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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[MARK ONE]
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
------------ ------------
COMMISSION FILE NUMBER 0-26298
HARBINGER CORPORATION
(Exact name of registrant as specified in Its charter)
GEORGIA 58-1817306
(State or other Jurisdiction of incorporation or (I.R.S. Employer
organization) Identification No.)
1277 LENOX PARK BOULEVARD 30319
ATLANTA, GEORGIA (Zip Code)
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (404) 467-3000
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
The number of shares of the issuer's class of capital stock outstanding as of
May 5, 1998, the latest practicable date, is as follows: 41,834,805 shares of
Common Stock, $.0001 par value (reflects three-for-two stock split in the form
of a stock dividend payable on May 15, 1998).
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HARBINGER CORPORATION
FORM 10-Q
QUARTER ENDED MARCH 31, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
Number
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<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - (Unaudited) March 31, 1998
and December 31, 1997................................................. 3
Consolidated Statements of Operations (Unaudited) - Three
Months Ended March 31, 1998 and 1997.................................... 4
Consolidated Statements of Comprehensive Loss (Unaudited) -
Three Months Ended March 31, 1998 and 1997........................... 5
Consolidated Statements of Cash Flows (Unaudited) -
Three Months Ended March 31, 1998 and 1997........................... 6
Notes to Consolidated Financial Statements (Unaudited)...................... 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations....................................................... 9
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.............................. 14
Item 6. Exhibits and Reports on Form 8-K................................................. 15
PART III. SIGNATURES..................................................................... 16
</TABLE>
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ITEM 1. FINANCIAL STATEMENTS
HARBINGER CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
---------------- -----------------
1998 1997
---------------- -----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ......................................... $ 75,254,000 $ 69,811,000
Short-term investments ............................................ 31,050,000 32,333,000
Accounts receivable, less allowances for returns and
doubtful accounts of $2,773,000 at March 31, 1998
and $2,790,000 at December 31, 1997 ............................. 30,215,000 35,017,000
Royalties receivable .............................................. 7,015,000 5,364,000
Deferred income taxes ............................................. 1,889,000 1,892,000
Other current assets .............................................. 4,439,000 3,431,000
------------- -------------
Total current assets .......................................... 149,862,000 147,848,000
------------- -------------
Property and equipment, less accumulated depreciation
and amortization .................................................. 18,780,000 18,167,000
Intangible assets, less accumulated amortization ..................... 16,543,000 16,464,000
Deferred income taxes ................................................ 909,000 909,000
Other assets ......................................................... 327,000 171,000
============= =============
$ 186,421,000 $ 183,559,000
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities:
Accounts payable .................................................. $ 4,864,000 $ 8,734,000
Accrued expenses .................................................. 25,515,000 25,835,000
Deferred revenues ................................................. 20,237,000 18,349,000
Current portion of long-term debt ................................. 454,000 623,000
------------- -------------
Total current liabilities ..................................... 51,070,000 53,541,000
------------- -------------
Commitments and contingencies
Redeemable preferred stock:
Zero Coupon, $1.00 redemption value; 4,000,000
shares issued and outstanding
at March 31, 1998 and
December 31, 1997 ............................................... -- --
Shareholders' equity:
Common stock, $0.0001 par value; 100,000,000 shares
authorized, 41,701,491 shares and 40,827,856 shares issued
and outstanding at March 31, 1998 and December 31, 1997 ......... 4,000 4,000
Additional paid-in capital ........................................ 196,587,000 189,841,000
Accumulated deficit ............................................... (60,153,000) (58,945,000)
Accumulated other comprehensive loss .............................. (1,087,000) (882,000)
------------- -------------
Total shareholders' equity .................................... 135,351,000 130,018,000
============= =============
$ 186,421,000 $ 183,559,000
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 4
HARBINGER CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1998 1997
------------- -------------
<S> <C> <C>
Revenues:
Services .......................................................... $ 20,674,000 $ 14,750,000
Software .......................................................... 10,426,000 9,570,000
------------ ------------
Total revenues .................................................. 31,100,000 24,320,000
------------ ------------
Direct costs:
Services .......................................................... 7,659,000 4,836,000
Software .......................................................... 980,000 1,846,000
------------ ------------
Total direct costs .............................................. 8,639,000 6,682,000
------------ ------------
Gross margin ................................................ 22,461,000 17,638,000
------------ ------------
Operating costs:
Selling and marketing ............................................. 6,724,000 5,818,000
General and administrative ........................................ 5,487,000 4,810,000
Depreciation and amortization ..................................... 2,019,000 1,591,000
Product development ............................................... 2,705,000 4,094,000
Charge for purchased in-process product development,
write-off of software development costs, restructuring,
acquisition related and other one-time charges .................. 8,039,000 16,236,000
------------ ------------
Total operating costs ......................................... 24,974,000 32,549,000
------------ ------------
Operating loss .............................................. (2,513,000) (14,911,000)
Interest income, net ................................................. (1,311,000) (731,000)
Equity in losses of joint ventures ................................... -- 141,000
Minority interest .................................................... -- (5,000)
------------ ------------
Loss from continuing operations before income taxes ......... (1,202,000) (14,316,000)
Income tax expense (benefit) ......................................... 136,000 (335,000)
------------ ------------
Loss from continuing operations ............................. (1,338,000) (13,981,000)
Income from discontinued operations .................................. -- 47,000
------------ ------------
Loss before extraordinary item .............................. (1,338,000) (13,934,000)
Extraordinary loss on debt extinguishment ............................ -- (2,419,000)
============ ============
Net loss applicable to common shareholders .................. $ (1,338,000) $(16,353,000)
============ ============
Basic and diluted net loss per share:
Loss from continuing operations ................................... $ (0.03) $ (0.39)
Income from discontinued operations ............................... -- --
Extraordinary loss on debt extinguishment ......................... -- (0.06)
------------ ------------
Net loss per common share ......................................... $ (0.03) $ (0.45)
============ ============
Weighted average number of common shares outstanding ................. 41,046,000 36,250,000
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
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HARBINGER CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Net loss applicable to common shareholders ........................... $ (1,338,000) $(16,353,000)
