-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DYDEY7adT4lmJb8KX2NoJu8Kh7Z3VKGeMw7lDHx4vmGDgjju9JV2Ux8y9+tz8j2O gWQfWCBHn1mkuFK6Dca/hg== 0000950144-98-006329.txt : 19980518 0000950144-98-006329.hdr.sgml : 19980518 ACCESSION NUMBER: 0000950144-98-006329 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARBINGER CORP CENTRAL INDEX KEY: 0000947116 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370] IRS NUMBER: 581817306 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-26298 FILM NUMBER: 98622390 BUSINESS ADDRESS: STREET 1: 1055 LENOX PK BLVD CITY: ATLANTA STATE: GA ZIP: 30319 BUSINESS PHONE: 4048414334 10-Q 1 HARBINGER CORPORATION 1 - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [MARK ONE] [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO ------------ ------------ COMMISSION FILE NUMBER 0-26298 HARBINGER CORPORATION (Exact name of registrant as specified in Its charter) GEORGIA 58-1817306 (State or other Jurisdiction of incorporation or (I.R.S. Employer organization) Identification No.) 1277 LENOX PARK BOULEVARD 30319 ATLANTA, GEORGIA (Zip Code) (Address of principal executive offices) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (404) 467-3000 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 [ ] The number of shares of the issuer's class of capital stock outstanding as of May 5, 1998, the latest practicable date, is as follows: 41,834,805 shares of Common Stock, $.0001 par value (reflects three-for-two stock split in the form of a stock dividend payable on May 15, 1998). - -------------------------------------------------------------------------------- Page 1 of 30 2 HARBINGER CORPORATION FORM 10-Q QUARTER ENDED MARCH 31, 1998 TABLE OF CONTENTS
Page Number ------------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets - (Unaudited) March 31, 1998 and December 31, 1997................................................. 3 Consolidated Statements of Operations (Unaudited) - Three Months Ended March 31, 1998 and 1997.................................... 4 Consolidated Statements of Comprehensive Loss (Unaudited) - Three Months Ended March 31, 1998 and 1997........................... 5 Consolidated Statements of Cash Flows (Unaudited) - Three Months Ended March 31, 1998 and 1997........................... 6 Notes to Consolidated Financial Statements (Unaudited)...................... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations....................................................... 9 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders.............................. 14 Item 6. Exhibits and Reports on Form 8-K................................................. 15 PART III. SIGNATURES..................................................................... 16
Page 2 of 30 3 ITEM 1. FINANCIAL STATEMENTS HARBINGER CORPORATION CONSOLIDATED BALANCE SHEETS (UNAUDITED)
March 31, December 31, ---------------- ----------------- 1998 1997 ---------------- ----------------- ASSETS Current assets: Cash and cash equivalents ......................................... $ 75,254,000 $ 69,811,000 Short-term investments ............................................ 31,050,000 32,333,000 Accounts receivable, less allowances for returns and doubtful accounts of $2,773,000 at March 31, 1998 and $2,790,000 at December 31, 1997 ............................. 30,215,000 35,017,000 Royalties receivable .............................................. 7,015,000 5,364,000 Deferred income taxes ............................................. 1,889,000 1,892,000 Other current assets .............................................. 4,439,000 3,431,000 ------------- ------------- Total current assets .......................................... 149,862,000 147,848,000 ------------- ------------- Property and equipment, less accumulated depreciation and amortization .................................................. 18,780,000 18,167,000 Intangible assets, less accumulated amortization ..................... 16,543,000 16,464,000 Deferred income taxes ................................................ 909,000 909,000 Other assets ......................................................... 327,000 171,000 ============= ============= $ 186,421,000 $ 183,559,000 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable .................................................. $ 4,864,000 $ 8,734,000 Accrued expenses .................................................. 25,515,000 25,835,000 Deferred revenues ................................................. 20,237,000 18,349,000 Current portion of long-term debt ................................. 454,000 623,000 ------------- ------------- Total current liabilities ..................................... 51,070,000 53,541,000 ------------- ------------- Commitments and contingencies Redeemable preferred stock: Zero Coupon, $1.00 redemption value; 4,000,000 shares issued and outstanding at March 31, 1998 and December 31, 1997 ............................................... -- -- Shareholders' equity: Common stock, $0.0001 par value; 100,000,000 shares authorized, 41,701,491 shares and 40,827,856 shares issued and outstanding at March 31, 1998 and December 31, 1997 ......... 4,000 4,000 Additional paid-in capital ........................................ 196,587,000 189,841,000 Accumulated deficit ............................................... (60,153,000) (58,945,000) Accumulated other comprehensive loss .............................. (1,087,000) (882,000) ------------- ------------- Total shareholders' equity .................................... 135,351,000 130,018,000 ============= ============= $ 186,421,000 $ 183,559,000 ============= =============
See accompanying notes to consolidated financial statements. Page 3 of 30 4 HARBINGER CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended March 31, --------------------------------- 1998 1997 ------------- ------------- Revenues: Services .......................................................... $ 20,674,000 $ 14,750,000 Software .......................................................... 10,426,000 9,570,000 ------------ ------------ Total revenues .................................................. 31,100,000 24,320,000 ------------ ------------ Direct costs: Services .......................................................... 7,659,000 4,836,000 Software .......................................................... 980,000 1,846,000 ------------ ------------ Total direct costs .............................................. 8,639,000 6,682,000 ------------ ------------ Gross margin ................................................ 22,461,000 17,638,000 ------------ ------------ Operating costs: Selling and marketing ............................................. 6,724,000 5,818,000 General and administrative ........................................ 5,487,000 4,810,000 Depreciation and amortization ..................................... 2,019,000 1,591,000 Product development ............................................... 2,705,000 4,094,000 Charge for purchased in-process product development, write-off of software development costs, restructuring, acquisition related and other one-time charges .................. 8,039,000 16,236,000 ------------ ------------ Total operating costs ......................................... 24,974,000 32,549,000 ------------ ------------ Operating loss .............................................. (2,513,000) (14,911,000) Interest income, net ................................................. (1,311,000) (731,000) Equity in losses of joint ventures ................................... -- 141,000 Minority interest .................................................... -- (5,000) ------------ ------------ Loss from continuing operations before income taxes ......... (1,202,000) (14,316,000) Income tax expense (benefit) ......................................... 136,000 (335,000) ------------ ------------ Loss from continuing operations ............................. (1,338,000) (13,981,000) Income from discontinued operations .................................. -- 47,000 ------------ ------------ Loss before extraordinary item .............................. (1,338,000) (13,934,000) Extraordinary loss on debt extinguishment ............................ -- (2,419,000) ============ ============ Net loss applicable to common shareholders .................. $ (1,338,000) $(16,353,000) ============ ============ Basic and diluted net loss per share: Loss from continuing operations ................................... $ (0.03) $ (0.39) Income from discontinued operations ............................... -- -- Extraordinary loss on debt extinguishment ......................... -- (0.06) ------------ ------------ Net loss per common share ......................................... $ (0.03) $ (0.45) ============ ============ Weighted average number of common shares outstanding ................. 41,046,000 36,250,000 ============ ============
