998 by the undersigned, thereunto duly authorized.
APPLIX, INC.
By: /s/ Patrick J. Scannell, Jr.
---------------------------------------
Patrick J. Scannell, Jr.
Executive Vice President, Finance &
Administration, Chief Financial Officer
and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities and on the
dates indicated.
SIGNATURE TITLE DATE
/s/ Jitendra S. Saxena Chairman and Chief Executive March 30, 1998
- ----------------------------- Officer and Director
Jitendra S. Saxena (Principal executive officer)
/s/ Patrick J. Scannell, Jr. Executive Vice President, March 30, 1998
- ----------------------------- Finance and Administration,
Patrick J. Scannell, Jr. Chief Financial Officer and
Treasurer (Principal financing
and accounting officer)
/s/ James J. Waldron Director March 30, 1998
- -----------------------------
James J. Waldron
/s/ Richard J. Davis Director March 27, 1998
- -----------------------------
Richard J. Davis
/s/ Paul J. Ferri Director March 30, 1998
- -----------------------------
Paul J. Ferri
/s/ Alain J. Hanover Director March 30, 1998
- -----------------------------
Alain J. Hanover
/s/ David C. Mahoney Director March 30, 1998
- -----------------------------
David C. Mahoney
-16-
<PAGE> 17
EXHIBIT A
APPLIX
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
In thousands, except per share data
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
For the year ended December 31, 1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Total revenue $48,498 $51,237 $32,343 $18,495 $12,171
Operating (loss) income (1,606) 507 (662) 1,310 (369)
Net (loss) income (404) (2,636) 664 1,409 (400)
PER SHARE DATA
Basic (loss) earnings per share $ (0.04) $ (0.27) $ 0.07 $ 0.22 $ (0.34)
Diluted (loss) earnings per share (0.04) (0.27) 0.07 0.20 (0.34)
Weighted average number of
shares outstanding
Basic 9,988 9,611 9,121 6,328 1,185
Diluted 9,988 9,611 10,055 6,934 1,185
</TABLE>
<TABLE>
<CAPTION>
As of December 31, 1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Cash, cash equivalents and
short-term investments $21,368 $19,882 $25,380 $20,092 $ 3,625
Working capital 22,632 21,124 18,242 15,780 2,648
Total assets 44,365 44,514 39,498 26,228 8,651
Capital lease obligations -- -- -- 3 133
Total stockholders' equity $27,987 $27,400 $21,351 $18,250 $ 4,707
</TABLE>
A-1
<PAGE> 18
EXHIBIT B
APPLIX
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company was incorporated in 1983 to develop and market software
applications for the UNIX market. In 1986, the Company introduced Alis,
its first office automation product, which accounted for substantially
all of the Company's revenue through 1990. Alis was replaced in 1991 by
the Aster*x product family, which represented the next generation of
UNIX applications and tools. In September 1993, the Company introduced
its Applixware real time Decision Support Software product family, to
replace the Company's Aster*x product family, on which it was based.
In October 1995, the Company acquired Target Systems Corporation, a
developer and marketer of Customer Interaction Software, in a
transaction accounted for under the purchase method of accounting.
Since November 1, 1995, the Company's operating results have included
the operating results of Target Systems.
In October 1996, the Company acquired Sinper Corporation, doing
business under the name TM1, a developer and marketer of software used
for on-line analytical processing (OLAP), in a transaction accounted
for under the purchase method of accounting. Since November 1, 1996,
the Company's operating results have included the operating results of
Sinper Corporation.
The two acquisitions enabled Applix to enter the Customer Interaction
Software (CIS) market through Applix Enterprise, a platform and
database-independent, thin-client integrated solution for sales,
marketing, service, and product quality functions; and to expand its
presence in the Decision Support Software (DSS) market with Applix TM1,
a real-time OLAP decision support tool. The Company's products are
available across a variety of platforms including UNIX, Windows/NT,
Windows 95 and Java.
The other addition to the Applix product family in 1996 was the
introduction of the Applix Anyware product line, which provides
Applixware capabilities in a thin-client form across the Internet or an
Intranet. Applix Anyware allows users to access any of the Applixware
product capabilities via browser-based clients, regardless of platform
or location.
Approximately 70% of 1997 revenues were from Applix's DSS product line
(comprised of Applixware, Applix Anyware and Applix TM1) and 30% were
from the CIS product line (comprised of Applix Enterprise). All of
Applix's applications and tools are based on the concept of real time
decision support. This concept focuses on putting information into the
hands of people who need the ability to more effectively interact with
customers and to make more timely business decisions.
Year 2000 Compliance
The Company has architected the current version of its products using
four-character and/or 32-bit integer interval representation of dates
to be Year 2000 compliant. The Year 2000 compliance will be achieved in
existing products through upgrades to the current version and third
party products sold by the Company will be reviewed for compliance.
There still may be incidents where some modules may use two character
date representations to conform with industry standards or to be
compatible with applications from other vendors. The Company is
actively reviewing these modules to update them for Year 2000
compliance. All costs related to Year 2000 compliance are expensed as
incurred.
The Company believes that the Year 2000 compliance for its own products
as well as its internal systems will not have a material impact on its
operations.
B-1
<PAGE> 19
APPLIX
The following table sets forth, for the period indicated, certain financial data
of the Company as a percentage of total revenue.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Results of Operations / For the years ended December 31, 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
License revenue 69.2% 72.4% 73.2%
Service revenue 30.8 27.6 26.8
-------------------------------------------
Total revenue 100.0 100.0 100.0
Cost of license revenue 6.3 4.4 7.6
Cost of service revenue 14.0 10.3 10.4
-------------------------------------------
Gross margin 79.7 85.3 82.0
Operating expenses:
Selling and marketing 57.2 43.6 44.3
Research and development 17.9 13.1 12.9
General and administrative 7.9 6.5 7.7
In-process research and development -- 21.1 19.1
-------------------------------------------
Total operating expenses 83.0 84.3 84.0
-------------------------------------------
Operating (loss) income (3.3) 1.0 (2.0)
Interest income 2.0 2.5 4.1
Income taxes (benefit) (0.5) 8.6 --
-------------------------------------------
Net (loss) income (0.8%) (5.1%) 2.1%
===========================================
</TABLE>
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
From the second quarter of 1993 through the fourth quarter of 1996, the
Company's revenue increased over the prior quarter. In support of that
growth, the Company's infrastructure and employee base grew
accordingly. In the first two quarters of 1997, the Company experienced
disappointing revenue, which did not continue the growth that the
Company had been experiencing. Such revenue, combined with the
Company's existing expense levels, resulted in a net loss for the first
two quarters of 1997. In response to these results, in the quarter
ended June 30, 1997, the Company effected a reorganization and reduced
its European headcount by approximately 10 people and its domestic
headcount by 10 people. The cost of these reductions was approximately
$250,000 and was included in the operating expenses for the second
quarter. During the last two quarters of 1997, the Company increased
revenue over the prior two quarters and recorded a profit.
License revenue decreased 9% to $33,577,000 in 1997 from $37,094,000 in
1996. Domestic license revenue decreased 8% to $19,195,000 in 1997 from
$20,960,000 in 1996. International license revenue decreased 11% to
$14,382,000 in 1997 from $16,134,000 in 1996. License revenue decreased
from the prior year due to a decline in the demand for the mature
Applixware product line and slower than anticipated growth of the
Applix Enterprise and Applix TM1 product line. During 1997, license
revenue from the DSS product lines decreased 25% to $23,744,000 (or 71%
of total license revenue) from $31,707,000 (or 85% of total license
revenue) in 1996 and license revenue from the CIS product line
increased 83% to $9,833,000 (or 29% of total license revenue) from
$5,387,000 (or 15% of total license revenue) during the same period.
The decrease in DSS license revenue was due to a decline in Applixware
sales, which was partially offset by an increase in Applix TM1 license
revenue, which was first recorded by the Company in November 1996.
License revenue from the
B-2
<PAGE> 20
APPLIX
financial services sector decreased 35% to $10,143,000 in 1997 from
$15,644,000 in 1996. License revenue from the government sector
decreased 17% to $7,134,000 in 1997 from $8,625,000 in 1996. Revenue
from the government sector has fluctuated significantly in the past,
and the Company expects fluctuations to continue. The Company's three
largest customers (including resellers) comprised 16% of total license
revenue during 1997 and 19% of total license revenue in 1996, although
all three of the largest customers were different in these two years.
Service revenue increased 6% to $14,921,000 (or 31% of total revenue)
in 1997 from $14,143,000 (or 28% of total revenue) in 1996. This
increase was due to increased maintenance revenue from the Company's
growing customer base, the new maintenance revenue attributable to the
Applix Enterprise and Applix TM1 products, and a continued emphasis by
the Company on selling training and consulting services. The Company
expects service revenue to continue to grow slightly as a proportion of
total revenue.