Other comprehensive loss, net of tax:
Foreign currency translation adjustments ........................... (205,000) (106,000)
------------ ------------
Comprehensive loss ............................................... $ (1,543,000) $(16,459,000)
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
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HARBINGER CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Cash flows provided by operating activities ........................... $ 1,205,000 $ 379,000
Cash flows from investing activities:
Short-term investments ............................................. 1,066,000 29,688,000
Purchases of property and equipment ................................ (2,545,000) (2,085,000)
Additions to software development costs ............................ (924,000) (1,164,000)
Investment in acquisitions ......................................... -- (1,907,000)
------------ ------------
Net cash provided by (used in) investing activities .......... (2,403,000) 24,532,000
------------ ------------
Cash flows from financing activities:
Exercise of stock options and warrants and issuance of
stock under employee stock purchase plan ......................... 6,746,000 765,000
Principal payments under notes payable, long-term debt
and capital lease obligations .................................... (169,000) (163,000)
Repayments under credit agreement .................................. -- (725,000)
Purchase of subordinated debenture ................................. -- (1,500,000)
------------ ------------
Net cash provided by (used in) financing activities ............ 6,577,000 (1,623,000)
------------ ------------
Net increase in cash and cash equivalents ............................. 5,379,000 23,288,000
Cash and cash equivalents at beginning of period ...................... 69,811,000 35,697,000
Effect of exchange rates on cash held in foreign currencies ........... 12,000 (44,000)
Cash received from acquisitions ....................................... 52,000 3,322,000
============ ============
Cash and cash equivalents at end of period ............................ $ 75,254,000 $ 62,263,000
============ ============
Supplemental disclosures:
Cash paid for interest ............................................. $ 25,000 $ 25,000
============ ============
Cash paid for income taxes ......................................... $ 347,000 $ --
============ ============
Supplemental disclosures of noncash investing and financing activities:
Purchase of subordinated debenture in exchange
for common stock ................................................. $ -- $ 4,200,000
============ ============
Acquisition of minority interest in exchange
for issuance of options .......................................... $ -- $ 2,216,000
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 7
HARBINGER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. The financial
information included herein is unaudited; however, the information reflects all
adjustments (consisting solely of normal recurring adjustments) that are, in the
opinion of management, necessary to a fair presentation of the financial
position, results of operations, and cash flows for the interim periods.
Operating results for the three months ended March 31, 1998 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1998. For further information, refer to the financial statements and footnotes
thereto included in Harbinger Corporation's ("Harbinger" or the "Company") Form
10-K for the year ended December 31, 1997 and the Company's current report on
Form 8-K dated February 24, 1998.
All share, per share and shareholders' equity amounts in the unaudited
consolidated financial statements have been retroactively restated to reflect a
three-for-two stock split payable on May 15, 1998 (see Note 6).
REVENUE RECOGNITION
On January 1, 1998, the Company adopted Statement of Position 97-2,
Software Revenue Recognition, issued by the Accounting Standards Executive
Committee in October 1997, effective for financial statements for fiscal years
beginning after December 15, 1997. The implementation of this statement did not
have a material impact on the Company's unaudited consolidated financial
statements for the period ended March 31, 1998.
COMPREHENSIVE INCOME
On January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, Reporting Comprehensive Income, issued by the
Financial Accounting Standards Board ("FASB") in June 1997, effective for fiscal
years beginning after December 15, 1997. Comprehensive income includes all
changes in equity during a period except those resulting in investments by
owners and distributions to owners.
OTHER
The Company continues to evaluate the requirements of Statement of
Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information, issued by the FASB in June 1997, effective
for fiscal years beginning after December 15, 1997. The provisions of this
standard do not apply to interim periods in the year of adoption.
2. ACQUISITION
Effective March 31, 1998, the Company acquired EDI Works! LLC ("EDI
Works!"), a Texas limited liability company for 194,497 shares of the Company's
common stock in a transaction accounted for using the pooling-of-interests
method of accounting. The EDI Works! business combination is not material, and
therefore has been accounted for as an immaterial pooling with EDI Works!
retained earnings of $130,000 at December 31, 1997 being credited directly to
the Company's accumulated deficit effective January 1, 1998. The results of
operations of EDI Works! are included in the Company's consolidated statement of
operations for the three months ended March 31, 1998.
Page 7 of 30
<PAGE> 8
In connection with the EDI Works! acquisition, the Company incurred a
charge of $323,000 for acquisition related expenses, asset write downs and
integration costs in the consolidated statement of operations for the period
ended March 31, 1998.
3. CHARGE FOR PURCHASED IN-PROCESS PRODUCT DEVELOPMENT, WRITE-OFF OF
SOFTWARE DEVELOPMENT COSTS, RESTRUCTURING, ACQUISITION RELATED AND
OTHER ONE-TIME CHARGES
In connection with the acquisitions made in 1998 and 1997, the Company
incurred charges for purchased in-process product development, write-off of
software development costs, restructuring, acquisition related and other
one-time charges. A summary of the components is as follows:
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------
1998 1997
----------- -----------
<S> <C> <C>
In-process product development ................ $ -- $ 2,715,000
Integration costs and non recurring
one-time charges ........................... 6,380,000 5,993,000
Transaction charges ........................... 388,000 4,904,000
Intangible asset write downs .................. -- 2,322,000
Asset write downs ............................. 151,000 302,000
Restructuring charges ......................... 1,120,000 --
----------- -----------
$ 8,039,000 $16,236,000
=========== ===========
</TABLE>
Approximately $2 million of the costs and expenses incurred in the
three months ended March 31, 1998 in connection with an acquisition in December
1997 included certain internal expense allocations which may recur in other
expense categories in the future, potentially resulting in an increase in such
expense categories as a percentage of total revenues.
4. SHAREHOLDERS' EQUITY
On March 31, 1998, the Company issued 194,497 shares of the Company's
common stock as consideration related to the Company's acquisition of EDI
Works!. (See Note 2.)
5. COMMITMENTS
During the first quarter ended March 31, 1998, the Company entered into
agreements with certain vendors to supply services to the Company related to the
integration of its recent acquisitions. The total obligation for such agreements
is approximately $7.9 million.
6. SUBSEQUENT EVENT
On April 24, 1998, the Board of Directors declared a three-for-two
stock split in the form of a stock dividend on the Company's common stock
payable on May 15, 1998, to shareholders of record on May 1, 1998. All share,
per share and shareholders' equity amounts included in the Company's
consolidated financial statements have been retroactively restated to reflect
the split for all periods presented.
Page 8 of 30
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the consolidated financial statements and notes thereto included elsewhere
herein and the Company's Form 10-K for the year ended December 31, 1997 and the
Company's current report on Form 8-K dated February 24, 1998.
