-----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, Ujw4Tk/K24AF3GfcNSQFg3lnvDgNaHVziJHH1C4rqGbNI5kxWANyLhVBzfAxnOTM zUDzgoyGMAACO4ygQBVdoA== 0000950144-97-002406.txt : 19970317 0000950144-97-002406.hdr.sgml : 19970317 ACCESSION NUMBER: 0000950144-97-002406 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970314 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970314 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: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 033-93804 FILM NUMBER: 97557059 BUSINESS ADDRESS: STREET 1: 1055 LENOX PARK BLVD CITY: ATLANTA STATE: GA ZIP: 30319 BUSINESS PHONE: 4048414334 8-K/A 1 HARBINGER CORPORATION 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------- FORM 8-K/A -------------- Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report March 14, 1997 (Date of earliest event reported): January 1, 1997 HARBINGER CORPORATION (Exact name of Company specified in its charter)
GEORGIA 0-26298 58-1817306 (State or other jurisdiction of (Commission File Number) (IRS Employer Identification No.) incorporation or organization) 1055 LENOX PARK BOULEVARD, ATLANTA, GEORGIA 30319 (Address of principal executive offices) (Zip Code)
(404) 467-3000 (Company's telephone number, including area code) This Form 8-K/A amends Registrant's previously filed Form 8-K dated January 1, 1997, which was filed on or about January 15, 1997. This document includes the financial statements and pro forma financial information which had been omitted from the previously filed document as permitted by Item 7(a)(4) of Form 8-K. ================================================================================ Page 1 of 24 Exhibit Index on Page 4 1 2 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial Statements of Business Acquired. The following financial statements for Harbinger NET Services, LLC are attached hereto as Exhibit 99.3: - Independent Auditors' Report - Balance Sheets as of December 31, 1996 and 1995 - Statements of Operations for the periods ended December 31, 1996 and 1995 - Statements of Shareholders' Equity for the periods ended December 31, 1996 and 1995 - Statements of Cash Flows for the periods ended December 31, 1996 and 1995 - Notes to Financial Statements for the periods ended December 31, 1996 and 1995 (b) Pro Forma Financial Information. Attached hereto as Exhibit 99.4 is the unaudited pro forma consolidated condensed statement of operations for the year ended December 31, 1996 and the unaudited pro forma consolidated condensed balance sheet as of December 31, 1996 including the notes to the unaudited pro forma consolidated condensed financial statements. (c) Exhibits. *2.1 Debenture Purchase Agreement Dated as of January 1, 1997 between the Company and BellSouth Telecommunications, Inc. *99.1 Text of Press Release of Harbinger Corporation, dated January 2, 1997. *99.2 Text of Press Release of Harbinger Corporation, dated October 28, 1996. 99.3 Audited Financial Statements of Harbinger NET Services, LLC for the periods ended December 31, 1996 and 1995. 99.4 Unaudited pro forma consolidated condensed statement of operations for the year ended December 31, 1996 and the unaudited pro forma consolidated condensed balance sheet as of December 31, 1996 including the notes to the unaudited pro forma consolidated condensed financial information. - ----------------- * Previously filed 2 3 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 hereunto duly authorized. HARBINGER CORPORATION /s/ Joel G. Katz ----------------------------- JOEL G. KATZ Chief Financial Officer (Principal Financial Officer; Principal Accounting Officer) Date: March 13, 1997 3 4 EXHIBIT INDEX
Exhibit Page No. --------- ----------- *2.1 Debenture Purchase Agreement Dated as of January 1, 1997 between the Company and BellSouth Telecommunications, Inc. *99.1 Text of Press Release of Harbinger Corporation, dated January 2, 1997. *99.2 Text of Press Release of Harbinger Corporation, dated October 28, 1996. 99.3 Audited Financial Statements of Harbinger NET Services, LLC for the periods ended December 31, 1996 and 1995. 5 99.4 Unaudited pro forma consolidated condensed statement of operations for the year ended December 31, 1996 and the unaudited pro forma consolidated condensed balance sheet as of December 31, 1996 including the notes to the unaudited pro forma consolidated condensed financial statements. 19
- --------------------- * Previously filed. 4 EX-99.3 2 AUDITED FINANCIAL STATEMENTS 1 EXHIBIT 99.3 INDEX TO FINANCIAL STATEMENTS
HARBINGER NET SERVICES, LLC PAGE ---- Independent Auditors' Report........................................................ F-2 Balance Sheets as of December 31, 1996 and 1995..................................... F-3 Statements of Operations for the periods ended December 31, 1996 and 1995....................................................................... F-4 Statements of Shareholders' Equity for the periods ended December 31, 1996 and 1995..................................................... F-5 Statements of Cash Flows for the periods ended December 31, 1996 and 1995....................................................................... F-6 Notes to Financial Statements for the periods ended December 31, 1996 and 1995....................................................................... F-7 HARBINGER CORPORATION Unaudited Pro Forma Consolidated Condensed Balance Sheets as of F-16 December 31, 1996.............................................................. Unaudited Pro Forma Consolidated Condensed Statement of Operations for the year ended December 31, 1996............................................... F-17 Notes to Unaudited Pro Forma Consolidated Condensed Financial Statements..................................................................... F-18
