HARBINGER CORP, 10-K405, 1998-03-31

HARBINGER CORP
10-K405, 1998-03-31
COMPUTER PROGRAMMING, DATA PROCESSING, ETC.

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

-------------------------------
FORM 10-K
--------------------------------

|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934

For the fiscal year ended December 31, 1997

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

For the transition period from ____________ to ______________

COMMISSION FILE NUMBER: 0-26298

HARBINGER CORPORATION
(exact name of registrant specified in its charter)

GEORGIA 58-1817306
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

1277 LENOX PARK BOULEVARD 30319
ATLANTA, GEORGIA (zip code)
(Address of principal executive offices)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (404) 467-3000

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Securities registered pursuant to Section 12(b) of the Act:

None

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Securities registered pursuant to Section 12(g) of the Act:

Title of each class Name of exchange on which registered
------------------- ------------------------------------
Common Stock, par value $.0001 per share The Nasdaq National Market

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

The aggregate market value of the voting stock held by non-affiliates of
the Registrant, based upon the average of the closing bid and ask quotations for
the Common Stock on March 13, 1998 as reported by The Nasdaq Stock Market, was
approximately $826,958,597. The shares of Common Stock held by each officer
and director and by each person known to the company who owns 5% or more of the
outstanding Common Stock have been excluded in that such persons may be deemed
to be affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes. As of March 13, 1998, Registrant
had outstanding 27,545,770 shares of Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Annual Report to Shareholders for the fiscal
year ended December 31, 1997 are incorporated by reference in Parts II and IV of
this Form 10-K to the extent stated herein. The Registrant's definitive Proxy
Statement for the Annual Meeting of Shareholders to be held April 24, 1998 is
incorporated by reference in Part III of this Form 10-K to the extent stated
herein.

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EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, CERTAIN MATTERS
DISCUSSED IN THIS ANNUAL REPORT ON FORM 10-K MAY BE CONSIDERED "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 AND THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED BY THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995. THOSE STATEMENTS INCLUDE STATEMENTS REGARDING THE INTENT, BELIEF OR
CURRENT EXPECTATIONS OF HARBINGER CORPORATION AND MEMBERS OF ITS MANAGEMENT AS
WELL AS THE ASSUMPTIONS ON WHICH SUCH STATEMENTS ARE BASED. PROSPECTIVE
INVESTORS ARE CAUTIONED THAT ANY SUCH 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. IMPORTANT FACTORS CURRENTLY KNOWN TO MANAGEMENT THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN FORWARD-LOOKING
STATEMENTS INCLUDE INTEGRATION OF RECENTLY ACQUIRED BUSINESSES AND ADVERSE
DEVELOPMENTS WITH RESPECT TO THE COMPANY'S DOMESTIC OR FOREIGN OPERATIONS. THESE
AND ADDITIONAL IMPORTANT FACTORS TO BE CONSIDERED ARE SET FORTH IN THE SAFE
HARBOR COMPLIANCE STATEMENT FOR FORWARD-LOOKING STATEMENTS INCLUDED AS EXHIBIT
99.1 TO THIS REPORT, THE TERMS OF WHICH ARE INCORPORATED BY REFERENCE HEREIN.
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.

PART I

ITEM 1. BUSINESS

The Company is a leading worldwide provider of electronic commerce products
and services to businesses and offers comprehensive, customizable,
standards-based electronic commerce solutions. Harbinger develops, markets and
supports software products and provides computer communications network and
consulting services which enable businesses to engage in electronic commerce.
These electronic commerce solutions are provided over the Harbinger Value-Added
Network ("VAN") or the Company's Internet Value-Added Servers ("IVAS"), or
directly over standard telephone lines, the Internet, or private internal
computer networks known as Intranets. Harbinger offers software products that
operate on multiple computer platforms, secure and reliable computer networks to
facilitate the transmission of business information and transactions, and
value-added products and services to enable businesses of all sizes to maximize
the number and value of their electronic trading relationships. As of March 31,
1998, the Company's customers included leading U.S. and multi-national
corporations and government agencies, including Northrop Grumman, Canadian Tire
Corporation, Compaq Computer, Hewlett-Packard, Westinghouse Electric, Baxter
Healthcare, Johnson & Johnson, Amoco, Chevron, Mobil Oil, Pacific Gas &
Electric, Southern California Edison and Texas Instruments.

The Company's products and services facilitate electronic commerce and
electronic data interchange ("EDI") among businesses by providing the ability to
electronically transmit and receive routine business information and documents
in a standard format and to create electronic catalogs of products. The
Harbinger VAN and IVAS serve as electronic communications links for computer
systems by receiving, storing and forwarding electronically transmitted business
documents and data for re-transmission in a form that can be received and
interpreted by the computer of another business. The method of document exchange
is user configurable by trading partner and by document type (such as purchase
order, invoice, quote, bid request and similar business documents). Both the
Harbinger VAN and IVAS provide encryption and other document management and
security methods to allow documents to be exchanged securely and reliably
Harbinger facilitates the electronic link to its computer communications network
through its electronic commerce software packages for use in a broad range of
computing environments, including PC-based solutions for DOS and Windows (3.x,
95 and NT Workstation), and client-server solutions for Windows NT Server, UNIX,
IBM AS/400 midrange and IBM MVS mainframe platforms. The Company also provides
professional services to assist businesses in the installation and
customization, operation and maintenance of their electronic trading
relationships and the creation of electronic catalogs and procurement solutions.

RECENT DEVELOPMENTS

An important part of the Company's strategy is to enhance its suite of
electronic commerce products and services and to address new electronic trading
communities. The Company believes that the addition of new products and markets
from its

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recent acquisitions enhances Harbinger's ability to provide a comprehensive
range of solutions for trading partners to conduct business electronically over
the Harbinger VAN and IVAS, other VANs, the Internet or private Intranets. The
Company has made a number of significant acquisitions since January 1, 1997.

Premenos Technology Corp. On December 19, 1997, Harbinger acquired all of
the capital stock of Premenos Technology Corp. ("Premenos") in a transaction
structured as a merger. In connection with the acquisition, the Company issued
approximately 5,358,655 shares of Harbinger common stock to Premenos
stockholders. The acquisition was accounted for under the pooling-of-interests
method of accounting. Management of Harbinger believes that the acquisition of
Premenos has enhanced Harbinger's ability to execute on its business strategy by
expanding the suite of products and services that Harbinger may offer its
customers, expanding Harbinger's customer base and enhancing and expanding the
base of electronic commerce professionals employed by Harbinger who are skilled
in developing electronic commerce solutions for its customers. The acquisition
of Premenos has enabled Harbinger to become the largest supplier of EDI software
to the mid-range systems market (AS/400, UNIX and NT) and a leading provider of
Internet-based EC solutions. The Premenos products and services which have been
added to the Harbinger suite of solutions include EDI/400, Templar, PowerDox and
WebDox. Premenos' EDI/400 product is the market leader for electronic commerce
software for the IBM/AS 400, which is the predominant computer in the mid-range
computer market. The acquisition of the Templar product, Premenos' leading
Internet security product, has further enhanced Harbinger's ability to deliver
secure Internet-based solutions to its customers. Premenos introduced the first
open-network technology for secure, auditable data transmission over the
Internet and its Templar Secure produce has replaced TrustedLink Guardian,
Harbinger's offering for encrypted transmission of EDI forms over the Internet.
PowerDox and WebDox, Premenos' forms-based EDI products for VANs and the
Internet, respectively, have expand Harbinger's ability to ease adoption of EDI
by trading communities with a large number of small trading partners who have
been unwilling to implement full-scale EDI. The acquisition of Premenos has also
expanded Harbinger's installed customer base by 3,800 customers and its
employee base by approximately 270 electronic commerce professionals. Moreover,
the addition of Premenos' headquarter facilities located in Concord, California
have provided Harbinger with an enhanced ability to recruit electronic
commerce professionals from the San Francisco Bay Area. The merger with
Premenos also added to Harbinger's operations several customer support and
development facilities throughout North America and Europe.

Atlas Products International, Ltd. On October 23, 1997, Harbinger acquired
all of the outstanding capital shares of Atlas Products International, Ltd.
("Atlas"), a Manchester, England-based provider of EDI translation software.
Atlas has a base of approximately 740 customers on PC, UNIX NT and
DEC/VMS platforms. Atlas products are used principally by small and mid-size
businesses and are distributed directly and through third-party channels in the
U.K., Europe and other markets around the world. Atlas provides Harbinger an
enhanced customer base, relationships in key industries including retail,
finance, manufacturing and distribution, and extensive EC/EDI standard support
for the European, and in particular U.K., markets. Harbinger issued
approximately 311,399 shares of Harbinger common stock in the acquisition of
Atlas. The Atlas business combination has been accounted for as a
pooling-of-interests. Prior years' consolidated financial statements were not
restated for this combination due to its materiality.

Acquion, Inc. On August 22, 1997, Harbinger acquired Acquion, Inc.
("Acquion"), based in Greenville, South Carolina. Acquion provides electronic
catalog and procurement solutions for business-to-business electronic commerce.
Acquion provides a component of Harbinger's supply chain management offering,
including MRO supplier content and electronic catalog software, and is an
extension of its core EDI/EC offerings. Harbinger acquired all of the
outstanding shares of Acquion for $13.6 million, consisting of $12.0 million in
cash and the assumption of $1.6 million in liabilities, including transaction
costs. The Company recorded the acquisition using the purchase method of
accounting.

SupplyTech, Inc. On January 3, 1997, the Company completed a merger with
SupplyTech, Inc. and its affiliate (collectively, "SupplyTech"), exchanging
2,400,000 shares of the Company's common stock for SupplyTech. SupplyTech
provides electronic commerce software products and services under the "STX"
brand. The acquisition allowed the Company to expand into trading communities in
the automotive, retail, aerospace and heavy manufacturing markets. In addition
to being one of the largest providers of PC-based EDI translation software in
the United States, SupplyTech also has operations in the U.K. The merger was
accounted for as a pooling-of-interests. The acquisition of SupplyTech broadened
the Company's markets and customer base, added complementary products and
technologies, strengthened its ability to offer electronic commerce software and
services to its customers and diversified its revenue base.

Harbinger NET Services, LLC. HNS was capitalized by the Company and certain
other investors in 1994 to develop EDI products and services for the Internet,
and prior to 1997 operated as a joint venture with BellSouth Telecommunications
("BST") in which the Company held a 66.1% fully-diluted equity interest. In
January 1997, the Company purchased the

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remaining equity interest in HNS and the $3.0 million Subordinated Convertible
Debenture (the "Debenture") held by BST, thereby obtaining direct ownership of
products designed to facilitate electronic commerce over the Internet. These
products include IVAS, Harbinger Express, designed to permit EDI over the World
Wide Web using a browser, and TrustedLink INP, a web site development tool.

Acquisition-related Charges. Harbinger incurred total charges of $15.3
million in the fourth quarter of 1997 and expects that it will incur an
additional $15 million in acquisition and integration related charges during the
first quarter of 1998. As a result of the charges in 1998, the Company expects
to incur a net loss for the first quarter of 1998. In connection with the Atlas
acquisition, Harbinger incurred a charge of $2.0 million relating to integration
and acquisition related expenses during the fourth quarter of 1997. Harbinger
incurred a $2.5 million charge relating to acquisition related charges and asset
write downs and $10.9 million related to an in-process product development
charge for the Acquion purchase during the three months ended September 30,
1997. In connection with the SupplyTech transaction in January 1997, Harbinger
incurred a charge of $12.4 million for acquisition related expenses, asset write
downs and integration costs incurred. In connection with the HNS transactions,
Harbinger incurred in the first quarter of 1997, a $2.4 million loss on the
extinguishment of the Debenture, a $2.7 million charge for in-process product
development, and $2.0 million incurred for acquisition related expenses and
asset write downs. Effective the fourth quarter of 1997, the Company's Board of
Directors approved the discontinuance of its TrustedLink Banker line of
business. In connection with this action, the Company provided for an
anticipated loss of $4.0 million related to the phase-out of this line of
business.

ELECTRONIC COMMERCE AND EDI

Electronic commerce involves the automation of business transactions
through the use of telecommunications and computers to exchange and
electronically process commercial information and transactional documents.
Electronic commerce typically involves the use of a third-party or private
value-added computer network to perform EDI, electronic funds transfer,
electronic forms, and bulletin board and electronic catalog services. EDI is a
cornerstone of electronic commerce and has historically been the source of the
majority of the Company's revenue. The advantages of EDI include one-time data
entry, reduced clerical workload and the elimination of paper records, rapid,
accurate and secure exchange of business data, and reduced operating and
inventory carrying costs. EDI facilitates uniform communications with different
trading partners in different industries, including customers, suppliers, common
carriers, and banks or other financial institutions.

EDI Transaction Flow. In a typical EDI transaction, a trading partner (the
"sending partner") first creates with its computer, either manually or
electronically, the business data used for the completion of a particular set of
documents, described by EDI standards as a transaction set. Transaction sets
include requests for quotes, quotes, purchase orders, invoices, shipping
notices, and other related documents and messages. Second, a translation
software program on the sending partner's computer converts the document or
transaction set into a standard EDI format. The most frequently used such
formats are ANSI X.12 in the United States and EDIFACT in the rest of the world.
Third, this information is electronically transmitted through telecommunications
links from the sending partner's computer to a central computer system that
serves as a value-added network shared by many trading partners. Value-added
networks receive documents for subsequent delivery to the intended trading
partner (the "receiving partner"), and connect many types of computer hardware
and communications devices, convert multiple transaction sets from one industry
standard to another, and maintain security by reducing the possibility of one
trading partner obtaining unauthorized access to another computer. VANs, such as
those operated by the Company or by IBM, GE Information Services, Sterling and
others, provide security and reliability by transmitting, controlling, logging
and archiving all messages through a central electronic clearinghouse and by
providing extensive customer support. As a result of these added features, the
transaction of business over a VAN is currently more costly than electronic
commerce over the Internet and other TCP/IP networks.

Trading Communities. Groups of companies that regularly trade with each
other generate significant repetitive business transactions. These existing
trading communities are natural prospects for implementation of EDI. The
expansion of EDI has been possible through the establishment of repetitive
transactions using the two standard formats noted above. In addition, there are
now subsets of these standards used in specific industries such as automotive,
banking, chemical, financial, grocery, healthcare, petroleum, retail and
utilities. The adoption of EDI as an accepted means of transmitting business
documents and data has also occurred, in part, because many trade organizations
or groups and many large companies within a trading community increasingly
recommend or require their member organizations or trading partners to adopt and
use EDI as the primary method of communicating business documents.

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Hubs and Spokes. Large companies within a trading community often are
described as "hubs" and their trading partners as "spokes." A hub company and
its trading partners communicate through electronic networks. These can be third
party networks and, for a few larger businesses, private networks owned and
operated by the hub company. Hub companies often initially justify EDI programs
with direct cost savings to reduce the administrative handling costs and to
eliminate data entry errors of the documents that they send and receive from
trading partners. Advanced EDI implementations by a hub company may be more
strategic in nature, being utilized as enabling technologies for business
processes such as supply chain management and just-in-time manufacturing, and
efficient consumer response and vendor managed inventory in retailing. For these
reasons, a hub company often adopts as a stated business objective that all of
its trading partners use EDI as the principal means of communicating business
documents. Spoke companies, in turn, often expand the electronic commerce
community by also requesting or requiring their other trading partners to
communicate through EDI. This expanding number of trading partners adopting EDI
results in the establishment of distinct trading communities comprising
potential software customers and network subscribers for EDI services.

According to The Yankee Group, the market for business-to-business
electronic commerce was an estimated $540 million in revenues in 1997 and is
estimated to increase to $134 billion by 2000. Furthermore, it is estimated by
management that of the 3 million U.S. companies with five or more employees,
approximately 150,000-170,000 have elected to date to make use of EDI. Although
many of these current users of EDI are members of defined trading communities,
the Company believes that the majority of the members of these trading
communities use electronic commerce solutions to communicate with a small
percentage of their trading partners. Acceptance of electronic commerce and
expansion within trading communities will depend on various factors, such as the
extent of automation in the industry, the degree to which hub companies require
electronic trading from their trading partners, the level of computer
sophistication of businesses in the trading community, the frequency of
transactions among trading partners in the community and the economic benefits
derived from the trading community by implementing electronic trading which
historically have accrued principally to the larger members of the community. To
date, EDI has minimal penetration in small companies because (i) current EDI
solutions have not provided significant added value, and (ii) EDI is not
pervasive among the average small company's trading partners.

ELECTRONIC COMMERCE AND THE INTERNET

The Internet is a collection of interconnected public and private networks
that allows any computer on the network to communicate with any other computer
on the network through an open communications protocol known as TCP/IP. Although
the Internet affords a lower cost, more robust and widely available medium for
electronic commerce than the proprietary VANs generally in current use, there
are significant actual and perceived concerns relating to the use of the
Internet for commercial transactions. These concerns include the absence of
security, inability to confirm message integrity, vulnerability of messages to
interception and fabrication, lack of user support, service or centralized "help
desk" support, and difficulties in obtaining reliable assurance of receipt of
messages sent or the authenticity of messages received. These difficulties
inherent in the Internet are magnified if the Internet is used to execute
commercial transactions such as EDI purchase orders, shipping instructions and
other operative commercial documents as opposed to informational electronic
mail. These commercial drawbacks of the Internet are heightened still further if
messages are intended for direct computer processing, as are typical EDI
messages.

To solve the current problems with using the Internet and other TCP/IP
networks for conducting business-to-business, electronic transactions and
communications, the Company offers both its web-based Harbinger Express and
email-based Templar products. Templar provides a solution designed to replicate
in software some of the desirable elements of an EDI VAN by allowing the user to
transmit documents over the Internet. By incorporating encryption technology,
Templar provides a viable alternative to the traditional VAN because it allows a
party to verify the identify of the sender of a communication and to verify the
integrity of the communication received, and allows a sender of communication to
verify the receipt of the communication, in unaltered form, by the intended
recipient. The Company anticipates that the opportunity for cost-savings,
achieved principally through flat-rate, volume-independent and time-of-day
independent pricing and higher speed access, will be an incentive for certain
business users to conduct electronic commerce transactions over the Internet and
other TCP/IP networks with the assistance of Templar. Templar can also be used
with the Harbinger network to provide seamless connectivity from the Internet to
public and private VANs. In addition, Harbinger Express provides a web-based
solution for clients to exchange business documents with their trading partners
using a web browser.

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THE HARBINGER SOLUTION

The Harbinger solution to addressing electronic commerce is based on the
following seven components which are designed to build trading partner
relationships and generate recurring revenue. The Company believes these
components differentiate it from its competitors in the market.

* Comprehensive Product Offering. The Company offers a range of
electronic commerce software solutions for trading communities,
including a suite of fully scaleable EDI translation software, its VAN
and IVAS solutions, Web EDI, electronic catalogs, and web site
creation and management software for small businesses.

* Mass Deployment Services. The Company provides mass deployment
services to trading community leaders to permit them to plan, manage
and deploy EDI and electronic commerce solutions to their trading
partners through the use of trading partner conferences and direct
marketing services.

* Trading Relationship Management Services. The Company provides a range
of trading relationship management services, including installation
assistance, trading partner certification and rules, and services such
as customization, training and consulting.

* Vertical Market Expertise. The Company has developed vertical market
expertise in selected industries such as aerospace, automotive,
electronics, financial services, food and beverage, government,
healthcare, heavy manufacturing, petroleum/chemicals, retail and
utilities.

* Flexible, Secure Value Added Architecture. The Company has developed a
combined network architecture utilizing the VAN and the IVAS which
permits secure and reliable network and secure Internet communications
to facilitate the transmission of business information and
transactions.

* Catalog Solutions. The Company provides flexible procurement catalog
solutions which can operate independently or be integrated with
businesses' legacy or enterprise resource planning systems. The
Company maintains a growing database of maintenance, replacement and
operating ("MRO") products from over 250 suppliers representing over 3
million stock-keeping units ("SKU's").

* Professional Services. The Company offers a full complement of
professional EDI services, including complete outsourcing of an EDI
trading hub, remote management of a customer's EDI translator, and
service bureau-type translation and mapping of raw trading information
to standard EDI formats and distribution to trading partners. The
Company also provides Internet applications development for trading
hubs desiring customized EC solutions.

STRATEGY

The Company's objective is to be a leading worldwide provider of electronic
commerce solutions to businesses of all sizes by offering a full spectrum of
products and services to enable customers to transact business on the Internet,
Intranets, through the Harbinger networks and other proprietary networks with a
focus on building trading partner relationships and generating recurring revenue
by increasing the number of subscribers to its network. The Company's strategy
to achieve this objective includes the following key elements.

Focus on Marketing to Trading Communities. Harbinger seeks to establish new
and larger trading communities by (i) developing marketing and technical
competence within specific industries by understanding the needs of major trade
organizations or hub companies in the industry, and the trading customs and
practices of their trading partners, (ii) working closely with trading partners
to define software and computer systems requirements, (iii) developing trading
community solutions to meet the needs of trading partners in these markets, and
(iv) providing a wide offering of value-added, high-quality services to
facilitate the adoption and implementation of EDI and other electronic commerce
solutions throughout these industries.

Provide a Comprehensive Range of Integrated Products and Services. The
products and services offered by the Company include EDI and electronic commerce
software for use on numerous computing platforms, value-added network
transaction processing, software programming and customization services,customer
support and training, and implementation

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and consulting services. The Company designs its products with significant
ease-of-use features and is in the process of completing development efforts to
integrate technologies acquired from Premenos, SupplyTech, Acquion and Atlas
with its existing software products.

Deliver Superior Customer Support Services. Harbinger offers extensive
customer service, consulting and support to trading partners to assist in the
operation and use of the Company's network services and its software products.
The ease-of-use of the Company's products, focus on solutions that address
specific vertical market needs, and extensive support services attract new
customers with limited EDI expertise and encourage greater utilization of the
Company's products and services by existing customers, thereby increasing
recurring revenues through greater transaction flow.

Capitalize on Electronic Commerce on the Internet. The Company formed HNS
in 1994 to develop EDI products and services for the Internet. Through its
acquisition of HNS in January 1997, the Company commenced directly offering a
suite of products and services to facilitate electronic commerce using the
Internet. Upon the acquisition of Premenos, the Company acquired the Templar
product for business customers to engage in electronic commerce transactions
over the Internet and other TCP/IP networks by facilitating the exchange of
secure, digitally-signed electronic documents, including EDI documents. The
Company expects to use the IVAS and Templar family of products to develop and
market a comprehensive range of products and services directed at delivering
electronic commerce solutions to business customers over the Internet, private
Intranets or the Company's networks.

Pursue Strategic Acquisitions and Alliances. The Company's strategy is to
enter new vertical markets, penetrate additional geographic markets and expand
its product and service offerings. The Company will continue to seek to acquire
complementary technologies and businesses. The Company has in the past completed
acquisitions to address other electronic commerce opportunities on the Internet,
enter new vertical markets, acquire complementary technologies and further
penetrate international markets. The Company also actively seeks strategic
alliances with leading professional services companies, software application
developers and computer system suppliers to resell, distribute and co-market the
Company's electronic commerce software products and network services.

Penetrate International Markets. The Company intends to aggressively pursue
international electronic commerce opportunities. Harbinger believes that a
significant component of its strategy is to provide electronic commerce and EDI
products and services to markets outside the United States. Through acquisitions
of Atlas in the U.K., INOVIS GmbH & Co. in Germany (March 1996), NTEX Holding BV
(March 1996) in The Netherlands, SupplyTech's subsidiaries in the U.K. and Italy
and Premenos' subsidiaries in the U.K. and France, the Company has increased its
support capabilities and product distribution in Europe. The Company entered
into an agreement with Brazilian-based Teledata Informacoes & Technologia, S.A.
in December 1996 to provide Harbinger's electronic commerce and EDI services
throughout Brazil, and with Impsat Corporation, in December 1997, to provide the
Company's solutions in Argentina and Columbia In addition, the Company has
operations in Mexico through the SupplyTech acquisition and in Canada through
the Premenos acquisition. Through a network of resellers, the Company sells into
other worldwide markets. The Company intends to aggressively pursue
international electronic commerce opportunities.

PRODUCTS AND SERVICES

The Company offers a comprehensive range of electronic commerce products
and services for entire trading communities. These Company offerings are divided
into three categories, providing electronic commerce solutions for large
companies, solutions designed for small and mid-sized companies, and services
for entire trading communities engaged in electronic commerce. Several of the
products of businesses recently acquired by Harbinger address the same markets
as, and may therefore be competitive with, or redundant with, existing Harbinger
products. As a result, the Company is currently involved in phasing out certain
products in connection with integrating these acquisitions. The following chart
summarizes the functions and platforms of the Company's principal electronic
commerce software products and includes a description of the services available
to software customers and network subscribers:

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COMPUTER
PRODUCT NAME FUNCTION PLATFORM
----------------------------------- -------------------------------------------------- ---------------------------

SOLUTIONS FOR LARGE BUSINESSES

<S> <C> <C>
TrustedLink Enterprise EDI translation communications, document UNIX, Windows NT, IBM
management, plus import/export of data from MVS, IBM AS/400
software applications

STX EDI translation communications, document IBM MVS, IBM AS/400,
management, plus import/export of data from DOS/VSE
software applications

TrustedLink Procurement Web-based electronic catalog solution that Windows NT
connects buyers to suppliers for on-line ordering

Templar Secure Data encryption and communications software for Windows 95/NT,
transmitting EDI documents over the Internet and Windows 3.1, UNIX
other TCP/IP networks

Internet Value Added Gateway connectivity and switching intermediation, UNIX/Windows NT
Server (IVAS) archival, standards compliance
and trusted third party services via the Internet

EDI*Benchmark and EDI Translation Software IBM MVS, DOS/VSE
EDI*Central

SOLUTIONS FOR SMALL AND MID-SIZE BUSINESSES

EDI/400 EDI translation communications operating on the IBM AS/400
IBM AS/400 platform, and ancillary functions
including mailboxing, audit trails, network
communications and compliance

TrustedLink Commerce EDI translation communications, document DOS, Windows, Windows
management and forms creation, plus import/ 95/NT
export of data from software applications

STX EDI translation communications, document DOS, Windows
management and forms creation, plus import/
export of data from software applications

PowerDox Forms-based electronic commerce products for UNIX/NT
transmission over VANs or other communications
media, including (i) PowerDox Central, software
residing on a server at the hub location and
(ii) PowerDox Remote, client software installed
at the spoke trading partner

WebDox Forms-based electronic commerce products for UNIX/NT
transmission of electronic forms over the World
Wide Web

Harbinger Express Software allowing users with only a Web browser Web browser on Windows
to send and receive EDI documents

STSECURITY Software for encrypting EDI documents for Windows
transmission over the Internet

</TABLE>

-7-

COMPUTER
PRODUCT NAME FUNCTION PLATFORM
----------------------------------- -------------------------------------------------- ---------------------------

<S> <C> <C>
Descrypt + Generalized encryption for multiple platforms
and applications

Descrypt/EDI + Complete encryption system for EDI-formatted
data using the ANSI X12.58 and X12.42 standards

Psypher/EDI + Encryption and authentication product for
generalized file security needs

Fdesmac + ANSI X9.9 authentication security for financial
applications

PIN Management System Security and security-related functions for card
issuers to become members of ATM sharing credit
and debit card networks

TrustedLink Distributor for EDI communications, document management and Windows
Petroleum forms creation for petroleum manufacturers and
distributors

ESRS Solution for complying with retail vendor DOS, Windows
shipping requirements

STBAR Bar code labeling software DOS, Windows

Pronto Software for profiling government suppliers to DOS, Windows
submit response to bids

TrustedLink INP Software permitting rapid development
of a Windows commerce enabled World Wide
Web site for promoting and selling
products and services via the Internet

SERVICES DESCRIPTION
---------------------------------- --------------------------------------------------------------------------------

Value-Added Network Services Fault tolerant, store and forward, retrieval services, protocol
conversion, electronic mail box

Internet Value-Added Server Intermediation, archival, standards compliance monitoring, and trusted
(IVAS) Services third party services via the Internet

Harbinger Net Access Internet access

EDI to Fax Services Translation of EDI documents to fax format

Trading Partner Certification Information seminars, support materials, testing and confirmation of EDI
communications with trading partners

Trading Partner Creation of trading partner packs for users to exchange documents with
Implementation Service other trading partners

Consulting and Programming Development of computer programs needed to integrate EDI with a customers
Services other software applications

Electronic Catalogs Comprehensive electronic catalog solutions for supply chain management
and maintenance, repair and operating initiatives

Customer Support Telephone hotline, support documentation, network transmission support,
electronic software updates
</TABLE>

-8-

Bid Filtering and Profiling Service which matches government bids with product suppliers
Service

FAX-2-EDI Service which converts Faxes to EDI format for submitting to government
agencies
</TABLE>

SOLUTIONS FOR LARGE BUSINESSES

TrustedLink Enterprise. The TrustedLink Enterprise product permits fast
receipt and transmission of EDI documents and supports a comprehensive range of
EDI standards across all major computing platforms. The Company offers this
product for MVS mainframe, UNIX and Windows NT Server. The product facilitates
the creation and control of business documents, such as order forms and
invoices, in complex client/server computing environments, and provides data
linking and messaging functions which act as a gateway to update a trading
partner's accounting system. The product also offers mapping, translation,
communication and trading partner management tools and utilize standard EDI
formats.