Gross margin decreased to 80% in 1997 from 85% in 1996. License revenue
gross margin decreased to 91% in 1997 from 94% in 1996 due to an
increase in royalty costs and increased capitalized software
amortization. A portion of the royalty increase was attributable to the
change of product sales mix where Applix Enterprise and Applix TM1
product lines have a higher royalty expense rate than the Applixware
product line. Service revenue gross margin decreased to 54% in 1997
from 63% in 1996, due to an increase in the number of support employees
servicing the growing customer base and the cost of outside consultants
used for the CIS product line. The increase in service revenue, which
has a lower gross margin than license revenue, as a percentage of total
revenue also contributed to the decrease in gross margin.
Selling and marketing expenses, which include domestic sales and
marketing expenses and the Company's international operations,
increased 24% to $27,753,000 in 1997 from $22,318,000 in 1996. These
expenses increased as a percentage of total revenue to 57% for 1997
from 44% for 1996. The majority of the expense increase was due to
investments in product marketing to increase product awareness and
channel development. International sales expense also increased due to
a full years operation of the Company's Netherlands subsidiary
established in August 1996 and an overall increase in the number of
international employees. The Company refocused its investment in
marketing activities on the emerging segments of the CIS and DSS
product lines during 1997. However, the current spending level as a
percentage of revenue may not be indicative of spending levels for
future years.
Research and development expenses, which consist primarily of employee
salaries, benefits and related expenses, increased 29% to $8,661,000 in
1997 from $6,731,000 in 1996, and increased as a percentage of total
revenue to 18% from 13%. The increase in these expenses was primarily
due to the increased cost of personnel and the additional operating
expense from the acquisition of Sinper Corporation in October 1996.
Total research and development expenditures were $9,476,000, including
$815,000 in capitalized software development costs, or 20% of total
revenue, in 1997 and $7,551,000, including $820,000 in capitalized
software development costs, or 15% of total revenue, in 1996.
General and administrative expenses, which include the costs of the
Company's finance, human resources and administrative functions,
increased 15% to $3,838,000 in 1997 from $3,347,000 in 1996, and
increased as a percentage of total revenue between these two years to
8% from 7%. The increase in expenses was primarily due to the hiring of
additional personnel and the acquisition of Sinper Corporation in
October 1996.
B-3
<PAGE> 21
APPLIX
On October 31, 1996, the Company acquired Sinper Corporation (Sinper)
for an aggregate cost of $11,500,000 consisting of cash of $5,000,000,
Common Stock valued at $5,000,000 and the estimated acquisition costs
of approximately $1,500,000. The acquisition was accounted for under
the purchase method of accounting. Accordingly, the balance sheet
accounts of Sinper and the results of its operations have been included
in the consolidated financial statements of the Company since the date
of acquisition.
In the fourth quarter of 1996 the Company took a charge of $10,821,000
for in-process research and development acquired as part of the Sinper
acquisition. Of the remaining purchase price, $489,000 was allocated to
completed technology, and $190,000 was allocated to net assets
acquired. Completed technology is being amortized over a period of
seven years from the acquisition date.
Net interest income decreased to $973,000 in 1997 from $1,265,000 in
1996 due to lower average cash balances and lower interest rates
available on investments and an increase in interest expense between
the periods as a result of capitalized lease obligation entered into
during 1997. The Company recognized a benefit for income taxes at a
rate of 36% for 1997.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
License revenue increased 57% to $37,094,000 in 1996 from $23,682,000
in 1995. Domestic license revenue increased 61% to $20,960,000 in 1996
from $13,015,000 in 1995. International license revenue increased 51%
to $16,134,000 in 1996 from $10,667,000 in 1995 due to continued demand
for the Company's products in the international marketplace and to an
expanded international presence. Sales of Applix Real Time comprised
14% of license revenue during 1996 compared to 23% of license revenue
during 1995, with substantially all of these sales being generated from
the financial services sector. License revenue to the financial
services sector increased 56% to $15,644,000 in 1996 from $10,028,000
in 1995. Applix Enterprise sales comprised 15% of license revenue
during 1996, the first full year of sales for the product line,
compared to 0.1% of license revenue in 1995. License revenue from the
government sector increased 29% to $8,625,000 in 1996 from $6,661,000
in 1995. Revenue from the government sector has fluctuated
significantly in the past, and the Company expects fluctuations to
continue. The Company's three largest customers (including resellers)
comprised 19% of total license revenue during 1996 and 25% of total
license revenue in 1995, although two of the largest customers were
different in these two years.
Service revenue increased 63% to $14,143,000 (or 28% of total revenue)
in 1996 from $8,661,000 (or 27% of total revenue) in 1995. This
increase was due to increased maintenance revenue from the Company's
growing customer base, the new maintenance revenue attributable to the
Applix Enterprise products, and a continued emphasis by the Company on
selling training and consulting services. The Company expects service
revenue to continue to grow slightly as a proportion of total revenue.
Gross margin increased to 85% in 1996 from 82% in 1995. License revenue
gross margin increased to 94% in 1996 from 90% in 1995 due to the
reduction of capitalized software amortization partially offset by an
increase in royalty costs. Service revenue gross margin increased to
63% in 1996 from 61% in 1995, due to the relative fixed costs of
operating the service organization combined with the significant
increase in service revenue. The gross margin increase was limited
somewhat by an increase in the proportion of total revenue represented
by service revenue, which has a lower gross margin than license revenue
and therefore has the effect of reducing overall gross margin.
B-4
<PAGE> 22
APPLIX
Selling and marketing expenses increased 56% to $22,318,000 in 1996
from $14,316,000 in 1995. The expense increase was due primarily to
increased staffing in both domestic sales and international sales to
support the Company's growth. These expenses remained consistent as a
percentage of total revenue between these two periods at 44%.
Research and development expenses increased 61% to $6,731,000 in 1996
from $4,179,000 in 1995, but remained constant as a percentage of total
revenue at 13%. The increase in these expenses was primarily due to the
hiring of additional personnel to support the Company's growth. Total
research and development expenditures were $7,551,000, including
$820,000 in capitalized software development costs, or 15% of total
revenue, in 1996 and $4,714,000, including $534,000 in capitalized
software development costs, or 15% of total revenue, in 1995. The
Company intends to continue its commitment to increasing its research
and development expense in the future as revenue increases in order to
support the technological needs of the Company's customers.
General and administrative expenses increased 35% to $3,347,000 in 1996
from $2,481,000 in 1995, but decreased as a percentage of total revenue
between these years to 7% from 8%. The increase in expenses was
primarily due to the hiring of additional personnel to support the
Company's growth.
On October 31, 1995, the Company acquired Target Systems Corporation
(Target) for an aggregate cost of $6,400,000 consisting of cash of
$4,900,000 and acquisition costs of approximately $1,500,000. The
acquisition was accounted for under the purchase method of accounting.
Accordingly, the balance sheet accounts of Target and the result of its
operations have been included in the consolidated financial statements
of the Company since the date of acquisition.
In the fourth quarter of 1995 the Company took a charge of $6,200,000
for in-process research and development acquired from Target. The
remaining purchase price of $200,000 was comprised of completed
technology, goodwill and liabilities assumed. Goodwill and completed
technology are being amortized over a period of seven years from the
acquisition date.
Interest income decreased to $1,265,000 in 1996 from $1,326,000 in 1995
due to lower cash balances available for investments as a result of the
acquisition of Sinper Corporation. Interest expense decreased between
the periods as a result of substantially lower capitalized lease
obligations. The Company provided for income taxes at a rate of 35% for
1996 before the charge for incomplete technology of $10,821,000 which
is not deductible for income tax purposes.
Liquidity and Capital Resources
The Company has generated cash from operations in each of the last
three years. In 1997, the Company generated $2,307,000 from operating
activities. Investing activities utilized cash totaling $15,437,000,
comprised primarily of net purchases and maturities of short-term
investments in the amount of $13,729,000 and purchases of property and
equipment in the amount of $1,222,000. Financing activities provided
cash of $803,000, comprised primarily from the exercise of incentive
stock options and the purchase of stock in the employee stock purchase
plan which together totaled $907,000. As of December 31, 1997, the
Company had cash, cash equivalents and short-term investments of
$21,368,000 and working capital of $22,632,000.
The Company has no commitments or specific plans for any significant
capital expenditures during 1998.
The Company believes that funds currently available and funds expected
to be generated from operations will be sufficient to fund the
Company's operations at least through 1998.