F-1 6 2 INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders Harbinger NET Services, LLC: We have audited the accompanying balance sheets of Harbinger NET Services, LLC as of December 31, 1996 and 1995 and the related statements of operations, shareholders' equity and cash flows for the periods ended December 31, 1996 and 1995. 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 audits 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 financial position of Harbinger NET Services, LLC as of December 31, 1996 and 1995 and the results of its operations and its cash flows for the periods ended December 31, 1996 and 1995 in conformity with generally accepted accounting principles. KPMG PEAT MARWICK LLP Atlanta, Georgia February 7, 1997 F-2 7 3 HARBINGER NET SERVICES, LLC BALANCE SHEETS
ASSETS December 31, ------------------------------------ 1996 1995 ------------- ----------- Current assets: Cash and cash equivalents............................ $ 3,322,000 $ 10,645,000 Accounts receivable.................................. 1,866,000 - Other current assets................................. 277,000 42,000 ------------- ------------ Total current assets........................ 5,465,000 10,687,000 Property and equipment, less accumulated depreciation and amortization.................... 1,039,000 219,000 ------------- ------------ $ 6,504,000 $ 10,906,000 ============= ============ LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable....................................... $ 207,000 $ 13,000 Due to affiliates, net................................. 2,040,000 180,000 Accrued expenses....................................... 783,000 160,000 Deferred revenues...................................... 196,000 - ------------- ------------ Total current liabilities..................... 3,226,000 353,000 Long-term debt......................................... 3,000,000 3,000,000 ------------- ------------ Total liabilities............................. 6,226,000 3,353,000 ------------- ------------ Shareholders' equity: Common stock, no par value; 10,000,000 shares authorized, 6,819,559 and 6,718,286 shares issued and outstanding, at December 31, 1996 and 1995, respectively........................ 8,870,000 8,703,000 Accumulated deficit................................ (8,592,000) (1,150,000) ------------- ------------ Total shareholders' equity.................... 278,000 7,553,000 ------------- ------------ Commitments and contingencies.......................... $ 6,504,000 $ 10,906,000 ============= ============
See accompanying notes to financial statements. F-3 8 4 HARBINGER NET SERVICES, LLC STATEMENTS OF OPERATIONS
Periods ended December 31, ------------------------------------- 1996 1995 -------------- ------------- Revenues: Services ........................................ $ 117,000 $ - Software ........................................ 2,036,000 - -------------- ------------- Total revenues.............................. 2,153,000 - -------------- ------------- Direct costs: Services ........................................ 644,000 - Software (including royalties payable to Harbinger Corporation and subsidiaries of $1.2 million - see Note 5)....................... 1,617,000 - -------------- ------------- Total direct costs.......................... 2,261,000 - -------------- ------------- Gross margin............................ (108,000) - -------------- ------------- Operating costs (including amounts for services provided by Harbinger Corporation and subsidiaries - see Note 5): Selling and marketing............................ 926,000 84,000 General and administrative....................... 1,614,000 133,000 Depreciation and amortization.................... 621,000 21,000 Product development.............................. 4,303,000 1,077,000 -------------- ------------- Total operating costs....................... 7,464,000 1,315,000 -------------- ------------- Operating loss.......................... (7,572,000) (1,315,000) Interest expense (income), net....................... (130,000) (165,000) -------------- ------------- Net loss................................ $ (7,442,000) $ (1,150,000) ============== =============
See accompanying notes to financial statements. F-4 9 5 HARBINGER NET SERVICES, LLC STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE PERIODS ENDED DECEMBER 31, 1996 AND 1995
Common stock Shareholder Total ------------------------- Accumulated note shareholders' Shares Amount deficit receivable equity --------- ------------ ------------ --------------- ------------- INITIAL CAPITALIZATION (MARCH 1995)...................... 1,004,000 $ 703,000 $ - $ - $ 703,000 Sale of common stock.............. 5,714,286 8,000,000 - (6,000,000) 2,000,000 Proceeds from payment of shareholder note receivable... - - - 6,000,000 6,000,000 Net loss.......................... - - (1,150,000) - (1,150,000) --------- ------------ ------------- -------------- -------------- BALANCE, DECEMBER 31, 1995................. 6,718,286 8,703,000 (1,150,000) - 7,553,000 --------- ------------ ------------- -------------- -------------- Sale of common stock.............. 101,273 167,000 - - 167,000 Net loss.......................... - - (7,442,000) - (7,442,000) --------- ------------ ------------- -------------- -------------- BALANCE, DECEMBER 31, 1996................. 6,819,559 $ 8,870,000 $ (8,592,000) $ - $ 278,000 ========= ============ ============= ============== ==============