See accompanying notes to consolidated financial statements. Page 4 of 30 5 HARBINGER CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)
Three Months Ended March 31, --------------------------------- 1998 1997 ------------ ------------ Net loss applicable to common shareholders ........................... $ (1,338,000) $(16,353,000) Other comprehensive loss, net of tax: Foreign currency translation adjustments ........................... (205,000) (106,000) ------------ ------------ Comprehensive loss ............................................... $ (1,543,000) $(16,459,000) ============ ============
See accompanying notes to consolidated financial statements. Page 5 of 30 6 HARBINGER CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended March 31, --------------------------------- 1998 1997 ------------ ------------ Cash flows provided by operating activities ........................... $ 1,205,000 $ 379,000 Cash flows from investing activities: Short-term investments ............................................. 1,066,000 29,688,000 Purchases of property and equipment ................................ (2,545,000) (2,085,000) Additions to software development costs ............................ (924,000) (1,164,000) Investment in acquisitions ......................................... -- (1,907,000) ------------ ------------ Net cash provided by (used in) investing activities .......... (2,403,000) 24,532,000 ------------ ------------ Cash flows from financing activities: Exercise of stock options and warrants and issuance of stock under employee stock purchase plan ......................... 6,746,000 765,000 Principal payments under notes payable, long-term debt and capital lease obligations .................................... (169,000) (163,000) Repayments under credit agreement .................................. -- (725,000) Purchase of subordinated debenture ................................. -- (1,500,000) ------------ ------------ Net cash provided by (used in) financing activities ............ 6,577,000 (1,623,000) ------------ ------------ Net increase in cash and cash equivalents ............................. 5,379,000 23,288,000 Cash and cash equivalents at beginning of period ...................... 69,811,000 35,697,000 Effect of exchange rates on cash held in foreign currencies ........... 12,000 (44,000) Cash received from acquisitions ....................................... 52,000 3,322,000 ============ ============ Cash and cash equivalents at end of period ............................ $ 75,254,000 $ 62,263,000 ============ ============ Supplemental disclosures: Cash paid for interest ............................................. $ 25,000 $ 25,000 ============ ============ Cash paid for income taxes ......................................... $ 347,000 $ -- ============ ============ Supplemental disclosures of noncash investing and financing activities: Purchase of subordinated debenture in exchange for common stock ................................................. $ -- $ 4,200,000 ============ ============ Acquisition of minority interest in exchange for issuance of options .......................................... $ -- $ 2,216,000 ============ ============
See accompanying notes to consolidated financial statements. Page 6 of 30 7 HARBINGER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1998 (UNAUDITED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The financial information included herein is unaudited; however, the information reflects all adjustments (consisting solely of normal recurring adjustments) that are, in the opinion of management, necessary to a fair presentation of the financial position, results of operations, and cash flows for the interim periods. Operating results for the three months ended March 31, 1998 are not necessarily indicative of the results that may be expected for the year ended December 31, 1998. For further information, refer to the financial statements and footnotes thereto included in Harbinger Corporation's ("Harbinger" or the "Company") Form 10-K for the year ended December 31, 1997 and the Company's current report on Form 8-K dated February 24, 1998. All share, per share and shareholders' equity amounts in the unaudited consolidated financial statements have been retroactively restated to reflect a three-for-two stock split payable on May 15, 1998 (see Note 6). REVENUE RECOGNITION On January 1, 1998, the Company adopted Statement of Position 97-2, Software Revenue Recognition, issued by the Accounting Standards Executive Committee in October 1997, effective for financial statements for fiscal years beginning after December 15, 1997. The implementation of this statement did not have a material impact on the Company's unaudited consolidated financial statements for the period ended March 31, 1998. COMPREHENSIVE INCOME On January 1, 1998, the Company adopted Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income, issued by the Financial Accounting Standards Board ("FASB") in June 1997, effective for fiscal years beginning after December 15, 1997. Comprehensive income includes all changes in equity during a period except those resulting in investments by owners and distributions to owners. OTHER The Company continues to evaluate the requirements of Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information, issued by the FASB in June 1997, effective for fiscal years beginning after December 15, 1997. The provisions of this standard do not apply to interim periods in the year of adoption. 2. ACQUISITION Effective March 31, 1998, the Company acquired EDI Works! LLC ("EDI Works!"), a Texas limited liability company for 194,497 shares of the Company's common stock in a transaction accounted for using the pooling-of-interests method of accounting. The EDI Works! business combination is not material, and therefore has been accounted for as an immaterial pooling with EDI Works! retained earnings of $130,000 at December 31, 1997 being credited directly to the Company's accumulated deficit effective January 1, 1998. The results of operations of EDI Works! are included in the Company's consolidated statement of operations for the three months ended March 31, 1998. Page 7 of 30 8 In connection with the EDI Works! acquisition, the Company incurred a charge of $323,000 for acquisition related expenses, asset write downs and integration costs in the consolidated statement of operations for the period ended March 31, 1998. 3. CHARGE FOR PURCHASED IN-PROCESS PRODUCT DEVELOPMENT, WRITE-OFF OF SOFTWARE DEVELOPMENT COSTS, RESTRUCTURING, ACQUISITION RELATED AND OTHER ONE-TIME CHARGES In connection with the acquisitions made in 1998 and 1997, the Company incurred charges for purchased in-process product development, write-off of software development costs, restructuring, acquisition related and other one-time charges. A summary of the components is as follows:
Three Months Ended March 31, ------------------------------ 1998 1997 ----------- ----------- In-process product development ................ $ -- $ 2,715,000 Integration costs and non recurring one-time charges ........................... 6,380,000 5,993,000 Transaction charges ........................... 388,000 4,904,000 Intangible asset write downs .................. -- 2,322,000 Asset write downs ............................. 151,000 302,000 Restructuring charges ......................... 1,120,000 -- ----------- ----------- $ 8,039,000 $16,236,000 =========== ===========