B-5
<PAGE> 23
APPLIX
Effect of Recent Accounting Pronouncement
For the year ended December 31, 1997, the Company adopted Statement of
Accounting Standards No. 128 ("FAS 128") which requires the
presentation of Basic and Dilutive earnings per share, which replaces
primary and fully diluted earnings per share. Earnings per share have
been restated for all periods presented to reflect the adoption of FAS
128. Basic net loss per share is computed using the weighted average
number of common shares outstanding during the period. Dilutive net
loss per share is computed using the weighted average number of common
shares outstanding during the period, plus the dilutive effect of
common stock equivalents. Common stock equivalent shares consist of
convertible debentures, preferred stock, stock options and warrants.
The dilutive computations do not include common stock equivalents for
the years ended December 31, 1997 and 1996 as their inclusion would be
antidilutive.
The Financial Accounting Standards Board recently issued Statement of
Position ("SOP") 97-2, Software Revenue Recognition, which supersedes
SOP 91-1, the existing pronouncement on this subject, in its final
form. The adoption of this new standard is not expected to have a
material effect on the Company's financial statements. The SOP is
effective for transactions entered into in fiscal years beginning after
December 15, 1997. The Company will adopt the new standards for the
year ending December 31, 1998.
In June 1997, the Financial Accounting Standard Board issued Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income." This Statement requires that changes in comprehensive income
be shown in a financial statement that is displayed with the same
prominence as other financial statements. The Statement will become
effective for fiscal years beginning after December 15, 1997. The
Company will adopt the new standard beginning in the first quarter of
the year ending December 31, 1998.
In June 1997, the Financial Accounting Standard Board also issued
Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information." This Statement
specifies new guidelines for determining a company's operating segments
and related requirements for disclosure. The Company is in the process
of evaluating the impact of the new standard on the presentation of the
financial statements and the disclosures therein. The Statement will
become effective for fiscal years beginning after December 15, 1997.
The Company will adopt the new standard for the year ending December
31, 1998.
Risk Factors
This Annual Report contains a number of forward-looking statements. Any
statements contained in this Annual Report (including statements to the
effect that the Company or its management "believes", "expects",
"anticipates", "plans" and similar expressions) that are not statements
relating to historical matters should be considered forward-looking
statements. There are a number of important factors that could cause
actual events or the Company's actual operating results to differ
materially from those indicated by such forward-looking statements.
These factors include, without limitation, those set forth below.
During the past several years, the Company has derived the substantial
majority of its revenue from its Applixware product family. The Company
has recently expanded its product offerings with the introduction of
Applix Enterprise, based on technology acquired in its acquisition of
Target Systems Corporation in late 1995, and Applix TM1, acquired
through its acquisition of Sinper Corporation in late 1996. In
addition, the Company has recently developed and introduced the Applix
Anyware product line, which delivers the functionality of Applixware,
Applix TM1 and Applix Enterprise to "thin-client" computing
environments (i.e., systems running a Java-enabled
B-6
<PAGE> 24
APPLIX
browser such as Netscape Navigator or Microsoft Explorer). The future
success of the Company is substantially dependent upon these newer
product lines, and there can be no assurance that these new product
lines will achieve the sales levels anticipated by the Company. In
addition, the short-term financial performance of the Company will be
largely contingent on its ability to continue to generate substantial
revenue and profit from its Applixware product line until its newer
product lines achieve greater revenue and profitability, and there can
be no assurance that the Company will be able to do so. Moreover, the
existence of a number of different product lines presents management,
sales and marketing, and product development challenges, and there can
be no assurance that the Company will be successful in addressing these
challenges.
The Company's DSS product line is marketed as real time decision
support solutions. Accordingly, the Company's future success is
substantially dependent upon the growth of the demand for real time
decision support solutions in a number of industry sectors and the
Company's ability to identify this demand, develop solutions for the
industry-specific needs and successfully market its products to
customers requiring such solutions. In addition, the Company's success
within any particular market for real time decision support
applications is dependent in large part upon its ability to establish
strategic marketing relationships with leading vendors within that
market.
The Company's financial performance will also depend significantly on
sales of the Applix Enterprise product line, which addresses the CIS
market. The Company believes this market is growing rapidly, but the
Company is a relatively new entrant into this market and faces intense
competition from larger companies such as Remedy Corporation, Vantive
Corporation, Clarify, Inc., Siebel Systems, Inc. and others.
Substantially all of the Applixware licenses sold by the Company are
for use on UNIX operating systems. As a result, the Company's financial
performance is significantly dependent upon the continued market
acceptance of this operating system and continued sales of UNIX-based
workstations, particularly by Sun Microsystems. With newer operating
systems that permit 32 bit processing on the desktop, such as Microsoft
Windows/NT and Windows 95, the Company is now competing directly with
vendors of PC software applications such as Microsoft, Lotus and Corel.
In addition, the Company's Applix TM1 product line competes with
product offerings from Oracle Corporation and Arbor Software. This
represents a more competitive environment than the Company has
historically faced in its UNIX market and will likely result in lower
prices and lower gross margins for the Company's products.
For the Company's Applix TM1 product line, the Company relies
significantly on original equipment manufacturers (OEMs) to distribute
products. The Company's revenue is dependent, among other things, upon
the ability of the OEMs to sell the Company's products to end-users.
Factors affecting the ability of these distribution channels to develop
and sell their products include competition, their ability to offer
products that meet user requirements at acceptable prices and overall
economic conditions in both the United States and foreign markets. In
addition, there can be no assurance that OEMs currently using the
Company's software in their products will continue to use the Company's
products and will not select third party's software products to replace
that of the Company. The Company's business, results of operations and
financial condition would be materially and adversely affected if the
Company's OEMs are unsuccessful in selling their products or
discontinue using the Company's software in their products.
The Company remains dependent to a significant degree on revenue from
domestic and international customers in the securities trading
industry, which has been the first industry to embrace real time
decision support solutions. During 1997, 1996 and 1995, license revenue
from the financial
B-7
<PAGE> 25
APPLIX
services sector comprised 30%, 41% and 42%, respectively, of the
Company's total license revenue, and the Company believes that the
substantial majority of its financial services sector revenue was
derived from companies engaged in the trading of securities. The
financial performance of the securities trading industry is volatile as
a result of its dependence upon unpredictable factors such as economic
conditions and securities market conditions. The Company's financial
performance will be subject to, and may be adversely affected by,
factors affecting the economic performance and capital expenditure
levels of the securities trading industry.
The Company's quarterly operating results have varied and may continue
to vary significantly depending on factors such as the timing of
significant orders, the timing of new product introductions and
upgrades by the Company and its competitors, and the mix of
distribution channels through which the products are sold. Revenues are
particularly difficult to predict because of the sales cycle of the
Company's products, which varies substantially from customer to
customer and industry to industry. A majority of the Company's license
revenue in a quarter is derived from orders received in that quarter.
Accordingly, delays in orders are likely to result in the associated
revenue not being realized by the Company in that period. Moreover, the
Company's expense levels are based in part on expectations of future
revenue levels, and a shortfall in the expected revenue could therefore
have a disproportionate adverse effect on the Company's net income.
Most of the Company's international sales through subsidiaries are
denominated in foreign currencies. Accordingly, a decrease in the value
of foreign currencies relative to the U.S. dollar could result in a
significant decrease in U.S. dollar revenue received by the Company for
its international sales. Due to the number of currencies involved in
the Company's international sales and the volatility of foreign
currency exchange rates, the Company cannot predict the effect of
exchange rate fluctuations on future operating results. To date,
foreign currency fluctuations have not had a material effect on the
Company's operating results. The Company has engaged in hedging
transactions to cover its currency translation exposure on intercompany
balances for the purpose of mitigating the effect of foreign currency
fluctuations. The international portion of the Company's business is
also subject to a number of inherent risks, including difficulties in
building and managing foreign operations and foreign reseller networks,
difficulties or delays in translating products into foreign languages,
import/export duties and quotas, and unexpected regulatory, economic or
political changes in foreign markets.
License revenue from sales (directly or indirectly) to branches or
agencies of the U.S. Government represented approximately 21%, 20% and
28% of total license revenue during 1997, 1996 and 1995, respectively.
The Company typically derives its government contract revenue from a
relatively small number of subcontract awards which tend to be
significant in amount for a company of Applix's size. Consequently, the
Company's government contract revenue is likely to continue to
fluctuate significantly from period to period, and any failure to
obtain a particular subcontract award, or any delay on the part of the
government agency in making the award or ordering products under an
awarded contract, could have a material adverse effect on the financial
performance of the Company within a given period.
Inflation
To date, inflation has not had a material adverse effect on the
Company's operating results.
B-8
<PAGE> 26
EXHIBIT C
APPLIX
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF APPLIX, INC.