See accompanying notes to financial statements. F-5 10 6 HARBINGER NET SERVICES, LLC STATEMENTS OF CASH FLOWS
Periods Ended December 31, --------------------------------------- 1996 1995 ----------------- -------------- Cash flows from operating activities: Net loss $ (7,442,000) $ (1,150,000) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization....................... 621,000 21,000 Increase in: Accounts receivable............................. (1,866,000) - Other current assets............................ (235,000) (49,000) Increase in: Accounts payable................................ 194,000 13,000 Due to affiliates, net.......................... 1,860,000 180,000 Accrued expenses................................ 623,000 160,000 Deferred revenues............................... 196,000 - -------------- -------------- Net cash used in operating activities........ (6,049,000) (825,000) -------------- -------------- Cash flows from investing activities--purchases of property and equipment (1,441,000) (233,000) -------------- -------------- Cash flows from financing activities: Proceeds from sale of common stock........................ 167,000 2,703,000 Proceeds from issuance of long-term debt.................. - 3,000,000 Proceeds from payment of shareholder note receivable...... - 6,000,000 -------------- -------------- Net cash provided by financing activities............................... 167,000 11,703,000 -------------- -------------- Net increase (decrease) in cash and cash equivalents......................... (7,323,000) 10,645,000 Cash and cash equivalents at beginning of the period.......... 10,645,000 - -------------- -------------- Cash and cash equivalents at end of the period................ $ 3,322,000 $ 10,645,000 ============== ============== Supplemental disclosure of noncash financing activity - sale of common stock for shareholder not receivable....... $ - $ 6,000,000 ============== ==============
See accompanying notes to financial statements. F-6 11 7 HARBINGER NET SERVICES, LLC NOTES TO FINANCIAL STATEMENTS FOR THE PERIODS ENDED DECEMBER 31, 1996 AND 1995 1. PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Harbinger NET Services, LLC (the "Company") was organized by Harbinger Corporation and certain other shareholders in December 1994 and began operations as a development stage enterprise in March 1995. Harbinger Corporation owned 91.4% of the Company's common stock outstanding at December 31, 1996 (see Note 6). The Company develops, markets, and supports software products to enable businesses to engage in electronic commerce using the Internet. Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. REVENUE RECOGNITION Software Revenues derived from software license fees are recognized upon shipment. Services Revenues derived from services include hosting fees, Internet access fees and consulting and training fees. Hosting revenue consists of fees related to the maintenance of client web pages on the Internet. Internet access revenue includes both fixed and usage based fees for use of the Company's Internet service. Consulting and training fees are billed under both time and materials and fixed fee arrangements and are recognized as services are performed. Deferred revenues Deferred revenues represent payments received from customers or billings invoiced to customers for software and services billed in advance. CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. PROPERTY AND EQUIPMENT Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the assets as follows:
Furniture, fixtures and leasehold improvements 10 years Computer software 5 years Computer and office equipment 5-10 years
F-7 12 8 HARBINGER NET SERVICES, LLC NOTES TO FINANCIAL STATEMENTS FOR THE PERIODS ENDED DECEMBER 31, 1996 AND 1995 PRODUCT AND SOFTWARE DEVELOPMENT COSTS Product development costs consist principally of compensation and benefits paid to the Company's employees or employees of Harbinger Corporation. All product development costs not qualifying for capitalization as software development costs are expensed as incurred. The Company's policy is to expense all software development costs associated with establishing technological feasibility. Because the Company's products have reached this stage of development almost concurrently with general release, the Company has not capitalized any software development costs in the accompanying financial statements, due to the amounts being insignificant. INCOME TAXES The Company has elected to incorporate as a Limited Liability Company in accordance with the laws in the State of Georgia. As a result, the Company is taxed in a manner similar to a partnership and has not provided for Federal or state income taxes as the results of operations are passed through to, and the related income taxes become the individual responsibility of, the Company's shareholders. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company uses financial instruments in the normal course of its business. The carrying values of cash equivalents, accounts receivable, other current assets, accounts payable, due to affiliates, net, accrued expenses and deferred revenues approximate fair value due to the short-term maturities of these assets and liabilities. The Company believes the fair value of its long-term debt exceeds its carrying value. STOCK OPTION PLAN Prior to January 1, 1996, the Company accounted for its stock option plan in accordance with the provisions of Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. As such, compensation expense would be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. On January 1, 1996 the Company adopted Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation ("SFAS No. 123"), which permits entities to recognize as expense over the vesting period the fair value of all stock-based awards on the date of grant. Alternatively, SFAS No. 123 also allows entities to continue to apply the provisions of APB Opinion No. 25 and provide pro forma net income disclosures for employee stock option grants made in 1995 and future years as if the fair-value-based method defined in SFAS No. 123 had been applied. The Company has elected to continue to apply the provisions of APB Opinion No. 25 and provide the pro forma disclosures under the provisions of SFAS No. 123 (see Note 4). F-8 13 9 HARBINGER NET SERVICES, LLC NOTES TO FINANCIAL STATEMENTS FOR THE PERIODS ENDED DECEMBER 31, 1996 AND 1995 2. PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 1996 and 1995 consists of the following: 1996 1995 ---------- ----------- Furniture, fixtures and leasehold improvements......... $ 254,000 $ 4,000 Computer software...................................... 246,000 36,000 Computer and office equipment.......................... 1,174,000 193,000 ----------- ---------- 1,674,000 233,000 Less accumulated depreciation and amortization..... (635,000) (14,000) ----------- ---------- $ 1,039,000 $ 219,000 =========== ==========
3. LONG-TERM DEBT In connection with a June 1995 financing, the Company issued a $3 million subordinated convertible debenture bearing interest at 6% with principal and accrued interest due in full in June 2000. This financing was completed simultaneously with a capital investment made by Harbinger Corporation of $8 million. The Company is party to an Operating Agreement (see Note 4) between Harbinger Corporation, the holder of the $3 million subordinated convertible debenture, and the Company's shareholders which provides, among other terms, a right of first refusal to Harbinger Corporation and the debenture holder with respect to future securities sales by the Company and restricts the Company from certain activities including issuing additional debt in excess of $7.5 million. The terms of the Operating Agreement also provide for the automatic conversion of the subordinated convertible debenture into the number of shares of the Company's common stock equivalent to the outstanding principal and accrued interest on the subordinated convertible debenture divided by the conversion price, as defined, at the time that the debenture holder receives any and all regulatory approvals required to hold equity in the Company. In January 1997, Harbinger Corporation purchased the $3 million subordinated convertible debenture (see Note 6). 4. SHAREHOLDERS' EQUITY COMMON STOCK The Company's initial capitalization of $703,000 was provided by Harbinger Corporation and certain other shareholders in March 1995 through the issuance of 1,004,000 shares of the Company's common stock at $0.70 per share. In connection with a June 1995 financing, the Company issued 5,714,286 shares of its common stock to Harbinger Corporation at a price equivalent to $1.40 per share in exchange for $2 million in cash and a $6 million note receivable bearing interest at 7% due at the earlier of September 1996 or the completion of an initial public offering, as defined, by Harbinger Corporation. The note receivable was paid in full in August 1995. In September of 1996, the Company issued 101,273 shares of its common stock pursuant to an employee stock purchase plan at $1.65 per share in exchange for $167,000 in cash. F-9 14 10 HARBINGER NET SERVICES, LLC NOTES TO FINANCIAL STATEMENTS FOR THE PERIODS ENDED DECEMBER 31, 1996 AND 1995 In January 1997, Harbinger Corporation purchased all shares and options held by minority shareholders (see Note 6). OPERATING AGREEMENT The shareholders of the Company, including the holder of the subordinated convertible debenture, are parties to an Operating Agreement which grants certain designated shareholders, presently Harbinger Corporation and the holder of the subordinated convertible debenture, the right after December 1, 1996 to initiate a buy-sell procedure with respect to shares owned by such shareholders. The Operating Agreement also provides for the Company to be controlled by a Board of Managers of seven individuals, two of which are designated by Harbinger Corporation, two are designated by the holder of the subordinated convertible debenture, two are jointly designated by these two parties, and the final member is selected by majority vote of shareholders other than these two parties. After December 31, 