Templar Secure. Harbinger acquired the Templar Secure product in connection
with its acquisition of Premenos. Templar Secure is an open, standard-based
solution for enabling secure transmission of digitally-designed electronic
documents, including EDI documents, over the Internet and other TCP/IP networks.
Templar Secure supplies security for message transmissions by utilizing public
key cryptography techniques licensed from RSA Data Security, Inc. and by
implementing security and confidentiality features at the software application
level. Templar generates a digital signature for each outbound message that
verifies the identity of the sender and automatically detects any alteration of
the message upon receipt. Templar automatically tracks message traffic and
message integrity and authenticity and provides user-configurable management
reports. Templar also maintains transmission records for audit trails. The
Company also markets an export version of Templar that was developed by Premenos
in order to allow export of Templar in compliance with current U.S. export
control laws and regulations applicable to the export of encryption technology.
The export version uses more limited cryptographic techniques than those
incorporated in the domestic version of the Templar product. In the export
version of Templar, the algorithms of cryptographic keys are shorter and can be
arithmetically decrypted in a shorter period of time than the domestic version's
algorithm. The Company is also working with various U.S. Government agencies in
an attempt to permit the domestic version of Templar to be freely exportable in
compliance with export regulations. Templar Secure is available for both UNIX
and Windows systems, and integrates easily with the Company's existing EDI
translators.

Internet Value-Added Server (IVAS). Similar to the Harbinger VAN, the
Company's IVAS offers many of the same value-added services over the Internet.
The IVAS provides intermediation, archiving, standards compliance monitoring and
third-party services via the Internet. In conjunction with the Company's VAN,
the IVAS permits participants in a trading community to select the desired
communications transport mechanism for individual documents of a typical EDI
transaction. IVAS is also offered as a product for license by end users. IVAS/P
is tailored to enable public operators to offer electronic commerce services in
their local market, while IVAS/E is intended for large enterprises directly
operating a server platform to link members of the enterprise's trading
community typically through a private intranet.

Mass Deployment Services. Harbinger offers mass deployment services to
trade organizations or hub companies within selected industries to establish and
promote the growth of trading communities. Initially, the Company develops
marketing and technical competence within an industry by learning the trading
customs and practices of their trading partners. The Company then defines the
software and computer system requirements for the promotion of electronic
commerce in the trading community. These definitions are used to develop
standard and customized software products to meet the needs of trading partners
within their own markets. These products are complemented by an array of
services to facilitate the adoption and implementation of EDI and other
electronic commerce services throughout that industry.

TrustedLink Procurement. Harbinger acquired the TrustedLink Procurement
product in connection with its acquisition of Acquion. TrustedLink Procurement
is a web-based electronic catalog which automates the processes surrounding the
procurement of non-production goods and services and other MRO items.
TrustedLink Procurement works in conjunction with a large company's enterprise
resource planning ("ERP") system to provide the ability to search for products,
compare similar product features and their latest pricing and lead time
information, and determine existing inventory levels. The company's purchasing
department can then initiate an order that will be routed through the ERP
system's purchasing module to either relieve inventory or place an order with
the appropriate supplier. Companies using TrustedLink Procurement can reduce
problems associated with "maverick" purchasing, better ensure enforcement of
negotiated pricing agreements and

-9-

<PAGE> 11
reduce multiple purchases from single suppliers. TrustedLink Procurement
includes Harbinger's Content Management services which aggregate supplier data
specific to a purchaser company so that only appropriate suppliers are presented
to the company.

Web Application Services. Harbinger offers an array of electronic commerce
products and services for the World Wide Web. This includes the design and
creation of customized web sites and applications and the hosting of these sites
and applications. The hosting service is designed for large companies that
desire high levels of security, reliability, and customer support. Other
services included are domain name registration, usage statistics, web
registration with Internet directories and Common Gateway Interface development.

EDI Outsourcing. Harbinger provides a full complement of EDI outsourcing
services to trading communities. Harbinger can provide complete outsourcing of
EDI operations for the hub company of a trading community, complete with onsite
personnel. The Company also offers remote management of an customer's EDI
translator where complete outsourcing is not desired, and Internet applications
development for trading hubs desiring customized EC solutions. To ease
implementation of EC by businesses reluctant to implement full scale EDI,
Harbinger also provides service bureau-type translation and mapping of raw
trading information to standard EDI formats and distribution to trading
partners.

SOLUTIONS FOR SMALL AND MID-SIZE BUSINESSES

EDI/400. Harbinger acquired its EDI/400 product through its merger with
Premenos. EDI/400 is currently the leading EDI software product for the
mid-range computer market, operating on the IBM AS/400 computer. The AS/400 is
the leading mid-range platform installed worldwide for use as either the main
computer for a small or mid-size business or as a departmental or dedicated
processor in a larger business.

TrustedLink Commerce. The TrustedLink Commerce product family is designed
for small to mid-sized companies which are new to electronic commerce. The
products perform the critical tasks to create, format and electronically
transmit and receive business documents and data between trading partners. The
products convert a customer's documents and data into EDI format, translate the
document to a standard form for use with the designated trading partner,
transmit the information to the Harbinger networks, the Internet, or other third
party networks and convert EDI documents and data received from their trading
partners into a format that may be interpreted by the user's personal computer.
Additionally, TrustedLink Guardian, which provides encryption and decryption for
secure transmission over the Internet, can be used with TrustedLink Commerce for
Windows 95, NT Workstation and TrustedLink Enterprise for UNIX, enabling a
variety of communication options.

STX Translation Software. These EDI translation software programs for DOS
and Windows allow companies to exchange business documents electronically. The
products are network independent with a large number of predefined network
connections available. They provide for automatic operation of EDI functions
without operator intervention, including scheduling to send and/or receive EDI
transactions, translating application files to an EDI format or translating EDI
files to an application-file format, and printing or deleting transactions.
Products in the STX family include STFORMS which enables the user to customize
the format of EDI documents, STBAR which allows the entry of data via bar code
scanning and STSECURITY which allows users to perform secure EDI over the
Internet. Additionally, STMAP mapping integration software allows users to
download EDI data seamlessly from an application already integrated with STX and
to move data electronically between business programs and EDI applications.

PowerDox and WebDox. PowerDox and WebDox are forms-based electronic
commerce products that enable large, "hub" companies to trade easily with small,
"spoke" trading partners who have been reluctant to implement full-scale EDI.
Forms-based products are typically marketed to larger companies who seek the
benefits of traditional EDI, but often have hundreds or thousands of smaller
trading partners who are unable or unwilling to invest in the infrastructure
required to support EDI. PowerDox Central is the Company's software that resides
on a server at the hub location and PowerDox Remote is client software that is
installed at a spoke trading partner. Custom forms are created analogous to the
forms promulgated by the various EDI standards bodies to meet the needs of the
hub when trading with the spokes in its trading community. WebDox operates in
the same way as PowerDox, but enables transmission of electronic forms over the
World Wide Web instead of a VAN or other communications medium.

Harbinger Express. Harbinger Express allows small and mid-size businesses
to perform EDI and electronic commerce using a web browser. The product is
designed for companies that conduct low EDI transaction volumes and have limited
requirements for integrating with other software applications. Harbinger Express
translates EDI documents into a

-10-

<PAGE> 12

hypertext markup language ("HTML") form which can be accessed by the trading
partner via the Internet. Harbinger Express users can also initiate EDI
documents simply by filling out a browser-based HTML form at the Harbinger
Express Website. The product converts the resulting document into EDI format and
transmits it to the receiving trading partner over the Harbinger networks or the
Internet.

TrustedLink INP. TrustedLink INP allows a user to establish an instant
presence on the Internet through the creation of a web site for the business
user. Users create their web site by entering information in an interview
format. The user can then preview their site using the included Netscape
Navigator software and publish the site on Harbinger's IVAS web hosting service.
TrustedLink INP includes an electronic catalog and purchase order system for
conducting commerce over the Internet.

Encryption Products. In connection with the acquisition of Premenos, the
Company acquired a broad range of encryption software products that enable banks
and other businesses to secure financial and other information transmitted over
internal and external networks. Customers include money center banks, large
corporations and government agencies interested in securing data transmitted
internally and externally. The encryption products, including Descrypt +,
Descrypt/EDI +, Psypher/EDI +, Fdesmac +, PIN Management System and others
operate on computer platforms ranging from PCs to UNIX and AS/400, DEC and
Tandem machines to MVS mainframes.

Trading Partner Packs and STX Forms Overlays. Harbinger develops custom
software templates, known as Trading Partner Packs and STX Forms Overlays, to
conform with guidelines and parameters identified by the major purchasers and
suppliers within various trading communities. For example, Harbinger can
customize its software to utilize only a specified subset of the ANSI X.12 or
EDIFACT standard that the major trading partners have defined for the trading
relationship. In this way, each trading partner is assured that only the data
elements that the trading partners expect are sent and received. The Company
distributes these customized products to help hub companies expand the
acceptance of EDI among trading partners. Harbinger maintains an extensive
library of Trading Partner Packs and STX Forms Overlays.

SERVICES FOR ENTIRE TRADING COMMUNITIES

Value-Added Network Services. Harbinger operates its VAN and IVAS as
value-added networks that provide the central point for document and data
receipt, translation and transmission and serve as a communication link between
the members of a trading community. Harbinger believes that its VAN is one of
the largest EDI networks in the United States as measured by the number of
billable subscribers. Harbinger offers trading partners a wide range of network
services including batch communication of purchase orders, invoices, shipping
confirmations, e-mail between trading partners and electronic catalogs. The
Company believes that its value-added network offers several advantages to
trading partners, including protocol conversion, transmission speed conversion,
flexibility in mail pick-up and drop-off times, and security and reliability.
The Company provides network services pursuant to subscriber agreements which
can be terminated by either party without cause at any time with 30 days written
notice. Customers are required to pay for services in accordance with the then
applicable service fees, which include set-up fees, monthly mailbox fees and
transaction fees.

Consulting and Programming Services. Harbinger technical consultants work
with trading communities to create the functional specifications to develop
computer programs necessary to integrate EDI with other software applications.
This process, known as "mapping," requires the identification of internal data
file and record formats along with the creation of functional specifications to
integrate EDI with trading partner applications. Harbinger also provides
software programming services to trading communities to create the application
interface programs necessary to translate data into and out of EDI standards.

Mass Deployment; Trading Partner Implementation and Certification.
Harbinger offers several programs to assist its hub customers in maximizing the
use of EDI and electronic commerce among its trading partners. These programs
communicate the advantages of EDI and electronic commerce to potential trading
partners of a major hub, regardless of size, and include information seminars,
support materials and the trading partner certification program. This program
assists trading partners in installing, testing and confirming EDI capabilities
with hub companies using the Harbinger networks.

Customer Training. Harbinger offers training classes for various stages of
EDI implementation by trading partners. These classes provide instruction on the
use of the Company software products operating either alone or together with
other application software. The classes explain the basics of EDI and its
integration with other application software and provide basic information for
creating application interface programs to connect trading partners.

-11-

<PAGE> 13
Electronic Catalogs. Harbinger offers its customers electronic catalog
technology, which allows purchasers to significantly streamline their purchasing
processes. This technology provides purchasers with online vendor catalogs in
real-time, offering up-to-date pricing, accurate descriptions, lead time and
other critical information, thereby saving companies the expense of maintaining
or otherwise accessing vendor information. Electronic catalog technology has
been applied in both supply chain management initiatives for production goods
and services, and maintenance, repair and operating supplies for non-production
goods and services. Harbinger provides its solution in the form of an
easy-to-use, web-based application which allows users to search and source data
from electronic vendor catalogs and from their own internal inventory.

Customer Support Services. Harbinger provides extensive customer service
and support to trading partners on the use and operation of its software
products and the business processes associated with electronic commerce. The
Company's support of EDI communication standards enables its customer support
personnel to perform file transfers to analyze problems on a customer's computer
system and to transmit software or EDI standard updates to a customer where
necessary.

SALES AND MARKETING

The Company's principal marketing strategy focuses on establishing
electronic trading communities and expanding the number of trading partners
using the Harbinger networks and software products. The Company seeks to target
trading communities composed of electronic trading partners in common industries
or markets conducting recurring business transactions. To achieve this
objective, the Company has developed a three-tiered sales and marketing program.
First, the Company identifies potential hub companies that either seek to
formulate an electronic commerce program, or that have made the decision to
implement an electronic commerce program. The Company representatives meet with
the hub company and discuss the procedure for enabling the hub company and/or
establishing electronic commerce relationships with trading partners. Second,
the Company contacts the hub company's trading partners through seminars and by
telemarketing, informing these parties of the electronic commerce requirements
of the hub company and implementation procedures. The Company schedules and
conducts half-day information seminars with potential trading partners of a
major hub company highlighting the benefits of electronic commerce, explaining
the hub organization's electronic commerce initiative, and demonstrating the
Company's products and services. Representatives of the hub company generally
attend these seminars to present their electronic commerce recommendations and
requirements. Third, Harbinger uses telemarketing, direct mail and advertising
activities that are targeted at potential customers who are not trading partners
of a specific hub. The Company's marketing and sales activities are centered
around the implementation of electronic commerce within these trading
communities through hub and spoke programs, particularly within selected
vertical markets.

Harbinger also markets and sells its products through distributors in the
United States and numerous international markets. Through the various marketing
programs, the Company has established alliances with distributors, application
software developers, systems integrators and value-added resellers of computer
products. The Company's objective is to integrate Harbinger's products with
those of its business partners and to promote distribution of Harbinger software
along with products and services sold by its Marketing Partners. The Company
fosters relationships with software vendors that bundle or imbed the Company's
products with their own products, or which resell the Company's products in
particular trading communities. Distributors typically sublicense the Company's
software to end-user customers and pay the Company a royalty, while co-marketers
typically forward leads to the Company in exchange for a percentage referral fee
if the sale is completed. The Company has relationships with partners such as
AT&T, Baan, Booz-Allen & Hamilton, Checkfree, Computer Associates, Control Data,
Coopers & Lybrand/Price Waterhouse, CyberCash, Daly & Wolcott, Data General,
Deloitte & Touche, Digital, Entrust Technologies, Ernst & Young, KPMG, GE
Information Systems, Hewlett Packard, IBM, JD Edwards, MAPICS, Maxware,
Microsoft, Nova Information Systems, Oracle, Peachtree Software, PeopleSoft,
SAP, Sprint, SSA, Sun, Sybase and Unisys for distribution of its products
worldwide.

As of March 1, 1998, the Company employed approximately 281 sales and
marketing personnel who concentrate their efforts in direct sales of the
Company's software products and services. The Company is in the process of
training and educating these new sales personnel on the range of its products
and services and obtaining from them an understanding of the new markets made
available through the acquisitions. Management believes that the addition of
these sales persons will allow the Company to sell many of its product and
service offerings into additional trading communities. The Company's
compensation strategies are designed to reward sales personnel based upon sales
to new customers and the sale of additional products and services to existing
customers.

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<PAGE> 14

PRODUCT DEVELOPMENT

The Company continues to assess the needs of trading partners in various
trading communities and to develop software programs and network services which
facilitate electronic commerce transactions over the Harbinger VAN and IVAS or
directly over standard telephone lines, the Internet, or private Intranets. The
Company's product development efforts currently are focused on providing a full
range of electronic commerce solutions to Harbinger customers. In addition, the
Company has incorporated into its products certain software licensed to it by
other software developers, where appropriate, to reduce product development
time. The Company is in the process of integrating software products and
technologies from acquired businesses with the Company's other software products
by combining the most favorable features of the products and maintaining common
translation software to facilitate the transfer of information and data between
operating environments. The Company's Internet products are being designed to
permit increased security and reliability for transmitting commercial data over
the Internet by using the Company's VAN and IVAS and supplementing it with
additional software encryption measures. These products may also allow Internet
users to access the Company's networks in order to provide a greater level of
reliability of accurate data transmission than otherwise available by using the
Internet alone.

The Company is in various stages of development for other software
applications, including electronic messaging, bar code integration to facilitate
the shipping and receiving of goods, an enhanced mapping product to allow users
to customize their EDI data to existing software applications, catalog-based
solutions, and foreign translations of the Company's software products for
distribution in international markets.

COMPETITION

The electronic commerce and EDI network services and computer software
markets are highly competitive. Numerous companies supply electronic commerce
network services, and several competitors target specific vertical markets such
as the pharmaceutical, agri-business, retail and transportation industries.
Additional competitors provide software designed to facilitate electronic
commerce and EDI communications. Several of the Company's most significant
competitors provide network services and related software products and services.
Other competitors provide PC-based computer programs and network services
specifically targeted to facilitate electronic banking transactions. These
competitors include banks and financial institutions that operate
privately-owned computer networks that link directly to their commercial
customers. The Company believes that many of its competitors have significantly
greater financial and personnel resources than the Company.

The market for Internet software and services is emerging and highly
competitive, ranging from small companies with limited resources to large
companies with substantially greater financial, technical and marketing
resources than the Company. The Company believes that existing competitors are
likely to expand the range of their electronic commerce services to include
Internet access, and that new competitors, which may include telephone companies
and media companies, are likely to increasingly offer services which utilize the
Internet to provide business-to-business data transmission services.
Additionally, several competitive network service providers allow their
subscribers access to the Internet, and several major software and
telecommunications companies have Internet access services. If the Internet
becomes an accepted method of electronic commerce, the Company could lose
network customers which would reduce recurring revenue from network services and
have a material adverse effect on the Company.

Competitors that offer products and/or services that compete with various
of the Company's products and services include, among others, IBM; AT&T;
Computer Associates International, Inc.; EDS; General Electric Information
Systems; QuickResponse Services, Inc.; Sterling Commerce, Inc., Aspect
Development, Inc., TSI International, Inc., Ariba Technologies, Inc., and a
joint venture between British Telecommunications Plc and MCI Communications
Corporation; as well as the internal programming staffs of various businesses
engaging in electronic commerce. The Company believes that the principal
competitive factors in the commercial electronic commerce industry include
responsiveness to customer needs, efficiency in the delivery of solutions, ease
of product use, quality of service, price and value. The Company believes it
competes favorably with regard to these factors.

INTELLECTUAL PROPERTY RIGHTS

In accordance with industry practice, the Company relies primarily on a
combination of copyright, patent and trademark laws, trade secrets,
confidentiality procedures and contractual provisions to protect its proprietary
rights. The Company seeks to protect its software, documentation and other
written materials principally under trade secret and copyright laws, which
afford only limited protection. The Company presently has one U.S. patent for an
electronic document interchange test

-13-

<PAGE> 15

facility, one U.S. patent for technology utilized in the Company's EDI/Open
product and U.S. patent applications pending for an EDI communication system and
for technology utilized in the Company's Templar product. In addition, the
Company has applied for foreign patents relating to technology utilized in the
Company's EDI/Open product and foreign patents relating to technology utilized
in the Company's Templar product. The Company owns a number of registered and
unregistered trademarks. In addition, the Company uses the trademark EDI/400 in
connection with its principal EDI product pursuant to a license agreement with
IBM that IBM may have the right to terminate on 60 days' prior written notice.
The Company has not received any indication from IBM that it intends to
terminate the agreement. The Company routinely enters into non-disclosure and
confidentiality agreements with employees, vendors, contractors, consultants and
customers. Despite the Company's efforts to protect its proprietary rights,
unauthorized parties may attempt to copy aspects of the Company's products or to
obtain and use information that the Company regards as proprietary. There can be
no assurance that the Company's means of protecting its proprietary rights will
be adequate or that competitors will not independently develop similar
technology. The laws of certain foreign countries in which the Company's
products are or may be developed, manufactured, licensed or distributed may not
protect the Company's products or intellectual property rights to the same
extent as do the laws of the United States and thus make the possibility of
piracy of the Company's technology and products more likely. The Company
believes that, due to the rapid pace of innovation within the electronic
commerce, EDI and related software industries, factors such as the technological
and creative skills of its personnel are more important in establishing and
maintaining a leadership position within the industry than are the various legal
protections of its technology. The Company does not believe that any of its
products infringe the proprietary rights of third parties. There can be no
assurance, however, that third parties will not claim infringement by the
Company with respect to current or future products. From time to time, the
Company has received notices which allege, directly or indirectly, that the
Company's products or other intellectual property rights infringe the rights of
others. The Company generally has been able to address these allegations without
material cost to the Company. The Company expects that software product
developers will increasingly be subject to infringement claims as the number of
products and competitors in electronic commerce grows and the functionality of
products in different industry segments overlaps. Any such claims, with or
without merit, could be time-consuming, result in costly litigation, cause
product shipment delays or require the Company to enter into royalty or
licensing agreements. Such royalty or licensing agreements, if required, may not
be able on terms acceptable to the Company or at all, which could have a
material adverse effect on the Company.

In its distribution agreements and certain of its customer or other
agreements, the Company agrees to indemnify certain parties, which may include
customers of parties with which the Company has contracted, for any expenses or
liabilities resulting from claimed infringements of patents, trademarks or
copyrights or certain other intellectual property rights of third parties. In
the event of litigation to determine the validity of any third-party claims,
such litigation, whether or not determined in favor of the Company, could result
in significant expense to the Company and divert the efforts of the Company's
technical and management personnel from productive tasks. In the event of an
adverse ruling in such litigation, the Company might be required to pay money
damages, to discontinue the use and sale of infringing products, to expend
significant resources to develop non-infringing technology or obtain licenses
from third parties. There can be no assurance that licenses from third parties
would be available on reasonable commercial terms, if at all. In the event of a
successful claim against the Company and the failure of the Company to develop
or license a substitute technology, the Company's business and operations
results would be materially adversely affected.

Third Party Technology. The Company incorporates in its products certain
software licensed to it by other software developers. These include the public
key cryptography software licensed by RSA Data Security, Inc. to Premenos which
is used in connection with Templar as well as certain database software used in
the Templar and EDI/Open products and certain graphical interface software used
in EDI products and Templar.

Premenos licensed the public key encryption technology pursuant to a
license agreement with RSA (the "RSA License"), which was transferred to
Harbinger in connection with the acquisition of Premenos. The RSA License grants
to the Company the non-exclusive, non-transferable, non-assignable limited
license to incorporate certain functionality within RSA's public key encryption
technology into a Premenos product solely to create a Bundled Product, as
defined in the RSA License, to reproduce and sublicense the Bundled Product, and
to use or authorize end-users to use the Bundled Product in conjunction with a
service bureau or internal network or to provide electronic communications,
messaging and similar services to third parties. A Bundled Product is defined as
a Company product which represents a significant functional and value
enhancement to the RSA technology designed to facilitate the secure exchange of
electronic information such as EDI documents over open networks. The RSA License
contains a number of restrictions regarding sublicensing of the Bundled Product
to act as a certification authority, as well as other restrictions regarding
end-user use, territory and distribution channels. The Company is prohibited
from selling the Bundled Product or any product with comparable functionality
which does not incorporate the RSA

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<PAGE> 16

encryption technology, except in certain circumstances, in which event the
Company is required to pay the otherwise applicable royalty fee to RSA.

The Company also incorporates database software licensed from Sybase, Inc.
into its Templar and certain versions of its EDI/Open products, and incorporates
graphical software licensed from third parties into the EDI products and
Templar. Although the Company seeks and generally receives assurances from
third-party software vendors as to such third party's intellectual property
rights and the non-infringement by such software of other parties' rights,
Harbinger's right to use such software could be impaired by third party claims.
In addition, certain agreements pursuant to which the Company uses such software
may be terminated in accordance with their terms in certain circumstances.

If the Company were deprived of the right to use software incorporated in
its products for any reason, there could be serious disruption to its business.

YEAR 2000 COMPLIANCE

Much publicity has been given to the "Year 2000" issue and the ability of
computer systems to function properly in the new millennium. The latest versions
of the Company's products are designed to be Year 2000 compliant. The Company is
in the process of determining the extent to which its earlier software products
as implemented in the Company's installed customer base are Year 2000 compliant,
as well as the impact of any non-compliance on the Company and its customers.
The Company currently anticipates that any problems resulting from non-compliant
products will be addressed through a combination of product modifications as
part of planned product enhancements and migration of customers to functionally
similar products which are Year 2000 compliant. Additional efforts are being
made to modify or replace other noncompliant software, systems and equipment
used by the Company internally, including third party software, before the year
1999. Further, the Company is aware of the risk that third parties, including
vendors and customers of the Company, will not adequately address the Year 2000
problem and the resultant potential adverse impact on the Company. The Company
projects that the majority of the remaining compliance effort will be absorbed
with the product enhancements planned for 1998, and thus that the Year 2000
problem will not have a material adverse impact on the Company's business,
operating results and financial condition, although there can be no assurance to
that effect. Regardless of whether the Company's products are Year 2000
compliant, there can be no assurance that customers will not assert Year 2000
related claims against the Company.

The Company believes that the purchasing patterns of customers and
potential customers may be affected by Year 2000 issues in a variety of ways.
Many companies are expending significant resources to correct or patch their
current software systems for Year 2000 compliance. These expenditures may result
in reduced funds available to purchase software products such as those offered
by the Company. Potential customers may also choose to defer purchasing Year
2000 compliant products until they believe it is absolutely necessary, thus
resulting in potentially stalled market sales within the industry. Conversely,
Year 2000 issues may cause other companies to accelerate purchases, thereby
causing an increase in short-term demand and a consequent decrease in long-term
demand for software products. Additionally, Year 2000 issues could cause a
significant number of companies, including current Company customers, to
reevaluate their current software needs, and as a result switch to other systems
or suppliers. Any of the foregoing could result in a material adverse effect on
the Company's business, operating results and financial condition.

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<PAGE> 17

EMPLOYEES

As of March 1, 1998, the Company had approximately 1,032 full-time
employees, including Atlas, Premenos, Acquion, SupplyTech and HNS employees.
Approximately 207 are technical personnel engaged in maintaining or developing
the Company's products or performing related services, approximately 281 are
marketing and sales personnel, approximately 389 are customer support and
operations personnel, and approximately 155 are involved in administration and
finance.

EXECUTIVE OFFICERS

The current executive officers of the Company and their ages as of March 1,
1998, are as follows:

NAME AGE POSITION
- ------------------------- --- -----------------------------------------------

C. Tycho Howle 48 Chairman of the Board of Directors

David T. Leach 47 Chief Executive Officer and Director

James C. Davis 45 President, Chief Operating Officer and Director

Joel G. Katz 34 Chief Financial Officer and Secretary

James M. Travers 46 President, Harbinger Software Division

David A. Meeker 55 Senior Vice President, North American Sales
Division

William van Nieuwenhuyzen 50 General Manager, Europe, Middle East and Africa

Mr. Howle has served as Chairman of the Board of Directors of the Company
and its predecessors since 1983. Mr. Howle also served as the Chief Executive
Officer until March 1997. From 1981 to 1983, Mr. Howle was a consultant with
McKinsey & Company, Inc., a management consulting firm. From 1979 to 1981, Mr.
Howle was a Product Line Manager with the Hewlett-Packard Company. From 1973 to
1977, he was a project manager with Booz, Allen & Hamilton's Applied Research
Unit.

Mr. Leach has served as Chief Executive Officer of the Company since March
1997 and a Director of the Company since February 1994. From February 1994 until
March 1997, he served as President and Chief Operating Officer of the Company,
and from June 1992 until February 1994, he was Group Executive Vice President,
Sales and Operations of the Company. He served as Senior Vice President of
Harbinger Computer Services, Inc. ("HCS") from 1988 until 1990 and was President
of HCS from 1990 until its reorganization into Harbinger Corporation in 1992.
Prior to joining HCS, Mr. Leach was a consultant with McKinsey & Company, Inc.

Mr. Davis has served as President and Chief Operating Officer of Harbinger
since March 1997 and a director of the Company since April 1997. From January
1995 until March 1997, he served as President of Harbinger Group Operations. He
served as President of the Company from January 1989 until December 1993, when
he resigned as an officer and director of the Company. He was Vice President and
Senior Vice President of HCS from May 1984 until December 1988.

Mr. Katz has served as Chief Financial Officer since January 1997 and
Secretary since February 1994. He served as Vice President, Finance from January
1995 until January 1997 and as Senior Director of Finance from February 1994 to
January 1995. He joined Harbinger in 1990 as Controller and became Director of
Finance in December 1991. From 1985 to 1990, he was a certified public
accountant in the audit division of Arthur Andersen LLP.

Mr. Travers, age 46, has served as President and General Manager of the
Company's Software Division since June 1997. From January 1994 until June 1997,
he served as President of Harbinger Enterprise Solutions. In this capacity, Mr.
Travers managed the business operations acquired from Texas Instruments, Inc.
("TI") Division. From 1978 through 1994, Mr. Travers served in various
managerial positions with TI, including Vice President for North American Field
Operations and

-16-

<PAGE> 18

most recently as Director of Business Development for TI's Worldwide
Applications Software Business and General Manager of TI's EDI business unit
from June 1992 through December 1994.

Mr. Meeker has served as Senior Vice President, North American Sales
Division since January 1997. From January 1995 until January 1997, he served as
Vice President, Sales of the Company and from September 1992 through December
1994, Mr. Meeker served as Vice President, Sales for National Data Corp., a
credit card processing company. From January 1992 through August 1992 Mr. Meeker
served as Vice President, Sales and Marketing for Software Alternatives, a
computer software and systems vendor. From January 1990 to January 1992, Mr.
Meeker served as Manager, U.S. Channel Operations for IBM.

Mr. van Nieuwenhuyzen has served as General Manager, Europe, Middle East
and Africa since October 1997 and was appointed an officer of Harbinger in
November 1997. From September 1995 to October 1997, he served as Manager of
Global Accounts, Europe, Middle East and Africa, of Hewlett-Packard EMEA SA, and
from May 1991 to September 1995, as Director of Computer Systems Organization of
Hewlett-Packard Netherlands BV.