Approximately $2 million of the costs and expenses incurred in the three months ended March 31, 1998 in connection with an acquisition in December 1997 included certain internal expense allocations which may recur in other expense categories in the future, potentially resulting in an increase in such expense categories as a percentage of total revenues. 4. SHAREHOLDERS' EQUITY On March 31, 1998, the Company issued 194,497 shares of the Company's common stock as consideration related to the Company's acquisition of EDI Works!. (See Note 2.) 5. COMMITMENTS During the first quarter ended March 31, 1998, the Company entered into agreements with certain vendors to supply services to the Company related to the integration of its recent acquisitions. The total obligation for such agreements is approximately $7.9 million. 6. SUBSEQUENT EVENT On April 24, 1998, the Board of Directors declared a three-for-two stock split in the form of a stock dividend on the Company's common stock payable on May 15, 1998, to shareholders of record on May 1, 1998. All share, per share and shareholders' equity amounts included in the Company's consolidated financial statements have been retroactively restated to reflect the split for all periods presented. Page 8 of 30 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere herein and the Company's Form 10-K for the year ended December 31, 1997 and the Company's current report on Form 8-K dated February 24, 1998. OVERVIEW Harbinger Corporation (the "Company") generates revenues from various sources, including revenues for services and license fees for software. Revenues for services principally includes subscription fees for transactions on the Company's Value Added Network ("VAN"), software maintenance and implementation charges and charges for consulting and training services. Subscription fees are based on a combination of monthly access charges and transaction-based usage charges. Software maintenance and implementation revenues represent recurring charges to customers and are deferred and recognized ratably over the service period. Revenues for consulting and training services are based on actual services rendered and are recognized as services are performed. License fees for software are recognized upon shipment, net of estimated returns. Software revenues include royalty revenues under distribution agreements with third party distributors which are recognized based upon sales to end users by that distributor. During 1997, the Company incurred $51.7 million in purchased in-process product development, write-off of software development costs, restructuring, acquisition related and other one-time charges associated with its acquisition of five companies. These costs related to the business combinations include activities such as cross training, planning, product integration and marketing ("Integration Activities"). Due to Integration Activities in the quarter ended March 31, 1998, certain internal expense allocations ("Integration Activity Costs") included in the acquisition related charges may recur in other expense categories in the future and may result in an increase in some expense categories as a percentage of total revenues. In connection with the two acquisitions in the fourth quarter of 1997 and one acquisition in the first quarter of 1998, the Company incurred additional merger related charges totaling $8 million in the first quarter of 1998 and expects to incur additional merger related charges totaling $7.9 million in subsequent quarters. 1998 ACQUISITION Effective March 31, 1998, the Company acquired EDI Works! LLC ("EDI Works!"), a Texas limited liability company for 194,497 shares of the Company's common stock in a transaction accounted for using the pooling-of-interests method of accounting. The results of operations of EDI Works! are included in the Company's consolidated statement of operations for the three months ended March 31, 1998. In connection with the EDI Works! acquisition, the Company incurred a charge of $323,000 for acquisition related expenses, asset write downs and integration costs in the consolidated statement of operations for the three months ended March 31, 1998. RESULTS OF OPERATIONS REVENUES Total revenues increased 28% from $24.3 million in the three months ended March 31, 1997 to $31.1 million in the same period in 1998. Revenues for services increased 40% from $14.8 million in the three months ended March 31, 1997 to $20.7 million in the same period in 1998, reflecting an increase in the number of subscribers utilizing the Company's VAN, increases in the average volume of transmissions by subscribers and increases in professional services revenues. In addition, a portion of revenues for services in the three months ended March 31, 1998 were from three acquisitions in the last three quarters. Of these three acquisitions, two were treated as immaterial poolings for accounting purposes and one was a purchase in the third quarter of 1997, therefore, there Page 9 of 30 10 is no comparable service revenues reflected in the first quarter of 1997. Revenues from software maintenance and implementation also increased, reflecting primarily an increase in the number of customers. Revenues from software license fees increased 9% from $9.6 million in the three months ended March 31, 1997 to $10.4 million in the same period in 1998. This increase primarily reflects increases in licensed enterprise software and software revenues generated from the Company's acquisitions in the last three quarters. DIRECT COSTS Direct costs for services increased from $4.8 million in the three months ended March 31, 1997 to $7.7 million in the three months ended March 31, 1998. As a percentage of services revenues, these costs were 32.8% for the three months ended March 31, 1997 and 37% for the three months ended March 31, 1998. The increase in direct costs as a percentage of services revenues from the first quarter of 1997 compared to the first quarter of 1998 primarily reflects the effects of a higher mix of lower margin professional services revenues. Additionally, the European subsidiaries continue to experience higher cost percentages than the domestic operations. Direct software costs decreased from $1.8 million for the three months ended March 31, 1997 to $980,000 for the three months ended March 31, 1998. Direct software costs, as a percentage of software revenues, were 19.3% for the three months ended March 31, 1997 and 9.4% for the three months ended March 31, 1998. The decrease in direct software costs as a percentage of software revenues from the first quarter of 1997 compared to the first quarter of 1998 primarily reflects the effects of a decrease in software amortization in 1998 as a result of write-offs of capitalized software development in connection with certain business combinations in 1997, an overall increase in royalty revenues received by the Company from distributors and a decrease in royalty fees paid by the Company for the use of third parties' products embedded in the Company's products. SELLING AND MARKETING Selling and marketing expenses increased 16% from $5.8 million, or 23.9% of revenues in the three months ended March 31, 1997, to $6.7 million, or 21.6% of revenues in the three months ended March 31, 1998. This decrease in selling and marketing expenses as a percentage of revenues is primarily due to the effect of increased software and services revenues, efficiencies associated with other costs to support increased sales activity and the effect of merger and integration activity costs. GENERAL AND ADMINISTRATIVE General and administrative expenses increased 14% from $4.8 million in the three months ended March 31, 1997 to $5.5 million in the three months ended March 31, 1998. As a percentage of revenues, these expenses decreased from 19.8% of revenues in the three months ended March 31, 1997 to 17.6% of revenues in the three months ended March 31, 1998. The decrease as a percentage of revenues reflects efficiencies associated with expanding the Company's operations, the effect of increases in software and services revenues and the effect of merger and integration activity costs. DEPRECIATION AND AMORTIZATION Depreciation and amortization increased 27% from $1.6 million in the three months ended March 31, 1997 to $2 million in the three months ended March 31, 1998. As a percentage of revenues, these expenses were 6.5% for both the first quarter of 1997 and the first quarter of 1998. PRODUCT DEVELOPMENT Total expenditures for product development, including capitalized software development costs, decreased from $5.3 million for the three months ended March 31, 1997 to $3.6 million for the three months ended March 31, 1998. This decrease is due to increased synergies realized from combined development operations and Integration Activities. The Company capitalized software development costs of $1.2 million and $924,000 for the three months Page 10 of 30 11 ended March 31, 1997 and 1998, respectively, which represented 22% and 25.4% of total expenditures for product development in these respective periods. The increase in the amounts capitalized, as a percentage of total expenditures for product development, from the three months ended March 31, 1997 to the three months ended March 31, 1998 reflects the Company incurring greater product development costs in 1998 on products that had reached technological feasibility. As a percentage of revenues, total product development expenditures decreased from 21.6% for the three months ended March 31, 1997 to 11.7% for the three months ended March 31, 1998. The decrease