OVERVIEW
Harbinger Corporation (the "Company") generates revenues from various
sources, including revenues for services and license fees for software. Revenues
for services principally includes subscription fees for transactions on the
Company's Value Added Network ("VAN"), software maintenance and implementation
charges and charges for consulting and training services. Subscription fees are
based on a combination of monthly access charges and transaction-based usage
charges. Software maintenance and implementation revenues represent recurring
charges to customers and are deferred and recognized ratably over the service
period. Revenues for consulting and training services are based on actual
services rendered and are recognized as services are performed. License fees for
software are recognized upon shipment, net of estimated returns. Software
revenues include royalty revenues under distribution agreements with third party
distributors which are recognized based upon sales to end users by that
distributor.
During 1997, the Company incurred $51.7 million in purchased in-process
product development, write-off of software development costs, restructuring,
acquisition related and other one-time charges associated with its acquisition
of five companies. These costs related to the business combinations include
activities such as cross training, planning, product integration and marketing
("Integration Activities"). Due to Integration Activities in the quarter ended
March 31, 1998, certain internal expense allocations ("Integration Activity
Costs") included in the acquisition related charges may recur in other expense
categories in the future and may result in an increase in some expense
categories as a percentage of total revenues. In connection with the two
acquisitions in the fourth quarter of 1997 and one acquisition in the first
quarter of 1998, the Company incurred additional merger related charges totaling
$8 million in the first quarter of 1998 and expects to incur additional merger
related charges totaling $7.9 million in subsequent quarters.
1998 ACQUISITION
Effective March 31, 1998, the Company acquired EDI Works! LLC ("EDI
Works!"), a Texas limited liability company for 194,497 shares of the Company's
common stock in a transaction accounted for using the pooling-of-interests
method of accounting. The results of operations of EDI Works! are included in
the Company's consolidated statement of operations for the three months ended
March 31, 1998.
In connection with the EDI Works! acquisition, the Company incurred a
charge of $323,000 for acquisition related expenses, asset write downs and
integration costs in the consolidated statement of operations for the three
months ended March 31, 1998.
RESULTS OF OPERATIONS
REVENUES
Total revenues increased 28% from $24.3 million in the three months
ended March 31, 1997 to $31.1 million in the same period in 1998. Revenues for
services increased 40% from $14.8 million in the three months ended March 31,
1997 to $20.7 million in the same period in 1998, reflecting an increase in the
number of subscribers utilizing the Company's VAN, increases in the average
volume of transmissions by subscribers and increases in professional services
revenues. In addition, a portion of revenues for services in the three months
ended March 31, 1998 were from three acquisitions in the last three quarters. Of
these three acquisitions, two were treated as immaterial poolings for accounting
purposes and one was a purchase in the third quarter of 1997, therefore, there
Page 9 of 30
<PAGE> 10
is no comparable service revenues reflected in the first quarter of 1997.
Revenues from software maintenance and implementation also increased, reflecting
primarily an increase in the number of customers.
Revenues from software license fees increased 9% from $9.6 million in
the three months ended March 31, 1997 to $10.4 million in the same period in
1998. This increase primarily reflects increases in licensed enterprise software
and software revenues generated from the Company's acquisitions in the last
three quarters.
DIRECT COSTS
Direct costs for services increased from $4.8 million in the three
months ended March 31, 1997 to $7.7 million in the three months ended March 31,
1998. As a percentage of services revenues, these costs were 32.8% for the three
months ended March 31, 1997 and 37% for the three months ended March 31, 1998.
The increase in direct costs as a percentage of services revenues from the first
quarter of 1997 compared to the first quarter of 1998 primarily reflects the
effects of a higher mix of lower margin professional services revenues.
Additionally, the European subsidiaries continue to experience higher cost
percentages than the domestic operations.
Direct software costs decreased from $1.8 million for the three months
ended March 31, 1997 to $980,000 for the three months ended March 31, 1998.
Direct software costs, as a percentage of software revenues, were 19.3% for the
three months ended March 31, 1997 and 9.4% for the three months ended March 31,
1998. The decrease in direct software costs as a percentage of software revenues
from the first quarter of 1997 compared to the first quarter of 1998 primarily
reflects the effects of a decrease in software amortization in 1998 as a result
of write-offs of capitalized software development in connection with certain
business combinations in 1997, an overall increase in royalty revenues received
by the Company from distributors and a decrease in royalty fees paid by the
Company for the use of third parties' products embedded in the Company's
products.
SELLING AND MARKETING
Selling and marketing expenses increased 16% from $5.8 million, or
23.9% of revenues in the three months ended March 31, 1997, to $6.7 million, or
21.6% of revenues in the three months ended March 31, 1998. This decrease in
selling and marketing expenses as a percentage of revenues is primarily due to
the effect of increased software and services revenues, efficiencies associated
with other costs to support increased sales activity and the effect of merger
and integration activity costs.
GENERAL AND ADMINISTRATIVE
General and administrative expenses increased 14% from $4.8 million in
the three months ended March 31, 1997 to $5.5 million in the three months ended
March 31, 1998. As a percentage of revenues, these expenses decreased from 19.8%
of revenues in the three months ended March 31, 1997 to 17.6% of revenues in the
three months ended March 31, 1998. The decrease as a percentage of revenues
reflects efficiencies associated with expanding the Company's operations, the
effect of increases in software and services revenues and the effect of merger
and integration activity costs.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased 27% from $1.6 million in the
three months ended March 31, 1997 to $2 million in the three months ended March
31, 1998. As a percentage of revenues, these expenses were 6.5% for both the
first quarter of 1997 and the first quarter of 1998.
PRODUCT DEVELOPMENT
Total expenditures for product development, including capitalized
software development costs, decreased from $5.3 million for the three months
ended March 31, 1997 to $3.6 million for the three months ended March 31, 1998.
This decrease is due to increased synergies realized from combined development
operations and Integration Activities. The Company capitalized software
development costs of $1.2 million and $924,000 for the three months
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<PAGE> 11
ended March 31, 1997 and 1998, respectively, which represented 22% and 25.4% of
total expenditures for product development in these respective periods. The
increase in the amounts capitalized, as a percentage of total expenditures for
product development, from the three months ended March 31, 1997 to the three
months ended March 31, 1998 reflects the Company incurring greater product
development costs in 1998 on products that had reached technological
feasibility. As a percentage of revenues, total product development expenditures
decreased from 21.6% for the three months ended March 31, 1997 to 11.7% for the
three months ended March 31, 1998. The decrease in product development
expenditures as a percentage of revenues between the three months ended March
31, 1997 and the three months ended March 31, 1998 is attributable to increased
revenues and development synergies realized from the Company's 1997
acquisitions. Amortization of capitalized software development costs included in
direct costs of software totaled $885,000 and $439,000 for the three months
ended March 31, 1997 and 1998, respectively.