We have audited the accompanying consolidated balance sheets of Applix,
Inc. as of December 31, 1997 and 1996 and the related consolidated
statements of operations, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of Applix, Inc. as of December 31, 1997 and 1996 and the consolidated
results of its operations and its cash flows for each of the three
years in the period ended December 31, 1997 in conformity with
generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
January 30, 1998
C-1
<PAGE> 27
APPLIX
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
In thousands, except share data / December 31, 1997 1996
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7,639 $ 19,882
Short-term investments 13,729 --
Accounts receivable, less allowance for doubtful
accounts of $531 and $518 at
December 31, 1997 and 1996, respectively 12,147 12,704
Other current assets 2,872 2,706
Deferred tax asset 2,623 2,946
---------------------------
Total current assets 39,010 38,238
Property and equipment, at cost:
Computer equipment 6,696 6,132
Office furniture, equipment and leasehold improvements 4,583 3,925
----------------------------
11,279 10,057
Less accumulated amortization and depreciation (7,268) (5,401)
----------------------------
Net property and equipment 4,011 4,656
Capitalized software costs, net of accumulated amortization
of $1,368 and $549 at December 31, 1997 and 1996, respectively 478 482
Other assets 866 1,138
----------------------------
TOTAL ASSETS $ 44,365 $ 44,514
============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 2,676 $ 3,012
Accrued liabilities 5,550 6,098
Deferred revenue 8,152 8,004
----------------------------
TOTAL CURRENT LIABILITIES 16,378 17,114
COMMITMENTS AND CONTINGENCIES (NOTE E)
Stockholders' equity:
Preferred stock, $.01 par value; 1,000,000 shares authorized
Common stock, $.0025 par value; 30,000,000
shares authorized; 10,344,063 and 10,182,562
shares issued at December 31, 1997 and 1996,
respectively 26 25
Capital in excess of par value 40,959 40,053
Accumulated deficit (11,923) (11,519)
Foreign currency translation adjustment (142) (226)
----------------------------
28,920 28,333
Less 278,698 shares of treasury stock, at cost (933) (933)
----------------------------
TOTAL STOCKHOLDERS' EQUITY 27,987 27,400
----------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 44,365 $ 44,514
============================
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
C-2
<PAGE> 28
APPLIX
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
In thousands, except per share data / For the Years Ended December 31, 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
License revenue $33,577 $37,094 $23,682
Service revenue 14,921 14,143 8,661
----------------------------------
Total revenue 48,498 51,237 32,343
Cost of license revenue 3,055 2,238 2,447
Cost of service revenue 6,797 5,275 3,382
----------------------------------
Gross margin 38,646 43,724 26,514
Operating expenses:
Selling and marketing 27,753 22,318 14,316
Research and development 8,661 6,731 4,179
General and administrative 3,838 3,347 2,481
In-process research and development -- 10,821 6,200
----------------------------------
Total operating expenses 40,252 43,217 27,176
Operating (loss) income (1,606) 507 (662)
Interest income, net 973 1,265 1,326
----------------------------------
Net (loss) income before income taxes (633) 1,772 664
Income taxes (benefit) (229) 4,408 --
----------------------------------
Net (loss) income $ (404) $(2,636) $ 664
==================================
Basic (loss) earnings per share $ (0.04) $ (0.27) $ 0.07
Diluted (loss) earnings per share (0.04) (0.27) 0.07
Weighted average common and common equivalent shares outstanding:
Basic 9,988 9,611 9,121
Diluted 9,988 9,611 10,055
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
C-3
<PAGE> 29
APPLIX
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
In thousands, except per share data/For the Years Ended December 31, 1997, 1996,
1995
<TABLE>
<CAPTION>
Capital Foreign
Common In Excess Of Accumulated Currency Treasury
Stock Par Value Deficit Translation Stock Total
----- --------- ------- ----------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
January 1, 1995 $23 $28,775 $ (9,547) $ (67) $(933) $18,251
Stock issued under stock option
and purchase plans (459,890 shares) 1 462 463
Stock option income tax benefits 2,036 2,036
Net income 664 664
Foreign exchange translation adjustment (63) (63)
--------------------------------------------------------------------------------
December 31, 1995 24 31,273 (8,883) (130) (933) 21,351
Stock issued under stock option
and purchase plans (420,395 shares) 1 1,706 1,707
Stock issued for purchase
of Sinper Corp. (152,439 shares) 5,000 5,000
Stock option income tax benefits 2,074 2,074
Net loss (2,636) (2,636)
Foreign exchange translation adjustment (96) (96)
--------------------------------------------------------------------------------
December 31, 1996 25 40,053 (11,519) (226) (933) 27,400
Stock issued under stock option
and purchase plans (161,501 shares) 1 906 907
Net loss (404) (404)
Foreign exchange translation adjustment 84 84
--------------------------------------------------------------------------------
December 31, 1997 $26 $40,959 $(11,923) $(142) $(933) $27,987
=================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
C-4
<PAGE> 30
APPLIX
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
In thousands/For the Years Ended December 31 1997 1996 1995
- -------------------------------------------- ---- ---- ----
<S> <C> <C> <C>
Operating activities:
Net (loss) income $ (404) $ (2,636) $ 664
Adjustments to reconcile net (loss) income
to net cash provided by operating activities:
Depreciation 1,867 1,231 1,274
Amortization of capitalized software costs 819 539 1,261
Amortization of goodwill and intangible assets 420 228 --
Provision for doubtful accounts 13 (5) 19
Charge for acquired in-process research and development -- 10,821 6,200
Deferred tax 323 2,056 (4,168)
Changes in operating assets and liabilities
net of effects of acquisitions:
Accounts receivable 544 (6,467) (1,971)
Other assets (314) (1,396) (623)
Accounts payable (336) 1,013 724
Accrued liabilities (773) (721) 7,146
Deferred revenue 148 (791) 3,170
----------------------------------
Cash provided by operating activities 2,307 3,872 13,696
Investing activities:
Purchase of property and equipment (893) (3,439) (2,008)
Capitalized software costs (815) (820) (534)
Purchase of short-term investments (27,810) -- --
Maturities of short-term investments 14,081 -- --
Purchase of foreign subsidiary -- (389) --
Purchase of Sinper Corp., net of cash acquired -- (6,270) --
Purchase of Target Systems, net of cash acquired -- -- (6,122)
----------------------------------
Cash used in investing activities (15,437) (10,918) (8,664)
Financing activities:
Proceeds from exercise of incentive stock options
and employee stock purchase plan 907 1,707 463
Principal payments under capital lease obligations (104) (63) (144)
----------------------------------
Cash provided by financing activities 803 1,644 319
----------------------------------
Effect of exchange rate changes on cash 84 (96) (63)
----------------------------------
Net (decrease) increase in cash and cash equivalents (12,243) (5,498) 5,288
----------------------------------
Cash and cash equivalents at beginning of period 19,882 25,380 20,092
----------------------------------
Cash and cash equivalents at end of period $ 7,639 $19,882 $25,380
==================================
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 19 $ 9 $ 2
Taxes 104 1,886 414
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
C-5
<PAGE> 31
APPLIX
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A
Nature of Business
Applix is a leading provider of software for front office business
applications in managing customer interaction, real time decision
support and office productivity across globally networked, extended
enterprise environments. The Company provides cross-platform
client/server, network-centric, webtop and thin-client computing
solutions throughout its core offerings. The solution offered within
customer interaction software (CIS) is Applix Enterprise. The Company
offers the following array of solutions within decision support
software (DSS): Applix TM1, real time multi-dimensional analysis
software for financial decision support systems; Applixware, an open
suite of desktop and development tools for accessing, analyzing and
communicating information in real time; Applix Office for UNIX and
Windows/NT and Anyware Office for Java-based desktops; and Applix
Anyware, an application development and deployment solution that
leverages Java to customize and deploy Applix's full suite of
applications.
B
Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Applix,
Inc. and its wholly-owned subsidiaries. Intercompany balances and
transactions have been eliminated.
Revenue Recognition
The Company's revenue recognition policy is in conformance with the
American Institute of Certified Public Accountants' Statement of
Position ("SOP"), 91-1 "Software Revenue Recognition." The Financial
Accounting Standards Board recently issued SOP 97-2, "Software Revenue
Recognition", which supersedes SOP 91-1. The new SOP is effective for
transactions entered into in fiscal years beginning after December 15,
1997 and will be adopted by the Company for the year ending December
31, 1998. The adoption of this new standard is not expected to have a
material effect on the Company's financial statements. Revenue is
recognized from the license of software upon shipment when collection
of the resulting receivables is deemed probable. At the time the
Company recognizes revenue from the sale of software products, no
significant vendor and post-contract support obligations remain, and
the estimated costs of insignificant support obligations are accrued.