GOVERNMENTAL REGULATIONS AND INDUSTRY STANDARDS

Government Regulatory and Industrial Policy Risks. The Company's network
services are transmitted to its customers over dedicated and public telephone
lines. These transmissions are governed by regulatory policies establishing
charges and terms for communications. Changes in the legislative and regulatory
environment relating to online services, EDI or the Internet access industry,
including regulatory or legislative changes which directly or indirectly affect
telecommunication costs or increase the likelihood of competition from regional
telephone companies or others, could have an adverse effect on the Company's
business. The Telecommunications Act of 1996 ("Act") amended the federal
telecommunications laws by lifting restrictions on regional telephone companies
and others competing with the Company and imposed certain restrictions regarding
obscene and indecent content communicated to minors over the Internet or through
interactive computer services. The Act set in motion certain events that will
lead to the elimination of restrictions on regional telephone companies
providing transport between defined geographic boundaries associated with the
provision of its own information services. This will enable regional telephone
companies to more readily compete with the Company by packaging information
service offerings with other services and providing them on a wider geographic
scale. While provisions of the Act prohibiting the use of a telecommunications
device or interactive computer service to send or display indecent material to
minors have been held by the U.S. Supreme Court to be unconstitutional, there
can be no assurance that future legislative or regulatory efforts to limit use
of the Internet in a manner harmful to Harbinger will not be successful. The
Clinton Administration has announced an initiative to establish a framework for
global electronic commerce. Also, some countries, such as Germany, have adopted
laws regulating aspects of the Internet, and there are a number of bills
currently being considered in the United States at the federal and state levels
involving encryption and digital signatures, all of which may impact Harbinger.
Harbinger cannot predict the impact, if any, that the Act and future court
opinions, legislation, regulations or regulatory changes in the United States or
other countries may have on its business. Management believes that the Company
is in compliance with all material applicable regulations. Harbinger's
TrustedLink Guardian product and the Templar product both incorporate encryption
technology which is subject to U.S. export control regulations. Although both
products are currently exportable under licenses granted by the Commerce
Department, government regulation in this area is subject to frequent change and
there can be no assurance that these products will remain exportable.

ITEM 2. PROPERTIES.

The Company occupies approximately 68,000 square feet of office space in
Atlanta, Georgia under leases expiring from 1998 through 2003. In Spring 1998,
Company's Atlanta locations will consolidate into a new facility under a lease
expiring in 2008, plus options to extend the lease term. The Company has leased
approximately 88,000 square feet and has an option for approximately an
additional 23,000 square feet in this new location which will serve as the
Company's headquarters and data center. The Company also has offices in
Michigan, Texas, California, South Carolina, Oregon, Pennsylvania and Canada,
occupying approximately 38,700, 20,696, 58,585, 21,550, 2,100, 215 and 4,182
square feet, respectively. In addition, the Company also has offices in The
Netherlands, Germany, the United Kingdom, France, Italy and Mexico occupying
approximately 19,375, 14,639, 7,600, 2,390, 2,228 and 1,529 square feet,
respectively. The Company's offices are generally located in suburban office
park environments.

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<PAGE> 19

ITEM 3. LEGAL PROCEEDINGS.

The Company is not a party to any material legal proceedings. From time to
time, the Company is involved in various routine legal proceedings incidental to
the conduct of its business.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

On December 18, 1997, the Company held a special meeting of its
shareholders to approve: (i) the merger with Premenos Technology Corp., a
Delaware corporation ("Premenos"), pursuant to the terms of the Merger
Agreement, dated October 23, 1997 by and among the Company, Olympic Subsidiary
Corporation, a Delaware corporation and a wholly-owned subsidiary of the Company
("Subsidiary"), and Premenos; the merger of Subsidiary with and into Premenos in
accordance with the terms of the Merger Agreement; and the issuance of shares of
Harbinger common stock under the Merger Agreement; and (ii) an increase in the
number of shares of Company common stock available for issuance under the
Company's 1996 Stock Option Plan from 4,125,000 to 5,125,000, an increase of
1,000,000 shares.

The following is a summary of the voting results on each matter:

Approval of the Merger Agreement and related transactions with Premenos:
<TABLE>
<CAPTION>
For Against Withheld
--- ------- --------
<S> <C> <C>
16,616,673 15,771 1,567

Approval of the Amendment to Company's 1996 Stock Option Plan:

<CAPTION>
For Against Withheld
--- ------- --------
<S> <C> <C>
13,346,489 3,645,826 10,700
</TABLE>

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.

Harbinger's Common Stock is traded on the Nasdaq National Market under the
symbol "HRBC". The price per share reflected in the table below represents the
range of low and high closing sale prices for the Company's Common Stock as
reported by the Nasdaq Stock Market for the quarters indicated:

QUARTER ENDED HIGH PRICE LOW PRICE
- --------------------- ---------- ---------
<S> <C> <C>
March 31, 1996 $15 5/8 $10 1/8
June 30, 1996 $18 1/2 $10
September 30, 1996 $18 5/8 $13 1/4
December 31, 1996 $19 1/4 $16 5/8
March 31, 1997 $40 3/4 $21 1/4
June 30, 1997 $32 1/2 $18 1/4
September 30, 1997 $39 1/4 $26
December 31, 1997 $42 1/2 $19 9/16

</TABLE>

The closing sale price of the Company's Common Stock as reported by the
Nasdaq Stock Market on March 13, 1998 was $35.375.

-18-

<PAGE> 20

The number of shareholders of record of the Company's Common Stock as of
March 8, 1998, was approximately 230.

The Company has never paid cash dividends on its capital stock. The Company
currently intends to retain any earnings for use in the business and does not
anticipate paying any cash dividends in the foreseeable future. In addition, the
Company's bank line of credit prohibits payments of cash dividends without prior
bank approval. The Company declared a 3-for-2 stock split in the form of a stock
dividend which was paid on January 31, 1997 to shareholders of record as of
January 17, 1997.

Pursuant to a Debenture Purchase Agreement dated January 1, 1997, the
Company completed its purchase from BellSouth Telecommunications, Inc. ("BST")
of a $3.0 million Subordinated Convertible Debenture (the "Debenture") of
Harbinger NET Services, LLC ("HNS"). After completing the purchase and assuming
the Company's conversion of the Debenture, the Company owned approximately 93%
of HNS. The Company acquired the Debenture for a purchase price consisting of
(i) $1.5 million in cash, and (ii) 242,288 shares of Common Stock. The shares of
Common Stock issued to acquire the Debenture were issued pursuant to an
exemption from registration under Section 4(2) of the Securities Act of 1933, as
amended (the "Act"), in reliance, in part, upon the representations and
warranties set forth in the Debenture Purchase Agreement.

On January 3, 1997, the Company issued 2,400,000 shares of Common Stock to
the shareholders of Supply Tech, Inc. and its affiliates ("SupplyTech") in
exchange for all of the outstanding shares of SupplyTech (the "STI
Acquisition"). The shares of common stock issued in the STI Acquisition were
issued pursuant to an exemption from registration under Section 4(2) of the
Securities Act in reliance, in part, upon the representations and warranties set
forth in the STI Acquisition agreement.

On May 1, 1997, the Company issued 19,757 shares of Common Stock to the
shareholders of Smart Solutions for Electronic Commerce, Inc. ("Smart") in
exchange for all the outstanding shares of Smart (the "Smart Acquisition"). The
Company acquired Smart for the aggregate consideration of such shares plus the
assumption of $223,000 in liabilities. The shares of common stock issued in the
Smart Acquisition were issued pursuant to an exemption from registration under
Section 4(2) of the Securities Act in reliance, in part, upon the
representations and warranties set forth in the Smart Acquisition agreement.

In March 1996, the Company acquired Ntex Holding B.V. ("Ntex") for $8.0
million, consisting of 107,780 shares of Common Stock, warrants to acquire
18,750 shares of Common Stock, $3.2 million in cash and the assumption of $3.5
million in liabilities, plus an earnout to be paid in shares of Common Stock
during 1997. The Company issued 10,897 shares to the former shareholders of Ntex
in April 1997 pursuant to an exemption from registration under Section 4(2) of
the Securities Act in reliance, in part, upon the representations and warranties
set forth in the Ntex acquisition agreement.

ITEM 6. SELECTED FINANCIAL DATA.

The information set forth under the section entitled "Selected Financial
Data" on page 1 of the Company's 1997 Annual Report to Shareholders is
incorporated herein by reference and filed herewith as part of Exhibit 13.1.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

The information set forth under the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Company's 1997 Annual Report to Shareholders is incorporated herein by reference
and filed herewith as a part of Exhibit 13.1.

-19-

<PAGE> 21

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The quarterly results of operations set forth in the Company's 1997 Annual
Report to Shareholders and the following financial statements, related notes
thereto and report of independent auditors set forth in the Company's 1997
Annual Report to Shareholders are incorporated herein by reference and filed
herewith as a part of Exhibit 13.1.

Consolidated Balance Sheets as of December 31, 1997 and 1996.

Consolidated Statements of Operations for the years ended December 31, 1997,
1996 and 1995.

Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1997, 1996 and 1995.

Consolidated Statements of Cash Flows for the years ended December 31,
1997, 1996 and 1995.

Notes to Consolidated Financial Statements.

Independent Auditors' Report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

Certain information required by this item is incorporated by reference from
the information contained in the Company's Proxy Statement for the Annual
Meeting of Shareholders expected to be filed with the Commission on March 31,
1998 under the captions "Proposal 5 - Ratification of Selection of Independent
Auditors."

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Certain information required by this item is incorporated by reference from
the information contained in the Company's Proxy Statement for the Annual
Meeting of Shareholders expected to be filed with the Commission on March 31,
1998 under the captions "Election of Directors," "Executive Officers" and
"Section 16(a) Beneficial Ownership Reporting Compliance."

ITEM 11. EXECUTIVE COMPENSATION.

The information required by this item will be included in the Company's
Proxy Statement for the Annual Meeting of Shareholders expected to be filed with
the Commission on March 31, 1998 under the caption "Executive Compensation" and
is incorporated by reference herein.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The information required by this item will be included in the Company's
Proxy Statement for the Annual Meeting of Shareholders expected to be filed with
the Commission on March 31, 1998 under the caption "Security Ownership of
Certain Beneficial Owners and Management" and is incorporated by reference
herein.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information required by this item will be included in the Company's
Proxy Statement for the Annual Meeting of Shareholders expected to be filed with
the Commission on March 31, 1998 under the caption "Certain Transactions" and is
incorporated by reference herein.

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<PAGE> 22

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a) The following documents are filed as part of this report:

1. Financial Statements

The financial statements of Harbinger Corporation and report of
independent auditors as set forth under Item 8 of this report on Form 10-K are
incorporated herein by reference.

2. Financial Statement Schedules

(i) The following Financial Statement Schedule of Harbinger
Corporation for the Years Ended December 31, 1995, 1996 and 1997 is filed as a
part of this Report on Form 10-K and should be read in conjunction with the
Consolidated Financial Statements, and related notes thereto, of Harbinger
Corporation.

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<PAGE> 23

HARBINGER CORPORATION AND SUBSIDIARIES

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

Amount
Balance at Charged to Recorded Charged to Balance at
Beginning of Costs and Due to Other End of
Description Period Expenses Acquisitions Accounts Deductions Period
- ------------------------------------ ------------ ---------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Allowance for returns and doubtful
accounts (in thousands):
1995....................... $ 635 613 - 1,309(B) (1,616)(A) $ 941
1996....................... $ 941 640 325 2,392(B) (1,873)(A) $ 2,425
1997....................... $2,425 1,561 - 3,148(B) (4,344)(A) $ 2,790

Allowance for net deferred tax assets
(in thousands):
1995....................... $ 227 - - - (227) $ -
1996....................... $ - 1,494 3,304 - - $ 4,798
1997....................... $4,798 13,509 4,364 - - $22,671
</TABLE>

- --------------

(A) Deductions represent write-offs of doubtful accounts and sales returns
charged against the allowance.

(B) Deductions from revenues for sales returns and allowances.

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Harbinger Corporation:

Under date of February 14, 1998, we reported on the consolidated balance
sheets of Harbinger Corporation and subsidiaries as of December 31, 1997
and 1996 and the related consolidated statements of operations,
shareholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1997, as contained in the Harbinger
Corporation 1997 Annual Report to Shareholders. We did not audit the 1996
and 1995 consolidated financial statements of Premenos Technology Corp. and
subsidiaries, or the 1995 combined financial statements of SupplyTech, Inc.
and SupplyTech International, LLC, which statements reflect total assets
constituting 64% in 1996 of the related consolidated total, and total
revenues constituting 38% and 67% in 1996 and 1995, respectively, of the
related consolidated totals. Those statements were audited by other
auditors whose reports have been furnished to us, and our opinion, insofar
as it relates to the amounts included for Premenos Technology Corp. and
subsidiaries for 1996 and 1995, and for SupplyTech, Inc. and SupplyTech
International, LLC for 1995, is based solely on the reports of the other
auditors. In connection with our audits of the aforementioned consolidated
financial statements, we also audited the related financial statement
schedule for each of the years in the three-year period ended December 31,
1997 listed in Item 14(a)(2). This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to
express an opinion on this financial statement schedule based on our
audits.

In our opinion, based on our audits and the reports of the other auditors
with respect to 1996 and 1995, such financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information set forth
therein.

/s/ KPMG Peat Marwick LLP
-------------------------------------
KPMG PEAT MARWICK LLP

Atlanta, Georgia
February 14, 1998

Schedules not listed above have been omitted because they are not
applicable or the information required to be set forth herein is included in the
Financial Statements or notes thereto.

(ii) The following Reports of Independent Public Accountants with
respect to the Company's statements of operations, shareholders' equity and cash
flows for the year ended December 31, 1996 and 1995 is filed as a part of this
Report on Form 10-K and should be read in conjunction with the Financial
Statements, and related notes thereto, of Harbinger Corporation.

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<PAGE> 24

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
Premenos Technology Corp.:

We have audited the consolidated balance sheet of Premenos Technology Corp. and
subsidiaries (the Company) as of December 31, 1996, and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
two years in the period then ended. We have also audited the Company's financial
statement schedule of Valuation and Qualifying Accounts included in the
Company's 1996 Form 10-K. These consolidated financial statements and the
financial statement schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated financial
statements and the financial statement schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Premenos Technology Corp. and subsidiaries as of December 31, 1996, and the
consolidated results of their operations and their cash flows for each of the
two years in the period then ended in conformity with generally accepted
accounting principles. In addition, in our opinion, the financial statement
schedule, referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information required to be included therein.

/s/ Coopers & Lybrand L.L.P.
----------------------------------------
COOPERS & LYBRAND L.L.P.

San Francisco, California
January 31, 1997, except for Paragraph 3 of Note 16
as to which the date is March 16, 1997

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<PAGE> 25

Independent Auditors' Report

To the Board of Directors and Shareholders
SupplyTech, Inc. and SupplyTech International, LLC:

We have audited the combined statements of operations,
shareholders' equity (deficit) and cash flows of SupplyTech, Inc. and
SupplyTech International, LLC for the year ended December 31, 1995.
These combined financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these combined financial statements based on our audits.

We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the combined
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the combined financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
combined financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the combined financial statements referred to
above present fairly, in all material respects, the results of
operations and cash flows of SupplyTech, Inc. and SupplyTech
International, LLC for the year ended December 31, 1995 in conformity
with generally accepted accounting principles

/s/ Ciulla, Smith & Dale, LLP
-----------------------------------------
CIULLA, SMITH & DALE, LLP

Southfield, Michigan
February 19, 1997

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<PAGE> 26

(b) Reports on Form 8-K. The Company filed the following report on Form
8-K during the quarter ended December 31, 1997.

(i) Report on Form 8-K/A filed October 29, 1997 with respect to
Item 7, Financial Statements for Acquion, Inc. as follows: Independent
Auditors' Report, Balance Sheet as of October 31, 1996, Statement of
Operations for the Year Ended October 31, 1996, Statement of Shareholder's
Deficit for the Year Ended October 31, 1996, Statement of Cash Flows for
the Year Ended October 31, 1996, and Notes to Financial Statements for the
Year Ended October 31, 1996, Unaudited Balance Sheet as of August 22,
1997, Unaudited Statements of Operations for the Periods Ended August 22,
1996 and 1997, and Unaudited Statements of Cash Flow for the Periods Ended
August 22, 1996 and 1997.

(ii) Report on Form 8-K filed October 29, 1997 with respect to Item
2, acquisition of API Systems, Ltd. and Item 5, execution of a Merger
Agreement, dated as of October 23, 1997 among Premenos Technology Corp.,
Olympic Subsidiary Corporation and the Company filed on October 29, 1997,
and Item 7(c), certain exhibits relating to the same.

(iii) Report on Form 8-K filed on December 8, 1997 with respect to
the acquisition of Premenos Technology Corp. and exchange of Premenos
stock options for Company stock options pursuant to Item 5 of the Form and
Item 7(c) of the Form.

(iv) Report on Form 8-K with respect to completion of the
acquisition of Premenos Technology Corp. dated December 31, 1997 and filed
January 2, 1998, reporting completion of the acquisition under Item 2,
filing of the following financial statements under Item 7(a): Consolidated
Balance Sheets as of December 31, 1996 and 1995, Consolidated Statements
of Operations for the Years Ended December 31, 1996, 1995 and 1994,
Consolidated Statements of Stockholders Equity for the Years Ended
December 31, 1996, 1995 and 1994, Consolidated Statements of Cash Flows
for the Years Ended December 31, 1996, 1995 and 1994, and Notes to
Consolidated Financial Statements, Condensed Consolidated Balance Sheet as
of September 30, 1997, Condensed Consolidated Statement of Operations for
the Nine Months Ended September 30, 1997, Condensed Consolidated Statement
of Cash Flows for the Nine Months Ended September 30, 1997, and Notes to
Condensed Consolidated Financial Statements; and other exhibits.

(c) Exhibits. The following exhibits are filed as part of, or are
incorporated by reference into, this report on Form 10-K:

EXHIBIT
NUMBER DESCRIPTION
- ------ -----------

2.1 Merger Agreement, dated as of October 23, 1997, by and
between the Company, Olympic Subsidiary Corporation and
Premenos Technology Corp. (incorporated by reference to
Exhibit 2.2 to the Company's Current Report on Form 8-K
dated October 23, 1997).

2.2 Stock Purchase Agreement among the Company, Fluor
Corporation and FD Engineers and Constructors, Inc.,
dated as of August 22, 1997 (incorporated by reference
to Exhibit 2.1 filed with the Company's Current Report
on Form 8-K dated August 22, 1997).

2.3 Merger Agreement dated January 3, 1997 among Supply
Tech, Inc., Harbinger Acquisition Corporation II and
the Company (incorporated by reference to Exhibit 2.1
filed with the Company's Current Report on Form 8-K
dated January 16, 1997).

3.1 Amended and Restated Articles of Incorporation of the
Company (incorporated by reference to Exhibit 3.1 to
the Company's Registration Statement on Form S-1 (File
33-93804) declared effective on August 22, 1995).

3.2 Amended and Restated Bylaws of the Company
(incorporated by reference to Exhibit 3.2 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1996).

4.1 Provisions of the Amended and Restated Articles of
Incorporation and Amended and Restated Bylaws of the
Company defining rights of the holders of the Common
Stock (incorporated by reference to Exhibits 3.1
through 3.4 to Harbinger's Registration Statement on
Form S-1 (File No. 33-93804) declared effective on
August 22, 1995).

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<PAGE> 27

4.2 Specimen Stock Certificate (incorporated by reference
to Exhibit 4.3 to the Company's Registration Statement
on Form S-1 (File 33-93804)).

4.3 Form of Registration Rights Agreement effective March
29, 1996 between each of the Harbinger N.V.
Shareholders and the Company (incorporated by reference
to Exhibit 2(a) filed with Harbinger's Current Report
on Form 8-K dated May 3, 1996).

4.4 Form of Warrant issued to former Harbinger N.V.
Shareholders on July 18, 1996 (incorporated by
reference to Exhibit 4.5 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1996).

4.5 Form of Warrant issued to former INOVIS Shareholders on
April 19, 1996 (incorporated by reference to Exhibit
2(a) filed with the Company's Current Report on Form
8-K dated July 1, 1996).

4.6 Registration Rights Agreement between the Company,
Allan Gray, Philip Bird, Tom Reynolds, C.G. Summers,
and Lancashire Enterprises Venture Fund, dated as of
October 23, 1997 (incorporated by reference to Exhibit
4.1 of Harbinger's Current Report on Form 8-K dated
October 23, 1997 and filed with the Commission on
October 29, 1997).

10.1 Promissory Note for $10,000,000 payable by the Company
to NationsBank of Georgia, N.A. dated April 16, 1997
(incorporated by reference to Exhibit 10.1 filed to the
Company's Registration Statement on Form S-3 (File No.
333-30501) declared effective on July 3, 1997).

10.2 Loan Agreement between the Company and NationsBank of
Georgia, N.A. dated as of August 15, 1994, with First
Amendment dated as of May 2, 1995 (incorporated by
reference to Exhibit 10.13 filed to the Company's
Registration Statement on Form S-1 (File 33-93804)
declared effective on August 22, 1995).

10.3 Second Amendment to Loan Agreement between the Company
and NationsBank, National Association (South) dated
April 16, 1997 (incorporated by reference to Exhibit
10.3 filed to the Company's Registration Statement on
Form S-3 (File No. 333-30501) declared effective on
July 3, 1997).

10.4 Employment Agreement between the Company and Mr. James
M. Travers effective as of February 1, 1995 with Letter
from the Company to Mr Travers dated December 27, 1994
(incorporated by reference to Exhibit 10.14 filed to
the Company's Registration Statement on Form S-1 (File
33-93804) declared effective on August 22, 1995).

10.5 Employment Agreement between the Company and Mr. James
C. Davis effective as of July 1, 1997 (incorporated by
reference to Exhibit 10.5 to the Company's Registration
Statement on Form S-3 (File No. 33-31191).

10.6 Employment Agreement between the Company and Mr. C.
Tycho Howle effective as of July 1, 1997 (incorporated
by reference to Exhibit 10.13 to the Company's
Registration Statement on Form S-3 (File No. 33-31191).

-25-
<PAGE> 28
10.7 Employment Agreement between the Company and Mr. Joel
G. Katz effective as of March 7, 1994 (incorporated by
reference to Exhibit 10.26 filed to the Company's
Registration Statement on Form S-1 (File No. 33-93804)
declared effective August 22, 1995).

10.8 Employment Agreement between the Company and Mr. David
T. Leach effective as of July 1, 1997 (incorporated by
reference to Exhibit 10.15 to the Company's
Registration Statement on Form S-3 (File No. 33-31191).

10.9 Employment Agreement between the Company and Mr. David
Meeker effective as of December 21, 1994 (incorporated
by reference to Exhibit 10.21 to the Company's
Registration Statement on Form S-1 (File No. 33-93804).

10.10 Employment Agreement between the Company and Mr. Willem
van Nieuwenhuyzen effective August 1, 1997
(incorporated by reference to Exhibit 99A filed with
the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997).

10.11 Amended and Restated 1993 Stock Option Plan for
Nonemployee Directors effective as of August 11, 1993
(incorporated by reference to Exhibit 10.33 filed to
the Company's Registration Statement on Form S-1 (File
33-93804) declared effective on August 22,1995).

10.12 First Amendment to Harbinger Corporation Amended and
Restated 1989 Stock Option Plan (incorporated by
reference to Exhibit 10.50 to the Company's Annual
Report on Form 10-K for the year ended December 31,
1995).

10.13 Third Amendment to Amended and Restated 1993 Stock
Option Plan for Nonemployee Directors (incorporated by
reference to Exhibit 10.17 to the Company's Annual
Report on Form 10-K for the year ended December 31,
1996).

10.14 Lease between the Company and 1277 Lenox Park
Boulevard, LLC for office located at 1277 Lenox Park
Boulevard, Atlanta, Georgia dated October 10, 1997
(incorporated by reference to Exhibit 99c filed to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997).

10.15 Amended and Restated 1989 Stock Option Plan effective
as of April 15, 1992 (incorporated by reference to
Exhibit 10.39 filed to the Company's Registration
Statement on Form S-1 (File 33-93804) declared
effective on August 22, 1995).

10.16 Form of Indemnification Agreement between the Company
and Directors (incorporated by reference to Exhibit
10.43 filed to the Company's Registration Statement on
Form S-1 (File 33-93804) declared effective on August
22, 1995).

10.17 Harbinger Corporation 1996 Stock Option Plan
(incorporated by reference to Exhibit 10.48 to the
Company's Annual Report on Form 10-K for the year ended
December 31. 1995).

10.18 First Amendment to Harbinger Corporation 1996 Stock
Option Plan (incorporated by reference to Exhibit 10.26
to the Company's Annual Report on Form 10-K for the
year ended December 31, 1996).

-26-
<PAGE> 29

10.19 Second Amendment to the 1996 Harbinger Corporation
Stock Option Plan (incorporated by reference to the
Company's Form S-8 Registration Statement (File
333-30219) filed June 27, 1997).

10.20 Third Amendment to the 1996 Harbinger Corporation Stock
Option Plan (incorporated by reference to the Company's
Form S-8 Registration Statement (File 333-42959) filed
December 22, 1997).

10.21 Amended and Restated Harbinger Corporation Employee
Stock Purchase Plan (incorporated by reference to
Exhibit 10.28 to the Company's Annual Report on Form
10-K for the year ended December 31, 1995).

10.22 First Amendment to Harbinger Corporation Employee Stock
Purchase Plan (incorporated by reference to Exhibit
10.28 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995).

10.23 Alliance Agreement dated July 21, 1995 between Systems
Software Associates, Inc. and the Company (incorporated
by reference to Exhibit 10.47 to the Company's
Registration Statement on Form S-1 (File 33-93804)).

13.1 The following financial information included within the
Company's Annual Report to Shareholders for the fiscal
year ended December 31, 1997:

(i) Selected Financial Data;

(ii) Quarterly Results of Operations;

(iii) Management's Discussion and Analysis of Financial Condition
and Results of Operations;

(iv) Consolidated Financial Statements, Notes to Consolidated
Financial Statements, and Independent Auditors' Report.

21.1 List of Subsidiaries of Company.

23.1 Consent of KPMG Peat Marwick LLP.

23.2 Consent of Coopers & Lybrand L.L.P.

23.3 Consent of Ciulla, Smith & Dale, LLP.

27.1 Financial Data Schedule for the period ended December 31, 1997
(for SEC use only).

27.2 Financial Data Schedule for the period ended December 31, 1996
(for SEC use only).

27.3 Financial Data Schedule for the period ended December 31, 1995
(for SEC use only).

99.1 Safe Harbor Compliance Statement.

-27-
<PAGE> 30

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on the 26th day of
March, 1998.

HARBINGER CORPORATION

By: /s/ David T. Leach
----------------------------------
David T. Leach
Chief Executive Officer

-28-
<PAGE> 31

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.

SIGNATURE TITLE DATE

/s/ C. Tycho Howle Chairman of the Board of March 26, 1998
- ------------------------ Directors
C. Tycho Howle

/s/ David T. Leach Chief Executive Officer; March 26, 1998
- ------------------------ Director (Principal Executive
David T. Leach Officer)

/s/ James C. Davis President; Chief Operating March 26, 1998
- ------------------------ Officer; Director
James C. Davis

/s/ Joel G. Katz Chief Financial Officer; March 26, 1998
- ------------------------ Secretary; (Principal Financial
Joel G. Katz Officer; Principal Accounting
Officer)

/s/ William D. Savoy Director March 26, 1998
- ------------------------
William D. Savoy

/s/ William B. King Director March 26, 1998
- ------------------------
William B. King

/s/ Stuart L. Bell Director March 26, 1998
- ------------------------
Stuart L. Bell

/s/ Benn R. Konsynski Director March 26, 1998
- ------------------------
Benn R. Konsynski

/s/ Ad Nederlof Director March 26, 1998
- ------------------------
Ad Nederlof

/s/ Klaus Neugebauer Director March 26, 1998
- ------------------------
Klaus Neugebauer

/s/ David Hildes Director March 26, 1998
- ------------------------
David Hildes

/s/ John D. Lowenberg Director March 26, 1998
- ------------------------
John D. Lowenberg

-29-
<PAGE> 32

EXHIBIT
NUMBER DESCRIPTION PAGE #
------- ------------------------------------------------- ------

2.1 Merger Agreement, dated as of October 23, 1997,
by and between the Company, Olympic Subsidiary
Corporation and Premenos Technology Corp.
(incorporated by reference to Exhibit 2.2 to the
Company's Current Report on Form 8-K dated
October 23, 1997).

2.2 Stock Purchase Agreement among the Company, Fluor
Corporation and FD Engineers and Constructors,
Inc., dated as of August 22, 1997 (incorporated
by reference to Exhibit 2.1 filed with the
Company's Current Report on Form 8-K dated August
22, 1997).

2.3 Merger Agreement dated January 3, 1997 among
Supply Tech, Inc., Harbinger Acquisition
Corporation II and the Company (incorporated by
reference to Exhibit 2.1 filed with the Company's
Current Report on Form 8-K dated January 16,
1997).

3.1 Amended and Restated Articles of Incorporation of
the Company (incorporated by reference to Exhibit
3.1 to the Company's Registration Statement on
Form S-1 (File 33-93804) declared effective on
August 22, 1995).

3.2 Amended and Restated Bylaws of the Company
(incorporated by reference to Exhibit 3.2 to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1996).

4.1 Provisions of the Amended and Restated Articles
of Incorporation and Amended and Restated Bylaws
of the Company defining rights of the holders of
the Common Stock (incorporated by reference to
Exhibits 3.1 through 3.4 to Harbinger's
Registration Statement on Form S-1 (File No.
33-93804) declared effective on August 22, 1995).