in product development expenditures as a percentage of revenues between the three months ended March 31, 1997 and the three months ended March 31, 1998 is attributable to increased revenues and development synergies realized from the Company's 1997 acquisitions. Amortization of capitalized software development costs included in direct costs of software totaled $885,000 and $439,000 for the three months ended March 31, 1997 and 1998, respectively. CHARGE FOR PURCHASED IN-PROCESS PRODUCT DEVELOPMENT, WRITE-OFF OF SOFTWARE DEVELOPMENT COSTS, RESTRUCTURING, ACQUISITION RELATED AND OTHER ONE-TIME CHARGES The Company incurred expenses of $8 million for the three months ended March 31, 1998 related to charges for purchased in-process product development, write-off of software development costs, restructuring, acquisition related and other one-time charges as a result of the acquisitions of: 1) Premenos Technology Corp. ("Premenos") on December 19, 1997 ($7.1 million), 2) Atlas Products International, Limited ("Atlas") on October 23, 1997 ($573,000), and 3) EDI Works! on March 31, 1998 ($323,000). (See Note 3 to unaudited notes to consolidated financial statements.) The Company expects to incur additional merger related charges totaling $7.9 million in subsequent quarters. For the three months ended March 31, 1997, the Company incurred expenses of $16.2 million, consisting of one-time charges of $4.3 million as a result of the acquisition of Harbinger NET Services, LLC ("HNS") on January 1, 1997 and $11.9 million as a result of the acquisition of Supply Tech, Inc., a Michigan corporation, and its affiliate, Supply Tech International, LLC, a Michigan limited liability company (collectively "STI") on January 3, 1997. Of the total, $7.5 million was acquisition related expenses and asset write downs for STI. Integration costs of $1.6 million related to HNS and $4.4 million related to STI were expensed. Purchased in-process product development costs of $2.7 million associated with HNS were expensed since the Company determined that the acquired technologies had not reached technological feasibility. INTEREST INCOME, NET Interest income, net, increased 79% from $731,000 for the three months ended March 31, 1997 to $1.3 million for the three months ended March 31, 1998 as a result of an increase in combined cash and cash equivalents and short-term investments from $62.3 million at March 31, 1997 to $106.3 million at March 31, 1998. INCOME TAXES The Company recorded income tax expense of $136,000 for the three months ended March 31, 1998 as compared to income tax benefit of $335,000 for the three months ended March 31, 1997, primarily as a result of the impact of acquisitions in each period. NET LOSS AND EARNINGS PER SHARE The Company realized a net loss of $1.3 million, or ($0.03) per share, for the three months ended March 31, 1998 as compared to a net loss of $16.4 million, or ($0.45) per share, for the three months ended March 31, 1997. The net loss in the period ended March 31, 1998 reflects the effect of the charge for purchased in-process product development, write-off of software development costs, restructuring, acquisition related charges and other one-time charges of $8 million. Excluding these acquisition related charges, net of the effect of taxes, the Company's net income for the three months ended March 31, 1998 would have been approximately $4.3 million, or $0.10 per share. The net loss in the period ended March 31, 1997 reflects the effect of the charge for purchased in-process product development, write-off of software development costs, restructuring, acquisition related charges Page 11 of 30 12 and other one-time charges of $16.2 million and the extraordinary loss on early debt extinguishment of $2.4 million. Excluding the one-time charges and extraordinary loss on debt extinguishment, net of the effect of taxes, the Company would have reported net income of $1.2 million or $0.03 per share. LIQUIDITY AND CAPITAL RESOURCES The Company's working capital increased $4.5 million from $94.3 million as of December 31, 1997 to $98.8 million as of March 31, 1998. In the three months ended March 31, 1998, cash provided by operating activities was $1.2 million compared to cash provided by operations of $379,000 for the three months ended March 31, 1997. The Company used net cash in investing activities of $2.4 million for the three months ended March 31, 1998 as compared to cash provided of $24.5 million for the three months ended March 31, 1997. The cash provided by investing activities for the period ended March 31, 1997 was primarily from the sales of short-term investments. Cash used in investing activities for the period ended March 31, 1998 included cash used for purchases of property and equipment and additions to software development. Cash provided by financing activities of $6.6 million for the period ended March 31, 1998 was primarily from the exercise of stock options and warrants and issuance of stock under the employee stock purchase plan. The Company used net cash in financing activities of $1.6 million for the period ended March 31, 1997 primarily for the purchase of subordinated debt associated with an acquisition. Management expects that the Company will continue to be able to fund its operations, investment needs and capital expenditures through cash flows generated from operations, cash on hand, borrowings under the Company's credit facilities and additional equity and debt capital. Management believes that outside sources for debt and additional equity capital, if needed, will be available to finance expansion projects and any potential future acquisitions. The form of any financing will vary depending upon prevailing market and other conditions and may include short or long term borrowings from financial institutions, or the issuance of additional equity or debt securities. However, there can be no assurances that funds will be available on terms acceptable to the Company. The Company does not believe that inflation has had a material impact on its business. However, there can be no assurance that Harbinger's business will not be affected by inflation in the future. YEAR 2000 COMPLIANCE The Company is addressing the Year 2000 Compliance issues on the software that it licenses and on the software that it uses internally. Based on its current analysis, the Company believes that Year 2000 compliance will not have a material effect on its business, operations or financial condition, as remediation costs either have been incurred or those costs estimated to be incurred are not material. FORWARD LOOKING STATEMENTS Other than historical information contained herein, certain statements included in this report may constitute "forward looking" statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934 related to the Company that involve risks and uncertainties including, but not limited to, quarterly fluctuations in results, the management of growth, market acceptance of certain products, impact of Year 2000 compliance and other risks. For further information about these and other factors that could affect the Company's future results, please see the Company's most recent Form 10-K filed with the Securities and Exchange Commission. Investors are cautioned that any forward looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those contemplated by such forward looking statements. The Company undertakes no obligation to update or revise forward looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results. Page 12 of 30 13 RECENT ACCOUNTING PRONOUNCEMENTS During the three-month period ended March 31, 1998 the Company adopted Statement of Position 97-2, Software Revenue Recognition, issued by the Accounting Standards Executive Committee, and Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income, issued by the Financial Accounting Standards Board. The Company continues to evaluate the requirements of Statement of Financial Accounting Standard No. 131, Disclosures about Segments of an Enterprise and Related Information, which does not apply to interim periods in the year of adoption. Page 13 of 30 14 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS a) The Annual Meeting of Shareholders (the "Annual Meeting") of Harbinger Corporation (the "Company") was held on April 24, 1998. There were present at said meeting in person or by proxy, shareholders of the Corporation who were the holders of 31,506,892 shares or 76.3% of the Common Stock entitled to vote. On April 24, 1998, the Board of Directors declared a three-for-two stock split on the Company's common stock payable on May 15, 1998 to shareholders of record on May 1, 1998. All share amounts reported in this Part II have been retroactively restated to reflect the split. b) The following directors were elected to hold office for a term as designated below or until their successors are elected and qualified, with the vote for each director being reflected below:
VOTES FOR VOTES WITHHELD --------- -------------- Elected to hold office until the 2001 Annual Meeting: David T. Leach 31,269,321 237,571 Ad Nederlof 31,322,683 184,209 David Hildes 31,260,921 245,971 Elected to hold office until the 2000 Annual Meeting: Klaus Neugebauer 31,322,683 184,209 Elected to hold office until the 1999 Annual Meeting: John D. Lowenberg, Sr. 31,268,872 238,020
The affirmative vote of the holders of a plurality of the outstanding shares of Common Stock represented at the Annual Meeting was required to elect each director. The Directors of the Company continuing in office until the 1999 Annual Meeting are as follows: C. Tycho Howle, William D. Savoy and Benn R. Konsynski. The directors of the Company continuing in office until the 2000 Annual Meeting are as follows: James C. Davis, Stuart L. Bell and William B. King. c) The proposal to amend the Company's 1996 Stock Option Plan was approved with 22,596,406 affirmative votes, 8,868,045 negative votes cast and 42,441 abstentions. An affirmative vote of the holders of a majority of the outstanding shares of Common Stock represented at the annual meeting was required to approve the amendment. d) The proposal to amend the Amended and Restated Harbinger Corporation Employee Stock Purchase Plan was approved with 31,209,142 affirmative votes, 269,025 negative votes cast and 28,725 abstentions. An affirmative vote of the holders of a majority of the outstanding shares of Common Stock represented at the annual meeting was required to approve the amendment. e) The proposal to amend the Company's Amended and Restated 1993 Stock Option Plan for Nonemployee Directors was approved with 24,703,659 affirmative votes, 6,761,580 negative votes cast and 41,653 abstentions. An affirmative vote of the holders of a majority of the outstanding shares of Common Stock represented at the annual meeting was required to approve the amendment. Page 14 of 30 15 f) The appointment of KPMG Peat Marwick LLP as independent public accountants to audit the accounts of the Company and its subsidiaries for the year ending December 31, 1998, was ratified with the votes as follows: 31,504,098 affirmative votes, 0 negative votes cast and 2,794 abstentions. An affirmative vote of the holders of a majority of the outstanding shares of Common Stock represented at the annual meeting was required to ratify the appointment of KPMG Peat Marwick LLP. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit 4.1 Registration Rights Agreement by and among Harbinger Corporation, Carol G. Croom, Charles E. Webber, Nine-Min Cheng, Judy A. Bailey, and Krish R. Sampat, dated March 31, 1998 Exhibit 27.1 Financial Data Schedule (for SEC use only). Exhibit 27.2 Restated Financial Data Schedule (for SEC use only). (b) Reports on Form 8-K Form 8-K dated February 24, 1998 reporting under Item 5 the financial information of revenues and net losses for Harbinger Corporation for the month ended January 31, 1998 for the purpose of ending the "risk-sharing" period with respect to the merger with Premenos Technology Corp. Page 15 of 30 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HARBINGER CORPORATION Date: 5/13/98 /s/ David T. Leach ----------------------------- --------------------------- David T. Leach Chief Executive Officer (Principal Executive Officer) Date: 5/13/98 /s/ Joel G. Katz ----------------------------- ------------------------- Joel G. Katz Chief Financial Officer (Principal Financial Officer; Principal Accounting Officer) Page 16 of 30 EX-4.1 2 REGISTRATION RIGHTS AGREEMENT 1 EXHIBIT 4.1 REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") dated as of the 31st day of March, 1998, is made by and between Harbinger Corporation, a Georgia corporation (the "Company"), and the holders of the common stock of the Company listed in Schedule I, attached hereto (the "Shareholders"). WITNESSETH: WHEREAS, the Shareholders are the owners of the shares of Common Stock of the Company listed on Schedule I hereto; WHEREAS, it is a condition to the consummation of the transactions contemplated by that certain Share Purchase Agreement, dated as of the date hereof, by and among the Company and the Shareholders (the "Purchase Agreement"), that this Agreement be executed by the parties hereto; WHEREAS, pursuant to the Purchase Agreement, the Company has acquired all of the share capital of EDI Works!, LLC, a limited liability company formed under the laws of the State of Texas ("EDI Works!"), in consideration of the issuance of certain shares of Common Stock of the Company to the Shareholders; and WHEREAS, the parties are willing to execute this Agreement and to be bound by the provisions hereof. NOW, THEREFORE, in consideration of the mutual agreements and promises contained herein, in the Purchase Agreement and in the other agreements contemplated thereby, and other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Shareholders and the Company, each with the other, do hereby agree as follows: ARTICLE I DEFINITIONS As used in this Agreement, the following terms shall have the following respective meanings: "Common Stock" means the common stock, $0.0001 par value per share, of the Company. "Commission" means the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any similar federal statute and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "Holder" means any Shareholder and any permitted transferee of Shareholder's rights under this Agreement pursuant to Section 2.6. "Holder Representative" means Carol Croom or, such time that she no longer owns any Registrable Securities, the Holder who owns the largest number of Registrable Securities. "Registrable Securities" means the Shares, as the same may be adjusted from time to time to reflect any stock split, stock dividend or other distribution of capital stock in respect thereof, or issuance of capital stock in Page 17 of 30 2 replacement thereof or exchange therefor. The term "Registrable Securities" does not include shares of Common Stock that have been registered, as defined below, and sold pursuant to such registration. The terms "register," "registered," and "registration" refer to a registration effected by preparing the filing of a registration statement in compliance with the Securities Act, and the declaration or order by the Commission of the effectiveness of such registration statement. "Restricted Period" means the period beginning on the Closing Date (as defined in the Purchase Agreement) and ending on the earlier of (i) the date of filing by the Company with the Commission of the Company's annual report on Form 10-K, quarterly report on Form 10-Q or other filing with the Commission, or (ii) the date of dissemination by the Company of a press release, which in any case of (i) or (ii) that reports the combined financial results of the Company and EDI Works! covering at least 30 days of combined operations of the Company and EDI Works! within the meaning of Section 201.01 of the Commission's Codification of Financial Reporting Policies. "Securities Act" means the Securities Act of 1933, as amended, or any similar federal statute and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "Shareholders" means the persons listed on Schedule I attached hereto. "Shares" means the shares of Common Stock of the Company listed on Schedule I hereto. In the event the Company shall declare a stock split, stock dividend or other distribution of capital stock in respect of, or issue capital stock in replacement of or exchange for, the Shares, such additional shares shall be Shares within the meaning of this Agreement. "Underwritten Public Offering" means a public offering of Common Stock for cash which is offered and sold in a registered transaction on a firm commitment underwritten basis through one or more underwriters, all pursuant to an underwriting agreement between the Company and any selling shareholders on the one hand and such underwriters on the other hand. ARTICLE II REGISTRATION RIGHTS Section 2.1 "Piggyback" Registration Rights. If the Company, at any time after the expiration of the Restricted Period and prior to the earlier of (i) the date on which all Registrable Securities shall have been disposed of by the Holders thereof or (ii) one year after the date of this Agreement, proposes to register under the Securities Act any class of the Company's equity or debt securities for sale to the public on a registration statement on Form