Service revenue includes revenue from training, consulting and support.
Support revenue is recognized ratably over the contract term, typically
one year. Revenue from training and consulting is recognized as the
services are performed. Payments received in advance for support
contracts are initially recorded as deferred revenue and are recognized
ratably over the term of the contract. Allowance for estimated future
product returns and costs of warranties is provided in the same period
as the related revenue.
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 over the economic life of
the product, generally one and one half years to three years.
C-6
<PAGE> 32
APPLIX
The Company evaluates the net realizable value of capitalized software
and other intangibles on an ongoing basis, relying on a number of
factors including operating results, business plans, budgets 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.
Amortization expense totaled $818,715, $538,780, and $1,261,437 for the
years ended December 31, 1997, 1996 and 1995, respectively, and is
included in the cost of license revenue.
Cash Equivalents
The Company considers all short-term investments with original
maturities of less than three months to be cash equivalents. The
Company's investment portfolio is diversified and consists of cash
equivalents and investments placed with high credit qualified
institutions.
Short-term Investments
All short-term investments are classified as available-for-sale, and
are in liquid high-grade commercial paper with original maturities
beyond three months and less than twelve months. Securities are marked
to market and the resulting unrealized gains and losses are
insignificant.
Property and Equipment
Property and equipment are stated at cost and are depreciated by use of
the straight-line and double declining balance methods over the
estimated useful lives of the related assets (2-6 years.) Assets
recorded under capital leases are amortized by the straight-line method
over their respective useful lives or the lease term, whichever is
shorter. The Company retires fully depreciated assets, no longer in
service, of which there were none in 1997 and which amounted to
$246,429 in 1996. Upon sale or retirement, the asset cost and related
accumulated depreciation are removed from the respective accounts, and
any related gain or loss is reflected in operations. Repair and
maintenance costs are expensed as incurred.
Translation of Foreign Currencies
The functional currency for all of the Company's foreign operations is
the applicable local currency. Assets and liabilities of all foreign
subsidiaries are translated at period-end rates of exchange. The
resulting translation adjustments are excluded from net earnings and
accumulated as a separate component of stockholders' equity.
Transaction gains and losses that arise from exchange rate changes
included in income, net of foreign currency forward contract gains or
losses, are immaterial for all periods presented.
Beginning in 1996, the Company has used foreign currency forward
contracts to offset the effects of exchange rate changes on the
intercompany balances. The foreign currency exposures are denominated
in European currencies. The Company normally hedges intercompany
balances for a 90 day period. Foreign currency contracts are marked to
market on a monthly basis and the resulting unrealized gains/losses are
recognized in the statement of operations. The net contract hedges were
$2.1 million in British pounds, $1.4 million in French francs, $3.0
million in German marks and $0.5 million in Netherland guilders at
December 31, 1997. The hedges outstanding at December 31, 1997
approximately equalled the intercompany balances due from the
subsidiaries.
Long-Lived Assets
The Company evaluates the net realizable value of capitalized software,
goodwill and other intangibles on an ongoing basis, relying on a number
of factors including operating results, business plans, budgets 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.
C-7
<PAGE> 33
APPLIX
The Company assesses the potential impairment of such long-lived
assets by comparing the expected future operating cash flows of the
assets in relation to its carrying value. If the carrying value is
greater than the undiscounted cash flows of the assets, then the
carrying value is reduced to the net present value of the future cash
flows. There have been no impairments to date.
Computation of Net Income (Loss) Per Common Share
For the year ended December 31, 1997, the Company adopted Statement of
Accounting Standards No. 128 ("FAS 128") which requires the
presentation of Basic and Dilutive earnings per share, which replaces
primary and fully diluted earnings per share. Earnings per share have
been restated for all periods presented to reflect the adoption of FAS
128. Basic net loss per share is computed using the weighted average
number of common shares outstanding during the period. Dilutive net
loss per share is computed using the weighted average number of common
shares outstanding during the period, plus the dilutive effect of
common stock equivalents. Common stock equivalent shares consist of
convertible debentures, preferred stock, stock options and warrants.
The dilutive computations do not include common stock equivalents for
the years ended December 31, 1997 and 1996 as their inclusion would be
antidilutive.
Effect of Recent Accounting Pronouncement
In June 1997, the Financial Accounting Standard Board issued Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income." This Statement requires that changes in comprehensive income
be shown in a financial statement that is displayed with the same
prominence as other financial statements. The Statement will become
effective for fiscal years beginning after December 15, 1997. The
Company will adopt the new standard beginning in the first quarter of
the year ending December 31, 1998.
In June 1997, the Financial Accounting Standard Board also issued
Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information." This Statement
specifies new guidelines for determining a company's operating segments
and related requirements for disclosure. The Company is in the process
of evaluating the impact of the new standard on the presentation of the
financial statements and the disclosures therein. The Statement will
become effective for fiscal years beginning after December 15, 1997.
The Company will adopt the new standard for the year ending December
31, 1998.
Income Taxes
Deferred tax liabilities and assets are determined based on the
difference between the financial statement basis and the tax basis of
assets and liabilities using tax rates in effect for the years in which
the differences are expected to reverse.
Risks and Uncertainties
During the years ended December 31, 1997 and 1996, license revenue from
the financial services sector comprised 30% and 41%, respectively, of
the Company's total license revenue, and the substantial majority of
the financial services sector revenue was derived from companies
engaged in the trading of securities.
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 that affect 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, valuation of
deferred tax assets, the allowance for doubtful accounts and accrued
liabilities.
C-8
<PAGE> 34
APPLIX
C
<TABLE>
<CAPTION>
Accrued Liabilities in thousands/December 31, 1997 1996
--------------------------------------------- ---- ----
<S> <C> <C>
Accrued liabilities consist of:
Commissions $ 833 $ 771
Employee Stock Purchase Plan 254 332
Accrued Vacation 659 734
Accrued Compensation 690 420
Accrued Legal and Audit 196 75
Royalties 496 730
Accrued Marketing 246 105
Leases 225 --
Other 916 819
Acquisition Costs -- 1,025
Taxes 1,035 1,087
-------------------
TOTAL $5,550 $6,098
===================
</TABLE>
D
<TABLE>
<CAPTION>
Income Taxes in thousands/December 31, 1997 1996
-------------------------------------- ---- ----
<S> <C> <C>
The components of the income tax provision are as follows:
CURRENT:
Federal and state $(738) $2,304
Foreign 186 231
-----------------------
(552) 2,535
DEFERRED:
Federal and state 496 1,853
Foreign (173) 20
-----------------------
323 1,873
-----------------------
TOTAL $(229) $4,408
=======================
</TABLE>
Based on the Company's projection of future earnings, management
believes that sufficient income will be generated in the future to
realize the deferred tax asset. The amount of the deferred tax asset
considered realizable, however, could be reduced in the near term if
estimates of future taxable income during the carryforward periods are
reduced. Net income (loss) before the in-process research and
development write off and taxes of foreign subsidiaries was not
significant for the year ended December 31, 1996.
The approximate tax effect of each type of temporary difference and
carryforward is as follows:
<TABLE>
<CAPTION>
In thousands / December 31, 1997 1996
<S> <C> <C>
Net operating loss carryforwards $ 278 $ 49
Deferred tax asset related to acquisition -- 651
Deferred revenue 831 1,319
Accounts receivable 177 173
Accrued expenses 138 468
Vacation and benefits 508 182
Software/fixed assets 411 78
Tax credit carryforwards 280 --
Minimum lease payments -- 26
----------------------
Net deferred tax asset $2,623 $2,946
======================
</TABLE>
C-9
<PAGE> 35
APPLIX
The following schedule reconciles the difference between the federal
income tax rate and the effective income tax rate:
<TABLE>
<CAPTION>
In thousands / December 31, 1997 1996
<S> <C> <C>
U.S. federal statutory rate $(215) $ 603
In-process research and development -- 3,426
State and foreign tax provision, net 300 497
Research and experimentation tax credit (449) (178)
Other 135 60
-----------------------
Tax Provision $(229) $4,408
=======================
</TABLE>
E
Commitments and Contingencies
Lease Commitments
The following is a schedule of future minimum lease payments as of
December 31, 1997:
<TABLE>
<CAPTION>
OPERATING LEASES
in thousands
<S> <C>
1998 $1,713
1999 1,460
2000 1,322
2001 1,049
2002 and thereafter 197
------
Total minimum lease payments $5,741
======
</TABLE>
Total rent expense for all operating leases was $ 2,283,660,
$1,644,680, and $937,510 for the years ended December 31, 1997, 1996
and 1995, respectively.
Contingencies
The Company is a party to various claims, legal actions and complaints,
arising out of the normal course of business, which it intends to
defend vigorously. In the opinion of management, all such matters are
either adequately covered by insurance, are without merit, or involve
such amounts that unfavorable judgements would not have a material
effect on the financial position of the Company.