1996, the members of the Board of Managers are elected by a simple majority vote of all of the Company's shareholders. In January 1997, Harbinger Corporation appointed a majority to the Board of Managers (see Note 6). STOCK OPTIONS The Company's Stock Option Plan (the "Plan") provides for the grant of options to officers, directors, consultants and key employees. The maximum number of shares of the Company's common stock that may be issued under the terms of the Plan shall not exceed 800,000 shares. Options granted under the terms of the Plan generally vest ratably over two or four years and are granted with an exercise price no less than the fair market value of the Company's common stock on the grant date. All options granted expire from seven to ten years from the date of grant. At December 31, 1996, there were options outstanding to acquire 564,727 shares of the Company's common stock, of which options to purchase 26,301 shares were exercisable. There were 235,273 options available for grant at December 31, 1996. The Company applies APB Opinion No. 25 and related interpretations in accounting for the Plan. As a result, the Company has not recognized compensation cost for its fixed stock option plan. Had compensation cost for the Company's stock-based compensation plans been determined consistent with SFAS No. 123, the Company's net loss would have been reduced to the pro forma amounts indicated below:
1996 1995 ----------- ----------- Net loss As reported $(7,442,000) $(1,150,000) Pro forma $(7,496,000) $(1,153,000)
For purposes of the pro forma amounts above, the fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions: dividend yield and expected volatility of 0%; risk-free interest rate of 5.9%; and expected lives of 2 years. F-10 15 11 HARBINGER NET SERVICES, LLC NOTES TO FINANCIAL STATEMENTS FOR THE PERIODS ENDED DECEMBER 31, 1996 AND 1995 A summary of the status of the Company's fixed stock option plan as of December 31, 1996 and 1995, and changes during the periods ended on those dates is presented below:
1996 1995 --------------------------- --------------------------- Weighted Weighted Average Average Exercise Exercise Fixed Options Shares Price Shares Price ------------------------------------------------ ----------- --------------- ----------- --------------- Outstanding at beginning of period.......... 103,102 $ 1.28 - $ - Granted..................................... 521,625 1.56 103,102 1.28 Exercised................................... - - - - Forfeited/canceled.......................... (60,000) 1.40 - - -------- -------- Outstanding at end of period................ 564,727 $ 1.53 103,102 $ 1.28 ======== ======== Options exercisable at year-end............. 26,301 - Weighted average fair value of options granted during the year................ $ 0.35 $ 0.28
The following table summarizes information about fixed stock options outstanding at December 31, 1996:
Options Outstanding Options Exercisable ----------------------------------------------- ----------------------------- Weighted Average Weighted Weighted Number Remaining Average Number Average Range of Outstanding Contractual Exercise Exercisable Exercise Exercise Prices at 12/31/96 Life Price at 12/31/96 Price ----------------------- ----------------- --------------- ------------- --------------- ------------- $ 0.70 17,102 8.35 $ 0.70 8,551 $ 0.70 $ 1.40 214,750 9.17 $ 1.40 17,750 $ 1.40 $ 1.65 332,875 9.48 $ 1.65 - $ - ------- ------ $ 0.70 - $1.65 564,727 9.33 $ 1.53 26,301 $ 1.17 ======= ======
F-11 16 12 HARBINGER NET SERVICES, LLC NOTES TO FINANCIAL STATEMENTS FOR THE PERIODS ENDED DECEMBER 31, 1996 AND 1995 5. RELATED PARTY TRANSACTIONS The Company has entered into several agreements with Harbinger Corporation and subsidiaries governing certain transactions between them, including the use of personnel, the use of technology owned by Harbinger Corporation, the rights of Harbinger Corporation to license and distribute the Company's products, and the payment of royalties by the Company and Harbinger Corporation. Amounts charged to Harbinger Corporation by the Company for services provided were $214,000 for the period ended December 31, 1996. This amount primarily consists of employee salaries and related benefits and included $191,000 in general and administrative expenses and $23,000 in selling and marketing expenses. These amounts have been included in the Company's statements of operations as a reduction of expense in the categories indicated. Additionally, the Company paid expenses on behalf of Harbinger Corporation in 1996 of $50,000 that have been reimbursed by Harbinger Corporation. The Company accrued royalties payable to Harbinger Corporation of $1,199,000 for the period ended December 31, 1996 which is included in direct costs--software and is related to the Company's licensing of products which include Harbinger Corporation's technology. Likewise, amounts charged to the Company by Harbinger Corporation for services provided were $1,785,000 and $324,000 for the periods ended December 31, 1996 and 1995, respectively. These amounts include $729,000 and $94,000 in general and administrative expenses, $105,000 and $36,000 in selling and marketing expenses, and $951,000 and $194,000 in product development expenses for the periods ended December 31, 1996 and 1995, respectively. These amounts have been included in the Company's accompanying statement of operations in the categories indicated. Additionally, Harbinger Corporation paid expenses of $505,000 and $413,000 for the periods ended December 1996 and 1995, respectively, on behalf of the Company that have been reimbursed to Harbinger Corporation by the Company. At December 31, 1996 and 1995, the Company had amounts due to Harbinger Corporation of $1,760,000 and $97,000 for these services and expenses incurred by the Company and for the royalties due to Harbinger Corporation. At December 31, 1996 and 1995, the Company had amounts due to (from) affiliates resulting from these and other affiliated transactions as follows:
1996 1995 ------------- ------------- Due to Harbinger Corporation and subsidiaries.................................... $ 1,760,000 $ 97,000 Due to holder of the subordinated convertible debenture (accrued interest included in accrued expenses)............................... 280,000 97,000 Due from Harbinger Corporation affiliate....................................... - (14,000) ------------- ------------- $ 2,040,000 $ 180,000 ============= =============
The Company believes the terms of transactions between the Company, Harbinger Corporation and subsidiaries and the holder of the subordinated convertible debenture are comparable to those which the Company could have obtained in transactions with unaffiliated parties. F-12 17 13 HARBINGER NET SERVICES, LLC NOTES TO FINANCIAL STATEMENTS FOR THE PERIODS ENDED DECEMBER 31, 1996 AND 1995 6. SUBSEQUENT EVENTS (UNAUDITED) On January 1, 1997, because of the expiration of restrictions under the operating agreement on Harbinger Corporation's ability to appoint a majority of the Company's Board of Managers, Harbinger Corporation exercised its rights as majority shareholder of the Company by appointing a majority of the members of the Company's Board of Managers. As a result, effective January 1, 1997, Harbinger Corporation will account for its investment in the Company by consolidating the statements of financial position and results of operations of the Company with those of Harbinger Corporation. Also on January 1, 1997, Harbinger Corporation entered into a debenture purchase agreement with the holder of the subordinated convertible debenture (the "Debenture") whereby Harbinger Corporation acquired the $3 million Debenture of the Company in exchange for $1.5 million in cash and 242,288 shares of Harbinger Corporation's common stock valued at $4.2 million. Immediately after this transaction, Harbinger Corporation acquired the minority interest in the Company, consisting of 585,335 shares of the Company's common stock and stock options to acquire 564,727 shares of the Company's common stock at exercise prices ranging from $0.70 per share to $1.65 per share, by exchanging cash of $1.6 million and stock options to acquire 355,317 shares of Harbinger Corporation's common stock at exercise prices ranging from $15.22 per share to $16.53 per share which were valued by Harbinger Corporation at $2.2 million. F-13 18 EX-99.4 3 UNAUDITED PRO FORMA CONSOLIDATED 1 EXHIBIT 99.4 HARBINGER CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL INFORMATION The following unaudited pro forma consolidated condensed financial information of Harbinger Corporation (the "Company") set forth below as of December 31, 1996 and for the year then ended give effect to (i) the Company's consolidation of the financial statements of Harbinger NET Services, LLC ("HNS"), (ii) the Company's purchase of the HNS subordinated convertible debenture (the "Debenture") as of December 31, 1996 with respect to the unaudited pro forma consolidated condensed balance sheet and as of January 1, 1996 with respect to the unaudited pro forma consolidated condensed income statement, and (iii) the Company's acquisition of all outstanding common stock and stock options of HNS held by minority shareholders as of December 31, 1996 with respect to the unaudited pro forma consolidated condensed balance sheet and as of January 1, 1996 with respect to the unaudited pro forma consolidated condensed income statement. The Company's purchase of the HNS Debenture has been accounted for as a loss on extinguishment of debt and the Company's purchase of the minority interest has been accounted for using the purchase method of accounting. For purposes of the unaudited pro forma consolidated condensed financial information, the allocations of the purchase price have been made based upon current available information. The unaudited pro forma consolidated condensed financial information should be read in conjunction with the historical financial statements and notes of the Company and HNS. The unaudited pro forma consolidated condensed financial information do not necessarily represent results which would have occurred if the transactions had taken place on the dates indicated nor are they necessarily indicative of the results of future operations. F-15 20 2 HARBINGER CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEETS (IN THOUSANDS)