S-1, S-2, S-3 or any successor form for the sale of equity securities to the public, then and in each such case the Company shall give fifteen (15) days prior written notice of such proposed registration to the Holder Representative and shall cause such number of Registrable Securities as shall be requested by the Holder Representative on behalf of the Holders included in such request within ten (10) days thereafter to be included, upon the same terms (including the method of distribution), in any such offering. The Company may, without the consent of the Holder Representative, withdraw any such registration and abandon any proposed offering if in the reasonable good faith belief of the Board of Directors of the Company such withdrawal and abandonment appears to be in the Company's best interests. The failure of any Holder to exercise his or her rights hereunder with respect to any registration shall not constitute a waiver of its rights to participate in any other registration. The foregoing obligations shall be subject to the following conditions and limitations: (i) The Company shall not be required to give such notice or include any Registrable Securities in any form of registration statement unless such Registrable Securities of such Holder are eligible for inclusion in the applicable form of registration statement as described above; Page 18 of 30 3 (ii) In an Underwritten Public Offering of the Registrable Securities, each Holder shall agree (a) to have the Registrable Securities sold to or by such underwriter or managing agent on terms substantially equivalent to the terms upon which the Company is selling the securities so registered by it, and (b) to delay the sale of any securities of the Company not sold by it in such registration statement for the period requested by such underwriter or managing agent up to 180 days (or such lesser amount of time if permitted by such underwriter or managing agent) following the effective date of such registration statement; (iii) If any underwriter in such Underwritten Public Offering shall advise the Company that it declines to include a portion of the Registrable Securities requested by the Holders to be included in the registration statement, then in case of an exclusion as to a portion of such Registrable Securities, such portion shall be allocated among the Holders in proportion to the respective number of shares of Common Stock requested to be registered by such Holders of the Company's securities. The Holders hereby acknowledge and agree that the Holders shall be subordinate in priority of registration to any person to whom the Company has granted registration rights prior to the date hereof; and (iv) The fees and expenses of the offering shall be borne by the Company; provided, however, that the Holders will pay all of the underwriting discounts and commissions, transfer taxes, transfer agent fees and the expenses, disbursements and charges of their own counsel with respect to the Registrable Securities. Section 2.2 Undertakings of Holders. As a condition of the registration provided for in this Section 2, each Holder who includes Registrable Securities in such registration shall (a) furnish such information concerning itself and the terms of its proposed offering to the Company as requested in connection with such registration; (b) agree to indemnify the Company (and each of its officers and directors who have signed the registration statement relating to the registration) and each person, if any, who controls the Company within the meaning of the Securities Act, the underwriters and each person, if any, who controls such underwriter within the meaning of the Securities Act, to the extent reasonably deemed necessary by the Company with respect to the accuracy of any information so furnished by such Holder; and (c) reasonably cooperate with the Company and its representatives to cause such registration to become effective at the earliest practicable time. Section 2.3 Additional Undertakings of the Company. Without limiting the generality of the provisions of this Section 2, if and whenever the Company is under an obligation to effect the registration of any Registrable Securities, the Company shall at its sole cost and expense: (i) furnish to the Holder such numbers of each prospectus (including each preliminary prospectus and prospectus supplement) in conformity with the requirements of the Securities Act, and such other documents as are reasonably requested by the Holder to facilitate the public offering of its Registrable Securities; and (ii) use its reasonable efforts to register or qualify the Registrable Securities covered by such registration under the securities or blue sky laws of such jurisdictions (and shall do any and all other acts or things) as is reasonable to enable the Holder to consummate the public sale or the disposition of its Registrable Securities; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. Section 2.4 Indemnification. (a) In the case of each registration effected by the Company pursuant to this Agreement in which any Holder's Registrable Securities are included, the Company agrees to indemnify and hold harmless such Holder Page 19 of 30 4 against any and all losses, claims, damages or liabilities to which they or any of them may become subject under the Securities Act or any other statute or common law, including any amount paid in settlement of any litigation, commenced or threatened, if such settlement is effected with the written consent of the Company, and to reimburse them for any reasonable legal or other reasonable expenses incurred by them in connection with the investigation of any claims and defenses of any actions (subject to Section 2.4(c)), insofar as any such losses, claims, damages, liabilities or actions arise out of or are based upon: any untrue statement or alleged untrue statement of a material fact contained in the registration statement, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto or any document incorporated by reference therein, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that the indemnification agreement contained in this Section 2.4(a) shall not (i) apply to such losses, claims, damages, liabilities or actions arising out of, or based upon, any such untrue statement or alleged untrue statement, or any such omission or alleged omission, if such statement or omission was made in reliance upon and in conformity with information furnished to the Company in writing by a Holder for use in connection with the preparation of the registration statement or any preliminary prospectus or final prospectus contained in the registration statement or any such amendment thereof or supplement thereto or any document incorporated by reference therein; or (ii) inure to the benefit of any person to the extent such person's claim for indemnification hereunder arises out of or is based on any violation by such person of applicable law. (b) In the case of each registration effected by the Company pursuant to this Agreement in which any Holder's Registrable Securities are included, such Holder shall be obligated, in the same manner and to the same extent as set forth in Section 2.4(a), to indemnify and hold harmless the Company and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act, its directors and officers, with respect to any statement or alleged untrue statement in, or omission or alleged omission from, such registration statement or any post-effective amendment thereof or any preliminary prospectus or final prospectus (as amended or supplemented, if amended or supplemented as aforesaid) contained in such registration statement, if such statement or omission was made in reliance upon and in conformity with information furnished in writing to the Company by such indemnifying person for use in connection with the preparation of such registration statement or any preliminary prospectus or final prospectus contained in such registration statement or any such amendment thereof or supplement thereto; provided, however, that the liability of each Holder hereunder shall be limited to the proceeds received by each Holder from the sale of Registrable Securities covered by such registration statement, amendment, supplement or prospectus, as the case may be. (c) Each person to be indemnified pursuant to this Section 2.4 shall, promptly after its receipt of written notice of the commencement of any action against such indemnified person in respect of which indemnity may be sought from an indemnifying person under this Section 2.4, notify the indemnifying person in writing of the commencement thereof. The omission of any indemnified person to so notify an indemnifying