F
Stockholders' Equity
Public Offering and Changes in Equity
On December 11, 1995, the Board of Directors declared a 2 for 1 stock
split effected in the form of a stock dividend distributed on December
26, 1995 to stockholders of record at the close of business on December
11, 1995. In this report, all per share amounts and numbers of shares
have been restated to reflect the 1995 stock split except where noted.
In addition, an amount equal to the $.0025 par value of the additional
shares arising from the split, $12,022, has been transferred from
capital in excess of par value to Common Stock.
On May 10, 1996 the stockholders approved an amendment to the
Company's Articles of Organization increasing from 15,000,000 to
30,000,000 the number of authorized shares of Common Stock.
C-10
<PAGE> 36
APPLIX
Reconciliation of basic and diluted earnings per share calculation
For the years ended December 31, 1997 and 1996, the basic and diluted
earnings per share calculation is the same due to a net loss for those
years.
<TABLE>
<CAPTION>
Loss Shares Per Share
For the year ended December 31, 1995 (Numerator) (Denominator) Amount
------------------------------------------------
<S> <C> <C> <C>
BASIC EPS
Income available to common stockholders $664,000 9,121,000 $0.07
EFFECT OF DILUTIVE SECURITIES
Common stock options 934,000
------------------------------------------------
DILUTED EPS
Income available to common stockholders
and assumed conversions $664,000 10,055,000 $0.07
================================================
</TABLE>
Stock Option Plans
The 1994 Equity Incentive Plan of the Company (the "Equity Plan"),
which was adopted by the Company's Board of Directors on April 11, 1994
and approved by its stockholders on May 20, 1994, enables the Company
to make awards of restricted Common Stock and to grant options to
purchase Common Stock to employees, officers or directors of and
consultants to the Company. Restricted stock awards entitle the
recipient to purchase Common Stock from the Company under terms which
provide for vesting over a period of time. The Company has the right to
repurchase the unvested portion of the Common Stock subject to the
award upon termination of the recipient's employment or other
relationship with the Company. Stock options entitle the optionee to
purchase Common Stock from the Company, for a specified exercise price,
during a period specified in the applicable option agreement. The
Equity Plan is administered by the Compensation Committee of the Board
of Directors, which selects the persons to whom restricted stock awards
and stock options are granted and determines the number of shares of
Common Stock covered by the award or option, its purchase price or
exercise price, its vesting schedule and (in the case of stock options)
its expiration date. Under the Equity Plan, the incentive stock options
must be granted with an exercise price of no less than fair market
value of the stock on the grant date as determined by the Board of
Directors. As of December 31, 1997, a total of 126,703 shares had been
issued upon exercise of stock options; an additional 1,729,966 shares
were issuable pursuant to stock options outstanding; and 633,488 shares
were reserved for future issuance under the Equity Plan. At December
31, 1997, options for 188,766 shares were exercisable. To date, no
restricted stock awards have been granted under the Equity Plan.
On March 13, 1997, the Board of Directors adopted an amendment to the
Equity Plan, increasing the number of shares authorized for issuance
by 450,000 which was then approved by its stockholders on May 8, 1997.
The Company also had a 1984 Stock Option Plan (the "Option Plan") for
certain employees, directors, and consultants, under which both
incentive stock options and nonqualified options could have been
issued. Under the Option Plan, the incentive stock options must have
been granted with an exercise price of no less than the fair market of
the stock on the date of grant, as determined by the Board of
Directors. The price of the stock options and the terms of exercise for
all options granted were determined by the Board of Directors.
Generally, stock options granted under the Option Plan vest over a
five-year period. The options expire on the date determined by the
Board of Directors, not to exceed 10 years following the date of grant
in the case of incentive stock options. As of December 31, 1997, a
total of 829,110 shares had been issued upon exercise of stock options
granted under the Option Plan and an additional 252,620 shares were
issuable pursuant to outstanding stock options. At December 31, 1997,
options for 185,808 shares were exercisable. No further options may be
granted under the Option Plan.
C-11
<PAGE> 37
APPLIX
On March 19, 1996, the Board of Directors adopted, and on May 10,
1996 the stockholders approved, the 1996 Director Stock Option Plan
(the "Director Plan"). The Director Plan provides for the grant of
nonstatutory options not intended to meet the requirements of the
Section 422 of the Internal Revenue Code of 1986, as amended. Only
directors of the Company who are not full-time employees of the Company
or any subsidiary of the Company are eligible to be granted options
under the Plan. A total of 50,000 shares of the Company's Common Stock
are reserved for issuance pursuant to the Director Plan. Shares issued
under the Plan may consist in whole or in part of authorized but
unissued shares or treasury shares. The Director Plan is administered
by the Board of Directors of the Company. The directors are elected by
the stockholders of the Company in accordance with the provisions of
the Restated Articles of Organization, as amended, and the By-Laws of
the Company. Under the Director Plan, the stock options must have been
granted with an exercise price of no less than the fair market value of
the stock on the date of grant, as determined by the Board of
Directors. Each option granted pursuant to the Director Plan becomes
exercisable in full on the first anniversary of the date of grant,
provided the optionee is serving as a director of the Company on such
date. As of December 31, 1997, there were no shares issued upon
exercise of stock options and 15,000 shares of Common Stock were
issuable pursuant to stock options outstanding under the Director Plan.
At December 31, 1997, options for 7,500 shares were exercisable under
the Director Plan.
The Board of Directors also adopted, on October 17, 1996, the 1996
Sinper Stock Option Plan (the "Sinper Plan"). The purpose of this plan
is to secure for the Company and its stockholders the benefits arising
from capital stock ownership by employees of Sinper Corporation
(Sinper), which became a wholly-owned subsidiary of the Company
pursuant to terms of the Agreement and Plan of Merger among the
Company, Applix Acquisition Corporation and Sinper, dated October 17,
1996. Options were granted to persons who were, at the time of grant,
employees of Sinper. A total of 88,500 shares of the Company's Common
Stock were reserved for issuance pursuant to the Sinper Plan. The
Sinper Plan is administered by the Board of Directors of the Company.
Under the Sinper Plan, the stock options must have been granted with an
exercise price of no less than the fair market value of the stock on
the date of grant, as determined by the Board of Directors. As of
December 31, 1997, there were no shares issued upon exercise of stock
options; 88,500 shares were issuable pursuant to stock options
outstanding under the Sinper Plan. At December 31, 1997, 7,350 options
outstanding under the Sinper Plan were exercisable. No additional
options may be granted under the Sinper Plan.
The Company applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees", and related Interpretations
in accounting for its plans. Had compensation cost for the Company's
stock option plans been determined based upon the fair value at the
grant date for awards under these plans consistent with the methodology
prescribed under Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation", the Company's net loss and
loss per share would have been decreased by approximately $199,000 (net
of tax), or $0.02 per share in 1997, net loss and loss per share would
have been increased by $1,567,000 (net of tax), or $0.16 per share in
1996 and net income and earnings per share would have been decreased by
$322,000 (net of tax), or $0.03 per share in 1995. The Company would
have recognized $1,077,000 (net of tax) in expense during 1997, but due
to a change in forfeiture rates from prior years the Company recognized
a credit of $1,276,000 (net of tax) resulting in income of $199,000
(net of tax) for 1997. The average fair value of the options granted is
estimated as $6.13 during 1997 on the date of grant using the
Black-Scholes Option-Pricing Model with the following assumptions:
dividend yield 0%, volatility of 90%, risk-free interest rate of 6%,
assumed forfeiture rate of 28% and an expected life of 5 years. The
average fair value of the options granted is estimated as $18.65 during
1996 and $7.30 during 1995 on the date of grant using the Black-Scholes
Option-Pricing Model with the following assumptions: dividend yield 0%,
volatility of 74%, risk-free interest rate of 7%, assumed forfeiture
rate of 11% and an expected life of 5 years.
The effects of applying SFAS 123 in this pro forma disclosure are not
likely to be representative of the effects on reported net income for
future years. SFAS 123 does not apply to awards prior to 1995 and
additional awards in future years are anticipated.