CHARGE FOR PURCHASED IN-PROCESS PRODUCT DEVELOPMENT, WRITE-OFF OF SOFTWARE
DEVELOPMENT COSTS, RESTRUCTURING, ACQUISITION RELATED AND OTHER ONE-TIME CHARGES
The Company incurred expenses of $8 million for the three months ended
March 31, 1998 related to charges for purchased in-process product development,
write-off of software development costs, restructuring, acquisition related and
other one-time charges as a result of the acquisitions of: 1) Premenos
Technology Corp. ("Premenos") on December 19, 1997 ($7.1 million), 2) Atlas
Products International, Limited ("Atlas") on October 23, 1997 ($573,000), and 3)
EDI Works! on March 31, 1998 ($323,000). (See Note 3 to unaudited notes to
consolidated financial statements.) The Company expects to incur additional
merger related charges totaling $7.9 million in subsequent quarters.
For the three months ended March 31, 1997, the Company incurred
expenses of $16.2 million, consisting of one-time charges of $4.3 million as a
result of the acquisition of Harbinger NET Services, LLC ("HNS") on January 1,
1997 and $11.9 million as a result of the acquisition of Supply Tech, Inc., a
Michigan corporation, and its affiliate, Supply Tech International, LLC, a
Michigan limited liability company (collectively "STI") on January 3, 1997. Of
the total, $7.5 million was acquisition related expenses and asset write downs
for STI. Integration costs of $1.6 million related to HNS and $4.4 million
related to STI were expensed. Purchased in-process product development costs of
$2.7 million associated with HNS were expensed since the Company determined that
the acquired technologies had not reached technological feasibility.
INTEREST INCOME, NET
Interest income, net, increased 79% from $731,000 for the three months
ended March 31, 1997 to $1.3 million for the three months ended March 31, 1998
as a result of an increase in combined cash and cash equivalents and short-term
investments from $62.3 million at March 31, 1997 to $106.3 million at March 31,
1998.
INCOME TAXES
The Company recorded income tax expense of $136,000 for the three
months ended March 31, 1998 as compared to income tax benefit of $335,000 for
the three months ended March 31, 1997, primarily as a result of the impact of
acquisitions in each period.
NET LOSS AND EARNINGS PER SHARE
The Company realized a net loss of $1.3 million, or ($0.03) per share,
for the three months ended March 31, 1998 as compared to a net loss of $16.4
million, or ($0.45) per share, for the three months ended March 31, 1997. The
net loss in the period ended March 31, 1998 reflects the effect of the charge
for purchased in-process product development, write-off of software development
costs, restructuring, acquisition related charges and other one-time charges of
$8 million. Excluding these acquisition related charges, net of the effect of
taxes, the Company's net income for the three months ended March 31, 1998 would
have been approximately $4.3 million, or $0.10 per share. The net loss in the
period ended March 31, 1997 reflects the effect of the charge for purchased
in-process product development, write-off of software development costs,
restructuring, acquisition related charges
Page 11 of 30
<PAGE> 12
and other one-time charges of $16.2 million and the extraordinary loss on early
debt extinguishment of $2.4 million. Excluding the one-time charges and
extraordinary loss on debt extinguishment, net of the effect of taxes, the
Company would have reported net income of $1.2 million or $0.03 per share.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital increased $4.5 million from $94.3 million
as of December 31, 1997 to $98.8 million as of March 31, 1998. In the three
months ended March 31, 1998, cash provided by operating activities was $1.2
million compared to cash provided by operations of $379,000 for the three months
ended March 31, 1997. The Company used net cash in investing activities of $2.4
million for the three months ended March 31, 1998 as compared to cash provided
of $24.5 million for the three months ended March 31, 1997. The cash provided by
investing activities for the period ended March 31, 1997 was primarily from the
sales of short-term investments. Cash used in investing activities for the
period ended March 31, 1998 included cash used for purchases of property and
equipment and additions to software development. Cash provided by financing
activities of $6.6 million for the period ended March 31, 1998 was primarily
from the exercise of stock options and warrants and issuance of stock under the
employee stock purchase plan. The Company used net cash in financing activities
of $1.6 million for the period ended March 31, 1997 primarily for the purchase
of subordinated debt associated with an acquisition.
Management expects that the Company will continue to be able to fund
its operations, investment needs and capital expenditures through cash flows
generated from operations, cash on hand, borrowings under the Company's credit
facilities and additional equity and debt capital. Management believes that
outside sources for debt and additional equity capital, if needed, will be
available to finance expansion projects and any potential future acquisitions.
The form of any financing will vary depending upon prevailing market and other
conditions and may include short or long term borrowings from financial
institutions, or the issuance of additional equity or debt securities. However,
there can be no assurances that funds will be available on terms acceptable to
the Company. The Company does not believe that inflation has had a material
impact on its business. However, there can be no assurance that Harbinger's
business will not be affected by inflation in the future.
YEAR 2000 COMPLIANCE
The Company is addressing the Year 2000 Compliance issues on the
software that it licenses and on the software that it uses internally. Based on
its current analysis, the Company believes that Year 2000 compliance will not
have a material effect on its business, operations or financial condition, as
remediation costs either have been incurred or those costs estimated to be
incurred are not material.
FORWARD LOOKING STATEMENTS
Other than historical information contained herein, certain statements
included in this report may constitute "forward looking" statements within the
meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934
related to the Company that involve risks and uncertainties including, but not
limited to, quarterly fluctuations in results, the management of growth, market
acceptance of certain products, impact of Year 2000 compliance and other risks.
For further information about these and other factors that could affect the
Company's future results, please see the Company's most recent Form 10-K filed
with the Securities and Exchange Commission. Investors are cautioned that any
forward looking statements are not guarantees of future performance and involve
risks and uncertainties and that actual results may differ materially from those
contemplated by such forward looking statements. The Company undertakes no
obligation to update or revise forward looking statements to reflect changed
assumptions, the occurrence of unanticipated events or changes to future
operating results.