4.2 Specimen Stock Certificate (incorporated by
reference to Exhibit 4.3 to the Company's
Registration Statement on Form S-1 (File
33-93804)).

4.3 Form of Registration Rights Agreement effective
March 29, 1996 between each of the Harbinger N.V.
Shareholders and the Company (incorporated by
reference to Exhibit 2(a) filed with Harbinger's
Current Report on Form 8-K dated May 3, 1996).

4.4 Form of Warrant issued to former Harbinger N.V.
Shareholders on July 18, 1996 (incorporated by
reference to Exhibit 4.5 to the Company's Annual
Report on Form 10-K for the year ended December
31, 1996).

4.5 Form of Warrant issued to former INOVIS
Shareholders on April 19, 1996 (incorporated by
reference to Exhibit 2(a) filed with the
Company's Current Report on Form 8-K dated July
1, 1996).

4.6 Registration Rights Agreement between the
Company, Allan Gray, Philip Bird, Tom Reynolds,
C.G. Summers, and Lancashire Enterprises Venture
Fund, dated as of October 23, 1997 (incorporated
by reference to Exhibit 4.1 of Harbinger's
Current Report on Form 8-K dated October 23, 1997
and filed with the Commission on October 29,
1997).

-30-

<PAGE> 33

10.1 Promissory Note for $10,000,000 payable by the
Company to NationsBank of Georgia, N.A. dated
April 16, 1997 (incorporated by reference to
Exhibit 10.1 filed to the Company's Registration
Statement on Form S-3 (File No. 333-30501)
declared effective on July 3, 1997).

10.2 Loan Agreement between the Company and
NationsBank of Georgia, N.A. dated as of August
15, 1994, with First Amendment dated as of May 2,
1995 (incorporated by reference to Exhibit 10.13
filed to the Company's Registration Statement on
Form S-1 (File 33-93804) declared effective on
August 22, 1995).

10.3 Second Amendment to Loan Agreement between the
Company and NationsBank, National Association
(South) dated April 16, 1997 (incorporated by
reference to Exhibit 10.3 filed to the Company's
Registration Statement on Form S-3 (File No.
333-30501) declared effective on July 3, 1997).

10.4 Employment Agreement between the Company and Mr.
James M. Travers effective as of February 1, 1995
with Letter from the Company to Mr Travers dated
December 27, 1994 (incorporated by reference to
Exhibit 10.14 filed to the Company's Registration
Statement on Form S-1 (File 33-93804) declared
effective on August 22, 1995).

10.5 Employment Agreement between the Company and Mr.
James C. Davis effective as of July 1, 1997
(incorporated by reference to Exhibit 10.5 to the
Company's Registration Statement on Form S-3
(File No. 33-31191).

10.6 Employment Agreement between the Company and Mr.
C. Tycho Howle effective as of July 1, 1997
(incorporated by reference to Exhibit 10.13 to
the Company's Registration Statement on Form S-3
(File No. 33-31191).

10.7 Employment Agreement between the Company and Mr.
Joel G. Katz effective as of March 7, 1994
(incorporated by reference to Exhibit 10.26 filed
to the Company's Registration Statement on Form
S-1 (File No. 33-93804) declared effective August
22, 1995).

10.8 Employment Agreement between the Company and Mr.
David T. Leach effective as of July 1, 1997
(incorporated by reference to Exhibit 10.15 to
the Company's Registration Statement on Form S-3
(File No. 33-31191).

10.9 Employment Agreement between the Company and Mr.
David Meeker effective as of December 21, 1994
(incorporated by reference to Exhibit 10.21 to
the Company's Registration Statement on Form S-1
(File No. 33-93804).

10.10 Employment Agreement between the Company and Mr.
Willem van Nieuwenhuyzen effective August 1, 1997
(incorporated by reference to Exhibit 99A filed
with the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997).

10.11 Amended and Restated 1993 Stock Option Plan for
Nonemployee Directors effective as of August 11,
1993 (incorporated by reference to Exhibit 10.33
filed to the Company's Registration Statement on
Form S-1 (File 33-93804) declared effective on
August 22,1995).

-31-
<PAGE> 34

10.12 First Amendment to Harbinger Corporation Amended
and Restated 1989 Stock Option Plan (incorporated
by reference to Exhibit 10.50 to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1995).

10.13 Third Amendment to Amended and Restated 1993
Stock Option Plan for Nonemployee Directors
(incorporated by reference to Exhibit 10.17 to
the Company's Annual Report on Form 10-K for the
year ended December 31, 1996).

10.14 Lease between the Company and 1277 Lenox Park
Boulevard, LLC for office located at 1277 Lenox
Park Boulevard, Atlanta, Georgia dated October
10, 1997 (incorporated by reference to Exhibit
99c filed to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30,
1997).

10.15 Amended and Restated 1989 Stock Option Plan
effective as of April 15, 1992 (incorporated by
reference to Exhibit 10.39 filed to the Company's
Registration Statement on Form S-1 (File
33-93804) declared effective on August 22, 1995).

10.16 Form of Indemnification Agreement between the
Company and Directors (incorporated by reference
to Exhibit 10.43 filed to the Company's
Registration Statement on Form S-1 (File
33-93804) declared effective on August 22, 1995).

10.17 Harbinger Corporation 1996 Stock Option Plan
(incorporated by reference to Exhibit 10.48 to
the Company's Annual Report on Form 10-K for the
year ended December 31. 1995).

10.18 First Amendment to Harbinger Corporation 1996
Stock Option Plan (incorporated by reference to
Exhibit 10.26 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1996).

10.19 Second Amendment to the 1996 Harbinger
Corporation Stock Option Plan (incorporated by
reference to the Company's Form S-8 Registration
Statement (File 333-30219) filed June 27, 1997).

10.20 Third Amendment to the 1996 Harbinger Corporation
Stock Option Plan (incorporated by reference to
the Company's Form S-8 Registration Statement
(File 333-42959) filed December 22, 1997).

10.21 Amended and Restated Harbinger Corporation
Employee Stock Purchase Plan (incorporated by
reference to Exhibit 10.28 to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1995).

10.22 First Amendment to Harbinger Corporation Employee
Stock Purchase Plan (incorporated by reference to
Exhibit 10.28 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995).

10.23 Alliance Agreement dated July 21, 1995 between
Systems Software Associates, Inc. and the Company
(incorporated by reference to Exhibit 10.47 to
the Company's Registration Statement on Form S-1
(File 33-93804)).

-32-
<PAGE> 35

13.1 The following financial information included
within the Company's Annual Report to
Shareholders for the fiscal year ended December
31, 1997:

(i) Selected Financial Data;

(ii) Quarterly Results of Operations;

(iii) Management's Discussion and Analysis of
Financial Condition and Results of
Operations; and

(iv) Consolidated Financial Statements, Notes
to Consolidated Financial Statements and
Independent Auditors' Report.

21.1 List of Subsidiaries of Company.

23.1 Consent of KPMG Peat Marwick LLP.

23.2 Consent of Coopers & Lybrand L.L.P.

23.3 Consent of Ciulla, Smith & Dale, LLP.

27.1 Financial Data Schedule for the period ended December 31, 1997
(for SEC use only).

27.2 Financial Data Schedule for the period ended December 31, 1996
(for SEC use only).

27.3 Financial Data Schedule for the period ended December 31, 1995
(for SEC use only).

99.1 Safe Harbor Compliance Statement.

-33-

<PAGE> 1

EXHIBIT 13.1

QUARTERLY RESULTS OF OPERATIONS
<TABLE>
<CAPTION>

(In thousands, except per share data) THREE MONTHS ENDED
- ---------------------------------------------------------------------------------------------------------------

MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1996 1996 1996 1996
-------- ------- -------- --------
<S> <C> <C> <C> <C>

Revenues ................................................. $ 17,233 $21,935 $22,846 $ 27,231
======== ======= ======= ========

Gross margin ............................................. $ 12,910 $16,384 $16,984 $ 19,855
======== ======= ======= ========

Operating income (loss) .................................. $ (8,212) $(1,528) $(1,898) $ 971
======== ======= ======= ========

Net loss applicable to common shareholders ............... $ (8,763) $(3,054) $(3,465) $ (809)
======== ======= ======= ========

Net loss per share of common stock ....................... $ (0.39) $ (0.13) $ (0.15) $ (0.03)
======== ======= ======= ========
Weighted average common and common
equivalent shares outstanding ........................ 22,663 23,366 23,511 23,748
======== ======= ======= ========

- ----------------------------------------------------------

Net income applicable to common shareholders
(excluding equity in loss of HNS, expected
to recur, and acquisition related and other
one-time charges listed separately below)* ............. $ 531 $ 858 $ 747 $ 1,158
======== ======= ======= ========
Net income per common share (excluding equity
in loss of HNS, expected to recur, and
acquisition related and other one-time
charges listed separately below)* ...................... $ 0.02 $ 0.03 $ 0.03 $ 0.05
======== ======= ======= ========

(In thousands, except per share data) THREE MONTHS ENDED
- ---------------------------------------------------------------------------------------------------------------

MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1997 1997 1997 1997
-------- ------- -------- --------
<S> <C> <C> <C> <C>

Revenues ................................................. $ 24,320 $28,418 $30,236 $ 37,701
======== ======= ======= ========

Gross margin ............................................. $ 17,638 $21,052 $22,453 $ 28,235
======== ======= ======= ========

Operating income (loss) .................................. $(14,911) $ 3,767 $(9,743) $(12,129)
======== ======= ======= ========
Net income (loss) applicable to
common shareholders .................................... $(16,353) $ 2,724 $(8,970) $(16,448)
======== ======= ======= ========

Net income (loss) per share of common stock .............. $ (0.68) $ 0.10 $ (0.35) $ (0.61)
======== ======= ======= ========
Weighted average common and common
equivalent shares outstanding .......................... 24,167 26,115 25,953 27,166
======== ======= ======= ========

- ----------------------------------------------------------

Net income applicable to common shareholders
(excluding charges listed separately below)** .......... $ 1,168 $ 2,724 $ 3,902 $ 5,938
======== ======= ======= ========
Net income per common share (excluding
charges listed separately below)** ..................... $ 0.05 $ 0.10 $ 0.14 $ 0.21
======== ======= ======= ========

</TABLE>

* Excludes pre-tax charge of $8.4 million for the quarter ended March 31,
1996, $2.2 million for the quarter ended June 30, 1996, $2.5 million for the
quarter ended September 30, 1996 and $425,000 for the quarter ended December
31, 1996 for purchased in-process product development, write-off of software
development costs and acquisition related and other one-time charges.

-34-
<PAGE> 2

** Excludes pre-tax charge of $16.2 million for quarter ended March 31, 1997,
$15.0 million for the quarter ended September 30, 1997 and $20.5 million for
at the quarter ended December 31, 1997 for purchased in-process product
development, write-off of software development costs, acquisition related
and other one-time charges. Also excludes a $2.4 million charge for quarter
ended March 31, 1997 for extraordinary loss on debt extinguishment and a
$4.0 million charge for quarter ended December 31, 1997 for loss on disposal
of TrustedLink Banker division, including provision for operating losses
during phase-out period.

-35-
<PAGE> 3
SELECTED FINANCIAL DATA

STATEMENT OF OPERATIONS DATA:

(In thousands, except per share data) Years Ended December 31,
- -----------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>

Revenues .......................................... $120,675 $ 89,245 $ 60,077 $45,454 $33,697
Direct costs ...................................... 31,297 23,112 14,994 10,558 8,138
-------- -------- -------- ------- -------
Gross margin ...................................... $ 89,378 $ 66,133 $ 45,083 $34,896 $25,559
======== ======== ======== ======= =======

Operating income (loss) ........................... $(33,016) $(10,667) $ 1,314 $ 505 $ 1,890
======== ======== ======== ======= =======
Net income (loss) applicable to common
shareholders .................................. $(39,047) $(16,091) $ (444) $ (273) $ 3,113
======== ======== ======== ======= =======
Diluted net income (loss) per share of
common stock .................................. $ (1.53) $ (0.69) $ (0.02) $ (0.02) $ 0.21
======== ======== ======== ======= =======
Weighted average common and common
equivalent shares outstanding ................. 25,441 23,387 19,049 16,075 14,660
======== ======== ======== ======= =======

- ---------------------------------------------------
Pooled Basis of Accounting for Acquisitions
Operating income (excluding special charges)* ..... $ 18,638 $ 2,808 $ 2,474 $ 4,822 $ 1,890
======== ======== ======== ======= =======

Net income applicable to common shareholders**..... $ 13,708 $ 3,366 $ 1,608 $ 2,524 $ 3,113
======== ======== ======== ======= =======

Diluted net income per common share** ............. $ 0.50 $ 0.14 $ 0.08 $ 0.15 $ 0.21
======== ======== ======== ======= =======

<CAPTION>
BALANCE SHEET DATA:

(In thousands) At December 31,
- -----------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>

Working capital ................................... 94,307 60,392 73,167 4,550 3,862
Total assets ...................................... 183,559 131,199 125,867 34,751 24,823
Long-term obligations, redeemable preferred
stock and puttable common stock ............... -- 1,608 7,116 803 5,591
Shareholders' equity .............................. 130,018 94,118 93,196 10,052 7,062

* Excludes $51.7 million, $13.5 million, $1.2 million and $4.3 million pre-tax
charges for 1997, 1996, 1995 and 1994, respectively, for purchased
in-process product development, write-off of software development costs,
acquisition related and other one-time charges.

** Excludes $7.0 million and $954,000 for 1996 and 1995, respectively, of
equity in loss of HNS expected to recur, $51.7 million, $13.5 million,
$1.2 million and $4.3 million of charges for 1997, 1996, 1995 and 1994,
respectively, for purchased in-process product development, write-off of
software development costs, acquisition related and other one-time charges.
Also excludes $2.4 million loss on extinguishment of debt in 1997 and $4.0
million loss on disposal of TrustedLink Banker division, including
provision for operating losses during phase-out period in 1997.

</TABLE>

Supplemental Information
- ------------------------
Statement of Operations Data as Originally Reported
(excluding acquisitions accounted for under the pooling of
interests method of accounting):

(In thousands) Years Ended December 31,
- -----------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Operating income*................................... $ 18,638 $ 7,589 $ 3,135 $ 1,619 $ 1,142
Net income applicable to common
shareholders**.................................. $ 13,708 $ 4,654 $ 1,563 $ 626 $ 3,242
Diluted net income per common share**............... $ 0.50 $ 0.27 $ 0.12 $ 0.06 $ 0.32

* Excludes $51.7 million, $8.8 million, $4.3 million of pre-tax charges for
1997, 1996 and 1994, respectively, for purchased in-process product
development, write-off of software development costs, acquisition related
and other one-time charges. The as originally reported supplemental
information above includes the financial results of the TrustedLink Banker
Division

** Excludes $7.0 million and $954,000 for 1996 and 1995, respectively, of
equity in loss of HNS, expected to recur, $51.7 million, $8.8 million, and
$4.3 million of charges for 1997, 1996 and 1994, respectively, for purchased
in-process product development, write-off of software development costs,
acquisition related and other one-time charges. Also excludes $2.4 million
loss on extinguishment of debt in 1997 and $4.0 million loss on disposal of
TrustedLink Banker division, including provision for operating losses during
phase-out period in 1997. The as originally reported supplemental
information above includes the financial results of the TrustedLink Banker
division.

</TABLE>
-36-
<PAGE> 4

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

ABOUT THE COMPANY

Harbinger Corporation (the "Company") generates revenues from various
sources, including revenues for services and license fees for software. Revenues
for services principally include 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,
acquisition related and other one-time charges associated with its purchases of
HNS, STI, Acquion, Atlas and Premenos. 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 1997, 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 Premenos
merger, the Company anticipates additional merger related charges totaling
$10-$15 million in the first quarter of 1998.

1997 ACQUISITIONS

HARBINGER NET SERVICES, LLC ("HNS")

In December 1994, the Company founded HNS to develop products and
services to facilitate electronic commerce using the Internet. HNS was
capitalized with an initial investment of approximately $360,000 from the
Company and approximately $340,000 from other investors, including shareholders,
executive officers and directors of the Company. In June 1995, the Company
purchased additional HNS common shares for $2.0 million in cash and a note for
$6.0 million, which was paid in full from the proceeds of the Company's initial
public offering. Also, in June 1995, BellSouth Telecommunications, Inc.
("BellSouth") invested $3.0 million in HNS in exchange for a five-year
subordinated convertible debenture (the "Debenture") bearing interest at the
rate of 6% per annum. In 1995 and 1996, the Company realized significant losses
on its investment in HNS, which was accounted for under the equity method of
accounting through December 31, 1996. 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 began accounting 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 recorded 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 of $5.7
million in excess of the face amount of the Debenture of $3.0 million plus
accrued interest of $280,000.

-37-

<PAGE> 5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

minority interest which was 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 also incurred acquisition related expenses and asset
write downs related to this acquisition of $2.0 million. The Company recorded a
net deferred income tax asset of approximately $840,000 as a result of this
acquisition and provided a valuation allowance against such net deferred income
tax asset to reduce it to zero.

STI

On January 3, 1997, the Company acquired SupplyTech, Inc., a Michigan
corporation, and its affiliate, SupplyTech International, LLC, a Michigan
limited liability company (collectively, "STI"), for 2,400,000 unregistered
shares of the Company's common stock in transactions accounted for using the
pooling-of-interests method of accounting. SupplyTech, Inc. was acquired in a
merger transaction pursuant to the terms of a merger agreement, dated January 3,
1997, by and among the Company, SupplyTech, Inc. and Harbinger Acquisition
Corporation II, a Georgia corporation and a wholly owned subsidiary of the
Company. SupplyTech, Inc. survived the merger as a wholly owned subsidiary of
the Company. SupplyTech International, LLC was acquired by the Company in a
series of related share purchases, which included the exchange of the Company's
common stock for all the outstanding shares of SupplyTech International, LLC.

In connection with the STI acquisition, the Company incurred a charge
of $12.4 million for acquisition related expenses, asset write downs and
integration costs incurred (including a $3.2 million charge for the vesting of a
contingent option which became exercisable upon the closing of the merger). The
Company recorded a net deferred income tax asset during the first quarter of
1997 of approximately $1.8 million relating to the STI acquisition and provided
a valuation allowance against such net deferred income tax asset to reduce it to
zero.

The financial position and results of operations of the Company have
been restated for all periods prior to the merger to give retroactive effect to
the STI acquisition.

ACQUION, INC. ("ACQUION")

Effective August 22, 1997, the Company acquired all of the common stock
of Acquion, a California corporation based in Greenville, South Carolina, for
approximately $13.6 million, consisting of $12.0 million in cash and the
assumption of approximately $1.6 million in liabilities. The Company recorded
the acquisition using the purchase method of accounting with $10.9 million of
the purchase price allocated to in-process product development and charged to
the consolidated statement of operations on August 22, 1997, $641,000 allocated
to purchased technology and $2.0 million allocated to goodwill. The Company also
incurred acquisition related expenses and asset write downs during 1997 related
to this acquisition of $2.5 million. The Company recorded a net deferred income
tax asset of approximately $4.1 million as a result of this acquisition and
provided a valuation allowance against such net deferred income tax asset to
reduce it to zero.

ATLAS PRODUCTS INTERNATIONAL, LIMITED ("ATLAS")

On October 23, 1997, the Company acquired Atlas, a company organized
under the laws of England, based in Manchester, United Kingdom, for 311,399
unregistered shares of the Company's common stock in a transaction accounted for
using the pooling-of-interests method of accounting. In connection with the
acquisition, the Company incurred a charge of $2.0 million in 1997 for
acquisition related expenses, asset write downs and integration costs incurred.
The Atlas business combination is not material and therefore has been accounted
for as an immaterial pooling.

-38-
<PAGE> 6

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

PREMENOS TECHNOLOGY CORP. ("PREMENOS")

On December 19, 1997, the Company acquired Premenos, a Delaware
corporation based in Concord, California. In connection with the transaction,
which was accounted for using the pooling-of-interests method of accounting, the
Company issued 5,358,655 shares of its common stock in exchange for all of the
shares of Premenos common stock. All Premenos options and warrants were
converted into the Company's options and warrants in accordance with the
conversion ratio.

In connection with the Premenos acquisition, the Company incurred a
charge of $15.3 million in 1997 for acquisition related expenses, asset write
downs and integration costs incurred. The Company anticipates additional merger
related charges totaling $10-$15 million in the first quarter of 1998.

The financial position and results of operations of the Company have
been restated for all periods prior to the merger to give retroactive effect to
the acquisition. The Company acquired net operating losses and research tax
credit carryforwards of approximately $1.3 million and $1.7 million,
respectively. The utilization of these net operating loss and research tax
credit carryforwards is restricted based on the ability of Premenos, as a
separate company, to generate taxable income.

1996 ACQUISITIONS

Effective March 31, 1996, the Company completed the acquisition of NTEX
Holding B.V. ("NTEX") for $8.0 million and the acquisition of INOVIS GmbH
("INOVIS") for $6.1 million. NTEX is a Rotterdam, The Netherlands-based supplier
of EC products and services with about 40 employees at the time of the
acquisition. It develops software for EDI, wide area communications and web site
development and it operates an electronic clearing center in The Netherlands.
NTEX builds value-added applications that utilize EDI and manages trading
communities for such markets as healthcare, agriculture, shipping and education.
INOVIS is a Karlsruhe, Germany-based supplier of EC products and services with
about 30 employees at the time of the acquisition. INOVIS develops software for
electronic catalogs and ordering systems that use both CD-ROM and the Internet.
It also manages an electronic clearing center serving the German-speaking
market. INOVIS builds value-added applications that utilize EDI and manages
trading communities for the music, book publishing, sporting goods and other
markets. The Company's acquisitions of NTEX and INOVIS are expected to
accelerate the Company's realization of opportunities for its products in
international markets.

The Company also completed five other acquisitions during 1996, which
are more fully described in the notes to the Company's accompanying consolidated
financial statements and which are not expected to have a significant impact on
the Company's financial position or results of operations. In the fourth quarter
of 1997, the Company sold its interest in one of the companies.

SSA ALLIANCE

Effective July 21, 1995, the Company purchased technology and entered
into a distribution agreement with System Software Associates, Inc. ("SSA") for
$4.7 million (the "SSA Alliance") pursuant to which the Company acquired from
SSA computer software that performs EDI functions on IBM AS/400 midrange
computers and licensed to SSA the Company's AS/400, Unix and PC-based EDI
software and related tools and utilities, under agreements whereby SSA may
remarket this software to licensees of SSA's Business Planning and Control
System. Through the SSA Alliance, the Company acquired software products and
technologies that complement the Company's existing software product line.
During 1997, the purchased technology was written down due to the acquisition of
other replacement technology that will be licensed to SSA and the distribution
agreement was written down based upon future expectations of net cash flows from
the arrangement.

-39-
<PAGE> 7

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

The following table presents, for the periods indicated, the percentage
relationship of certain consolidated statements of operations data items to
total revenues.

<TABLE>
<CAPTION>
Percentage of Total Revenues
------------------------------
Years Ended December 31,
------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>

STATEMENTS OF OPERATIONS DATA:
Revenues:
Services .............................................. 53.9% 51.8% 48.7%
Software .............................................. 46.1 48.2 51.3
----- ----- -----
Total revenues ..................................... 100.0 100.0 100.0
----- ----- -----
Direct costs:
Services .............................................. 19.5 18.3 16.2
Software .............................................. 6.4 7.6 8.8
----- ----- -----
Total direct costs ................................. 25.9 25.9 25.0
----- ----- -----
Gross margin .................................... 74.1 74.1 75.0
----- ----- -----
Operating costs:
Selling and marketing ................................. 22.4 28.0 29.2
General and administrative ............................ 17.4 19.4 19.2
Depreciation and amortization ......................... 6.0 5.3 3.6
Product development ................................... 12.9 18.3 18.9
Charge for purchased in-process product
development, write-off of software
development costs, acquisition
related and other one-time charges ................. 42.8 15.1 1.9
----- ----- -----
Total operating costs ........................... 101.5 86.1 72.8
----- ----- -----
Operating income (loss) ...................... (27.4) (12.0) 2.2
----- ----- -----
Interest income, net .................................... (3.2) (3.2) (1.3)
Equity in losses of joint ventures ...................... 0.2 8.1 2.1
----- ----- -----
Income (loss) from continuing operations
before income taxes ....................... (24.4) (16.9) 1.4
Income tax expense ...................................... 2.6 1.1 2.1
----- ----- -----
Loss from continuing operations .............. (27.0) (18.0) (0.7)
----- ----- -----
Income (loss) from operations of TrustedLink Banker
division, net of taxes in 1995 ....................... (0.1) -- 0.3
Loss on disposal of TrustedLink Banker division,
including provision for operating losses during
phase-out period ...................................... (3.3) -- --
----- ----- -----
Loss before extraordinary item ............... (30.4) (18.0) (0.4)
Extraordinary loss on debt extinguishment ............... (2.0) -- --
Preferred stock dividends ............................... -- -- (0.3)
----- ----- -----
Net loss applicable to common
shareholders .............................. (32.4)% (18.0)% (0.7)%
===== ===== ====
</TABLE>

Revenues. Total revenues increased from $60.1 million in 1995 to $89.2
million in 1996 and to $120.7 million in 1997. Revenues for services increased
from $29.2 million in 1995 to $46.2 million in 1996 and to $65.0 million in
1997. These increases reflect 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. Revenues from

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<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

software maintenance and implementation also increased in each year, reflecting
an overall increase in the number of customers. Revenues from software license
fees increased from $30.8 million in 1995 to $43.0 million in 1996 and to $55.7
million in 1997. The increase in 1997 as compared to 1996 was primarily the
result of increases in domestic PC and enterprise software sales, sales from the
Company's European subsidiaries, software sales from 1997 acquisitions and
increases in revenues derived through the Company's network of international
distributors. The increase in 1996 as compared to 1995 was primarily the result
of a $4.3 million increase in royalties from SSA over the prior year, $1.2
million in royalties for software licensed through HNS, increases in software
license fees attributable to the licensing of enterprise-wide software products,
including sales of EDI/Open UNIX software and increases in revenues derived
through Premenos' network of distributors. Revenues reported by the Company for
its European subsidiaries were impacted by the effect of exchange rates in
converting their currency into the Company's reporting currency and management
issues associated with its European operations.

Direct Costs. Direct costs for services increased from $9.7 million in
1995 to $16.3 million in 1996 and to $23.5 million in 1997. As a percentage of
services revenues, these costs were 33.3% in 1995, 35.4% in 1996 and 36.1% in
1997. The increase in direct costs as a percentage of services revenues from
1995 to 1996 primarily reflects the effect of a higher mix of lower margin
professional services revenues from the Company's European subsidiaries acquired
in March 1996. The increase as a percentage of services revenues from 1996 to
1997 primarily reflects the higher mix of lower margin professional services
revenues at the Company's European subsidiaries and at Acquion which were
acquired in March 1996 and August 1997, respectively. Additionally, the
professional services margins decreased at Premenos due to increased emphasis on
providing software integration and consulting services to customers. Direct
software costs increased from $5.3 million in 1995 to $6.8 million in 1996 and
to $7.8 million in 1997. Direct software costs, as a percentage of software
revenues, were 17.0% in 1995, 15.7% in 1996 and 14.0% in 1997. The decrease in
direct software costs as a percentage of software revenues from 1995 to 1997
primarily reflects the effect of higher margin royalty revenues from certain
distributors, licensing of higher margin software products and decreases in
software amortization as a result of write-offs of software development in
connection with the STI business combination.

Selling and Marketing. Selling and marketing expenses increased from
$17.5 million in 1995 to $25.0 million in 1996 and to $27.0 million in 1997. As
a percentage of revenues, these expenses were 29.2% in 1995, 28.0% in 1996 and
22.4% in 1997. The decreases as a percentage of revenues between years
principally reflect the effect of increased 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 from $11.6 million in 1995 to $17.3 million in 1996 and to $21.0
million in 1997. As a percentage of revenues, these expenses were 19.2% in 1995,
19.4% in 1996 and 17.4% in 1997. The increase from 1995 to 1996 primarily
reflects increases in the provision for various legal and tax exposures at STI.
The decrease as a percentage of revenues between 1996 and 1997 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
from $2.2 million in 1995 to $4.7 million in 1996 and to $7.2 million in 1997.
As a percentage of revenues, these expenses increased from 3.6% in 1995 to 5.3%
in 1996 and to 6.0% in 1997. The increases, as a percentage of revenues,
primarily relate to amortization of intangible assets related to the
acquisitions completed between 1995 and 1997 and increases in capital
expenditures between 1995 and 1997.

Product Development. Total expenditures for product development,
including capitalized software development costs, increased from $14.1 million
in 1995 to $21.1 million in 1996 and decreased to $20.6 million in 1997. This
decrease is due to increased synergies realized from the STI merger and
Integration Activities. The Company capitalized software development costs of
$2.7 million, $4.8 million and $5.0 million in 1995, 1996 and 1997,
respectively, which represented 19.4%, 22.7% and 24.4% 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
1995 to 1997 reflects the Company incurring greater product development costs in
1996 and 1997 on products that had reached technological feasibility. As a
percentage of revenues, total product development expenses increased from 23.4%
in 1995 to 23.6% in 1996 and decreased to

-41-
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

17.1% in 1997. The increase in product development expenses as a percentage of
revenues between 1995 and 1996 principally reflects additional development
resources associated with the Windows PC product line, enterprise software
products, European software products and continuing development of technology
acquired in other acquisitions in 1996. The decrease in product development
expenses as a percentage of revenues between 1996 and 1997 is attributable to
increased revenues, development synergies realized from merging with STI and
Integration Activities. Amortization of capitalized software development costs
included in direct costs of software totaled $1.8 million, $3.4 million and $3.7
million in 1995, 1996 and 1997, respectively. Additionally, the Company, through
its investment in HNS, expended approximately $1.1 million in 1995 and $4.3
million in 1996 to develop products and services to facilitate electronic
commerce on the Internet.