person of the commencement of any such action shall relieve the indemnifying person from any liability in respect of such action which it may have to such indemnified person on account of the indemnity agreement contained in this Section 2.4, but shall not relieve the indemnification person from any other liability which it may have to such indemnified person. If any such action shall be brought against any indemnified person and it shall notify an indemnifying person of the commencement thereof, the indemnifying person shall be entitled to participate therein and, to the extent it may desire, jointly with any other indemnifying persons similarly notified, to assume the defense thereof with counsel reasonably satisfactory to such indemnified person, and after notice from the indemnifying person to such indemnified person of its election so to assume the defense thereof, the indemnifying person shall not be liable to such indemnified person under this Section 2.4 for any legal or other expenses subsequently incurred by such indemnified person in connection with the defense thereof other than reasonable costs of investigation unless (i) the indemnified party shall have employed counsel in an action in which the indemnified party and indemnifying party are both defendants and there is a conflict of interest between such parties that would prevent counsel from adequately representing both parties, (ii) the indemnifying party shall not have employed counsel satisfactory within the exercise of reasonable judgment of the indemnified party to represent the indemnified party within a reasonable time after the notice of the commencement of the action or (iii) the indemnifying party has authorized the employment of counsel for the indemnified party at the expense of the indemnifying party. The undertaking contained in this Section 2.4 shall be in addition to any liabilities which the indemnifying person may have pursuant to law. Page 20 of 30 5 (d) If the indemnification provided for in this Section 2.4 is unavailable to or insufficient to hold harmless an indemnified party under Section 2.4 (a) or (b) above in respect of any losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Holders on the other from the offering of the securities. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law or if the indemnified party failed to give the notice required under Section 2.4(c) above, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company and the Holders in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions or proceedings in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Holders on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total net proceeds from the offering (before deducting expenses) received by the Holders. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Holders and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. Section 2.5 Rule 144 Requirements. For a period commencing on the date of this Agreement ending upon the first to occur of (i) the first anniversary of the date of this Agreement or (ii) the sale of all Registrable Securities by the Holders, with a view to making available to each Holder the benefits of Rule 144 (or any successor rule thereto) promulgated under the Securities Act, the Company agrees to file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act. Each Holder's right to require the Company to register the Registrable Securities pursuant to Section 2.1, shall expire at such time as the Registrable Securities held by such Holder are eligible for sale in the open market without restriction as to the number of shares pursuant to Rule 144 (or any successor rule thereto) under the Securities Act or Section 4(1) thereof. Section 2.6 Transfer of Registration Rights. The registration rights described in this Section 2 shall not be transferable without the prior consent of the Company; provided, however, that a Holder may transfer such registration rights to a permitted transferee of Shares so long as (i) such transfer of Shares is conducted in compliance with all applicable transfer restrictions, whether imposed by contract, applicable law or otherwise, and (ii) such transferee is a member of the Holder's immediate family or is a trust or family limited partnership established for the benefit of such a family member; provided further, that such registration rights shall not be transferable by any transferee contemplated by the foregoing proviso who is a natural person. ARTICLE III TRANSFERABILITY Section 3.1 Transferability. Transfer of the Shares shall be made only on the books of the Company by the holders of record thereof or by their legal representatives who shall furnish proper evidence of authority to transfer, or by their attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the Company, subject to the restrictions set forth in the Purchase Agreement and the documents and agreements contemplated thereby. The Holder(s) in whose name the Shares stand on the books of the Company shall be deemed by the Company to be owner(s) thereof for all purposes. Section 3.2 Restrictive Legends. Unless and until otherwise permitted by this Section, each instrument evidencing Shares shall contain or otherwise be imprinted with a suitable legend in substantially the following form: The shares evidenced by this certificate have not been registered under the Securities Act of 1933, as amended, or under the securities laws of any state, and such shares may not be sold, transferred, Page 21 of 30 6 pledged or hypothecated unless (1) covered by an effective registration statement under the Securities Act of 1933; (2) in accordance with Rule 144 of the rules and regulations of such act; or (3) in accordance with some other transaction which is exempt from the registration requirements of such Act. The shares evidenced by this certificate have been offered and sold in reliance on exemptions promulgated under the Securities Act of 1933. The shares represented by this certificate were issued pursuant to a business combination that is accounted for as a "pooling of interests" and may not be sold, nor may the owner thereof reduce his risk relative thereto in any way (except as permitted by SEC Staff Accounting Bulletin No. 76), until such time as Harbinger Corporation has published financial results covering at least 30 days of combined operations after the effective date of the event through which the business combination was effected. The Company is hereby authorized to place "stop transfer" instructions on its records and to instruct any transfer agent to prevent the transfer of such shares except in conformity with this Article. Section 3.3 Restriction on Transfer. No Shares may be transferred prior to the expiration of the Restricted Period. In addition, no Shareholder may transfer Shares other than under Section 2.1 until it has delivered written notice to the Company describing briefly the manner of any such proposed transfer and until (i) the Company has received from the Shareholder's counsel an opinion (reasonably satisfactory in form and substance to the Company's counsel) that such transfer can be made without compliance with the registration provisions of the Securities Act or any state securities law, or (ii) such transfer complies with Rule 144 (or comparable successor provisions) promulgated under the Securities Act and applicable state securities act requirements, or (iii) a registration statement filed by the Company is declared effective by the Commission and under applicable state securities laws or steps necessary to perfect exemptions from such registration are completed. Notwithstanding anything to the contrary herein, in the event that there is an Underwritten Public Offering of securities of the Company pursuant to a registration covering Registrable Securities and a Holder of Registrable Securities does not sell his Registrable Securities to the underwriters of the Company's securities in connection with such offering, such Holder shall refrain from selling such Registrable Securities during the period of distribution of the Company's securities by such underwriters and the period in which the underwriting syndicate participates in the after market; provided, however, that such Holder shall, in any event, be entitled to sell its Registrable Securities commencing on the one hundred and eightieth (180th) day after the effective date of such registration statement in accordance with the terms hereof or such other amount of time that may be required by the underwriter of similarly situated holders of the Company's securities. ARTICLE IV MISCELLANEOUS Section 4.1 Notices. All notices, communications and deliveries hereunder