Page 12 of 30
<PAGE> 13
RECENT ACCOUNTING PRONOUNCEMENTS
During the three-month period ended March 31, 1998 the Company adopted
Statement of Position 97-2, Software Revenue Recognition, issued by the
Accounting Standards Executive Committee, and Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive Income, issued by the Financial
Accounting Standards Board. The Company continues to evaluate the requirements
of Statement of Financial Accounting Standard No. 131, Disclosures about
Segments of an Enterprise and Related Information, which does not apply to
interim periods in the year of adoption.
Page 13 of 30
<PAGE> 14
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a) The Annual Meeting of Shareholders (the "Annual Meeting") of Harbinger
Corporation (the "Company") was held on April 24, 1998. There were present
at said meeting in person or by proxy, shareholders of the Corporation who
were the holders of 31,506,892 shares or 76.3% of the Common Stock entitled
to vote. On April 24, 1998, the Board of Directors declared a three-for-two
stock split on the Company's common stock payable on May 15, 1998 to
shareholders of record on May 1, 1998. All share amounts reported in this
Part II have been retroactively restated to reflect the split.
b) The following directors were elected to hold office for a term as
designated below or until their successors are elected and qualified, with
the vote for each director being reflected below:
<TABLE>
<CAPTION>
VOTES FOR VOTES WITHHELD
--------- --------------
Elected to hold office until the
2001 Annual Meeting:
<S> <C> <C>
David T. Leach 31,269,321 237,571
Ad Nederlof 31,322,683 184,209
David Hildes 31,260,921 245,971
Elected to hold office until the
2000 Annual Meeting:
Klaus Neugebauer 31,322,683 184,209
Elected to hold office until the
1999 Annual Meeting:
John D. Lowenberg, Sr. 31,268,872 238,020
</TABLE>
The affirmative vote of the holders of a plurality of the outstanding
shares of Common Stock represented at the Annual Meeting was required to
elect each director.
The Directors of the Company continuing in office until the 1999 Annual
Meeting are as follows: C. Tycho Howle, William D. Savoy and Benn R.
Konsynski. The directors of the Company continuing in office until the 2000
Annual Meeting are as follows: James C. Davis, Stuart L. Bell and William
B. King.
c) The proposal to amend the Company's 1996 Stock Option Plan was approved
with 22,596,406 affirmative votes, 8,868,045 negative votes cast and 42,441
abstentions. An affirmative vote of the holders of a majority of the
outstanding shares of Common Stock represented at the annual meeting was
required to approve the amendment.
d) The proposal to amend the Amended and Restated Harbinger Corporation
Employee Stock Purchase Plan was approved with 31,209,142 affirmative
votes, 269,025 negative votes cast and 28,725 abstentions. An affirmative
vote of the holders of a majority of the outstanding shares of Common Stock
represented at the annual meeting was required to approve the amendment.
e) The proposal to amend the Company's Amended and Restated 1993 Stock Option
Plan for Nonemployee Directors was approved with 24,703,659 affirmative
votes, 6,761,580 negative votes cast and 41,653 abstentions. An affirmative
vote of the holders of a majority of the outstanding shares of Common Stock
represented at the annual meeting was required to approve the amendment.
Page 14 of 30
<PAGE> 15
f) The appointment of KPMG Peat Marwick LLP as independent public accountants
to audit the accounts of the Company and its subsidiaries for the year
ending December 31, 1998, was ratified with the votes as follows:
31,504,098 affirmative votes, 0 negative votes cast and 2,794 abstentions.
An affirmative vote of the holders of a majority of the outstanding shares
of Common Stock represented at the annual meeting was required to ratify
the appointment of KPMG Peat Marwick LLP.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 4.1 Registration Rights Agreement by and among
Harbinger Corporation, Carol G. Croom,
Charles E. Webber, Nine-Min Cheng, Judy A.
Bailey, and Krish R. Sampat, dated March 31,
1998
Exhibit 27.1 Financial Data Schedule (for SEC use only).
Exhibit 27.2 Restated Financial Data Schedule
(for SEC use only).
(b) Reports on Form 8-K
Form 8-K dated February 24, 1998 reporting under Item 5 the
financial information of revenues and net losses for Harbinger
Corporation for the month ended January 31, 1998 for the
purpose of ending the "risk-sharing" period with respect to
the merger with Premenos Technology Corp.
Page 15 of 30
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HARBINGER CORPORATION
Date: 5/13/98 /s/ David T. Leach
----------------------------- ---------------------------
David T. Leach
Chief Executive Officer
(Principal Executive Officer)
Date: 5/13/98 /s/ Joel G. Katz
----------------------------- -------------------------
Joel G. Katz
Chief Financial Officer
(Principal Financial Officer;
Principal Accounting Officer)
Page 16 of 30
<PAGE> 1
EXHIBIT 4.1
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") dated as of the 31st
day of March, 1998, is made by and between Harbinger Corporation, a Georgia
corporation (the "Company"), and the holders of the common stock of the Company
listed in Schedule I, attached hereto (the "Shareholders").
WITNESSETH:
WHEREAS, the Shareholders are the owners of the shares of Common Stock
of the Company listed on Schedule I hereto;
WHEREAS, it is a condition to the consummation of the transactions
contemplated by that certain Share Purchase Agreement, dated as of the date
hereof, by and among the Company and the Shareholders (the "Purchase
Agreement"), that this Agreement be executed by the parties hereto;
WHEREAS, pursuant to the Purchase Agreement, the Company has acquired
all of the share capital of EDI Works!, LLC, a limited liability company formed
under the laws of the State of Texas ("EDI Works!"), in consideration of the
issuance of certain shares of Common Stock of the Company to the Shareholders;
and
WHEREAS, the parties are willing to execute this Agreement and to be
bound by the provisions hereof.
NOW, THEREFORE, in consideration of the mutual agreements and promises
contained herein, in the Purchase Agreement and in the other agreements
contemplated thereby, and other valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Shareholders and the Company,
each with the other, do hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
respective meanings:
"Common Stock" means the common stock, $0.0001 par value per share, of
the Company.
"Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Holder" means any Shareholder and any permitted transferee of
Shareholder's rights under this Agreement pursuant to Section 2.6.
"Holder Representative" means Carol Croom or, such time that she no
longer owns any Registrable Securities, the Holder who owns the largest number
of Registrable Securities.
"Registrable Securities" means the Shares, as the same may be adjusted
from time to time to reflect any stock split, stock dividend or other
distribution of capital stock in respect thereof, or issuance of capital stock
in
Page 17 of 30
<PAGE> 2
replacement thereof or exchange therefor. The term "Registrable Securities"
does not include shares of Common Stock that have been registered, as defined
below, and sold pursuant to such registration.