December 31, 1996 ------------------------------------------------------------------- Historical --------------------------- Pro Forma Pro Forma ASSETS Company HNS Adjustments Consolidated ------------ ----------- --------------- --------------- Current assets: Cash and cash equivalents................ $ 8,395 $ 3,322 (1,500) (2) $ 8,660 (1,557) (3) Accounts receivable, net................. 9,795 1,866 11,661 Deferred income taxes.................... 1,517 - 1,517 Due from joint venture................... 1,760 - (1,760) (4) - Other current assets..................... 1,049 277 1,326 ---------- --------- --------- Total current assets.................. 22,516 5,465 23,164 ---------- --------- --------- Property and equipment, net................. 6,845 1,039 7,884 Investments in joint ventures............... 407 - 24 (1) - (153) (1) (278) (4) Intangible assets, net...................... 11,405 - 153 (1) 12,942 1,384 (3) Deferred income taxes....................... 1,284 - 1,284 ---------- --------- --------- $ 42,457 $ 6,504 $ 45,274 ========== ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable......................... $ 1,570 $ 207 $ 1,777 Accrued expenses and due to affiliates, net....................... 5,843 2,823 (280) (2) 6,976 350 (3) (1,760) (4) Deferred revenues........................ 3,751 196 3,947 ---------- --------- --------- Total current liabilities............. 11,164 3,226 12,700 ---------- --------- --------- Long-term debt.............................. - 3,000 (3,000) (2) - Minority interest........................... - - 24 (1) - (24) (3) Redeemable preferred stock.................. - - - Shareholders' equity: Preferred stock.......................... - - Common stock............................. 2 - 2 Additional paid in capital............... 45,259 8,870 4,200 (2) 51,675 2,216 (3) (8,870) (4) Accumulated deficit...................... (13,968) (8,592) (2,420) (2) (19,103) 8,592 (4) (2,715) (3) ---------- --------- --------- 31,293 278 32,574 ---------- --------- --------- $ 42,457 $ 6,504 $ 45,274 ========== ========= =========
F-16 21 3 HARBINGER CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS (IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
Year Ended December 31, 1996 ------------------------------------------------------------------- Historical --------------------------- Pro Forma Pro Forma Company HNS Adjustments Consolidated ------------ ----------- --------------- --------------- Revenues: Services ............................... $ 27,806 $ 117 $27,923 Software ............................... 13,919 2,036 (1,199) (4) 14,756 ---------- ---------- ------- Total revenues........................ 41,725 2,153 42,679 ---------- ---------- ------- Direct costs: Services ............................... 8,619 644 9,263 Software ............................... 2,165 1,617 (1,199) (4) 2,583 ---------- ---------- ------- Total direct costs.................... 10,784 2,261 11,846 ---------- ---------- ------- Gross margin ............................... 30,941 (108) 30,833 ---------- ---------- ------- Operating costs: Selling and marketing.................... 7,929 926 8,855 General and administrative............... 7,799 1,614 9,413 Depreciation and amortization............ 1,992 621 172 (5) 2,785 Product development...................... 5,632 4,303 9,935 Charge for purchased in-process product development and acquisition-related charges............................... 8,775 - 8,775 ---------- ---------- ------- Total operating costs.............. 32,127 7,464 39,763 ---------- ---------- ------- Operating loss..................... (1,186) (7,572) (8,930) Interest expense (income), net.............. (156) (130) (186) (2) (227) 245 (6) Equity in losses of joint ventures.......... 7,073 - (7,004) (4) 69 ---------- ---------- ------- Loss before income tax expense.............. (8,103) (7,442) (8,772) Income tax expense.......................... 146 - 146 ---------- ---------- ------- Net loss.................................... (8,249) (7,442) (8,918) Preferred stock dividends................... (28) - (28) ========== ========== ======= Net loss applicable to common shareholders............................. $ (8,277) $ (7,442) $(8,946) ========== ========== ======= Net loss per share of common stock.......... $ (0.52) $ (0.55) ========== ======= Weighted average common and common equivalent shares outstanding............ 16,065 16,307 ========== =======
F-17 22 4 HARBINGER CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL INFORMATION On January 1, 1997, because of the expiration of restrictions on the Company's ability to appoint a majority of the HNS Board of Managers, the Company exercised its rights as majority shareholder of HNS by appointing a majority of the members of the HNS Board of Managers. As a result, effective January 1, 1997, the Company will account for its investment in HNS by consolidating the statements of financial position and results of operations of HNS with those of the Company. Also on January 1, 1997, the Company entered into a debenture purchase agreement with the holder of the Debenture whereby the Company acquired the Debenture in exchange for $1.5 million in cash and 242,288 shares of the Company's common stock valued at $4.2 million. The Company expects to record an extraordinary loss on debt extinguishment of $2.4 million in the first quarter of 1997 related to this transaction which represents the amount paid in excess of the face amount of the Debenture of $3.0 million plus accrued interest of $280,000. Immediately after this transaction, the Company acquired the minority interest in HNS, consisting of 585,335 shares of HNS