Charge for Purchased In-Process Product Development, Write-Off of
Software Development Costs, Acquisition Related and Other One-Time Charges. The
Company incurred expenses of $1.2 million in 1995, $13.5 million in 1996 and
$51.7 million in 1997 primarily for purchased in-process product development and
integration related costs. In connection with the acquisition of certain assets
in December 1995, STI acquired in-process product development associated with
certain AS/400 technology. In connection with the acquisition of three European
companies in March 1996, the Company acquired in-process product development for
several software products. In addition, the Company acquired in-process product
development in connection with its acquisition of Don Valley Technology Corp.
and Prime Factors, Inc. in May and July of 1996, respectively. In connection
with the HNS and Acquion acquisitions in 1997, the Company acquired in-process
product development of approximately $2.7 million and $10.9 million,
respectively. Since the Company determined that certain of the acquired
technologies had not reached technological feasibility, the Company expensed the
portion of the purchase price allocable to such in-process product development.
In connection with the HNS, STI, Acquion, Atlas and Premenos acquisitions, the
Company incurred $2.0 million, $12.4 million, $2.5 million, $2.0 million and
$15.3 million, respectively, for acquisition related expenses, asset write downs
and integration costs incurred. Approximately $8.0 million of the costs and
expenses incurred in connection with the acquisitions of HNS, STI, Acquion,
Atlas and Premenos were Integration Activity Costs which 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. The Company also incurred $3.8
million in restructuring charges related to increasing synergies among all
operating divisions as a result of recent acquisitions.

Equity in Losses of Joint Ventures. The Company recognized equity in
losses of insignificant joint ventures of $131,000 and $302,000 in 1996 and
1997, respectively. The Company recognized, as its equity in the losses of HNV,
$313,000 in 1995 and $69,000 in 1996. These losses reflect the impact of the
operations of HNV for the full year in 1995 as compared to three months in 1996,
prior to the Company's acquisition of the remaining 80% of equity of HNV
effected on March 31, 1996. In addition, the Company recognized, as its equity
in the losses of HNS, $954,000 in 1995 and $7.0 million in 1996 reflecting the
Company's losses associated with its Internet joint venture with BellSouth. The
Company acquired the BellSouth convertible debenture and the remaining equity
interests of this joint venture on January 1, 1997 from BellSouth and the other
HNS minority shareholders and option holders.

Income Taxes. The Company recorded income tax expense of $1.3 million,
$996,000 and $3.1 million in 1995, 1996 and 1997, respectively. Taxable income
of $7.4 million will be required in future years to realize the Company's net
deferred income tax assets at December 31, 1997 of $2.8 million, net of a
valuation allowance of $22.7 million. Future decreases of $3.3 million in the
total valuation allowance of $22.7 million at December 31, 1997 relate to
foreign net operating loss carryforwards and will reduce the intangibles
associated with those acquisitions as those net operating loss carryforwards are
realized.

Loss on Extinguishment of Debt. The Company recorded a loss of $2.4
million on debt extinguishment in the first quarter of 1997 related to the HNS
transaction.

Discontinued Operations. The Company discontinued its TrustedLink
Banker division ("Banker") in 1997, which had been generating lower than desired
profitability and growth. The results of Banker for all years presented are
reported in the accompanying reclassified statements of operations under
discontinued operations. In addition, in the fourth quarter of 1997, the Company
provided for an anticipated loss of $4 million related to the discontinuance of
the Banker operations.

-42-
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Net Loss. The Company realized a net loss of $444,000, $16.1 million
and $39.0 million in 1995, 1996 and 1997, respectively. The net loss in 1995
reflects principally the effect of equity in losses of joint ventures of $1.3
million and the effect of charges for purchased in-process product development
of $1.2 million. Excluding the equity in losses of HNS and the charges for
in-process product development, the Company's net income in 1995 would have been
approximately $1.6 million or $0.08 per share. The net loss in 1996 reflects
principally the effect of charges for purchased in-process product development
and acquisition related charges of $13.5 million in connection with three
European acquisitions effected in March 1996 and two other acquisitions effected
in May and July of 1996 and equity in losses of HNS of $7.0 million. Excluding
these charges and the equity in losses of HNS, the Company's net income in 1996
would have been $3.4 million or $0.14 per share. The net loss in 1997 reflects
principally the effect of charges for purchased in-process product development,
write-off of software developments costs, acquisition related and other one-time
charges of $51.7 million in connection with the acquisitions of HNS, STI,
Acquion, Atlas and Premenos in 1997, loss on disposal of TrustedLink Banker
division, including provision for operating losses during the phase-out period,
of $4.0 million and the loss on debt extinguishment of $2.4 million. Excluding
these charges, the Company's net income in 1997 would have been approximately
$13.7 million or $0.50 per share.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 1997, the Company had working capital of $94.3 million.
Cash and short-term investments totaled $102.1 million, representing
approximately 56% of total assets. Since its inception, the Company has financed
its operations through a combination of private and public equity and debt
financing, a bank line of credit and cash flows from operations. The Company
generated cash from operating activities of $6.8 million in 1995, $11.9 million
in 1996 and $1.6 million in 1997. The Company used net cash for investing
activities of $67.6 million, $1.3 million and $30.1 million in 1995, 1996 and
1997, respectively. Cash used for investing activities in 1997 primarily
consisted of investments in acquisitions, purchases of property and equipment
and capitalized software development costs. Financing activities provided $76.0
million, $570,000 and $59.1 million in 1995, 1996 and 1997, respectively. The
1995 and 1997 amounts were generated principally from the public issuance of
common stock.

The Company's bank credit facility consists of a revolving line of
credit which bears interest at prime plus 0.625% and permits the Company to
borrow a maximum of $10.0 million, subject to a limitation based upon the
Company's qualified receivables. This facility, which also provides the Company
with a 24-month term-out feature for up to $2.0 million, contains certain
restrictive covenants and is secured by substantially all of the Company's
assets. The covenants include restrictions on the Company's capital expenditures
and net losses, and require the Company to maintain certain financial ratios.
The Company pays a commitment fee on the unused portion of this revolving credit
facility. As of December 31, 1997, the Company had $10 million available on this
facility. At December 31, 1997, the Company has a $623,000 obligation for debt
and capital leases acquired in business combinations. The Company's other
commitments consist principally of operating leases on its office space. In
October 1997, the Company entered into a lease agreement with the current
landlord to occupy space in an adjoining building. The expected occupancy is in
Spring 1998. In conjunction with the lease, the Company was required to provide
a letter of credit for $2.75 million. The lease has a term of ten years with a
right to cancel after seven years and requires annual rent payments of
approximately $2.1 million. In connection with the relocation, management
expects to incur approximately $2.0 million for capital expenditures and other
moving costs. Aside from the above, the Company currently has no material
commitments for capital expenditures.

Under the terms of the amended alliance agreement with SSA, the Company
provides for 360-day payment terms.

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<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

This report includes "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 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.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income ("SFAS No. 130"). SFAS No. 130 requires companies to display, with the
same prominence as other financial statements, the components of comprehensive
income. SFAS No. 130 requires that an enterprise classify items of other
comprehensive income by their nature in a financial statement and display the
accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a statement of
financial position. SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997. Reclassification of financial statements for earlier periods
provided for comparative purposes is required. The Company's financial
statements will include the disclosure of comprehensive income in accordance
with the provisions of SFAS No. 130 beginning the first quarter of 1998.

In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131, Disclosures about Segments of an Enterprise and Related
Information ("SFAS No. 131"). SFAS No. 131 requires that an enterprise disclose
certain information about operating segments. SFAS No. 131 is effective for
financial statements for periods beginning after December 15, 1997. The Company
will evaluate the need for such disclosures at that time.

In October 1997, the Accounting Standards Executive Committee issued
Statement of Position 97-2, Software Revenue Recognition ("SOP 97-2"). SOP 97-2
is effective for financial statements for fiscal years beginning after December
15, 1997. The Company does not expect that adoption of SOP 97-2 will
significantly affect its results of operations.

-44-
<PAGE> 12

HARBINGER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

DECEMBER 31,
-------------------------
ASSETS 1997 1996
--------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents ................................ $ 69,811 $ 35,697
Short-term investments ................................... 32,333 29,844
Accounts receivable, less allowances for returns and
doubtful accounts of $2,790 and $2,425 in 1997 and
1996, respectively .................................... 35,017 19,993
Royalties receivable ..................................... 5,364 1,337
Deferred income taxes .................................... 1,892 4,033
Other current assets ..................................... 3,431 4,736
--------- ---------
Total current assets .................................. 147,848 95,640
--------- ---------
Property and equipment, less accumulated depreciation
and amortization ......................................... 18,167 14,926
Intangible assets, less accumulated amortization .............. 16,464 19,806
Deferred income taxes ......................................... 909 --
Other assets .................................................. 171 827
--------- ---------
$ 183,559 $ 131,199
========= =========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ......................................... $ 8,734 $ 4,474
Accrued expenses ......................................... 25,835 13,125
Deferred revenues ........................................ 18,349 14,595
Current portion of long-term debt ........................ 623 1,504
Note payable to bank -- 1,550
--------- ---------
Total current liabilities ........................... 53,541 35,248
--------- ---------

Commitments and contingencies

Long-term debt, excluding current portion ..................... -- 1,608
Deferred income taxes ......................................... -- 122
Equity in loss in joint venture in excess of investment
in joint venture ........................................... -- 81
Minority interest in consolidated subsidiaries ................ -- 22

Zero Coupon redeemable preferred stock, no par value;
4,000,000 shares issued and outstanding .................... -- --

Shareholders' equity:
Common stock, $0.0001 par value; 100,000,000 shares
authorized; 27,218,571 and 23,871,064 shares issued
and outstanding as of December 31, 1997 and 1996,
respectively .......................................... 3 2
Additional paid-in capital ............................... 189,842 113,847
Accumulated deficit ...................................... (59,827) (19,731)
--------- ---------
Total shareholders' equity .......................... 130,018 94,118
--------- ---------
$ 183,559 $ 131,199
========= =========

</TABLE>

See accompanying notes to consolidated financial statements.

-45-
<PAGE> 13

HARBINGER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1997 1996 1995
--------- -------- --------
<S> <C> <C> <C>
Revenues:
Services .................................................... $ 65,018 $ 46,225 $ 29,235
Software (including related party royalties from HNS and
SSA of $6.9 million and $1.5 million for the years
ended December 31, 1996 and 1995, respectively) ........... 55,657 43,020 30,842
--------- -------- --------
Total revenues ....................................... 120,675 89,245 60,077
--------- -------- --------
Direct costs:
Services .................................................... 23,478 16,346 9,738
Software .................................................... 7,819 6,766 5,256
--------- -------- --------
Total direct costs ................................... 31,297 23,112 14,994
--------- -------- --------

Gross margin ...................................... 89,378 66,133 45,083
--------- -------- --------

Operating costs:
Selling and marketing ....................................... 27,014 25,032 17,516
General and administrative .................................. 20,951 17,293 11,553
Depreciation and amortization ............................... 7,211 4,695 2,193
Product development ......................................... 15,564 16,305 11,347
Charge for purchased in-process product development,
write-off of software development costs, acquisition
related and other one-time charges ........................ 51,654 13,475 1,160
--------- -------- --------
Total operating costs ................................ 122,394 76,800 43,769
--------- -------- --------
Operating income (loss) ........................... (33,016) (10,667) 1,314

Interest income, net ........................................... (3,902) (2,838) (800)
Equity in losses of joint ventures ............................. 302 7,204 1,266
Minority interest .............................................. (2) 4 (20)
--------- -------- --------
Income (loss) from continuing operations
before income taxes ........................... (29,414) (15,037) 868
Income tax expense ............................................. 3,093 996 1,313
--------- -------- --------
Loss from continuing operations ................... (32,507) (16,033) (445)
Discontinued operations:
Income (loss) from operations of TrustedLink Banker
division, net of income taxes of $128 in 1995 ............. (121) (30) 200
Loss on disposal of TrustedLink Banker division,
including provision for operating losses during
phase-out period of $2.3 million .......................... (4,000) -- --
--------- -------- --------
Loss before extraordinary item .................... (36,628) (16,063) (245)
Extraordinary loss on debt extinguishment ...................... (2,419) -- --
--------- -------- --------
Net loss .......................................... (39,047) (16,063) (245)
Preferred stock dividends -- (28) (199)
--------- -------- --------
Net loss applicable to common shareholders ........ $ (39,047) $(16,091) $ (444)
========= ======== ========

</TABLE>

See accompanying notes to consolidated financial statements.

-46-
<PAGE> 14

HARBINGER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Basic and diluted net loss per share:
Loss from continuing operations ............................ $(1.28) $ (0.69) $ (0.02)

Income (loss) from operations of TrustedLink Banker
division, net of income taxes ............................ -- -- 0.01
Loss on disposal of TrustedLink Banker division,
including provision for operating losses during
phase-out period ......................................... (0.16) -- --
Extraordinary loss on debt extinguishment .................. (0.09) -- --
Preferred stock dividends .................................. -- -- (0.01)
------ -------- -------

Net loss per common share .................................. $(1.53) $ (0.69) $ (0.02)
====== ======== =======
Weighted average number of common shares
outstanding ................................................ 25,441 23,387 19,049
====== ======== =======

Pro forma net loss data:
Income (loss) from continuing operations before
income taxes as reported ................................. $(15,037) $ 868
Pro forma income tax expense ............................... 996 797
-------- -------
Pro forma net income (loss) from continuing
operations ............................................... (16,033) 71
Income (loss) from discontinued operations ................. (30) 200
-------- -------
Pro forma net income (loss) ................................ (16,063) 271
Preferred stock dividends .................................. (28) (199)
-------- -------
Pro forma net income (loss) applicable to common
shareholders ............................................. $(16,091) $ 72
======== =======
Pro forma net income (loss) per common share ............... $ (0.69) $ --
======== =======
Weighted average number of common shares
outstanding ................................................ 23,387 19,049
======== =======

</TABLE>

See accompanying notes to consolidated financial statements.

-47-
<PAGE> 15

HARBINGER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)

FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

<TABLE>
<CAPTION>
Preferred stock,
Series C Common stock Additional Deferred Total
------------------- ----------------- paid-in compen- Accumulated shareholders'
Shares Amount Shares Amount capital sation deficit equity
------- ------ ---------- ------ -------- ----- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>

BALANCE, DECEMBER 31, 1994 -- $ -- 16,129,438 $ 2 $ 13,169 $ (87) $ (3,032) $ 10,052
Exercise of stock options
and warrants -- -- 951,007 -- 1,970 -- -- 1,970
Issuance of stock in exchange
for subsidiary stock -- -- 435,404 -- 453 -- -- 453
Issuance of common stock in
public offering, net -- -- 4,165,554 -- 77,995 -- -- 77,995
Reclassification of Series C
preferred stock to
shareholders' equity 250,000 2,485 -- -- -- -- -- 2,485
Tax benefits from stock plans -- -- -- -- 557 -- -- 557
Other transactions -- -- (1,500) -- 200 (50) (22) 128
Preferred stock dividends -- -- -- -- -- -- (199) (199)
Net loss -- -- -- -- -- -- (245) (245)
------- ----- ---------- --- -------- ----- -------- --------
BALANCE, DECEMBER 31, 1995 250,000 2,485 21,679,903 2 94,344 (137) (3,498) 93,196
Exercise of stock options and
warrants and issuance of
stock under employee stock
purchase plan -- -- 701,609 -- 2,545 -- -- 2,545
Tax benefits from stock plans -- -- -- -- 2,854 -- -- 2,854
Conversion of preferred stock,
Series C to common stock (250,000) (2,489) 211,038 -- 2,489 -- -- --
Issuance of common stock and
options and warrants to
acquire common stock in
connection with acquisitions -- -- 447,745 -- 6,750 -- -- 6,750
Reclassification of puttable
common stock to common stock
as a result of forfeiture
of put right -- -- 825,000 -- 4,675 -- -- 4,675
Other transactions -- 4 5,769 -- 190 137 (4) 327
Preferred stock dividends -- -- -- -- -- -- (28) (28)
Foreign currency translation
adjustment -- -- -- -- -- -- (138) (138)
Net loss -- -- -- -- -- -- (16,063) (16,063)
------- ----- ---------- --- -------- ----- -------- --------
BALANCE, DECEMBER 31, 1996 -- -- 23,871,064 2 113,847 -- (19,731) 94,118
Exercise of stock options and
warrants and issuance of
stock under employee stock
purchase plan -- -- 693,166 -- 5,098 -- -- 5,098
Tax benefits from stock plans -- -- -- -- 498 -- -- 498

</TABLE>

-48-
<PAGE> 16
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of stock and stock
options to purchase a
debenture and acquire
minority interest of
subsidiary -- -- 242,288 -- 6,416 -- -- 6,416
Issuance of common stock and
vesting of contingent option
in connection with acquisitions -- -- 342,053 -- 3,958 -- (296) 3,662
Issuance of stock in secondary
offering, net -- -- 2,070,000 1 60,025 -- -- 60,026
Treasury stock transaction -- -- -- -- -- -- (9) (9)
Foreign currency translation
adjustment -- -- -- -- -- -- (744) (744)

Net loss -- -- -- -- -- -- (39,047) (39,047)
------- ----- ---------- --- -------- ----- -------- --------
BALANCE, DECEMBER 31, 1997 -- $ -- 27,218,571 $ 3 $189,842 $ -- $(59,827) $130,018
======= ===== ========== === ======== ===== ======== ========

</TABLE>

See accompanying notes to consolidated financial statements.

-49-
<PAGE> 17

HARBINGER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1997 1996 1995
--------- --------- --------
<S> <C> <C> <C>

Cash flows from operating activities:
Net loss.......................................................... $ (39,047) $ (16,063) $ (245)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Charge for purchased in-process product development,
write-off of software development costs, acquisition
related and other one-time charges......................... 26,761 13,005 1,160
Loss on disposal of TrustedLink Banker division.............. 4,000 -- --
Loss on debt extinguishment.................................. 2,419 -- --
Depreciation and amortization................................ 10,917 8,180 3,907
Loss on sale of property and equipment....................... 389 54 177
Discount amortization on investments......................... 88 (723) (709)
Equity in losses of joint ventures........................... 302 7,204 1,266
Noncash compensation charges................................. - 40 125
Minority interest and other.................................. (287) 8 (26)
Deferred income taxes........................................ 1,110 1,354 1,005
(Increase) decrease in:
Accounts receivable........................................ (12,971) (5,237) (3,524)
Royalties receivable....................................... (4,027) 1,890 (2,403)
Other assets............................................... 1,410 (2,488) (1,164)
Increase in:
Accounts payable and accrued expenses...................... 9,300 2,144 4,141
Deferred revenues.......................................... 1,260 2,510 3,055
--------- --------- --------
Net cash provided by operating activities............... 1,624 11,878 6,765
--------- --------- --------

Cash flows from investing activities:
Short-term investments............................................ (2,577) 22,601 (51,013)
Purchases of property and equipment............................... (8,576) (9,666) (4,880)
Additions to software development costs........................... (5,014) (4,798) (2,727)
Purchased technology.............................................. -- -- (150)
Investment in acquisitions........................................ (13,924) (9,524) (300)
Investment in joint ventures...................................... -- -- (8,551)
Organizational expenditures....................................... -- -- (11)
Proceeds from disposal of property and equipment.................. 7 57 35
--------- --------- --------
Net cash used in investing activities................... (30,084) (1,330) (67,597)
--------- --------- --------
</TABLE>

See accompanying notes to consolidated financial statements.

-50-
<PAGE> 18

HARBINGER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C>
Cash flows from financing activities:
Dividends paid on preferred stock ................................. -- (28) (199)
Exercise of stock options and warrants and issuance of
stock under employee stock purchase plan ........................ 5,098 2,545 1,970
Principal payments under notes payable, long-term debt
and capital lease obligations ................................... (2,968) (3,547) (3,328)
Proceeds from issuance of common stock ............................ 60,026 -- 77,995
Repayments under credit agreement ................................. (1,550) -- --
Decrease in restricted cash ....................................... -- 50 80
Increase in note payable to bank, net ............................. -- 1,550 --
Purchase of HNS subordinated debenture ............................ (1,500) -- --
Redemption of Series B preferred stock ............................ -- -- (480)
-------- -------- --------
Net cash provided by financing activities .................. 59,106 570 76,038
-------- -------- --------
Net increase in cash and cash equivalents ............................ 30,646 11,118 15,206
Cash and cash equivalents at beginning of year ....................... 35,697 24,258 9,052
Effect of exchange rates on cash held in foreign currencies .......... (76) (53) --
Cash received from acquisitions ...................................... 3,544 374 --
-------- -------- --------
Cash and cash equivalents at end of year ............................. $ 69,811 $ 35,697 $ 24,258
======== ======== ========

Supplemental disclosures:
Cash paid for interest ............................................ $ 90 $ 407 $ 299
======== ======== ========
Cash paid for income taxes ........................................ $ -- $ 152 $ 540
======== ======== ========

Supplemental disclosures of noncash investing and
financing activities:
Purchase of HNS subordinated debenture in exchange
for common stock ................................................ $ 4,200 $ -- $ --
======== ======== ========
Acquisition of HNS minority interest in exchange
for issuance of options ......................................... $ 2,216 $ -- $ --
======== ======== ========
Acquisition of technology and distribution agreement
in exchange for common stock .................................... $ -- $ -- $ 4,675
======== ======== ========

Long-term debt assumed in acquisition of product line ............. $ -- $ -- $ 2,200
======== ======== ========
Capital lease obligation for equipment ............................ $ -- $ -- $ 631
======== ======== ========
Conversion of minority interest to equity ......................... $ -- $ -- $ 454
======== ======== ========
Long-term debt assumed in acquisition of a
business ........................................................ $ -- $ 670 $ --
======== ======== ========
Acquisition of minority interest in exchange for
common stock .................................................... $ 392 $ -- $ --
======== ======== ========
Acquisition of businesses in exchange for assumption of
liabilities and issuance of common stock, options and
warrants to acquire common stock ................................ $ 454 $ 13,143 $ --
======== ======== ========

</TABLE>

See accompanying notes to consolidated financial statements.

-51-
<PAGE> 19
1. PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BUSINESS AND PRESENTATION

Harbinger Corporation and subsidiaries (the "Company") develops,
markets and supports software products and provides computer communications
network and consulting services to enable businesses to engage in electronic
commerce. The Company's products and services are used by customers in targeted
industries, including the petroleum, chemicals, utilities, electronics,
distribution, aerospace, automotive, communications, transportation,
textile/apparel and healthcare industries both in the United States and certain
international markets including Europe and South America.

The consolidated financial statements of the Company include the
accounts of Harbinger Corporation and its direct and indirect subsidiaries. All
significant intercompany balances and transactions between companies have been
eliminated.

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 consolidated
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, net of estimated returns. Royalty revenues are
recognized based upon sales to end users.

Services

Revenues derived from services includes subscription fees,
maintenance and implementation fees, and consulting and training fees.
Subscription fees include both fixed and usage based fees for use of
the Company's Value-Added Network and are recognized over the service
period and as transactions are processed. Maintenance and
implementation fees are generally billed annually in advance, include
fixed fees for customer support and product updates and are recognized
ratably over the service period. 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 of revenue recognition.

DIRECT COSTS

Direct costs for services include telecommunications charges, the costs
of personnel to conduct network operations and customer support, consulting and
other personnel related expenses. Direct costs for software include duplication,
packaging and amortization of purchased technology and software development
costs and royalties paid to third party distributors.

CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

Cash, cash equivalents and short-term investments are stated at cost,
which approximates fair value, and consist primarily of money market funds and
U.S. Treasury bills. The Company considers all highly liquid investments with
original maturities of three months or less to be cash equivalents. Investments
maturing between three and twelve months from the date of purchase are
classified as short-term investments.

-52-

<PAGE> 20
Management determines the appropriate classification of debt securities
at the time of purchase and reevaluates such designation as of each balance
sheet date. As of December 31, 1997, debt securities were classified as
held-to-maturity as the Company intended to hold, and had the ability to hold,
these securities to maturity. Held-to-maturity securities are stated at
amortized cost, which approximates fair market value.

Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of temporary cash investments
and other short-term obligations of the U.S. Government.

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:

Computer and communications equipment 3 - 5 years
Furniture, fixtures and leasehold improvements 5 - 10 years
Transportation equipment 3 years
Equipment and fixtures under capital leases 3 - 7 years
Building 10 years

INVESTMENTS IN JOINT VENTURES

The Company's 91% investment in Harbinger Net Services, LLC ("HNS")
through December 31, 1996 (see Notes 2 and 5), its 20% investment in Harbinger
N.V. ("HNV") through March 31, 1996 (see Notes 2 and 5) and its investment in
other joint ventures are accounted for using the equity method of accounting.
The Company applied the equity method of accounting for its investment in HNS
because of a shareholders' agreement among all HNS shareholders which provided
for all significant operating and management decisions for HNS to be vested in
the HNS Board of Managers through December 31, 1996. The HNS Board of Managers
was not controlled by the Company (see Notes 2 and 5).

INTANGIBLE ASSETS

Purchased Technology, Goodwill and Other Intangible Assets

Purchased technology, goodwill and other intangible assets are
being amortized over periods of five to ten years. The Company evaluates the
recoverability of these intangible assets at each period end using the
undiscounted estimated future net operating cash flows expected to be derived
from such assets. If such evaluation indicates a potential impairment, the
Company uses the fair value to determine the amount of these intangible assets
that should be written off.

Software Development Costs

The Company capitalizes certain software development costs in
accordance with Statement of Financial Accounting Standards No. 86, Accounting
for the Costs of Computer Software to Be Sold, Leased or Otherwise Marketed.
Costs incurred internally to create a computer software product or to develop an
enhancement to an existing product are charged to expense when incurred as
research and development until technological feasibility has been established
for the product or enhancement. Thereafter, all software production costs are
capitalized and reported at the lower of unamortized cost or net realizable
value. Capitalization ceases when the product or enhancement is available for
general release to customers. Software development costs are amortized on a
product-by-product basis at the greater of the amounts computed using (a) the
ratio of current gross revenues for a product or enhancement to the total
current and anticipated future gross revenues for that product or enhancement or
(b) the straight-line method over the remaining estimated economic life of the
product or enhancement, not to exceed five years. The Company evaluates the net
realizable value of its software development costs at each period end using
undiscounted estimated future net operating cash flows expected to be derived
from the respective software product or enhancement. If such evaluation
indicates that the unamortized software development costs exceed the net
realizable value, the Company writes off the amount by which the unamortized
software development costs exceed net realizable value.

-53-

<PAGE> 21

INCOME TAXES

The Company accounts for income taxes using the asset and liability
method of Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes ("SFAS No. 109"). Under SFAS No. 109, deferred income tax assets
and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred income tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred income tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes the
enactment date.

During 1997, the Company acquired SupplyTech, Inc. and SupplyTech
International, LLC (collectively, "STI") (see Note 2). Effective January 1,
1995, SupplyTech, Inc. elected to be taxed as an S corporation under the
Internal Revenue Code. The acquisition of SupplyTech, Inc. by the Company
terminated the S corporation status under the Internal Revenue Code.
Accordingly, SupplyTech, Inc. was taxed as a regular corporation in 1997.
SupplyTech International, LLC was incorporated under the laws of the state of
Michigan as a Limited Liability Corporation ("LLC"). As an LLC, SupplyTech
International, LLC has elected to be taxed as a partnership under the Internal
Revenue Code. In 1997, SupplyTech International, LLC's income is included in the
Company's consolidated income subject to regular corporate tax. As a result of
these elections, STI has been taxed in a manner similar to a partnership for
1995 and 1996 and has not provided for any federal or state income taxes as the
results of operations are passed through to, and the related income taxes
become, the individual responsibility of STI's shareholders.

The pro forma income tax expense for 1996 and 1995 reflects the income
tax expense that would have been reported if STI had been a C corporation and
subject to SFAS No. 109 during these periods.

NET EARNINGS (LOSS) PER SHARE OF COMMON STOCK

On December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, Earnings Per Share ("SFAS No. 128"), which
prescribes the calculation methodology and financial reporting requirements for
basic and diluted earnings per share. Basic earnings (loss) per common share
available to common shareholders are based on the weighted average number of
common shares outstanding. Diluted earnings (loss) per common share available to
common shareholders are based on the weighted average number of common shares
outstanding and dilutive potential common shares, such as dilutive stock
options. All prior period net earnings (loss) data presented in these
consolidated financial statements have been restated to conform to the
provisions of SFAS No. 128.

RECLASSIFICATIONS

Certain amounts in the accompanying 1996 and 1995 consolidated
financial statements have been reclassified to conform to the presentation
adopted in the 1997 consolidated financial statements.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company uses financial instruments in the normal course of its
business. The carrying values of cash equivalents, short-term investments,
accounts and royalties receivable, accounts payable, 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 approximates its carrying value.

FOREIGN CURRENCY TRANSLATION

Foreign currency financial statements of the Company's international
operations are translated into U.S. dollars at current exchange rates, except
for revenues, costs and expenses, and net income (loss) which are translated at
average exchange rates during each reporting period. Net exchange gains or
losses resulting from the translation of assets and liabilities are accumulated
as cumulative foreign currency translation adjustments and reported as a
separate component of shareholders' equity included in the Company's accumulated
deficit.