The terms "register," "registered," and "registration" refer to a
registration effected by preparing the filing of a registration statement in
compliance with the Securities Act, and the declaration or order by the
Commission of the effectiveness of such registration statement.
"Restricted Period" means the period beginning on the Closing Date (as
defined in the Purchase Agreement) and ending on the earlier of (i) the date of
filing by the Company with the Commission of the Company's annual report on Form
10-K, quarterly report on Form 10-Q or other filing with the Commission, or (ii)
the date of dissemination by the Company of a press release, which in any case
of (i) or (ii) that reports the combined financial results of the Company and
EDI Works! covering at least 30 days of combined operations of the Company and
EDI Works! within the meaning of Section 201.01 of the Commission's Codification
of Financial Reporting Policies.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Shareholders" means the persons listed on Schedule I attached hereto.
"Shares" means the shares of Common Stock of the Company listed on
Schedule I hereto. In the event the Company shall declare a stock split, stock
dividend or other distribution of capital stock in respect of, or issue capital
stock in replacement of or exchange for, the Shares, such additional shares
shall be Shares within the meaning of this Agreement.
"Underwritten Public Offering" means a public offering of Common Stock
for cash which is offered and sold in a registered transaction on a firm
commitment underwritten basis through one or more underwriters, all pursuant to
an underwriting agreement between the Company and any selling shareholders on
the one hand and such underwriters on the other hand.
ARTICLE II
REGISTRATION RIGHTS
Section 2.1 "Piggyback" Registration Rights. If the Company, at
any time after the expiration of the Restricted Period and prior to the earlier
of (i) the date on which all Registrable Securities shall have been disposed of
by the Holders thereof or (ii) one year after the date of this Agreement,
proposes to register under the Securities Act any class of the Company's equity
or debt securities for sale to the public on a registration statement on Form
S-1, S-2, S-3 or any successor form for the sale of equity securities to the
public, then and in each such case the Company shall give fifteen (15) days
prior written notice of such proposed registration to the Holder Representative
and shall cause such number of Registrable Securities as shall be requested by
the Holder Representative on behalf of the Holders included in such request
within ten (10) days thereafter to be included, upon the same terms (including
the method of distribution), in any such offering. The Company may, without the
consent of the Holder Representative, withdraw any such registration and abandon
any proposed offering if in the reasonable good faith belief of the Board of
Directors of the Company such withdrawal and abandonment appears to be in the
Company's best interests. The failure of any Holder to exercise his or her
rights hereunder with respect to any registration shall not constitute a waiver
of its rights to participate in any other registration. The foregoing
obligations shall be subject to the following conditions and limitations:
(i) The Company shall not be required to give such notice
or include any Registrable Securities in any form of
registration statement unless such Registrable
Securities of such Holder are eligible for inclusion
in the applicable form of registration statement as
described above;
Page 18 of 30
<PAGE> 3
(ii) In an Underwritten Public Offering of the Registrable
Securities, each Holder shall agree (a) to have the
Registrable Securities sold to or by such underwriter
or managing agent on terms substantially equivalent
to the terms upon which the Company is selling the
securities so registered by it, and (b) to delay the
sale of any securities of the Company not sold by it
in such registration statement for the period
requested by such underwriter or managing agent up to
180 days (or such lesser amount of time if permitted
by such underwriter or managing agent) following the
effective date of such registration statement;
(iii) If any underwriter in such Underwritten Public
Offering shall advise the Company that it declines to
include a portion of the Registrable Securities
requested by the Holders to be included in the
registration statement, then in case of an exclusion
as to a portion of such Registrable Securities, such
portion shall be allocated among the Holders in
proportion to the respective number of shares of
Common Stock requested to be registered by such
Holders of the Company's securities. The Holders
hereby acknowledge and agree that the Holders shall
be subordinate in priority of registration to any
person to whom the Company has granted registration
rights prior to the date hereof; and
(iv) The fees and expenses of the offering shall be borne
by the Company; provided, however, that the Holders
will pay all of the underwriting discounts and
commissions, transfer taxes, transfer agent fees and
the expenses, disbursements and charges of their own
counsel with respect to the Registrable Securities.
Section 2.2 Undertakings of Holders. As a condition of the
registration provided for in this Section 2, each Holder who includes
Registrable Securities in such registration shall (a) furnish such information
concerning itself and the terms of its proposed offering to the Company as
requested in connection with such registration; (b) agree to indemnify the
Company (and each of its officers and directors who have signed the registration
statement relating to the registration) and each person, if any, who controls
the Company within the meaning of the Securities Act, the underwriters and each
person, if any, who controls such underwriter within the meaning of the
Securities Act, to the extent reasonably deemed necessary by the Company with
respect to the accuracy of any information so furnished by such Holder; and (c)
reasonably cooperate with the Company and its representatives to cause such
registration to become effective at the earliest practicable time.
Section 2.3 Additional Undertakings of the Company. Without
limiting the generality of the provisions of this Section 2, if and whenever the
Company is under an obligation to effect the registration of any Registrable
Securities, the Company shall at its sole cost and expense:
(i) furnish to the Holder such numbers of each prospectus
(including each preliminary prospectus and prospectus
supplement) in conformity with the requirements of
the Securities Act, and such other documents as are
reasonably requested by the Holder to facilitate the
public offering of its Registrable Securities; and
(ii) use its reasonable efforts to register or qualify the
Registrable Securities covered by such registration
under the securities or blue sky laws of such
jurisdictions (and shall do any and all other acts or
things) as is reasonable to enable the Holder to
consummate the public sale or the disposition of its
Registrable Securities; provided, however, that the
Company shall not be required in connection therewith
or as a condition thereto to qualify to do business
or to file a general consent to service of process in
any such states or jurisdictions.
Section 2.4 Indemnification.