common stock and stock options to acquire 564,727 shares of HNS common stock at exercise prices ranging from $0.70 per share to $1.65 per share, by exchanging cash of $1.6 million and stock options to acquire 355,317 shares of the Company's common stock at exercise prices ranging from $15.22 per share to $16.53 per share which were valued by the Company at $2.2 million. Including transaction and other costs of $350,000, the Company paid $4.1 million for the acquisition of the HNS minority interest which will be accounted for using the purchase method of accounting with $2.7 million of the purchase price allocated to in-process product development and charged to the consolidated statement of operations on January 1, 1997, and $1.4 million allocated to goodwill and purchased technology. The Company expects to record a net deferred income tax asset of approximately $840,000 as a result of these transactions and intends to provide a valuation allowance against such net deferred income tax asset to reduce it to zero. The accompanying unaudited pro forma consolidated condensed financial information illustrates the estimated effects of the transactions described above as if they had occurred as of December 31, 1996 with respect to the unaudited pro forma consolidated condensed balance sheet and as of January 1, 1996 with respect to the unaudited pro forma consolidated condensed statement of operations. The historical financial statements are derived from the audited financial statements of the Company and HNS as of and for the year ended December 31, 1996. The unaudited pro forma consolidated condensed financial information does not purport to represent what the results of operations or financial position of the Company would actually have been if the transactions had occurred on such dates or to project the results of operations or financial position of the Company for any future date or period. The unaudited pro forma consolidated condensed financial information should be read together with the historical financial statements and notes of the Company and HNS. The unaudited pro forma consolidated condensed financial information reflects the following adjustments: 1) Reflects the recognition of the minority interest related to the Company's change from the equity method to the consolidated method of accounting for HNS and the reclassification of an insignificant intangible asset from investment in HNS to intangible assets. F-18 23 5 HARBINGER CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL INFORMATION 2) Reflects adjustments to record the Company's purchase of the Debenture for $1.5 million in cash and the issuance of Harbinger common stock valued at $4.2 million to the holder of the Debenture. The adjustment also reflects a $2.42 million increase in the Company's accumulated deficit resulting from the loss on debt extinguishment relating to the Company's purchase of the Debenture and the elimination of the interest expense recorded with respect to the Debenture. 3) Reflects adjustments to record the acquisition of the shares held by the minority shareholders for $4.1 million including $1.6 million in cash and the issuance of options to acquire the Company's stock valued at $2.2 million. The purchase price allocation reflects: (i) a $1.4 million increase in goodwill and purchased technology; (ii) a $2.7 million increase in the Company's accumulated deficit resulting from the valuation of in-process product development which will be charged to the consolidated statement of operations on January 1, 1997; and (iii) a provision of $350,000 for transaction related costs. 4) Additionally, the Company has made the following consolidating adjustments: (i) the elimination of the Company's investment in HNS and the historical equity accounts of HNS; and (ii) the elimination of intercompany revenues and expenses and their corresponding balance sheet accounts along with the elimination of the Company's equity in losses of HNS. 5) Reflects an increase in amortization expense as a result of the acquisition of HNS. Amortization of goodwill arising from the acquisition is provided using the straight-line method over ten years. Purchased technology is amortized using the straight-line method over the remaining estimated economic life of the product or enhancement, which was determined to be five years. 6) Reflects interest expense on the cash payment of $3,057,000 to fund the transactions on January 1, 1996 at the prime rate (8%) for the year. The Company anticipates that it will incur integration costs related to these transactions of $1.5 million to $2.5 million during the first quarter of 1997. These acquisition integration costs have not been reflected in the accompanying unaudited pro forma consolidated condensed financial information. The unaudited pro forma consolidated condensed statement of operations does not reflect the $2.4 million loss on extinguishment of the Debenture or the $2.7 million charge for in-process produce development related to the acquisition of the minority interest of HNS. These charges will be recorded in the first quarter of 1997. All share, per share and shareholders' equity amounts for the Company have been adjusted to reflect a three-for-two stock split effected in the form of a 150% stock dividend paid on January 31, 1997. F-19 24 -----END PRIVACY-ENHANCED MESSAGE-----