-54-
<PAGE> 22

STOCK COMPENSATION PLANS

Prior to January 1, 1996, the Company accounted for its stock option
plans in accordance with the provisions of Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees ("APB No. 25"), and related
interpretations. As such, compensation expense would generally 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 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 10).

2. ACQUISITIONS

1997 ACQUISITIONS

SUPPLYTECH, INC. AND SUPPLYTECH INTERNATIONAL, LLC

On January 3, 1997, the Company acquired SupplyTech, Inc., a Michigan
corporation, and its affiliate, SupplyTech International, LLC, a Michigan
limited liability company (collectively, "STI"), for 2,400,000 unregistered
shares of the Company's common stock in transactions accounted for using the
pooling-of-interests method of accounting. In connection with the STI
acquisition, the Company incurred a charge of $12.4 million for acquisition
related expenses, asset write downs and integration costs incurred (including a
$3.2 million charge for the vesting of a contingent option which became
exercisable upon the closing of the merger) (see Note 15). The Company recorded
a net deferred income tax asset during the first quarter of 1997 of $1.8 million
relating to the STI acquisition and provided a valuation allowance against such
net deferred income tax asset to reduce it to zero.

PREMENOS TECHNOLOGY CORP. ("PREMENOS")

In connection with the Premenos acquisition, the Company incurred a
charge of $15.3 million in 1997 for acquisition related expenses, asset write
downs and integration costs incurred (see Note 15).

The financial position and results of operations of the Company have
been restated for all periods prior to the mergers to give retroactive effect to
the STI and Premenos acquisitions.

-55-
<PAGE> 23
Total revenues and net loss for the individual companies as previously
reported are as follows (in thousands):

<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------
1997 1996 1995
-------- -------- -------
<S> <C> <C> <C>
Total revenues:
Harbinger Corporation.......... $ 79,868 $ 38,236 $19,845
STI............................ -- 17,538 14,713
Premenos....................... 40,807 33,471 25,519
-------- -------- -------
$120,675 $ 89,245 $60,077
======== ======== =======

Net income (loss) applicable to
common shareholders:
Harbinger Corporation.......... $(42,832) $ (8,277) $ 1,048
STI............................ -- (4,818) (2,989)
Premenos....................... 3,785 (2,996) 1,497
-------- -------- -------
$(39,047) $(16,091) $ (444)
======== ======== =======
</TABLE>

Effective January 3, 1997, the operations of Harbinger Corporation and
STI were combined. In addition, all acquisition related and other one-time
charges are reflected in Harbinger Corporation's net loss.

HNS

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 (see Note
5), 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 began accounting for its investment in
HNS by consolidating the statements of financial position and results of
operations of HNS with those of the Company.

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 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
was 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 also incurred
acquisition related expenses and asset write downs related to this acquisition
of $2.0 million (see Note 15). The Company recorded a net deferred income tax
asset of approximately $840,000 as a result of this acquisition and provided a
valuation allowance against such net deferred income tax asset to reduce it to
zero.

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<PAGE> 24
SMART SOLUTIONS FOR ELECTRONIC COMMERCE, INC. ("SMART SOLUTIONS")

Effective May 1, 1997, the Company acquired all of the common stock of
Smart Solutions, a Michigan corporation based in Traverse City, Michigan, for
$677,000, consisting of 19,757 unregistered shares of the Company's common stock
valued at $454,000 and the assumption of $223,000 in liabilities. The Company
recorded the acquisition using the purchase method of accounting with $100,000
of the purchase price allocated to purchased technology, $71,000 allocated to
tangible assets and $506,000 allocated to goodwill.

ACQUION, INC. ("ACQUION")

Effective August 22, 1997, the Company acquired all of the common stock
of Acquion, a California corporation based in Greenville, South Carolina, for
approximately $13.6 million, consisting of $12.0 million in cash and the
assumption of approximately $1.6 million in liabilities including transaction
costs. The Company recorded the acquisition using the purchase method of
accounting with $10.9 million of the purchase price allocated to in-process
product development and charged to the consolidated statement of operations on
August 22, 1997, $641,000 allocated to purchased technology and $2.0 million
allocated to goodwill. The Company also incurred acquisition related expenses
and asset write downs of $2.5 million during 1997 related to this acquisition
(see Note 15). The Company recorded a net deferred income tax asset of
approximately $4.1 million as a result of this acquisition and provided a
valuation allowance against such net deferred income tax asset to reduce it to
zero.

ATLAS PRODUCTS INTERNATIONAL, LIMITED ("ATLAS")

Effective October 23, 1997, the Company acquired Atlas, a company
organized under the laws of England, based in Manchester, United Kingdom, for
311,399 unregistered shares of the Company's common stock in a transaction
accounted for using the pooling-of-interests method of accounting. In connection
with the acquisition, the Company incurred a charge of $2.0 million in 1997 for
acquisition related expenses, asset write downs and integration costs incurred
(see Note 15). The Atlas business combination is not material, and therefore has
been accounted for as an immaterial pooling with Atlas' accumulated deficit of
$296,000 being credited directly to the Company's accumulated deficit on the
date of acquisition.

1996 ACQUISITIONS

NTEX HOLDING, B.V. ("NTEX")

Effective March 31, 1996, the Company acquired all of the common stock
of NTEX, a Dutch corporation based in Rotterdam, The Netherlands, for $8.0
million, consisting of $3.2 million in cash, 107,780 shares of the Company's
common stock valued at $1.2 million, warrants to acquire 18,750 shares of the
Company's common stock at $11.33 per share valued at $100,500 and the assumption
of $3.5 million in liabilities including transaction costs. The Company recorded
the acquisition using the purchase method of accounting with $4.4 million of the
purchase price allocated to in-process product development and charged to the
consolidated statement of operations on March 31, 1996, $204,000 allocated to
purchased technology, $621,000 allocated to tangible assets and $2.8 million
allocated to goodwill.

INOVIS GmBH & CO. ("INOVIS")

Effective March 31, 1996, the Company acquired all of the common stock
of INOVIS, a German corporation based in Karlsruhe, Germany, for $6.1 million,
consisting of $1.4 million in cash, 210,276 shares of the Company's common stock
valued at $2.4 million, warrants to acquire 30,000 shares of the Company's
common stock at $10.17 per share valued at $104,000, a note payable of $557,000
and the assumption of $1.7 million in liabilities including transaction costs.
The Company recorded the acquisition using the purchase method of accounting
with $3.4 million of the purchase price allocated to in-process product
development and charged to the consolidated statement of operations on March 31,
1996, $600,000 allocated to purchased technology, $1.0 million allocated to
tangible assets and $1.1 million allocated to goodwill.

-57-
<PAGE> 25

HNV

Effective March 31, 1996, the Company acquired the remaining
outstanding common stock of HNV, a Dutch corporation based in Hoofddorp, The
Netherlands, for $1.2 million, consisting of 58,065 shares of the Company's
common stock valued at $668,000 and the assumption of $554,000 in liabilities
including transaction costs. The Company recorded the acquisition using the
purchase method of accounting with $300,000 of the purchase price allocated to
in-process product development and charged to the consolidated statement of
operations on March 31, 1996, $518,000 allocated to tangible assets and $447,000
allocated to goodwill and other intangibles (see Note 5).

DON VALLEY TECHNOLOGY CORPORATION ("DON VALLEY")

Effective May 14, 1996, the Company acquired all the common stock of
Don Valley, a Canadian corporation based in Toronto, Canada, for $2.5 million,
consisting of $1.1 million in cash, 25,945 shares of the Company's common stock
valued at $1.1 million and the assumption of $300,000 in liabilities including
transaction costs. The Company recorded the acquisition using the purchase
method of accounting with $2.0 million of the purchase price allocated to
in-process product development and charged to the consolidated statement of
operations on May 14, 1996, a net liability of $37,000 allocated to tangible
assets and $545,000 allocated to goodwill and other intangibles.

PRIME FACTORS, INC. ("PRIME FACTORS")

Effective July 19, 1996, the Company acquired all the common stock of
Prime Factors, an Oregon corporation based in Eugene, Oregon, for $4.1 million,
consisting of $3.0 million in cash, 21,118 shares of the Company's common stock
valued at $749,000 and the assumption of $351,000 in liabilities including
transaction costs. The Company recorded the acquisition using the purchase
method of accounting with $2.5 million of the purchase price allocated to
in-process product development and charged to the consolidated statement of
operations on July 19, 1996, $1.2 million allocated to purchased technology and
$411,000 allocated to tangible assets.

COMTECH MANAGEMENT SYSTEMS, INC. ("COMTECH")

Effective August 1, 1996, the Company acquired all of the common stock
of Comtech, a Texas corporation based in Amarillo, Texas, for $500,000,
consisting of 24,561 shares of the Company's common stock valued at $422,000 and
the assumption of $75,000 in liabilities. The Company recorded the acquisition
using the purchase method of accounting with $114,000 of the purchase price
allocated to tangible assets, $100,000 allocated to purchased technology and
$283,000 allocated to goodwill.

EDI INTEGRATION SERVICES LIMITED ("EISL")

Effective October 15, 1996, the Company acquired all of the common
stock of EISL, a company based in Hampshire, United Kingdom, for $804,000
consisting of $134,000 in cash and the assumption of a $670,000 note payable.
The Company recorded the acquisition using the purchase method of accounting
with $250,000 allocated to purchased technology, $548,000 allocated to goodwill
and $6,000 allocated to tangible assets.

PRO FORMA FINANCIAL INFORMATION

The results of operations of the acquired companies have been included
in the Company's consolidated statements of operations beginning on the
following dates: HNS: January 1, 1997; Smart Solutions: May 1, 1997; Acquion:
August 22, 1997; Atlas: October 1, 1997; NTEX, INOVIS and HNV: March 31, 1996;
Don Valley: May 14, 1996; Prime Factors: July 19, 1996; Comtech: August 1, 1996;
EISL: October 15, 1996.

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<PAGE> 26

The unaudited pro forma results of operations of the Company for 1997
and 1996 as if the acquisitions described above had been effected on January 1,
1997 and 1996, respectively, are summarized as follows (in thousands, except per
share data):

Years Ended December 31,
------------------------
1997 1996
-------- -------

Revenues............................... $123,264 $97,197
======== =======
Net loss applicable to common
shareholders....................... $(24,006) $(9,417)
======== =======
Net loss per share applicable to
common shareholders................ $(0.93) $ (0.39)
======== =======
Weighted average number of common
shares outstanding................. 25,683 23,848
======== =======

The unaudited pro forma results do not reflect the charges for
purchased in-process product development.

The unaudited pro forma results do not necessarily represent results
which would have occurred if the acquisitions had taken place on the dates
indicated nor are they necessarily indicative of the results of future
operations.

The terms of the Company's acquisitions of NTEX and INOVIS included
earnout agreements with certain employees/shareholders which provide for the
Company to pay these individuals additional consideration based upon the
attainment of certain performance goals for their respective former companies
for the year ended March 31, 1997. The Company provided an accrual of $425,000
for the year ended December 31, 1996 which was included in acquisition related
charges in the accompanying 1996 statement of operations to reflect the employee
compensation earned with respect to these agreements. This amount was paid
during 1997.

3. PURCHASED TECHNOLOGY AND DISTRIBUTION AGREEMENT

SYSTEM SOFTWARE ASSOCIATES, INC. ("SSA")

On July 21, 1995, the Company entered into a distribution agreement and
purchased certain software products from SSA in exchange for the issuance of
825,000 shares of the Company's common stock valued at $4.7 million at the date
of issuance and the issuance of 4,000,000 shares of the Company's Zero Coupon
Redeemable Preferred Stock. The Company also provided SSA with an option to put
the 825,000 shares of common stock issued back to the Company for cash on
January 31, 1997 exercisable only if the market value of the common stock on
that date was less than $6.00 per share. In September 1996, the Company
registered the 825,000 shares of puttable common stock. SSA sold all of the
shares during 1996. After 1996, the Company no longer considered SSA to be a
related party. The Zero Coupon Redeemable Preferred Stock issued has no voting
or dividend rights, vests at a rate of one million shares per year only if SSA
attains certain royalty targets for the years 1997 through 2000 and contains
mandatory redemption provisions of $0.67 per share payable in cash or the
Company's common stock, at the option of the holder, thirty days after the end
of each year. The Company will accrete the Zero Coupon Redeemable Preferred
Stock to its redemption price as it becomes probable that it will be earned
through a charge to direct costs of software in the period earned. The royalty
targets for 1997 were not met.

The terms of the distribution agreement provide for SSA to pay the
Company royalties through December 2000 based upon future software and service
revenues that SSA derives from the sale of the Company's products, including
certain minimum royalties of $1.4 million for 1995 and $5.7 million for 1996.

-59-
<PAGE> 27

The Company allocated the consideration associated with these
transactions of $4.8 million (including transaction costs of $122,000) as
follows: $2.3 million to purchased technology and $2.5 million to the
distribution agreement based upon the estimated fair values of the purchased
technology and distribution agreement at the date of the exchange. During 1997,
the purchased technology was written down due to the acquisition of other
replacement technology that will be licensed to SSA and the distribution
agreement was written down based upon future expectations of net cash flows from
the arrangement (see Note 15).

GENERAL ELECTRIC INFORMATION SERVICES, INC. ("GEIS")

On December 31, 1995, the Company entered into an agreement to purchase
certain software products and entered into an alliance agreement with GEIS. The
total purchase price was $2.5 million, consisting of $300,000 in cash and the
assumption of a note payable to GEIS in the amount of $2.2 million. The Company
recorded the purchase of the technology and the alliance agreement based upon
fair value with $1.2 million of the purchase price allocated to in-process
product development and charged to the consolidated statement of operations on
December 31, 1995, $375,000 allocated to purchased technology, $950,000
allocated to the alliance agreement and $15,000 allocated to tangible assets.
During 1997, the purchased technology was written down due to the acquisition of
other replacement technology that will be licensed to GEIS and the distribution
agreement was written down based upon future expectations of net cash flows from
the arrangement (see Note 15).

Certain terms of the alliance agreement include the referral of
customers to the Company by GEIS, the performance of certain software
maintenance services by GEIS and a $1.2 million guaranteed payment by GEIS to
the Company for the two-year period ended December 31, 1997, relating to
software maintenance revenues to be paid by GEIS to the Company.

4. PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December 31, 1997
and 1996 (in thousands):

<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Computer and communications
equipment.............................. $ 26,115 $ 18,964
Furniture, fixtures and leasehold
improvements........................... 6,766 5,880
Transportation equipment.................... 128 134
Equipment and fixtures under capital
leases................................. 720 669
Building.................................... 59 59
-------- --------
33,788 25,706
Less accumulated depreciation
and amortization.................... (15,621) (10,780)
-------- --------
$ 18,167 $ 14,926
======== ========
</TABLE>

5. INVESTMENTS IN JOINT VENTURES

INVESTMENT IN HNS

The Company founded HNS to develop products and services to facilitate
electronic commerce using the Internet. In March 1995, HNS was capitalized with
an investment of approximately $360,000 from the Company and approximately
$340,000 from certain other investors, including certain shareholders,
executives, officers, and directors of the Company. In June 1995, the Company
and BellSouth Corporation ("BellSouth") contributed cash of $8.0 million for HNS
common stock and $3.0 million for HNS convertible debt, respectively. As of
December 31, 1996, the Company owned an equity interest in HNS of approximately
91.4%, or 66.1% assuming the conversion of the BellSouth Debenture and the
exercise of outstanding HNS options. The Company recognized equity in losses of
its HNS joint venture of $7.0 million and $954,000 for the years ended December
31, 1996 and 1995, respectively.

-60-
<PAGE> 28

The Company had several agreements with HNS governing certain
transactions between them, including the use of personnel, the management and
operation of HNS, the use by HNS of the Company's products and services, the
Company's right to license and distribute HNS products, if any, derived from the
Company's products and the payment by HNS and the Company of royalties and other
amounts. Amounts charged to HNS by the Company for services provided were $1.8
million and $324,000 for the years ended December 31, 1996 and 1995,
respectively. These amounts primarily consisted of employee salaries and related
benefits and included $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 costs for the years ended December 31, 1996
and 1995, respectively. 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 HNS in 1996 and 1995 of
$505,000 and $413,000 that were reimbursed by HNS.

The Company recognized royalty revenues from HNS of $1.2 million for
the year ended December 31, 1996 related to HNS's licensing of products which
include the Company's technology and for referral fees. These royalty revenues
and referral fees from HNS were determined based upon a royalty agreement
between the Company and HNS. At December 31, 1996, the Company had an amount due
from HNS of $1.8 million for these services and expenses incurred by the Company
on behalf of HNS and for the royalty revenues earned from HNS. Likewise, amounts
charged to the Company by HNS for services provided during the period ended
December 31, 1996 were $214,000. This amount includes $191,000 in general and
administrative expenses and $23,000 in selling and marketing expenses which are
included in the Company's accompanying 1996 statement of operations.
Additionally, HNS paid expenses of $50,000 in 1996 on behalf of the Company that
were reimbursed by the Company.

Effective January 1, 1997, the Company purchased the BellSouth
Debenture and acquired the remaining minority interest in HNS (see Note 2).

-61-
<PAGE> 29

The following table sets forth the condensed balance sheet of HNS as of
December 31, 1996 and the condensed statements of operations for the years ended
December 31, 1996 and 1995 (in thousands):

Balance sheet:

1996
-------
<S> <C>
Cash and cash equivalents ................ $ 3,322
Accounts receivable ...................... 1,866
Property and equipment, net .............. 1,039
Other assets ............................. 277
-------
$ 6,504
=======

Accounts payable and accrued expenses .... $ 990
Due to affiliates, net ................... 2,040
Deferred revenues ........................ 196
Long-term debt ........................... 3,000
Shareholders' equity ..................... 278
-------
$ 6,504
=======

<CAPTION>
1995 1995
------- -------
<S> <C> <C>
Statements of operations:

Revenues:
Services ............................. $ 117 $ --
Software ............................. 2,036 --
------- -------
Total revenues .................. 2,153 --
------- -------
Direct costs:
Services ............................. 644 --
Software ............................. 1,617 --
------- -------
Total direct costs .............. 2,261 --
------- -------
Gross margin .............. (108) --
------- -------

Operating costs:
Selling and marketing ................ 926 84
General and administrative ........... 1,614 133
Depreciation and amortization ........ 621 21
Product development .................. 4,303 1,077
------- -------
Total operating costs ........... 7,464 1,315
------- -------

Operating loss ............. (7,572) (1,315)

Interest income, net ..................... 130 165
------- -------
Net loss ................................. $(7,442) $(1,150)
======= =======
</TABLE>

-62-
<PAGE> 30
INVESTMENT IN HNV

On November 5, 1993, the Company acquired a 20% interest in HNV, which
was formed to offer electronic commerce services in the European marketplace.
The initial capitalization of HNV consisted of an investment of $500,000 from
the Company and $2.0 million from certain other investors, including
shareholders of the Company. In December 1995, the Company and other HNV
investors, including shareholders of the Company, contributed to HNV additional
capital of $150,000 and $600,000, respectively. The Company had a license
arrangement with HNV which allowed HNV to use the Company's network and PC
technology and provided for the payment of royalty fees to the Company based on
a percentage of software and network revenues, as defined. The Company did not
recognize any royalty revenue from HNV during 1996 or 1995. Under a management
agreement, the Company provided certain consulting and management services to
HNV. Effective March 31, 1996, the Company acquired the remaining outstanding
common stock of HNV (see Note 2).

The Company recognized equity in losses of its HNV joint venture of
$69,000 and $313,000 for the years ended December 31, 1996 and 1995,
respectively.

Amounts charged to HNV by the Company for services provided during the
years ended December 31, 1996 and 1995 were (in thousands):

Services - direct costs..................... $ -- $ 63

General and administrative.................. 54 182
Product development......................... -- 27
Depreciation and amortization............... -- 4
---- ----
$ 54 $ 76
==== ====

</TABLE>

These amounts have been included in the statements of operations for
the Company as a reduction of expenses in the categories indicated.
Additionally, the Company paid expenses on behalf of HNV of $18,000 and $95,000
for the years ended December 31, 1996 and 1995, respectively, that were
reimbursed by HNV.

6. INTANGIBLE ASSETS

Intangible assets consist of the following at December 31, 1997 and
1996 (in thousands):

<TABLE>
<CAPTION>
1997 1996
------- -------

<S> <C> <C>
Purchased technology (see Note 15)............. $ 2,523 $ 6,113
Goodwill, GEIS alliance and SSA distribution
agreements (see Note 15)................... 9,514 9,468
Software development costs (see Note 15)....... 10,473 11,774
Other.......................................... -- 30
------- -------
22,510 27,385
Less accumulated amortization.................. (6,046) (7,579)
------- -------
$16,464 $19,806
======= =======

</TABLE>

-63-
<PAGE> 31

7. ACCRUED EXPENSES

Accrued expenses consist of the following at December 31, 1997 and 1996
(in thousands):

1997 1996
------- -------
<S> <C> <C>

Accrued salaries and wages.................. $ 8,011 $ 5,284
State income, property, sales and
other taxes............................ 3,227 2,290
Accrued severance........................... 3,689 --
Accrued TrustedLink Banker discontinued
operations costs........................ 3,685 --
Accrued integration costs incurred.......... 3,940 --
Other accrued expenses...................... 3,283 5,551
------- -------
$25,835 $13,125
======= =======
</TABLE>

8. INCOME TAXES

The provision for income tax expense (benefit) includes income taxes
currently payable and those deferred because of temporary differences between
the financial statement and tax bases of assets and liabilities and any increase
or decrease in the valuation allowance for deferred income tax assets.

During 1997, the Company acquired SupplyTech, Inc. and SupplyTech
International, LLC (collectively "STI")(see Note 2). Effective January 1, 1995,
SupplyTech, Inc. elected to be taxed as an S corporation under the Internal
Revenue Code. The acquisition of SupplyTech, Inc. by the Company terminated the
S corporation status under the Internal Revenue Code. Accordingly, SupplyTech,
Inc. was taxed as a regular corporation in 1997. SupplyTech International, LLC
was incorporated under the laws of the state of Michigan as a Limited Liability
Corporation ("LLC"). As an LLC, SupplyTech International, LLC has elected to be
taxed as a partnership under the Internal Revenue Code. In 1997, SupplyTech
International, LLC's income is included in the Company's consolidated income
subject to regular corporate tax. As a result of these elections, STI has been
taxed in a manner similar to a partnership for 1995 and 1996 and has not
provided for any federal or state income taxes as the results of operations are
passed through to, and the related income taxes become, the individual
responsibility of STI's shareholders.

Effective with the S corporation election, SupplyTech Inc.'s net
deferred income tax asset in the amount of $516,000 recorded as of December 31,
1994 was charged to income tax expense in 1995. Upon termination of SupplyTech,
Inc.'s S corporation status, the net deferred income tax asset of $1.8 million
was fully provided for by a valuation allowance.

The pro forma income tax expense for 1996 and 1995 reflects the income
tax expense that would have been reported if STI had been a C corporation and
subject to SFAS No. 109 during these periods.

Income (loss) from continuing operations before income taxes for the
years ended December 31, 1997, 1996 and 1995 consists of the following (in
thousands):

<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- -------

<S> <C> <C> <C>
U.S. operations.................................. $(31,375) $ (6,583) $ 2,021
Foreign operations............................... 1,961 (8,454) (1,153)
-------- -------- -------
Total income (loss) from continuing
operations before income taxes............ $(29,414) $(15,037) $ 868
======== ======== =======

</TABLE>

-64-
<PAGE> 32

Income tax expense (benefit) from continuing operations for the years
ended December 31, 1997, 1996 and 1995 is summarized as follows (in thousands):

<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Current:
Federal $ 581 $ (330) $ 242
Foreign 1,187 10 --
State 215 (38) 194
------ ------ ------
Total current $1,983 $ (358) $ 436
------ ------ ------

Deferred:
Federal $ 981 $1,064 $ 843
Foreign -- 167 --
State 129 123 34
------ ------ ------
Total deferred $1,110 $1,354 $ 877
------ ------ ------

Total income tax expense $3,093 $ 996 $1,313
====== ====== ======

</TABLE>

The Company's income taxes currently payable for federal and state
purposes have been reduced by the tax benefit derived from stock option
transactions. The benefit, which totaled $498,000, $2.9 million and $557,000 for
the years ended December 31, 1997, 1996 and 1995, respectively, has been
credited directly to stockholders' equity.

Income tax expense for discontinued operations of the TrustedLink
Banker division (from operations) for 1995 was $128,000. There was no income tax
expense for discontinued operations of the TrustedLink Banker division (from
operations) in 1997 or 1996. There is no income tax expense or benefit relating
to loss on disposal of TrustedLink Banker division or extraordinary loss on debt
extinguishment.

Pro forma income tax expense (benefit) from continuing operations for
the years ended December 31, 1996 and 1995 is summarized as follows (in
thousands):

<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Current:
Federal .................................. $ (330) $242
Foreign .................................. 10 --
State .................................... (38) 194
------ ----
Total current ....................... $ (358) $436
------ ----

Deferred:
Federal .................................. $1,064 $393
Foreign .................................. 167 --
State .................................... 123 (32)
------ ----
Total deferred ...................... $1,354 $361
------ ----

Pro forma income tax expense ................ $ 996 $797
====== ====

</TABLE>

-65-
<PAGE> 33

Income tax expense (benefit) differs from the amounts computed by
applying the federal statutory income tax rate of 34% to income (loss) from
continuing operations before income taxes as a result of the following (in
thousands):

Computed "expected" income tax expense (benefit) .......... $(10,001) $(5,113) $ 295
Increase (decrease) in income tax expense (benefit)
resulting from:
State income taxes, net of federal income tax
benefit ............................................. 227 56 150
Tax-exempt income ...................................... (157) (130) (49)
Loss from STI .......................................... -- 1,630 835
Change in tax status of STI ............................ (1,798) -- 516
Nondeductible charge for purchased in-process
product development and other costs ................. 1,431 3,134 --
Increase (decrease) in the valuation allowance for
deferred income tax assets .......................... 13,509 1,494 (226)
Other .................................................. (118) (75) (208)
-------- ------- ------
$ 3,093 $ 996 $1,313
======== ======= ======
</TABLE>

Pro forma income tax expense (benefit) differs from the amounts
computed by applying the federal statutory income tax rate of 34% to income
(loss) from continuing operations before income taxes as a result of the
following (in thousands):

Computed "expected" income tax expense (benefit) ....... $(5,113) $ 295
Increase (decrease) in income tax expense (benefit)
resulting from:
State income taxes, net of federal income tax
benefit .......................................... 56 107
Tax-exempt income ................................... (130) (49)
Nondeductible charge for purchased in-process
product development and other costs .............. 3,134 --
Increase in the valuation allowance for
deferred income tax assets ....................... 2,819 579
Other ............................................... 230 (135)
------- -----
$ 996 $ 797
======= =====
</TABLE>

The significant components of deferred income tax expense (benefit)
from continuing operations for the years ended December 31, 1997, 1996 and 1995
are summarized as follows (in thousands):

Deferred income tax expense (benefit) ........... $(14,619) $ (140) $1,103
Increase (decrease) in the valuation allowance
for deferred income tax assets ............. 13,509 1,494 (226)
-------- ------ ------
$ (1,110) $1,354 $ 877
======== ====== ======
</TABLE>

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<PAGE> 34

The significant components of pro forma deferred income tax expense
(benefit) from continuing operations for the years ended December 31, 1996 and
1995 are summarized as follows (in thousands):

Deferred income tax expense (benefit) .............. $(1,465) $(218)
Increase (decrease) in the valuation allowance
for deferred income tax assets .................. 2,819 579
------- -----
$ 1,354 $ 361
======= =====

</TABLE>

The income tax effects of the temporary differences that give rise to
the Company's deferred income tax assets and liabilities as of December 31, 1997
and 1996 are as follows (in thousands):

1997 1996
-------- -------
<S> <C> <C>
Deferred income tax assets:
Net operating loss carryforwards...................... $ 5,544 $ 5,469
Deferred revenue...................................... 1,486 1,008
Intangible assets..................................... 7,924 2,391
Accrued expenses...................................... 10,313 1,011
Research tax credit................................... 2,082 1,642
Other................................................. 790 --
-------- -------
Gross deferred income tax assets................... 28,139 11,521
Valuation allowance...................................... (22,671) (4,798)
-------- -------
Deferred income tax assets, net of the valuation
allowance.............................................. 5,468 6,723
Deferred income tax liabilities - principally due to
software development costs............................. (2,667) (2,812)
Net deferred income tax assets..................... 2,801 3,911
Less current deferred income tax assets.................. 1,892 4,033
-------- -------
Noncurrent deferred income tax assets (liabilities)...... $ 909 $ (122)
======== =======
</TABLE>

The decrease in net deferred income tax assets for the years ended
December 31, 1997, 1996 and 1995 was $1.1 million, $1.4 million and $877,000,
respectively. During 1997, the net increase in the valuation allowance was $17.9
million. Under SFAS No. 109, deferred income tax assets and liabilities are
recognized for differences between the financial statement carrying amounts and
the tax bases of assets and liabilities which will result in future deductible
or taxable amounts and for net operating loss and tax credit carryforwards. A
valuation allowance is then established to reduce the deferred income tax assets
to the level at which it is "more likely than not" that the tax benefits will be
realized. Realization of tax benefits of deductible temporary differences and
operating loss and tax credit carryforwards depends on having sufficient taxable
income within the carryback and carryforward periods. Sources of taxable income
that may allow for the realization of tax benefits include (a) taxable income in
the current year or prior years that is available through carryback, (b) future
taxable income that will result from the reversal of existing taxable temporary
differences and (c) future taxable income generated by future operations. The
Company continually reviews the adequacy of the valuation allowance and
recognizes these benefits as reassessment indicates that it is more likely than
not that the benefits will be realized.