C-12
<PAGE> 38
APPLIX
Stock option activity for all plans is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-------------------
Weighted Average
Options Available Options Option Price
for Grant Outstanding Per Share
--------- ----------- ---------
<S> <C> <C> <C>
BALANCE AT JANUARY 1, 1994 415,294 991,832 $ 0.95
Options authorized, 1994 Plan 634,834
Expiration of 1984 Plan (264,494)
Options granted (257,264) 257,264 $ 2.26
Options exercised -- (28,000) $ 0.95
Options cancelled 54,868 (54,868) $ 1.15
----------------------------------------------
BALANCE AT DECEMBER 31, 1994 583,238 1,166,228 $ 1.19
Options authorized, 1994 Plan 443,557
Expiration of 1984 Plan (44,804)
Options granted (1,350,000) 1,350,000 $13.87
Options exercised -- (451,122) $ 0.98
Options cancelled 103,290 (103,290) $ 5.16
----------------------------------------------
BALANCE AT DECEMBER 31, 1995 (264,719) 1,961,816 $ 7.18
Options authorized, 1994 Plan 466,552
Options authorized/granted,
1996 Director Plan 50,000 7,500 $34.75
Options authorized/granted,
1996 Sinper Plan 88,500 88,500 $22.63
Expiration of 1984 Plan (14,240)
Options granted, 1994 Plan (358,800) 262,800 $24.37
Options exercised -- (385,799) $ 3.04
Options cancelled 85,906 (85,906) $14.33
----------------------------------------------
BALANCE AT DECEMBER 31, 1996 53,199 1,848,911 $13.76
Options authorized, 1994 Plan 495,214
Expiration of 1984 Plan (20,428)
Options granted, 1994 Plan (829,200) 829,200 $ 8.36
Options granted, 1996 Director Plan (7,500) 7,500 $12.88
Options exercised -- (72,322) $ 2.51
Options cancelled 543,823 (543,823) $11.00
Options cancelled for repricing 1,433,699 (1,433,699) $16.21
Options granted for repricing (1,433,699) 1,433,699 $ 3.25
----------------------------------------------
BALANCE AT DECEMBER 31, 1997 235,108 2,069,466 $ 3.76
==============================================
</TABLE>
The following table summarizes information concerning currently
outstanding and exercisable options:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
------ ----------- ---- ----- ----------- -----
<S> <C> <C> <C> <C> <C>
$ 0.15 168 4.00 $0.15 168 $0.15
$ 0.37 6,804 4.13 $0.37 6,804 $0.37
$ 1.12 -$ 1.65 150,264 4.98 $1.30 122,192 $1.29
$ 1.87 -$ 2.25 107,692 5.84 $2.04 61,982 $2.03
$ 3.25 -$ 4.50 1,545,828 9.33 $3.36 141,068 $3.26
$ 5.56 -$ 9.69 235,460 6.87 $7.09 45,960 $7.04
$12.88 -$13.12 11,700 7.54 $12.96 1,800 $13.12
$21.25 -$26.25 4,030 5.10 $23.13 1,930 $21.16
$32.13 -$34.75 7,520 5.25 $34.74 7,520 $34.74
--------------------------------------------------------------------------------------------------
2,069,466 389,424
</TABLE>
C-13
<PAGE> 39
APPLIX
Stock Purchase Plan
The Company established an Employee Stock Purchase Plan during 1995,
allowing employees to purchase Common Stock, in a series of offerings,
through payroll deductions of up to 10% of their total compensation.
The purchase price in each offering is 85% of the fair market value of
the stock on (i) the offering commencement date or (ii) the offering
termination date (six months after commencement date), whichever is
lower. The plan allows for the purchase of up to 100,000 shares of
Common Stock per plan period and 400,000 shares of Common Stock in the
aggregate. As of December 31, 1997, 132,543 shares of common stock had
been issued under the plan.
G
Summary of Contribution Plan
Applix has a defined contribution plan (401(k)) in which all full time
employees are eligible to participate once they have reached the age of
21. Employee and employer contributions vest immediately.
The Company may make discretionary contributions to the plan as
determined by the Board of Directors. Prior to May 15, 1996 the Company
did not make any discretionary contributions to the Plan.
Beginning May 15, 1996, the Company has matched one third of the
employee's contribution, up to 6% of the employee's earnings. The
Company's matching contribution to the plan was $237,936 during 1997
and $136,700 during 1996.
H
Major Customer and Geographic Data
The Company operates in one business segment.
The Company's three largest customers (including resellers) comprised
16% of total license revenue during 1997 and 19% of total license
revenue in 1996, although all of the three customers were different in
these two years.
License revenue (direct or indirect) from branches of the U.S.
Government amounted to 21%, 20% and 28% of total license revenue for
the years ended December 31, 1997, 1996 and 1995, respectively. A
summary of the Company's operations by geographic locations for the
years ended December 31, 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1997 / In thousands UNITED STATES EUROPE ELIMINATIONS CONSOLIDATED
<S> <C> <C> <C> <C>
REVENUE:
Customers $30,336 $18,162 $ -- $48,498
Intercompany 3,255 -- (3,255) --
----------------------------------------------------------------
Total revenue $33,591 $18,162 $(3,255) $48,498
----------------------------------------------------------------
Operating income (loss) $ 4,802 $(6,408) $ -- $ (1,606)
----------------------------------------------------------------
Identifiable assets $39,130 $ 9,635 $(4,744) $44,021
----------------------------------------------------------------
Year Ended December 31, 1996 / In thousands
REVENUE:
Customers $34,108 $17,129 $ -- $51,237
Intercompany 4,166 -- (4,166) --
----------------------------------------------------------------
Total revenue $38,274 $17,129 $(4,166) $51,237
----------------------------------------------------------------
Operating income (loss) $ 3,910 $(3,403) $ -- $ 507
----------------------------------------------------------------
Identifiable assets $41,066 $ 9,009 $(5,561) $44,514
----------------------------------------------------------------
</TABLE>
C-14
<PAGE> 40
APPLIX
<TABLE>
<CAPTION>
Year Ended December 31, 1995 / In thousands UNITED STATES EUROPE ELIMINATIONS CONSOLIDATED
<S> <C> <C> <C> <C>
REVENUE:
Customers $21,741 $10,602 $ -- $32,343
Intercompany 4,043 -- (4,043) --
----------------------------------------------------------------
Total revenue $25,784 $10,602 $(4,043) $32,343
----------------------------------------------------------------
Operating income (loss) $ 2,326 $(2,988) $ -- $ (662)
----------------------------------------------------------------
Identifiable assets $39,086 $ 4,972 $(4,560) $39,498
================================================================
</TABLE>
Operating income (loss) reflects revenue less related costs of revenue,
direct selling expenses and allocated operating expenses incurred in
the United States, which include general, administrative, research,
development and marketing expenses. These expenses are allocated in
proportion to the segment sales. Total allocated expenses for the years
ended December 31, 1997, 1996 and 1995 were $18,566,000, $12,360,000
and $8,150,000, respectively, of which $6,949,000, $4,260,000 and
$2,673,000, respectively, were allocated to Europe.
Export sales included in U.S. operations were as follows:
<TABLE>
<CAPTION>
In thousands / Year Ended December 31, 1997 1996 1995
<S> <C> <C> <C>
Region
Europe $3,470 $2,058 $1,261
Asia 982 1,806 1,184
Australia 325 239 836
Canada 1,436 1,580 401
Other 504 455 185
-----------------------------
$6,717 $6,138 $3,867
=============================
</TABLE>
The Company's operations are structured to achieve consolidated
objectives. As a result, significant interdependencies and overlaps
exist among the Company's operating entities. Accordingly, the revenue,
operating income (loss) and identifiable assets shown for each
geographic area may not be indicative of the amounts which would have
been reported if the operating entities were independent of one
another.
I
Acquisitions
On October 31, 1996, the Company acquired Sinper Corporation (Sinper)
for an aggregate cost of $11,500,000 consisting of cash of $5,000,000,
Common Stock valued at $5,000,000 and the estimated acquisition costs
of approximately $1,500,000. The acquisition was accounted for under
the purchase method of accounting. Accordingly, the balance sheet
accounts of Sinper and the results of its operations have been included
in the consolidated financial statements of the Company since the date
of acquisition. During 1996, the Company expensed in-process research
and development that did not qualify for capitalization under SFAS No.,
86 totalling $10,821,000. Of the remaining purchase price, $489,000 was
allocated to completed technology, and $190,000 was allocated to net
assets acquired. Completed technology will be amortized over a period
of seven years from the acquisition date.
On October 31, 1995, the Company acquired Target Systems Corporation
(Target) for an aggregate cost of $6,400,000. This purchase price was
comprised of the purchase of stock valued at $4,900,000 for cash and
acquisition cost of approximately $1,500,000. Accordingly, the balance
sheet accounts of Target and the result of its operations have been
included in the consolidated financial statements of the Company since
the date of acquisition. During 1995, the Company took a charge of
$6,200,000 for in-process research and development acquired from
Target. The remaining purchase price of $200,000 is comprised of
completed technology, goodwill and liabilities assumed. Goodwill and
completed technology will be amortized over a period of seven years
from the acquisition date.