(a) In the case of each registration effected by the Company
pursuant to this Agreement in which any Holder's Registrable Securities are
included, the Company agrees to indemnify and hold harmless such Holder
Page 19 of 30
<PAGE> 4
against any and all losses, claims, damages or liabilities to which they or any
of them may become subject under the Securities Act or any other statute or
common law, including any amount paid in settlement of any litigation, commenced
or threatened, if such settlement is effected with the written consent of the
Company, and to reimburse them for any reasonable legal or other reasonable
expenses incurred by them in connection with the investigation of any claims and
defenses of any actions (subject to Section 2.4(c)), insofar as any such losses,
claims, damages, liabilities or actions arise out of or are based upon: any
untrue statement or alleged untrue statement of a material fact contained in the
registration statement, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto or any document incorporated by
reference therein, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that the indemnification agreement
contained in this Section 2.4(a) shall not (i) apply to such losses, claims,
damages, liabilities or actions arising out of, or based upon, any such untrue
statement or alleged untrue statement, or any such omission or alleged omission,
if such statement or omission was made in reliance upon and in conformity with
information furnished to the Company in writing by a Holder for use in
connection with the preparation of the registration statement or any preliminary
prospectus or final prospectus contained in the registration statement or any
such amendment thereof or supplement thereto or any document incorporated by
reference therein; or (ii) inure to the benefit of any person to the extent such
person's claim for indemnification hereunder arises out of or is based on any
violation by such person of applicable law.
(b) In the case of each registration effected by the Company
pursuant to this Agreement in which any Holder's Registrable Securities are
included, such Holder shall be obligated, in the same manner and to the same
extent as set forth in Section 2.4(a), to indemnify and hold harmless the
Company and each person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act, its directors and officers, with respect to
any statement or alleged untrue statement in, or omission or alleged omission
from, such registration statement or any post-effective amendment thereof or any
preliminary prospectus or final prospectus (as amended or supplemented, if
amended or supplemented as aforesaid) contained in such registration statement,
if such statement or omission was made in reliance upon and in conformity with
information furnished in writing to the Company by such indemnifying person for
use in connection with the preparation of such registration statement or any
preliminary prospectus or final prospectus contained in such registration
statement or any such amendment thereof or supplement thereto; provided,
however, that the liability of each Holder hereunder shall be limited to the
proceeds received by each Holder from the sale of Registrable Securities covered
by such registration statement, amendment, supplement or prospectus, as the case
may be.
(c) Each person to be indemnified pursuant to this Section 2.4
shall, promptly after its receipt of written notice of the commencement of any
action against such indemnified person in respect of which indemnity may be
sought from an indemnifying person under this Section 2.4, notify the
indemnifying person in writing of the commencement thereof. The omission of any
indemnified person to so notify an indemnifying person of the commencement of
any such action shall relieve the indemnifying person from any liability in
respect of such action which it may have to such indemnified person on account
of the indemnity agreement contained in this Section 2.4, but shall not relieve
the indemnification person from any other liability which it may have to such
indemnified person. If any such action shall be brought against any indemnified
person and it shall notify an indemnifying person of the commencement thereof,
the indemnifying person shall be entitled to participate therein and, to the
extent it may desire, jointly with any other indemnifying persons similarly
notified, to assume the defense thereof with counsel reasonably satisfactory to
such indemnified person, and after notice from the indemnifying person to such
indemnified person of its election so to assume the defense thereof, the
indemnifying person shall not be liable to such indemnified person under this
Section 2.4 for any legal or other expenses subsequently incurred by such
indemnified person in connection with the defense thereof other than reasonable
costs of investigation unless (i) the indemnified party shall have employed
counsel in an action in which the indemnified party and indemnifying party are
both defendants and there is a conflict of interest between such parties that
would prevent counsel from adequately representing both parties, (ii) the
indemnifying party shall not have employed counsel satisfactory within the
exercise of reasonable judgment of the indemnified party to represent the
indemnified party within a reasonable time after the notice of the commencement
of the action or (iii) the indemnifying party has authorized the employment of
counsel for the indemnified party at the expense of the indemnifying party. The
undertaking contained in this Section 2.4 shall be in addition to any
liabilities which the indemnifying person may have pursuant to law.
Page 20 of 30
<PAGE> 5
(d) If the indemnification provided for in this Section 2.4 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 2.4 (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and the Holders on the other from the offering of the securities. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law or if the indemnified party failed to give the
notice required under Section 2.4(c) above, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company and the Holders in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof), as well as any other
relevant equitable considerations. The relative benefits received by the Company
on the one hand and the Holders on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total net proceeds from the
offering (before deducting expenses) received by the Holders. The relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or the
Holders and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
Section 2.5 Rule 144 Requirements. For a period commencing on the
date of this Agreement ending upon the first to occur of (i) the first
anniversary of the date of this Agreement or (ii) the sale of all Registrable
Securities by the Holders, with a view to making available to each Holder the
benefits of Rule 144 (or any successor rule thereto) promulgated under the
Securities Act, the Company agrees to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act. Each Holder's right to require the Company
to register the Registrable Securities pursuant to Section 2.1, shall expire at
such time as the Registrable Securities held by such Holder are eligible for
sale in the open market without restriction as to the number of shares pursuant
to Rule 144 (or any successor rule thereto) under the Securities Act or Section
4(1) thereof.
Section 2.6 Transfer of Registration Rights. The registration
rights described in this Section 2 shall not be transferable without the prior
consent of the Company; provided, however, that a Holder may transfer such
registration rights to a permitted transferee of Shares so long as (i) such
transfer of Shares is conducted in compliance with all applicable transfer
restrictions, whether imposed by contract, applicable law or otherwise, and (ii)
such transferee is a member of the Holder's immediate family or is a trust or
family limited partnership established for the benefit of such a family member;
provided further, that such registration rights shall not be transferable by any
transferee contemplated by the foregoing proviso who is a natural person.
ARTICLE III
TRANSFERABILITY
Section 3.1 Transferability. Transfer of the Shares shall be made
only on the books of the Company by the holders of record thereof or by their
legal representatives who shall furnish proper evidence of authority to
transfer, or by their attorney thereunto authorized by power of attorney duly
executed and filed with the Secretary of the Company, subject to the
restrictions set forth in the Purchase Agreement and the documents and
agreements contemplated thereby. The Holder(s) in whose name the Shares stand on
the books of the Company shall be deemed by the Company to be owner(s) thereof
for all purposes.
Section 3.2 Restrictive Legends. Unless and until otherwise
permitted by this Section, each instrument evidencing Shares shall contain or
otherwise be imprinted with a suitable legend in substantially the following
form:
The shares evidenced by this certificate have not been registered under
the Securities Act of 1933, as amended, or under the securities laws of
any state, and such shares may not be sold, transferred,
Page 21 of 30
<PAGE> 6
pledged or hypothecated unless (1) covered by an effective registration
statement under the Securities Act of 1933; (2) in accordance with Rule
144 of the rules and regulations of such act; or (3) in accordance with
some other transaction which is exempt from the registration
requirements of such Act. The shares evidenced by this certificate have
been offered and sold in reliance on exemptions promulgated under the
Securities Act of 1933.