As a result of the 1997 acquisition of the minority interest in HNS
(see Note 2), the Company acquired certain intangible assets for which it
provided a valuation allowance of $840,000 on the related deferred taxes. The
Company also acquired certain intangible assets in the Acquion acquisition (see
Note 2) for which it provided a valuation allowance of approximately $4.1
million on the related deferred taxes. The Company acquired net operating losses
and research tax credit carryforwards in the Premenos acquisition (see Note 2)
of approximately $1.3 million and $1.7 million, respectively. The utilization of
these net operating loss and research tax credit carryforwards is restricted
based on the ability of Premenos, as a separate company, to generate taxable
income.

-67-
<PAGE> 35
During 1996, the Company acquired foreign net operating loss
carryforwards in the NTEX and HNV acquisitions (see Note 2) of approximately
$6.5 million and $3.1 million, respectively. The Company established a valuation
allowance relating to the carryforwards of $2.4 million and $1.1 million,
respectively, which is included in the valuation allowance at December 31, 1996.
If the benefit from these net operating loss carryforwards is realized, the
Company will reduce the related valuation allowance and will reduce goodwill
recorded in connection with these transactions. For the year ended December 31,
1996, the Company realized a portion of these foreign net operating loss
carryforwards and recognized deferred foreign income tax expense of $93,000 and
$74,000 relating to the reduction in the valuation allowance for these
carryforwards and reduced goodwill associated with these acquisitions by a like
amount. During 1996, the Company also acquired certain intangible assets in the
INOVIS acquisition (see Note 2). The Company's acquisition of these intangible
assets for income tax reporting purposes created a deferred income tax asset of
approximately $1.5 million for which the Company provided a valuation allowance.

At December 31, 1997, the Company has domestic and foreign net
operating loss carryforwards and research tax credit carryforwards of
approximately $19.8 million, $9.7 million and $2.1 million, respectively. The
domestic net operating loss carryforwards expire at various dates through the
year 2012 unless utilized, the foreign net operating loss carryforwards do not
expire and the research tax credit carryforwards expire beginning in 2007
through 2012. The Company's domestic net operating loss carryforward at December
31, 1997 includes $14.7 million in income tax deductions related to stock
options excluded from the table of deferred income tax assets above, which will
be reflected as a credit to additional paid-in capital when realized.

9. LONG-TERM DEBT

Long-term debt as of December 31, 1997 and 1996 consist of the
following (in thousands):

6% promissory note payable to GEIS; paid off in 1997 ....... $ -- $ 1,650
Non interest bearing note payable to the former
shareholders of EISL, due in equal quarterly
principal installments through September 1998
(see Note 2) ........................................... 285 625
Capital lease obligations .................................. 146 460
Other debt ................................................. 192 377
----- -------
Total long-term debt ................................ 623 3,112
Less current portion of long-term debt ..................... (623) (1,504)
----- -------
Long-term debt, excluding current portion ........... $ -- $ 1,608
===== =======
</TABLE>

10. SHAREHOLDERS' EQUITY

PREFERRED STOCK, SERIES C

In 1993, the Company sold Series C redeemable preferred stock and
warrants in a private placement resulting in proceeds of $2.5 million. The terms
of the Series C redeemable preferred stock included a 7% cash dividend payable
quarterly and a mandatory redemption on March 1, 1996. In June 1995, the Company
entered into agreements with holders of its Series C redeemable preferred stock
to provide for the conversion on March 1, 1996 of all Series C redeemable
preferred stock to the Company's common stock. The number of shares of common
stock issuable upon conversion was determined by dividing (a) the issue price of
$10.00 times the number of shares of the Series C redeemable preferred stock
outstanding by (b) 95% of the average trading price of the common stock, as
defined. On March 1, 1996, the Company issued 211,038 shares of its common stock
in exchange for all outstanding shares of the Company's Series C preferred
stock.

-68-
<PAGE> 36
COMMON STOCK

1997 TRANSACTIONS

On January 10, 1997, the Board of Directors declared a three-for-two
stock split in the form of a 150% stock dividend on the Company's common stock
payable on January 31, 1997, to shareholders of record on January 17, 1997. 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.

In July 1997, the Company completed a secondary public offering of its
common stock. The Company sold 3.3 million shares consisting of 2.1 million
shares sold by the Company and 1.2 million shares sold by selling shareholders
at $30.75 per share resulting in net proceeds to the Company, after
underwriters' commissions and offering expenses, of $60.0 million.

In January 1997, the Company issued 242,288 shares of the Company's
common stock as partial consideration related to the purchase of the BellSouth
Debenture in accordance with the debenture purchase agreement.

In January 1997, the Company issued 2,400,000 shares of the Company's
common stock related to the Company's acquisition of STI which was accounted
for as a pooling-of-interests.

In May 1997, the Company issued 19,757 shares of the Company's common
stock as partial consideration related to the Company's acquisition of Smart
Solutions.

In October 1997, the Company issued 311,399 shares of the Company's
common stock related to the Company's acquisition of Atlas.

In December 1997, the Company issued 5,358,655 shares of the Company's
common stock related to the Company's acquisition of Premenos which was
accounted for as a pooling-of-interests.

In 1997, the Company issued 10,897 shares of the Company's common stock
related to earnout agreements with certain employees/shareholders which provided
for the Company to pay these individuals additional consideration based upon
attainment of certain performance goals for their respective former companies.

1996 TRANSACTIONS

In April 1996 the Company issued 376,121 shares of the Company's common
stock as partial consideration related to the Company's acquisition of NTEX,
INOVIS and HNV. In August 1996 the Company issued 24,561 shares of the Company's
common stock as consideration related to the Company's acquisition of Comtech.

In September 1996, the Company registered 825,000 shares of puttable
common stock held by SSA. As of December 31, 1996, SSA had sold the shares and
forfeited its rights to put the shares of common stock back to the Company.
Therefore, approximately $4.7 million of puttable common stock was reclassified
to shareholders' equity in 1996.

WARRANTS

The Company issued warrants in December 1997 related to the merger of
Premenos. The warrants enable the holders to acquire 17,467 shares of the
Company's common stock at $8.44 per share, representing the exchange ratio
agreed to in the merger agreement.

The Company issued warrants in April 1996 related to the acquisition of
NTEX and INOVIS. The warrants enable the holders to acquire 48,750 shares of the
Company's common stock at a range of $11.34 to $11.43 per share, representing
the fair value of the common stock at the date of issuance. There are 30,000
warrants outstanding as of December 31,1997.

-69-
<PAGE> 37
The Company issued warrants in July 1996 to two investors in HNV who
are also shareholders of the Company because certain events did not occur with
respect to the performance of HNV. The warrants enable the holders to acquire
75,000 shares of the Company's common stock at $18.50 per share, representing
the fair value of the common stock at the date of issuance.

STOCK COMPENSATION PLANS

Stock Options

The Company's 1989 Stock Option Plan (the "1989 Plan") and
1996 Stock Option Plan (the "1996 Plan") and together combined (the "Plans")
provide for the grant of options to officers, directors, consultants and key
employees. The maximum number of shares of stock that may be issued under the
1996 Plan shall not exceed in the aggregate the sum of 5,125,000 options plus an
amount equal to the number of all shares that are either not subject to options
granted under the 1989 Plan or were subject to options granted thereunder that
expire without exercise to officers, directors, consultants and key employees.
Options granted under the terms of the 1996 Plan generally vest ratably over
four years and are granted with an exercise price no less than the fair market
value of the common stock on the grant date. Options granted prior to July 1994
vest ratably over three years and options granted since July 1994 vest ratably
over four years. All options granted expire seven years from the date of grant.
At December 31, 1997, there were options outstanding to purchase 4,628,341
shares of the Company's common stock, of which options to purchase 1,033,329
shares were exercisable. There were 1,316,521 options available for grant at
December 31, 1997.

In 1993, the Board of Directors authorized the creation of a
stock option plan for nonemployee members of the Company's Board of Directors
(the "Nonemployee Directors Plan"). A total of 225,000 shares of common stock
has been reserved for issuance under the Nonemployee Directors Plan at an option
price no less than the fair market value of the common stock on the option grant
date. Options expire seven years from the date of grant. The options granted
under the Nonemployee Directors Plan vest ratably in the year of grant based on
attendance at regularly scheduled board meetings. Options which have not vested
in the year of grant expire and become available for grant under the Nonemployee
Directors Plan. Options granted under the Nonemployee Directors Plan for 136,500
shares of common stock were outstanding and exercisable as of December 31, 1997.
There were 41,625 options available for grant under the Nonemployee Directors
Plan at December 31, 1997.

In addition to outstanding options granted under the Company's
existing stock option plans, the Company has granted options to acquire 105,000
shares of common stock to certain existing and former nonemployee directors for
past services. As of December 31, 1997, 80,000 of these options were outstanding
and exercisable.

At December 31, 1997 the Company has five stock-based compensation
plans which are described herein. The Company applies APB Opinion No. 25 and
related interpretations in accounting for its plans. Accordingly, no
compensation cost has been recognized for its fixed stock option plans and its
stock purchase plan. The compensation cost that would have been charged
against income for its plans was $9.2 million, $3.5 million and $984,000 for
1997, 1996 and 1995, respectively, had compensation cost for the Company's
five stock-based compensation plans been determined consistent with SFAS No.
123. The Company's net loss and loss per share would have been reduced to the
pro forma amounts indicated below (in thousands, except per share data):

Net loss applicable to As reported $(39,047) $(16,091) $ (444)
common shareholders Pro forma $(48,221) $(19,592) $(1,428)

Basic and diluted loss As reported $ (1.53) $ (0.69) $ (0.02)
per common share Pro forma $ (1.90) $ (0.84) $ (0.08)

</TABLE>

-70-
<PAGE> 38
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions:
1995 and 1996: dividend yield of 0.5%; expected volatility of 57.8%; risk-free
interest rates of 5.9%; and expected lives of five years for all of the Plan
options; 1997: dividend yield of 0.5%; expected volatility of 67.3%; risk-free
interest rate of 5.7%; and expected lives of five years for all of the Plan
options.

A summary of the status of the Company's stock option plans as of
December 31, 1997, 1996 and 1995 and changes during the years ended on those
dates is presented below:

<TABLE>
<CAPTION>
1997 1996 1995
----------------------- ----------------------- ----------------------
Weighted Weighted Weighted
Average Average Average
Shares Exercise Shares Exercise Shares Exercise
Fixed Options (000s) Price (000s) Price (000s) Price
- ---------------------------------- -------- ------------ -------- ----------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>

Outstanding at beginning of year 3,045 $11.27 2,358 $ 4.68 2,040 $3.78
Granted 2,998 20.99 1,577 17.88 854 7.76
Exercised (572) 5.42 (653) 2.87 (364) 1.98
Forfeited/canceled (626) 25.79 (237) 12.82 (172) 3.60
Outstanding at end of year 4,845 16.10 3,045 11.27 2,358 4.68

Options exercisable at end of year 1,250 1,007 1,052
Weighted average fair value of
options granted during the year $ 9.05 $ 7.47 $ 3.86

</TABLE>

The following table summarizes information about fixed stock options
outstanding at December 31, 1997:

<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------- ------------------------
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
Range of Outstanding Contractual Exercise Exercisable Exercise
Exercise Prices at 12/31/97 Life (Years) Price at 12/31/97 Price
----------------- ----------- ------------ --------- ----------- ---------

<S> <C> <C> <C> <C> <C>
$ 0.020 - $ 4.250 800,265 3.03 $ 3.3737 635,620 $ 3.1468
$ 4.253 - $ 9.170 248,089 4.55 $ 6.3857 73,250 $ 6.9076
$10.330 - $11.670 573,443 5.14 $11.6005 108,942 $11.3913
$14.500 - $16.490 537,639 6.28 $15.7946 171,146 $15.5444
$16.670 - $16.940 133,602 7.18 $16.7468 19,687 $16.7919
$17.420 - $17.420 680,275 7.20 $17.4200 -- --
$17.670 - $20.500 284,951 6.14 $18.1998 86,547 $18.6060
$20.830 - $20.830 502,060 9.08 $20.8300 -- --
$20.875 - $25.125 671,300 7.08 $23.1852 84,157 $22.2649
$27.250 - $40.000 413,217 6.89 $32.1336 70,480 $32.2432
--------- ---------
$ 0.020 - $40.000 4,844,841 6.12 $16.1007 1,249,829 $10.0004
========= =========

</TABLE>

-71-
<PAGE> 39
Employee Stock Purchase Plan

Effective January 1, 1996, the Company began offering
employees the right to purchase shares of the Company's common stock at 85% of
the lower of the beginning of period or end of period market price pursuant to
the Employee Stock Purchase Plan (the "Purchase Plan"). Under the Purchase Plan,
full-time employees, except persons owning 5% or more of the Company's common
stock, are eligible to participate after six months of employment. Employees may
contribute up to 15% of their annual salary toward the Purchase Plan up to a
maximum of $15,000 per year. A maximum of 225,000 shares of common stock are
reserved for issuance under the Purchase Plan. During 1997 and 1996, 107,209 and
26,780 shares, respectively, were issued under the Purchase Plan.

Under SFAS No. 123, compensation cost is recognized for the
fair value of the employees' purchase rights, which was estimated using the
Black-Scholes model with the following assumptions for 1996: dividend yield of
0.5%; expected volatility of 57.8%; and risk-free interest rate of 5.9%; for
1997: dividend yield of 0.5%; expected volatility of 67.3% and risk-free
interest rate of 5.7%. The weighted-average fair value of those purchase rights
granted in 1997 and 1996 was $5.95 and $5.62, respectively.

11. OTHER RELATED PARTY TRANSACTIONS

The Company received $465,000 and $600,000 in 1997 and 1996,
respectively, in revenue from an affiliated company that is partially owned by
an employee of one of the Company's foreign subsidiaries. This same affiliated
company also billed the Company $63,000 and $350,000 in 1997 and 1996,
respectively, for services that the affiliated company provided to the Company.

Prior to the acquisition, one of Premenos' directors was a partner of a
law firm which provided various legal services to Premenos. In 1996, such legal
services included representation related to the acquisition of subsidiaries. Two
other directors of Premenos also provided training and consulting services to
the Company from time to time. Amounts incurred for all such services in 1997,
1996 and 1995 were $493,000, $879,000 and $1.0 million, respectively.

12. SEGMENT INFORMATION, INTERNATIONAL OPERATIONS AND MAJOR CUSTOMERS

SEGMENT INFORMATION

The Company operates in a single industry segment: the development,
marketing and supporting of software products and the providing of network and
consulting services to enable businesses to engage in electronic commerce.

INTERNATIONAL OPERATIONS

A summary of the Company's operations by geographic area as of and for
the years ended December 31, 1997 and 1996 is presented below (in thousands):

<TABLE>
<CAPTION>
North Latin
America Europe America Other Eliminations Total
------- ------ ------- ----- ------------ ----
<S> <C> <C> <C> <C> <C> <C>
Revenues:
1997 $101,596 $17,676 $2,423 $523 $(1,543) $120,675
1996 $ 78,796 $10,787 $ 358 $ -- $ (696) $ 89,245

Operating
income (loss):
1997 $(34,489) $ 959 $ 376 $138 $ -- $(33,016)
1996 $ (2,491) $(8,138) $ 5 $ -- $ (43) $(10,667)

Identifiable
assets:
1997 $193,924 $13,345 $ 200 $ -- $(23,910) $183,559
1996 $132,642 $12,362 $ 112 $ -- $(13,917) $131,199

</TABLE>

-72-
<PAGE> 40
Revenues from foreign operations and identifiable assets of foreign
operations were less than 10% of consolidated revenues and assets in 1995.

Revenues generated from export sales included in United States revenues
were less than 10% of consolidated revenues in 1997, 1996 and 1995.

MAJOR CUSTOMERS

No single customer comprised greater than 10% of the Company's
consolidated revenues in 1997, 1996 or 1995.

13. COMMITMENTS

401(k) PROFIT SHARING PLAN

In 1997, the Company maintained three separate 401(k) savings and
retirement plans for the benefit of its domestic employees. In accordance with
section 401(k) of the Internal Revenue Code, to be eligible for participation,
employees must be age 18 or older and meet length of service criteria (six or
twelve months of employment) as stipulated in each plan. Each plan provides for
matching contributions to be made by the Company. Under the terms of the plan
covering the former employees of Premenos, the Company is required to match 50%
of employee contributions to a maximum of 5% of their annual compensation. Under
the terms of the plan covering the former employees of STI, the Company is
required to match 25% of employee contributions to a maximum of 6% of their
annual compensation. Under the terms of the plan covering all other domestic
employees, subject to certain limitations, the Company may make a discretionary
matching contribution of up to $300 of the employee contributions at a rate
determined annually by the Board of Directors of the Company. Total Company
contributions under all 401(k) plans totaled $454,000, $194,000 and $148,000 for
the years ended December 31, 1997, 1996 and 1995, respectively.

The Board of Directors of the Company has approved the consolidation of
these plans into one standard 401(k) plan for all domestic employees. Management
anticipates that the new plan will be implemented by the third quarter of 1998
and will require the Company to match 50% of employee contributions to a maximum
of 4% of their annual compensation, subject to a $2,200 limit per employee.

CREDIT FACILITY

The Company maintains a credit facility which provides $10 million in
borrowing availability, subject to the terms of the facility, at an interest
rate of prime plus 0.625% and requires the Company to pay a commitment fee on
the unused portion of 0.375%. The credit facility requires, among other things,
the Company to maintain certain minimum financial ratios and restricts the
Company from making certain investments, incurring additional indebtedness and
making capital expenditures in excess of certain specified levels, as defined in
the terms of the facility. No amounts were outstanding under the facility at
December 31, 1997.

LEASES

The Company leases office facilities, automobiles, fixtures and
equipment under operating leases which extend through 2005. Rent expense under
all operating leases was approximately $4.3 million, $3.2 million and $1.9
million for the years ended December 31, 1997, 1996 and 1995, respectively. The
Company also leases equipment under capital leases. Substantially all of the
capital leases are collateralized by the equipment associated with the leases.
At December 31, 1997, the Company is obligated under these agreements to make
the following lease payments (in thousands):

-73-
<PAGE> 41

<TABLE>
<CAPTION>
Operating Capital
Leases Leases
--------- -------

<S> <C> <C>
1998............................................ $ 6,642 $151

1999............................................ 6,592 --
2000............................................ 5,719 --
2001............................................ 3,876 --
2002............................................ 3,192 --
Thereafter...................................... 7,747 --
------- ----
Total minimum lease payments.................... $33,768 151
=======
Less amount representing interest............... (5)
----
Present value of net minimum lease payments..... $146
====

</TABLE>

In October 1997, the Company entered into a lease agreement with the
current landlord to occupy space in an adjoining building. The expected
occupancy is in Spring 1998. In conjunction with the lease, the Company was
required to provide a letter of credit for $2.75 million. The lease has a term
of ten years with a right to cancel after seven years and requires annual rent
payments of approximately $2.1 million. In connection with the relocation,
management expects to incur approximately $2.0 million for capital expenditures
and other moving costs.

CONTINGENCIES

The Company is subject to lawsuits, claims and other complaints arising
out of the ordinary conduct of business. While the ultimate results and outcome
cannot be determined, management does not expect that they will have a material
adverse effect on the Company's results of operations or financial position.

14. DISCONTINUED OPERATIONS

In the fourth quarter of 1997, the Board of Directors approved the
discontinuance of the Company's TrustedLink Banker division ("Banker"). Revenues
from Banker were $4.0 million, $3.5 million and $3.3 million for the years ended
December 31, 1997, 1996 and 1995, respectively. The results of operations for
Banker for all years presented are reported in the accompanying reclassified
statements of operations under discontinued operations. In the fourth quarter of
1997, the Company provided for an anticipated loss of $4.0 million related to
the phase out of Banker operations. No income tax expense or benefit was
recognized in 1997 or 1996 due to the Company's net operating loss
carryforwards. The 1995 results of operations are shown net of taxes at the
Company's then current effective tax rate. The assets and liabilities of Banker
are included in the Company's consolidated balance sheets as of December 31,
1997 and 1996 and are summarized as follows (in thousands):

<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Accounts receivable........................ $ 215 $ 684
Other current assets....................... 49 39
Property and equipment, net................ 155 149
Capitalized software, net.................. - 284
Current liabilities........................ (1,765) (2,383)
------- -------
Net liabilities...................... $(1,346) $(1,227)
======= =======

</TABLE>

-74-
<PAGE> 42

15. CHARGE FOR PURCHASED IN-PROCESS PRODUCT DEVELOPMENT, WRITE-OFF OF SOFTWARE
DEVELOPMENT COSTS, ACQUISITION RELATED AND OTHER ONE-TIME CHARGES

In connection with the 1997, 1996 and 1995 acquisitions, the Company
incurred charges for purchased in-process product development, write-off of
software development costs, acquisition related and other one-time charges. A
summary of the components are as follows (in thousands):

<TABLE>
<CAPTION>
1997 1996 1995
------- ------- ------

<S> <C> <C> <C>
In-process product development............. $13,632 $12,649 $1,160
Integration costs and non recurring
one-time charges........................ 14,639 826 --
Transaction charges........................ 9,515 -- --
Intangible asset write downs............... 8,431 -- --
Asset write downs.......................... 1,599 -- --
Restructuring charges...................... 3,838 -- --
------- ------- ------
$51,654 $13,475 $1,160
------- ------- ------
</TABLE>

The Company incurred $3.8 million in restructuring charges related to
increasing synergies among all operating divisions as a result of recent
acquisitions. The restructuring resulted in the termination of 82 employees
across several departments including research and development, customer service,
marketing, administrative and finance and other areas. As of December 31, 1997,
the Company had actually paid $261,000 in termination benefits to former
employees.

Approximately $8.0 million of the costs and expenses incurred in
connection with the acquisitions of HNS, STI, Acquion, Atlas and Premenos
include certain internal expense allocations which 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. The Company anticipates
additional merger related charges totaling $10-$15 million in the first
quarter of 1998.

-75-
<PAGE> 43

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Harbinger Corporation:

We have audited the accompanying consolidated balance sheets of Harbinger
Corporation and subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We did not audit the 1996 and 1995
consolidated financial statements of Premenos Technology Corp. and subsidiaries,
or the 1995 combined financial statements of SupplyTech, Inc. and SupplyTech
International, LLC, which statements reflect total assets constituting 64% in
1996 of the related consolidated total, and total revenues constituting 38% and
67% in 1996 and 1995, respectively, of the related consolidated totals. Those
statements were audited by other auditors whose reports have been furnished to
us, and our opinion, insofar as it relates to the amounts included for Premenos
Technology Corp. and subsidiaries for 1996 and 1995, and for SupplyTech, Inc.
and SupplyTech International, LLC for 1995, is based solely on the reports of
the other auditors.

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 and the reports of the other auditors provide a
reasonable basis for our opinion.

In our opinion, based on our audits and the reports of the other auditors
with respect to 1996 and 1995, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Harbinger Corporation and subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1997 in conformity with generally accepted
accounting principles.

/s/ KPMG Peat Marwick LLP
------------------------------------
KPMG PEAT MARWICK LLP

Atlanta, Georgia
February 14, 1998

<PAGE> 1

EXHIBIT 21.1

HARBINGER CORPORATION
LIST OF SUBSIDIARIES

EDI Integration Services Limited SupplyTech International S.r.L.

Harbinger N.V. SupplyTech Australia Truest

Harbinger Ltd. (UK) SupplyTech Australia Pty, Ltd.

Harbinger Acquisition Corporation III Acquion, Inc.

Harbinger Acquisition Corporation IV Smart Solutions for Electronic
Commerce, Inc.

Omega GmbH Atlas Products International
Limited

INOVIS GmbH & Co. API Systems Limited

INOVIS Computergestutate Information Premenos Technology Corp.
Ssysteme GmbH

INOVIS Verwaltungs GmbH Premenos Corp.

INOVIS Media GmbH Premenos Holdings, Inc.

INOVIS Regio Service GmbH Premenos U.K. Ltd.

NTEX Holdings B.V. Premenos S.A. (France)

NTEX Computer Centrum, B.V. Premenos Canada Holding Corp.

NTEX Datacommunications, B.V. Premenos Canada Corp.

SupplyTech, Inc. Prime Factors, Inc.

SupplyTech International, LLC Premenos Europa

SupplyTech de Mexico, S.A. de C.V. Casique II

<PAGE> 1

EXHIBIT 23.1

INDEPENDENT AUDITORS' CONSENT

The Board of Directors
Harbinger Corporation:

We consent to incorporation by reference in the Registration Statements (No.
333-30219), (No. 33-96774), (No. 333-42959) and (No. 333-03247) on Form S-8 of
Harbinger Corporation of our reports dated February 14, 1998, relating to the
consolidated balance sheets of Harbinger Corporation as of December 31, 1997 and
1996, and the related consolidated statements of operations, shareholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1997, and the related financial statement schedule, which reports
appear in the 1997 Annual Report on Form 10-K of Harbinger Corporation.

Our reports dated February 14, 1998, which included references to other auditors
with respect to 1996 and 1995, as they relate to the 1996 and 1995 consolidated
financial statements of Premenos Technology Corp. and subsidiaries, and to the
1995 combined financial statements of Supply Tech, Inc. and Supply Tech
International, LLC which are included in the consolidated financial statements
of Harbinger Corporation, are based solely on the reports of the other auditors
as it relates to the amounts included for Premenos Technology Corp. and
subsidiaries for 1996 and 1995, and for Supply Tech, Inc. and Supply Tech
International, LLC for 1995.

KPMG PEAT MARWICK LLP

Atlanta, Georgia
March 26, 1998

<PAGE> 1

EXHIBIT 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in the 1997 Annual Report on Form 10-K of Harbinger
Corporation and to the incorporation by reference in the registration statements
of Harbinger Corporation on Form S-3 (File Nos. 33-96774, 333-03247, 333-30219
and 333-42959) of our report dated January 31, 1997, except for Paragraph 3 of
Note 16 as to which the date is March 16, 1997, on our audits of the
consolidated financial statements and financial statement schedule of Premenos
Technology Corp. and subsidiaries as of December 31, 1996, and for each of the
two years in the period then ended, which report is included in the Premenos
Technology Corp. 1996 Annual Report on Form 10-K.

COOPERS & LYBRAND L.L.P.

San Francisco, California
March 25, 1998

<PAGE> 1

EXHIBIT 23.3

INDEPENDENT AUDITORS' CONSENT

The Board of Directors
Harbinger Corporation:

We consent to the use of our report dated February 19, 1997 relating to the
combined statements of operations, shareholders' equity (deficit), and cash
flows of SupplyTech, Inc. and SupplyTech International, LLC. for the year ended
December 31, 1995 included in Harbinger Corporation's Report on Form 8-K/A
Amendment No. 1 filed on March 18, 1997 and Harbinger Corporation's Current
Report on Form 8-K filed on July 1, 1997 and incorporated by reference to this
Form 10-K for the fiscal year ended December 31, 1997.

Ciulla, Smith & Dale, LLP

Southfield, Michigan
March 26, 1998

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF HARBINGER CORPORATION FOR THE YEAR ENDED
DECEMBER 31, 1997 AND IS QUALIFED IN ITS ENTIRETY BY REFERENCE TO SUCH
CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 69,811
<SECURITIES> 32,333
<RECEIVABLES> 37,807
<ALLOWANCES> 2,790
<INVENTORY> 0
<CURRENT-ASSETS> 147,848
<PP&E> 33,788
<DEPRECIATION> 15,621
<TOTAL-ASSETS> 183,559
<CURRENT-LIABILITIES> 53,541
<BONDS> 0
0
0
<COMMON> 3
<OTHER-SE> 130,015
<TOTAL-LIABILITY-AND-EQUITY> 183,559
<SALES> 55,657
<TOTAL-REVENUES> 120,675
<CGS> 7,819
<TOTAL-COSTS> 31,297
<OTHER-EXPENSES> 122,394
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 132
<INCOME-PRETAX> (29,414)
<INCOME-TAX> 3,093
<INCOME-CONTINUING> (32,507)
<DISCONTINUED> 4,121
<EXTRAORDINARY> 2,419
<CHANGES> 0
<NET-INCOME> (39,047)
<EPS-PRIMARY> (1.53)
<EPS-DILUTED> (1.53)

</TABLE>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF HARBINGER CORPORATION FOR THE YEAR ENDED
DECEMBER 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 35,697
<SECURITIES> 29,844
<RECEIVABLES> 22,418
<ALLOWANCES> 2,425
<INVENTORY> 0
<CURRENT-ASSETS> 95,640
<PP&E> 25,706
<DEPRECIATION> 10,780
<TOTAL-ASSETS> 131,199
<CURRENT-LIABILITIES> 35,248
<BONDS> 0
0
0
<COMMON> 2
<OTHER-SE> 94,116
<TOTAL-LIABILITY-AND-EQUITY> 131,199
<SALES> 43,020
<TOTAL-REVENUES> 89,245
<CGS> 6,766
<TOTAL-COSTS> 23,112
<OTHER-EXPENSES> 76,800
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 224
<INCOME-PRETAX> (15,037)
<INCOME-TAX> 996
<INCOME-CONTINUING> (16,033)
<DISCONTINUED> 30
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (16,091)
<EPS-PRIMARY> (0.69)
<EPS-DILUTED> (0.69)

</TABLE>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF HARBINGER CORPORATION FOR THE YEAR ENDED
DECEMBER 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 24,258
<SECURITIES> 51,722
<RECEIVABLES> 15,803
<ALLOWANCES> 941
<INVENTORY> 0
<CURRENT-ASSETS> 96,752
<PP&E> 15,482
<DEPRECIATION> 6,887
<TOTAL-ASSETS> 125,867
<CURRENT-LIABILITIES> 24,218
<BONDS> 0
4,675
2,485
<COMMON> 2
<OTHER-SE> 90,708
<TOTAL-LIABILITY-AND-EQUITY> 125,867
<SALES> 30,842
<TOTAL-REVENUES> 60,077
<CGS> 5,256
<TOTAL-COSTS> 14,994
<OTHER-EXPENSES> 43,769
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 288
<INCOME-PRETAX> 868
<INCOME-TAX> 1,313
<INCOME-CONTINUING> (445)
<DISCONTINUED> (200)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (444)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)

</TABLE>

<PAGE> 1

EXHIBIT 99.1

Safe Harbor Compliance Statement

In passing the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"), 15 U.S.C.A. Sections 77z-2 and 78u-5 (Supp. 1996), Congress
encouraged public companies to make "forward-looking statements" by creating a
safe harbor to protect companies from securities law liability in connection
with forward-looking statements. Harbinger Corporation ("Harbinger" or the
"Company") intends to qualify both its written and oral forward-looking
statements for protection under the Reform Act and any other similar safe harbor
provisions.