C-15
<PAGE> 41
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
*3.1 -- Restated Articles of Organization.
*3.2 -- By-laws.
*+10.1 -- 1994 Equity Incentive Plan.
*+10.2 -- 1984 Stock Option Plan.
**10.3 -- Commercial Lease between the Registrant and
Westboro II-III, Inc. dated January 5, 1996.
**10.4 -- Commercial Lease between the Registrant and
Westboro I Real Estate Corp. dated January 15, 1996.
** 10.5 -- 1996 Director Stock Option Plan.
11.1 -- Statement regarding computation of earnings per
share (included in Notes to Consolidated Financial
Statements).
21.1 -- Subsidiaries of the Registrant.
23.1 -- Consent of Coopers & Lybrand L.L.P.
27.1 -- Financial Data Schedule.
27.2 -- Restated Financial Data Schedule relating to the
Registrant's Form 10-Q for the period ended September
30, 1997, as filed with the Commission on November 14,
1997.
27.3 -- Restated Financial Data Schedule relating to the
Registrant's Form 10-Q for the period ended June 30,
1997, as filed with the Commission on August 13, 1997.
27.4 -- Restated Financial Data Schedule relating to the
Registrant's Form 10-Q for the period ended March 31,
1997, as filed with the Commission on May 15, 1997.
27.5 -- Restated Financial Data Schedule relating to the
Registrant's Form 10-K for the period ended December
31, 1996, as filed with the Commission on April 4,
1997.
27.6 -- Restated Financial Data Schedule relating to the
Registrant's Form 10-Q for the period ended September
30, 1996, as filed with the
<PAGE> 42
Commission on November 14, 1996.
27.7 -- Restated Financial Data Schedule relating to the
Registrant's Form 10-Q for the period ended June 30,
1996, as filed with the Commission on August 14, 1996.
* Incorporated by reference from the Company's Registration Statement on Form
S-1 (File no. 33-85688).
**Incorporated by reference to the Registrant's Report on Form 10-K for the
fiscal year ended December 31, 1995, as filed with the Commission on April 1,
1996.
+ Management contract or compensatory plan.
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
Jurisdiction of
Name of Entity: Incorporation:
- --------------- --------------
Applix Securities Corp. Massachusetts
Sinper Corporation Florida
Target Systems Corporation Massachusetts
Applix France France
Applix GmbH Germany
Applix B.V. The Netherlands
Applix (UK) Limited England
Applix Foreign Sales Corporation Barbados
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Applix, Inc. on Form S-8 (File Nos. 33-89382, 33-87882, 33-87776, 333-2340,
333-06303, 333-16963 and 333-20853) of our report dated January 30, 1998, on our
audits of the consolidated financial statements of Applix, Inc. as of December
31, 1997 and 1996, and for each of the years in the three year period ending
December 31, 1997, which report is included in this Annual Report on Form 10-K.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
March 30, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (3)
THE EXHIBITS FILED AS A PART OF THIS ANNUAL REPORT AND FORM 10k IS THE
FOLLOWING:
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 7,639
<SECURITIES> 13,729
<RECEIVABLES> 12,678
<ALLOWANCES> (531)
<INVENTORY> 0
<CURRENT-ASSETS> 39,010
<PP&E> 11,279
<DEPRECIATION> (7,268)
<TOTAL-ASSETS> 44,365
<CURRENT-LIABILITIES> 16,378
<BONDS> 0
0
0
<COMMON> 26
<OTHER-SE> 27,961
<TOTAL-LIABILITY-AND-EQUITY> 44,365
<SALES> 48,498
<TOTAL-REVENUES> 48,498
<CGS> 9,852
<TOTAL-COSTS> 9,852
<OTHER-EXPENSES> 40,252
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (633)
<INCOME-TAX> (229)
<INCOME-CONTINUING> (404)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (404)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 8,841
<SECURITIES> 10,471
<RECEIVABLES> 11,260
<ALLOWANCES> (522)
<INVENTORY> 0
<CURRENT-ASSETS> 35,874
<PP&E> 10,972
<DEPRECIATION> (6,764)
<TOTAL-ASSETS> 41,535
<CURRENT-LIABILITIES> 14,360
<BONDS> 0
0
0
<COMMON> 26
<OTHER-SE> 27,149
<TOTAL-LIABILITY-AND-EQUITY> 41,535
<SALES> 35,001
<TOTAL-REVENUES> 35,001
<CGS> 7,320
<TOTAL-COSTS> 7,320
<OTHER-EXPENSES> 30,061
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,663)
<INCOME-TAX> (619)
<INCOME-CONTINUING> (1,044)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,044)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 17,522
<SECURITIES> 0
<RECEIVABLES> 11,533
<ALLOWANCES> (517)
<INVENTORY> 0
<CURRENT-ASSETS> 34,628
<PP&E> 10,442
<DEPRECIATION> (6,275)
<TOTAL-ASSETS> 40,180
<CURRENT-LIABILITIES> 13,457
<BONDS> 0
0
0
<COMMON> 26
<OTHER-SE> 26,697
<TOTAL-LIABILITY-AND-EQUITY> 40,180
<SALES> 22,801
<TOTAL-REVENUES> 22,801
<CGS> 4,855
<TOTAL-COSTS> 4,855
<OTHER-EXPENSES> 20,332
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,912)
<INCOME-TAX> (712)
<INCOME-CONTINUING> (1,200)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,200)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> (.12)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 19,315
<SECURITIES> 0
<RECEIVABLES> 10,814
<ALLOWANCES> (506)
<INVENTORY> 0
<CURRENT-ASSETS> 34,526
<PP&E> 10,417
<DEPRECIATION> (5,847)
<TOTAL-ASSETS> 40,598
<CURRENT-LIABILITIES> 13,394
<BONDS> 0
0
0
<COMMON> 25
<OTHER-SE> 25,179
<TOTAL-LIABILITY-AND-EQUITY> 40,598
<SALES> 11,096
<TOTAL-REVENUES> 11,096
<CGS> 2,348
<TOTAL-COSTS> 2,348
<OTHER-EXPENSES> 10,066
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,088)
<INCOME-TAX> (407)
<INCOME-CONTINUING> (681)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (681)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 19,882
<SECURITIES> 0
<RECEIVABLES> 13,222
<ALLOWANCES> (518)
<INVENTORY> 0
<CURRENT-ASSETS> 38,238
<PP&E> 10,057
<DEPRECIATION> (5,401)
<TOTAL-ASSETS> 44,514
<CURRENT-LIABILITIES> 17,114
<BONDS> 0
0
0
<COMMON> 25
<OTHER-SE> 27,375
<TOTAL-LIABILITY-AND-EQUITY> 44,514
<SALES> 51,237
<TOTAL-REVENUES> 51,237
<CGS> 7,513
<TOTAL-COSTS> 7,513
<OTHER-EXPENSES> 43,217
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,772
<INCOME-TAX> 4,408
<INCOME-CONTINUING> (2,636)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,636)
<EPS-PRIMARY> (.27)
<EPS-DILUTED> (.27)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 26,050
<SECURITIES> 0
<RECEIVABLES> 8,124
<ALLOWANCES> (476)
<INVENTORY> 0
<CURRENT-ASSETS> 39,974
<PP&E> 8,694
<DEPRECIATION> (4,853)
<TOTAL-ASSETS> 45,106
<CURRENT-LIABILITIES> 16,505
<BONDS> 0
0
0
<COMMON> 25
<OTHER-SE> 28,576
<TOTAL-LIABILITY-AND-EQUITY> 45,106
<SALES> 36,258
<TOTAL-REVENUES> 36,258
<CGS> 5,337
<TOTAL-COSTS> 5,337
<OTHER-EXPENSES> 22,687
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 9,219
<INCOME-TAX> 3,226
<INCOME-CONTINUING> 5,993
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,993
<EPS-PRIMARY> .63
<EPS-DILUTED> .56
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 29,003
<SECURITIES> 0
<RECEIVABLES> 8,194
<ALLOWANCES> (469)
<INVENTORY> 0
<CURRENT-ASSETS> 42,535
<PP&E> 7,882
<DEPRECIATION> (4,478)
<TOTAL-ASSETS> 46,755
<CURRENT-LIABILITIES> 20,957
<BONDS> 0
0
0
<COMMON> 25
<OTHER-SE> 25,773
<TOTAL-LIABILITY-AND-EQUITY> 46,755
<SALES> 22,903
<TOTAL-REVENUES> 22,903
<CGS> 3,296
<TOTAL-COSTS> 3,296
<OTHER-EXPENSES> 14,466
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,768
<INCOME-TAX> 2,018
<INCOME-CONTINUING> 3,750
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,750
<EPS-PRIMARY> .39
<EPS-DILUTED> .35
</TABLE>