shall be made in writing signed by the party making the same, shall specify the Section hereunder pursuant to which it is given or being made, and shall be delivered personally or by telecopy transmission or sent by registered or certified mail or by any express mail service (with postage and other fees prepaid) as follows: If to Company: Harbinger Corporation 1055 Lenox Park Blvd Atlanta, Georgia 30319-5309 Attention: President Telecopy No.: 404/467-3143 with a copy to: Harbinger Corporation 1055 Lenox Park Blvd. Atlanta, Georgia 30319-5309 Attn: Loren B. Wimpfheimer Director of Legal Affairs Telecopy No.: 404/467-3476 Page 22 of 30 7 If to the Representative EDI Works! L.L.C. Holder: 6464 Savoy Drive, Suite 105 Houston, Texas 77036 Attn: Carol Croom Telecopy No. (713) 706-4438 Section 4.2 Remedies. Each party hereto acknowledges that a remedy at law for any breach or attempted breach of this Agreement will be inadequate, agrees that each other party hereto shall be entitled to specific performance and injunctive and other equitable relief in case of any such breach or attempted breach, and further agrees to waive any requirement for the securing or posting of any bond in connection with the obtaining of any such injunctive or any other equitable relief. Section 4.3 Effect of Sale. Any Holder who sells all of his Registrable Securities pursuant to the terms of this Agreement shall cease to be a party to this Agreement and shall have no further rights or obligations hereunder. Section 4.4 Amendment. This Agreement may not be modified or amended except in a writing signed by the Company and the holders of 66-2/3% of the total Registrable Securities outstanding at such time (with any shares of Registrable Securities issuable upon conversion of other securities deemed to be outstanding for these purposes). Section 4.5 Governing Law. This Agreement shall be subject to and governed by the laws of the State of Georgia. Section 4.6 Jurisdiction. All legal actions to enforce or interpret the provisions of this Agreement shall be filed in a court of the State of Georgia or of the United States District Court having jurisdiction over Fulton County, Georgia. All parties irrevocably waive any objection they may have to the laying of venue of any suit, action or proceeding arising out of or relating hereto brought in any such court, irrevocably waive any claim that any such suit, action or proceeding so brought has been brought in an inconvenient forum and further waive the right to object that such court does not have jurisdiction over such party. No party shall bring a suit, action or proceeding in respect of this Agreement in any other jurisdiction than as aforesaid. Section 4.7 Successors and Assigns. This Agreement shall be binding upon and inure to the parties contained in this Agreement and their respective heirs, executors, distributees, successors (including successors by merger) and permitted assigns. Section 4.8 Invalid Provisions. Should any portion of this Agreement be adjudged or held to be invalid, unenforceable or void, such holding shall not have the effect of invalidating or voiding the remainder of this Agreement and the parties hereby agree that the portion so held invalid, unenforceable or void shall, if possible, be deemed amended or reduced in scope, or to otherwise be stricken from this Agreement to the extent required for the purposes of validity and enforcement thereof. Section 4.9 Section Headings. The section and paragraph headings contained herein are for reference purposes only and shall not in any way affect the meaning and interpretation of this Agreement. Section 4.10 Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, and such counterparts together shall constitute only one instrument. Page 23 of 30 8 Section 4.11 Entire Agreement. This Agreement constitutes the sole and entire agreement between the parties hereto with respect to the subject matter hereof. Section 4.12 Time of the Essence. Time is of the essence with respect to every provision of this Agreement. Section 4.13 Pooling of Interests. If any provision of this Agreement or the application of any such provision to any person or circumstance precludes the use of "pooling of interests" accounting treatment in connection with the Purchase Agreement, then such provision shall be of no force and effect to the extent, and solely to the extent necessary to preserve such accounting treatment pursuant to the Purchase Agreement, and in that event, the remainder of this Agreement shall not be affected, and in lieu of such provision there shall be added as part of this Agreement a provision as similar in terms as may be possible for the purchase under the Purchase Agreement to be treated as a "pooling of interests" for accounting purposes. Section 4.14 Number; Gender. Whenever the context so requires, the singular number shall include the plural and the plural shall include the singular, and the gender of any pronoun shall include the other gender. IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its behalf and its corporate seal to be hereunto affixed by its duly authorized officers and the Shareholders have executed this Agreement, as of the day and year first above written. ATTEST: HARBINGER CORPORATION By: /s/ Cheryl A. Vota By: /s/ James C. Davis ------------------------ --------------------------------------------- Name: James C. Davis ------------------------------------------- Title: President and Chief Operating Officer ------------------------------------------ SHAREHOLDERS: /s/ Carol G. Croom ------------------------------------------------ Carol G. Croom /s/ Charles E. Webber ------------------------------------------------ Charles E. Webber /s/ Nine-Min Cheng ------------------------------------------------ Nine-Min Cheng /s/ Judy A. Bailey ------------------------------------------------ Judy A. Bailey /s/ Krish R. Sampat ------------------------------------------------ Krish R. Sampat Page 24 of 30 9 The undersigned, spouse of Krish Sampat, hereby agrees and consents by his/her signature below to be bound by the terms and conditions hereof as to his/her interests, whether as community property or otherwise, if any, in the EDI Works! Stock which is subject to this Agreement. /s/ Linda Kumazawa /s/ K. K. Sampat - ---------------------------------- -------------------------------- Witness Page 25 of 30 10 The undersigned, spouse of Nine-Min Cheng hereby agrees and consents by his/her signature below to be bound by the terms and conditions hereof as to his/her interests, whether as community property or otherwise, if any, in the EDI Works! Stock which is subject to this Agreement. /s/ Linda Kumazawa /s/ Jsun Chein Cheng - ---------------------------------- -------------------------------- Witness Page 26 of 30 11 The undersigned, spouse of Carol Croom, hereby agrees and consents by his/her signature below to be bound by the terms and conditions hereof as to his/her interests, whether as community property or otherwise, if any, in the EDI Works! Stock which is subject to this Agreement. /s/ Linda Kumazawa /s/ Pat Croom - ---------------------------------- -------------------------------- Witness Page 27 of 30 12 SCHEDULE I
Shareholder Number of Shares ----------- ---------------- Carol G. Croom 23,340 Carol G. Croom 2,593 Charles E. Webber 23,340 Charles E. Webber 2,593 Nine-Min Cheng 23,340 Nine-Min Cheng 2,593 Judy A. Bailey 23,340 Judy A. Bailey 2,593 Krish R. Sampat 23,340 Krish R. Sampat 2,593
Page 28 of 30 EX-27.1 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF HARBINGER CORPORATION FOR THE QUARTER END MAR-31-98 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS. ALL AMOUNTS HAVE BEEN RETROACTIVELY RESTATED TO REFLECT A THREE-FOR-TWO STOCK SPLIT IN THE FORM OF A STOCK DIVIDEND PAYABLE ON MAY-15-98. 1000 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 75,254 31,050 32,988 2,773 0 149,862 34,944 16,164 186,421 51,070 0 0 0 4 135,347 186,421 10,426 31,100 980 8,639 24,974 0 27 (1,202) 136 (1,338) 0 0 0 (1,338) (0.03) (0.03)
EX-27.2 4 RESTATED FINANCIAL DATA SCHEDULE 1997
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS OF HARBINGER CORPORATION FOR THE QUARTER ENDED MAR-31-97 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS. ALL AMOUNTS HAVE BEEN RETROACTIVELY RESTATED TO REFLECT A THREE-FOR-TWO STOCK SPLIT IN THE FORM OF A STOCK DIVIDEND PAYABLE ON MAY-15-98. 1,000 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 62,263 0 24,703 2,037 0 92,651 28,927 12,631 129,302 38,505 0 0 0 4 87,617 129,302 9,570 24,320 1,846 6,682 32,549 0 69 (14,316) (335) (13,981) 47 (2,419) 0 (16,353) (0.45) (0.45)
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