"Forward-looking statements" are defined by the Reform Act. Generally,
forward-looking statements include expressed expectations of future events and
the assumptions on which the expressed expectations are based. All
forward-looking statements are inherently uncertain as they are based on various
expectations and assumptions concerning future events and they are subject to
numerous known and unknown risks and uncertainties which could cause actual
events or results to differ materially from those projected. Due to those
uncertainties and risks, the investment community is urged not to place undue
reliance on written or oral forward-looking statements of Harbinger. The Company
undertakes no obligation to update or revise this Safe Harbor Compliance
Statement for Forward-Looking Statements (the "Safe Harbor Statement") to
reflect future developments. In addition, Harbinger 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 over
time. This Safe Harbor Statement supersedes that certain Safe Harbor Statement
filed as Exhibit 99.5 to the Company's Current Report on Form 8-K dated October
29, 1997.

Harbinger provides the following risk factor disclosure in connection
with its continuing effort to qualify its written and oral forward-looking
statements for the safe harbor protection of the Reform Act and any other
similar safe harbor provisions. Important factors currently known to management
that could cause actual results to differ materially from those in
forward-looking statements include the disclosures contained in the Annual
Report on Form 10-K to which this statement is appended as an exhibit and also
include the following;

Integration of Recent Acquisitions; Future Acquisitions. Harbinger
Corporation ("Harbinger" or "Company") has completed a number of acquisitions
since January 1, 1997, including the acquisitions of Premenos Technology Corp.
("Premenos"), Atlas Products International, Limited and it affiliate ("Atlas"),
Acquion, Inc. ("Acquion"), SupplyTech, Inc. and its affiliated entities
(collectively, "SupplyTech"), and the minority interests of Harbinger NET
Services, LLC ("HNS"). Premenos, Acquion, SupplyTech and HNS have historically
reported significant operating losses. In addition, the acquisition of Premenos
represents Harbinger's largest acquisition to date and will require significant
management time and attention to successfully integrate the business and
operation of the two companies. Harbinger's acquisitions present a number of
risks and challenges, including the historical operating losses of Premenos,
Acquion, SupplyTech and HNS, the integration of the software products of the
acquired companies into Harbinger's current suite of products, the integration
of the sales forces of acquired companies into Harbinger's existing sales
operations, the coordination of customer support services, the integration of
international operations of acquired companies with Harbinger's international
affiliates, and the diversion of management's attention from other business
concerns. In connection with its prior acquisitions, Harbinger has experienced
the following effects during the periods subsequent to such acquisitions:
integration costs and expenses associated with such acquisition transactions;
refinement of the acquired companies business operations to conform to
Harbinger's mission and strategy, and the discontinuance of the non-core
business operations of the acquired company; and elimination of certain revenue
opportunities as a result of product overlap, channel conflict, or other
competitive overlap. Management of Harbinger currently anticipates that all or
certain of the foregoing factors may impact future operating results of
Harbinger as a result of the consummation of the merger with Premenos (the
"Merger") including, but not limited to, growth in revenue and operating income
in future periods. Several of the newly acquired products address the same
markets as, and may therefore be competitive with, or redundant with, existing
Harbinger products. There can be no assurance that Harbinger can successfully
assimilate its operations and integrate its software products with these
recently acquired operations, software products and technologies, that Harbinger
will be successful in repositioning its products on a timely basis to achieve
market acceptance or that the integration efforts associated with recent
acquisitions will not have a material adverse effect upon Harbinger's

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<PAGE> 2

business or results of operations in future periods. Any delay in such
integration efforts or adverse developments associated therewith could have a
material adverse effect on Harbinger.

Harbinger's growth has been significantly enhanced through acquisitions
of other businesses, products and licenses. There can be no assurance that in
the future Harbinger will be able to identify suitable acquisition candidates
available for sale at reasonable prices, consummate any acquisition or
successfully integrate any acquired business into Harbinger's operations.
Operational and software integration problems may arise if Harbinger undertakes
future acquisitions of complementary products, technologies or businesses.
Future acquisitions may also result in potentially dilutive issuances of equity
securities, the incurrence of additional debt, the write-off of in-process
product development and capitalized product costs, integration costs, and the
amortization of expenses related to goodwill and other intangible assets, all of
which could have a material adverse effect on Harbinger. Acquisitions involve
numerous additional risks, including difficulties in the assimilation of the
operations, products and personnel of the acquired company, differing company
cultures, the diversion of management's attention from other business concerns,
risks of entering markets in which Harbinger has little or no direct prior
experience, and the potential loss of key employees of the acquired company.
Customer satisfaction or performance problems at a single acquired firm could
have a material adverse impact on the reputation of Harbinger as a whole.
Although Harbinger has cash resources of approximately $100 million, to the
extent Harbinger desires to finance a future acquisition, there can be no
assurance that Harbinger will be able to secure financing for such a transaction
on reasonable terms or at all. See "Ability to Manage Growth."

Factors Affecting Operating Results; Potential Fluctuations in
Quarterly Results. Although Harbinger has been able to grow its revenue and
operating income (before special charges) in the past, there can be no assurance
that Harbinger will be able to continue to grow its revenue and operating income
at historical levels in the future or that fluctuations in revenue or operating
income growth will not occur in future periods. Factors currently known to
management that could impact rate of growth in revenue or operating income in
future periods include, but are not limited to, the management time and effort
currently anticipated in connection with the integration of recently acquired
businesses, and a slow down in the rate of growth of AS/400 EDI sales. In
addition, Harbinger's quarterly operating results have in the past and may in
the future vary or decrease significantly depending on factors such as revenue
from software sales, the timing of new product and service announcements,
changes in pricing policies by Harbinger and its competitors, market acceptance
of new and enhanced versions of Harbinger's products, the size and timing of
significant orders, changes in operating expenses, changes in Harbinger's
strategy, personnel changes, government regulation, the introduction of
alternative technologies, the effect of acquisitions and general economic
factors. Harbinger has limited or no control over many of these factors.
Harbinger has experienced losses in the past, and at December 31, 1997,
Harbinger had an accumulated deficit of approximately $59.8 million. Harbinger
operates with virtually no software product order backlog because its software
products typically are shipped shortly after orders are received. As a result,
revenues in any quarter are substantially dependent on the quantity of purchases
of services requested and product orders received in that quarter. Quarterly
revenues also are difficult to forecast because the market for electronic
commerce and EDI software products is rapidly evolving and Harbinger's revenues
in any period may be significantly affected by the announcements and product
offerings of Harbinger's competitors as well as alternative technologies.
Harbinger's IVAS and electronic catalog products are more complex and expensive
compared to Harbinger's other electronic commerce and Internet products
introduced to date, and will generally involve significant investment decisions
by prospective customers. Accordingly, Harbinger expects that in selling its
IVAS and electronic catalog products it will encounter risks typical of
companies that rely on large dollar purchase decisions, including the reluctance
of purchasers to commit to major investments in new products and protracted
sales cycles, both of which add to the difficulty of predicting future revenues
and may result in quarterly fluctuations. Harbinger's expense levels are based,
in part, on its expectations as to future revenues. If revenue levels are below
expectations, Harbinger may be unable or unwilling to reduce expenses
proportionately and operating results are likely to be adversely affected. As a
result, Harbinger believes that period-to-period comparisons of its results of
operations are not necessarily meaningful and should not be relied upon as
indications of future performance. Due to all of the foregoing factors, it is
likely that in some future quarter or quarters Harbinger's operating results
will be below the expectations of public market analysts and investors. In such
event, the price of the Harbinger Common Stock will likely be adversely affected
in a material manner.

Harbinger recognizes revenues for software license fees upon shipment,
net of estimated returns. Customers using Harbinger's PC products are permitted
to return products after delivery for a specified period,

85
<PAGE> 3

generally 60 days. Harbinger generally has experienced returns of approximately
10% to 30% of the PC product license fees, and Harbinger records revenues after
a deduction for estimated returns. Any material increase in Harbinger's return
experience could have an adverse effect on its operating results. See
"Integration of Recent Acquisitions; Future Acquisitions."

Acquisition-Related and Other Charges; Loss Expected in Quarter Ending
March 31, 1998. In the first quarter of 1998, Harbinger expects to incur
approximately $15.0 million in acquisition and integration related charges. As a
result of these charges, Harbinger expects to incur a net loss for the first
quarter of 1998. Certain of the costs and expenses incurred in connection with
these integration activities and reflected in such charges included internal
expense allocations which may recur in other expense categories in the future
and may result in an increase in some expense categories in Harbinger's results
of operations in future periods.

Ability to Manage Growth. Harbinger has recently experienced
significant growth in revenue, operations and personnel as it has made strategic
acquisitions, added subscribers to the Harbinger VAN and IVAS and increased the
number of licensees of its software products. This growth could continue to
place a significant strain on Harbinger's management and operations, including
its sales, marketing, customer support, research and development, finance and
administrative operations. Achieving and maintaining profitability during a
period of expansion will depend, among other things, on Harbinger's ability to
successfully expand its products, services and markets and to manage its
operations and acquisitions effectively. Difficulties in managing growth,
including difficulties in obtaining and retaining talented management and
product development personnel, especially following an acquisition, could have a
material adverse effect on Harbinger.

Ability to Respond to Rapid Change. Harbinger's future success will
depend significantly on its ability to enhance its current products and develop
or acquire and market new products which keep pace with technological
developments and evolving industry standards as well as respond to changes in
customer needs. The market for electronic commerce and EDI products and
services, VAN services and Internet software products and services is
characterized by rapidly changing technology, evolving industry standards and
customer demands, and frequent new product introductions and enhancements. There
can be no assurance that Harbinger will be successful in developing or acquiring
product enhancements or new products to address changing technologies and
customer requirements adequately, that it will introduce such products on a
timely basis, or that any such products or enhancements will be successful in
the marketplace. Harbinger's delay or failure to develop or acquire
technological improvements or to adapt its products to technological change
would have a material adverse effect on Harbinger's business, results of
operations and financial condition. The failure of Harbinger's management team
to respond effectively to and manage rapidly changing technological and business
conditions as well as the growth of its own business, should it occur, could
have a material adverse impact on Harbinger's business, results of operations
and prospects.

Intense Competition. The electronic commerce, EDI and network services
and products businesses are intensely competitive, and Harbinger has many
competitors with substantially greater financial, marketing, personnel and
technological resources than Harbinger. Other companies offer products and
services that may be considered by customers to be acceptable alternatives to
Harbinger's products and services. Certain companies also operate private
computer networks for transacting business with their trading partners and
Harbinger expects other companies to offer products and services competitive
with the Templar, Express and IVAS products and services. It is expected that
other companies may develop and implement similar computer-to-computer networks,
some of which may be "public" networks such as Harbinger's and others may be
"private," providing services only to a specific group of trading partners,
thereby reducing Harbinger's ability to increase sales of its network services.
In addition, several companies offer PC-based, midrange NT and UNIX, and
mainframe and Internet computer software products which compete with Harbinger's
software products. Advanced operating systems and applications software from
Microsoft and other vendors also may offer electronic commerce functions that
limit Harbinger's ability to sell its software products. Harbinger believes that
the continuing acceptance of electronic commerce and EDI will attract new
competitors, including software applications and operating systems companies
that may bundle electronic commerce solutions with their programs, and
alternative technologies that may be more sophisticated and cost effective than
Harbinger's products and services. Competitive companies may offer certain
electronic commerce products or services, such as communications software or
network transactional services, at no charge or a deeply discounted charge, in
order to obtain the sale of other products or services. Since Harbinger's

86
<PAGE> 4

agreements with its network subscribers generally are terminable upon 30 days'
notice, Harbinger does not have the contractual right to prevent its customers
from changing to a competing network. See "Dependence on New Products; Industry
Standards." Competitors that offer products and/or services that compete with
various of Harbinger's products and services include, among others, IBM, Inc.;
AT&T; Computer Associates International, Inc.; EDS; General Electric Information
Systems; QuickResponse Services, Inc.; Sterling Commerce, Inc., Aspect
Development, Inc., TSI International, Inc., Ariba Technologies, Inc. and a joint
venture between British Telecommunications Plc and MCI Communications
Corporation; as well as the internal programming staffs of various businesses
engaging in electronic commerce.

Emergence of Electronic Commerce Over the Internet. The Internet
provides an alternative means of providing electronic commerce to business
trading partners. The market for Internet software and services is both emerging
and highly competitive, ranging from small companies with limited resources to
large companies with substantially greater financial, technical and marketing
resources than Harbinger. In addition to Harbinger's Internet related products
and services, several existing competitors of Harbinger have introduced their
own Internet electronic commerce products and services. Moreover, new
competitors, which may include telephone companies and media companies, are
likely to increase the provision of business-to-business data transmission
services using the Internet. There is no assurance that the Internet will become
an accepted method of electronic commerce. There is no assurance that
Harbinger's TrustedLink Guardian end user software and IVAS or Premenos' Templor
Products, which enable electronic commerce over the Internet, will be accepted
in the Internet market or can be competitive with other products based on
evolving technologies. If the Internet becomes an accepted method of electronic
commerce, Harbinger could lose network customers from its VAN which would reduce
recurring revenue from network services and have a material adverse effect on
Harbinger. Even if customers choose Harbinger's Internet solutions, the revenue
gained from the sale of these solutions may not offset the loss of revenue from
the sale of Harbinger's traditional EDI solutions.

The use of Harbinger's and Premenos' Internet electronic commerce
products and services will depend in large part upon the continued development
of the infrastructure for providing Internet access and services. Use of the
Internet for business-to-business electronic commerce services raises numerous
issues that greatly impact the development of this market. These issues include
reliability, data security and data integrity, timely transmission, and pricing
of products and services. Because global commerce and online exchange of
information on the Internet is new and evolving, it is difficult to predict with
any assurance whether the Internet will prove to be a viable commercial
marketplace. The Internet has experienced, and is expected to continue to
experience, substantial growth in the number of users and the amount of traffic.
There can be no assurance that the Internet will continue to be able to support
the demands placed on it by this continued growth. In addition, the Internet
could lose its viability due to delays in the adoption of new standards and
protocols to handle increased levels of Internet activity, or due to increased
governmental regulation. There can be no assurance that the infrastructure or
complementary services necessary to make the Internet a viable commercial
marketplace will be developed, or, if developed, that the Internet will become a
viable commercial marketplace for products and services such as those offered by
Harbinger and Premenos. If the necessary infrastructure or complementary
services or facilities are not developed, or if the Internet does not become a
viable commercial marketplace, Harbinger's business, operating results or
financial condition will be materially adversely affected.

Dependence on New Products; Industry Standards. The electronic commerce
industry is characterized by rapid technological change, frequent new product
and service introductions and evolving industry standards. Harbinger's future
success will depend in significant part on its ability to anticipate industry
standards, to continue to apply advances in electronic commerce product and
service technologies, to enhance existing products and services, and to
introduce and acquire new products and services on a timely basis to keep pace
with technological developments. There can be no assurance that Harbinger will
be successful in developing, acquiring or marketing new or enhanced products or
services that respond to technological change or evolving industry standards,
that Harbinger will not experience difficulties that could delay or prevent the
successful development, acquisition or marketing of such products or services or
that its new or enhanced products and services will adequately meet the
requirements of the marketplace and achieve market acceptance. In the past,
Harbinger has experienced delays in the commencement of commercial shipments of
new products and enhancements, resulting in delays or losses of product
revenues. Such delays or failure in the introduction of new or enhanced products
or services, or the failure

87
<PAGE> 5
of such products or services to achieve market acceptance, could have a material
adverse effect on the business, results of operations and financial condition of
Harbinger.

Investment in International Subsidiaries; International Growth and
Operations. Harbinger believes that its continued growth and profitability will
require expansion of its international operations through its international
subsidiaries, including Atlas, NTEX Holding, B.V. in The Netherlands and INOVIS
GmbH & Co. in Germany, as well as the international operations of SupplyTech in
the United Kingdom, Italy and Mexico and Premenos in France (collectively, the
"International Subsidiaries"). This expansion will require financial resources
and significant management attention, particularly by certain members of the
management of Harbinger. Harbinger's ability to successfully expand its business
internationally will also depend upon its ability to attract and retain both
talented and qualified managerial, technical and sales personnel and electronic
commerce services customers outside the United States and its ability to
continue to effectively manage its domestic operations while focusing on
international expansion. Certain of the International Subsidiaries have
experienced operating losses in their recent histories and some have experienced
significant operating losses in their recent histories. To the extent that the
International Subsidiaries are unable to penetrate international markets in a
timely and profitable manner, Harbinger's growth, if any, in international sales
will be limited, and Harbinger could be materially adversely affected.

During the third quarter of 1997, Harbinger's growth in revenue was
adversely affected by a fluctuation in currency exchange rates, management
issues associated with its European operations, and general softness in demand
in the European markets. Moreover, Harbinger's ability to successfully implement
its international strategy may require installation and operation of a
value-added network and implementation of its IVAS software in other countries,
as well as additional improvements to its infrastructure and management
information systems, including its international customer support systems. In
addition, there can be no assurance that Harbinger will be able to maintain or
increase international market demand for Harbinger's products or services.

International operations are subject to certain inherent risks,
including unexpected changes in regulatory requirements and tariffs, longer
payment cycles, increased difficulties in collecting accounts receivable and
potentially adverse tax consequences. To the extent international sales are
denominated in foreign currencies, gains and losses on the conversion to U.S.
dollars of revenues, operating expenses, accounts receivable and accounts
payable arising from international operations may contribute to fluctuations in
Harbinger's results of operations. Harbinger has not entered into any hedging or
other arrangements for the purpose of guarding against the risk of currency
fluctuation. In addition, sales in Europe and certain other parts of the world
typically are adversely affected in the third calendar quarter of each year
because many customers reduce their business activities in the summer months.

Dependence on Key Management and Personnel; Ability to Attract and
Retain Qualified Personnel. Harbinger's success is largely dependent upon its
executive officers and key sales and technical personnel, the loss of one or
more of whom could have a material adverse effect on Harbinger. The future
success of Harbinger will depend in large part upon its ability to attract and
retain talented and qualified personnel. In particular, Harbinger believes that
it will be important for Harbinger to hire experienced product development and
sales personnel. Competition in the recruitment of highly-qualified personnel in
the computer software and electronic commerce industries is intense. The
inability of Harbinger to locate and retain such personnel may have a material
adverse effect on Harbinger. No assurance can be given that Harbinger can retain
its key employees or that it can attract qualified personnel in the future.
Harbinger currently carries key-person life insurance policies on the lives of
Messrs. Howle, Leach, Davis and Travers.

Year 2000 Compliance. Much publicity has been given to the "Year 2000"
issue and the ability of computer systems to function properly in the new
millennium. Most of the latest versions of the Company's products released or to
be released are designed to be Year 2000 compliant. The Company is in the
process of determining the extent to which its earlier software products as
implemented in the Company's installed customer base are Year 2000 compliant, as
well as the impact of any non-compliance on the Company and its customers. The
Company currently anticipates that any problems resulting from non-compliant
products will be addressed through a combination of product modifications as
part of planned product enhancements and migration of customers to functionally
similar products which are Year 2000 compliant. Additional efforts are being
made to modify or

88
<PAGE> 6

replace other noncompliant software, systems and equipment used by the Company
internally, including third party software, before the year 1999. Further, the
Company is aware of the risk that third parties, including vendors and customers
of the Company, will not adequately address the Year 2000 problem and the
resultant potential adverse impact on the Company. The Company projects that the
majority of the compliance effort will be absorbed with the product enhancements
planned for 1998, and thus that the Year 2000 problem will not have a material
adverse impact on the Company's business, operating results and financial
condition, although there can be no assurance to that effect. Regardless of
whether the Company's products are Year 2000 compliant, there can be no
assurance that customers will not assert Year 2000 related claims against the
Company. The Company believes that the purchasing patterns of customers and
potential customers may be affected by Year 2000 issues in a variety of ways.
Many companies are expending significant resources to correct or patch their
current software systems for Year 2000 compliance. These expenditures may result
in reduced funds available to purchase software products such as those offered
by the Company. Potential customers may also choose to defer purchasing Year
2000 compliant products until they believe it is absolutely necessary, thus
resulting in potentially stalled market sales within the industry. Conversely,
Year 2000 issues may cause other companies to accelerate purchases, thereby
causing an increase in short-term demand and a consequent decrease in long-term
demand for software products. Additionally, Year 2000 issues could cause a
significant number of companies, including current Company customers, to
reevaluate their current software needs, and as a result switch to other systems
or suppliers. Any of the foregoing could result in a material adverse effect on
the Company's business, operating results and financial condition. Any of the
foregoing, or combination thereof, could result in a material adverse effect on
the Company's business, operating results and financial condition.

Dependence on Alliance Partners. Harbinger has various agreements with
alliance partners for the distribution and marketing of certain software
products of Harbinger. These alliance partners pay Harbinger royalties
representing a percentage of fees generated from the sale of software licensed
from Harbinger. For the years ended December 31, 1995 and 1996, revenues from
one of these alliance partners were approximately $1.4 million and $5.7 million,
respectively, which equaled the contractual minimum royalty during those years.
There is no minimum royalty obligation after 1996, and Harbinger has experienced
and believes that revenues from this alliance partner will decline in the
future. Further, based on amendments to the arrangement, Harbinger has
experienced and believes that the average collection period related to cash
flows derived from royalty revenues earned from this alliance partner will
lengthen substantially. In addition, in 1997 Premenos was dependent on a
distribution partner for approximately 6% of revenues, arising principally from
this partner's distribution efforts in Europe and other overseas locations.
There can be no assurance that this partner will continue to distribute Premenos
or Harbinger products in 1998, or that such distribution efforts, if continued,
will achieve the same degree of results.

Risks of Product Development. Software products as complex as those
offered by Harbinger may contain undetected errors or failures when first
introduced or when new versions are released. If software errors are discovered
after introduction, Harbinger could experience delays or lost revenues during
the period required to correct these errors. There can be no assurance that,
despite testing by Harbinger and by current and potential customers, errors will
not be found in new products or releases after commencement of commercial
shipments, resulting in loss of or delay in market acceptance, additional and
unexpected expenses to fund further product development or to add programming
personnel to complete a development project, and loss of revenue because of the
inability to sell the new product on a timely basis, any one or more of which
could have a material adverse effect on Harbinger.

Dependence on Data Centers. The network service operations of Harbinger
are dependent upon the ability to protect computer equipment and the information
stored in Harbinger's data centers against damage that may be caused by fire,
power loss, telecommunication failures, unauthorized intrusion, computer viruses
and disabling devices and other similar events. Notwithstanding precautions
Harbinger has taken, there can be no assurance that a fire or other natural
disaster, including national, regional or local telecommunications outages,
would not result in a prolonged outage of Harbinger's network services. In the
event of a disaster, and depending on the nature of the disaster, it may take
from several hours to several days before Harbinger's off-site computer system
can become operational for all of Harbinger's customers, and use of the
alternative off-site computer would result in substantial additional cost to
Harbinger. In the event that an outage of Harbinger's network extends for more
than several hours, Harbinger will experience a reduction in revenues by reason
of such outage. In the event that such outage extends

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for one or more days, Harbinger could potentially lose many of its customers,
which may have a material adverse effect on Harbinger.

Dependence upon Certain Licenses. Harbinger relies on certain
technology that it licenses from third parties and other products that are
integrated with internally developed software and used in Harbinger's products
to perform key functions or to add important features. There can be no assurance
that Harbinger will be successful in negotiating third-party technology licenses
on suitable terms or that such licenses will not be terminated in the future.
Moreover, any delay or product problems experienced by such third party
suppliers could result in delays in introduction of Harbinger's products and
services until equivalent technology, if available, is identified, licensed and
integrated, which could have a material adverse effect on Harbinger's business,
operating results and financial condition.

Limited Protection of Proprietary Technology; Risks of Infringement.
Harbinger relies primarily on a combination of copyright, patent and trademark
laws, trade secrets, confidentiality procedures and contractual provisions to
protect its proprietary rights. Harbinger seeks to protect its software,
documentation and other written materials principally under trade secret and
copyright laws, which afford only limited protection. Harbinger presently has
one patent for an electronic document interchange test facility and a patent
application pending for an EDI communication system. Despite Harbinger's efforts
to protect its proprietary rights, unauthorized parties may attempt to copy
aspects of Harbinger's products or to obtain and use information that Harbinger
regards as proprietary. There can be no assurance that Harbinger's means of
protecting its proprietary rights will be adequate or that Harbinger's
competitors will not independently develop similar technology. In distributing
many of its products, Harbinger relies primarily on "shrink wrap" licenses that
are not signed by licensees and, therefore, may be unenforceable under the laws
of certain jurisdictions. In addition, Harbinger has licensed it products to
users and distributors in other countries, and the laws of some foreign
countries do not protect Harbinger's proprietary rights to as great an extent as
the laws of the United States. Harbinger does not believe that any of its
products infringe the proprietary rights of third parties. There can be no
assurance, however, that third parties will not claim infringement by Harbinger
with respect to current or future products, and Harbinger has agreed to
indemnify many of its customers against such claims. Harbinger expects that
software product developers will increasingly be subject to infringement claims
as the number of products and competitors in electronic commerce grows and the
functionality of products in different industry segments overlaps. Any such
claims, with or without merit could be time-consuming, result in costly
litigation, cause product shipment delays or require Harbinger to enter into
royalty or licensing agreements and indemnify its customers against resulting
liability, if any. Such royalty or licensing agreements, if required, may not be
available on terms acceptable to Harbinger or at all, which could have a
material adverse effect on Harbinger.

Government Regulatory and Industrial Policy Risks. Harbinger's network
services are transmitted to its customers over dedicated and public telephone
lines. These lines are governed by Federal and state regulations establishing
the rates, terms and conditions for their use. Changes in the legislative and
regulatory environment relating to online services, EDI or the Internet access
industry, including regulatory or legislative changes which directly or
indirectly affect telecommunication costs, restrict content or increase the
likelihood of competition from regional telephone companies or others, could
have a material adverse effect on Harbinger's business. The Telecommunications
Act of 1996 ("Act") amended the federal telecommunications laws by lifting
restrictions on regional telephone companies and others competing with Harbinger
and imposed certain restrictions regarding obscene and indecent content
communicated to minors over the Internet or through interactive computer
services. The Act set in motion certain events that will lead to the elimination
of restrictions on regional telephone companies providing transport between
defined geographic boundaries associated with the provision of their own
information services. This will enable regional telephone companies to more
readily compete with Harbinger by packaging information service offerings with
other services and providing them on a wider geographic scale. While provisions
of the Act prohibiting the use of a telecommunications device or interactive
computer service to send or display indecent material to minors have been held
by the U.S. Supreme Court to be unconstitutional, there can be no assurance that
future legislative or regulatory efforts to limit use of the Internet in a
manner harmful to Harbinger will not be successful. The Clinton administration
has announced an initiative to establish a framework for global electronic
commerce. Also, some countries such as Germany have adopted laws regulating
aspects of the Internet, and there are a number of bills currently being
considered in the United States at the federal and state levels involving
encryption and digital signatures, all of which may impact Harbinger. Harbinger
cannot predict the

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impact, if any, that the Act and future court opinions, legislation, regulations
or regulatory changes in the United States or other countries may have on its
business. Management believes that Harbinger is in compliance with all material
applicable regulations. Harbinger's Trusted Link Guardian product and the
Templar product both incorporate encryption technology which is subject to U.S.
export control regulations. Although both products are currently exportable
under licenses granted by the Commerce Department, government regulation in this
area is subject to frequent change and there can be no assurance that these
products will remain exportable.

Anti-Takeover Provisions. The Harbinger Board has authority to issue up
to 20,000,000 shares of preferred stock and to fix the rights, preferences,
privileges and restrictions, including voting rights, of the preferred stock
without further vote or action by Harbinger shareholders. The rights of the
holders of Harbinger Common Stock will be subject to, and may be adversely
affected by, the rights of the holders of any preferred stock that may be issued
in the future. While Harbinger has no present intention to issue additional
shares of preferred stock, such issuance, while providing desired flexibility in
connection with possible acquisitions and other corporate purposes, could have
the effect of making it more difficult for a third party to acquire a majority
of the outstanding voting stock of Harbinger. In addition, the Harbinger Charter
and the Harbinger Bylaws contain provisions that may discourage proposals or
bids to acquire Harbinger. This could limit the price that certain investors
might be willing to pay in the future for shares of Harbinger Common Stock. The
Harbinger Charter provides for a classified board of directors with three-year,
staggered terms for its members. The classification of the Harbinger Board could
have the effect of making it more difficult for a third party to acquire control
of Harbinger.