The shares represented by this certificate were issued pursuant to a
business combination that is accounted for as a "pooling of interests"
and may not be sold, nor may the owner thereof reduce his risk relative
thereto in any way (except as permitted by SEC Staff Accounting
Bulletin No. 76), until such time as Harbinger Corporation has
published financial results covering at least 30 days of combined
operations after the effective date of the event through which the
business combination was effected.
The Company is hereby authorized to place "stop transfer" instructions on its
records and to instruct any transfer agent to prevent the transfer of such
shares except in conformity with this Article.
Section 3.3 Restriction on Transfer. No Shares may be transferred
prior to the expiration of the Restricted Period. In addition, no Shareholder
may transfer Shares other than under Section 2.1 until it has delivered written
notice to the Company describing briefly the manner of any such proposed
transfer and until (i) the Company has received from the Shareholder's counsel
an opinion (reasonably satisfactory in form and substance to the Company's
counsel) that such transfer can be made without compliance with the registration
provisions of the Securities Act or any state securities law, or (ii) such
transfer complies with Rule 144 (or comparable successor provisions) promulgated
under the Securities Act and applicable state securities act requirements, or
(iii) a registration statement filed by the Company is declared effective by the
Commission and under applicable state securities laws or steps necessary to
perfect exemptions from such registration are completed.
Notwithstanding anything to the contrary herein, in the event that
there is an Underwritten Public Offering of securities of the Company pursuant
to a registration covering Registrable Securities and a Holder of Registrable
Securities does not sell his Registrable Securities to the underwriters of the
Company's securities in connection with such offering, such Holder shall refrain
from selling such Registrable Securities during the period of distribution of
the Company's securities by such underwriters and the period in which the
underwriting syndicate participates in the after market; provided, however, that
such Holder shall, in any event, be entitled to sell its Registrable Securities
commencing on the one hundred and eightieth (180th) day after the effective date
of such registration statement in accordance with the terms hereof or such other
amount of time that may be required by the underwriter of similarly situated
holders of the Company's securities.
ARTICLE IV
MISCELLANEOUS
Section 4.1 Notices. All notices, communications and deliveries
hereunder shall be made in writing signed by the party making the same, shall
specify the Section hereunder pursuant to which it is given or being made, and
shall be delivered personally or by telecopy transmission or sent by registered
or certified mail or by any express mail service (with postage and other fees
prepaid) as follows:
If to Company: Harbinger Corporation
1055 Lenox Park Blvd
Atlanta, Georgia 30319-5309
Attention: President
Telecopy No.: 404/467-3143
with a copy to: Harbinger Corporation
1055 Lenox Park Blvd.
Atlanta, Georgia 30319-5309
Attn: Loren B. Wimpfheimer
Director of Legal Affairs
Telecopy No.: 404/467-3476
Page 22 of 30
<PAGE> 7
If to the Representative EDI Works! L.L.C.
Holder: 6464 Savoy Drive, Suite 105
Houston, Texas 77036
Attn: Carol Croom
Telecopy No. (713) 706-4438
Section 4.2 Remedies. Each party hereto acknowledges that a
remedy at law for any breach or attempted breach of this Agreement will be
inadequate, agrees that each other party hereto shall be entitled to specific
performance and injunctive and other equitable relief in case of any such breach
or attempted breach, and further agrees to waive any requirement for the
securing or posting of any bond in connection with the obtaining of any such
injunctive or any other equitable relief.
Section 4.3 Effect of Sale. Any Holder who sells all of his
Registrable Securities pursuant to the terms of this Agreement shall cease to be
a party to this Agreement and shall have no further rights or obligations
hereunder.
Section 4.4 Amendment. This Agreement may not be modified or
amended except in a writing signed by the Company and the holders of 66-2/3% of
the total Registrable Securities outstanding at such time (with any shares of
Registrable Securities issuable upon conversion of other securities deemed to be
outstanding for these purposes).
Section 4.5 Governing Law. This Agreement shall be subject to and
governed by the laws of the State of Georgia.
Section 4.6 Jurisdiction. All legal actions to enforce or
interpret the provisions of this Agreement shall be filed in a court of the
State of Georgia or of the United States District Court having jurisdiction over
Fulton County, Georgia. All parties irrevocably waive any objection they may
have to the laying of venue of any suit, action or proceeding arising out of or
relating hereto brought in any such court, irrevocably waive any claim that any
such suit, action or proceeding so brought has been brought in an inconvenient
forum and further waive the right to object that such court does not have
jurisdiction over such party. No party shall bring a suit, action or proceeding
in respect of this Agreement in any other jurisdiction than as aforesaid.
Section 4.7 Successors and Assigns. This Agreement shall be
binding upon and inure to the parties contained in this Agreement and their
respective heirs, executors, distributees, successors (including successors by
merger) and permitted assigns.
Section 4.8 Invalid Provisions. Should any portion of this
Agreement be adjudged or held to be invalid, unenforceable or void, such holding
shall not have the effect of invalidating or voiding the remainder of this
Agreement and the parties hereby agree that the portion so held invalid,
unenforceable or void shall, if possible, be deemed amended or reduced in scope,
or to otherwise be stricken from this Agreement to the extent required for the
purposes of validity and enforcement thereof.
Section 4.9 Section Headings. The section and paragraph headings
contained herein are for reference purposes only and shall not in any way affect
the meaning and interpretation of this Agreement.
Section 4.10 Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which when so executed and
delivered shall be deemed an original, and such counterparts together shall
constitute only one instrument.
Page 23 of 30
<PAGE> 8
Section 4.11 Entire Agreement. This Agreement constitutes the
sole and entire agreement between the parties hereto with respect to the subject
matter hereof.
Section 4.12 Time of the Essence. Time is of the essence with
respect to every provision of this Agreement.
Section 4.13 Pooling of Interests. If any provision of this
Agreement or the application of any such provision to any person or circumstance
precludes the use of "pooling of interests" accounting treatment in connection
with the Purchase Agreement, then such provision shall be of no force and effect
to the extent, and solely to the extent necessary to preserve such accounting
treatment pursuant to the Purchase Agreement, and in that event, the remainder
of this Agreement shall not be affected, and in lieu of such provision there
shall be added as part of this Agreement a provision as similar in terms as may
be possible for the purchase under the Purchase Agreement to be treated as a
"pooling of interests" for accounting purposes.
Section 4.14 Number; Gender. Whenever the context so requires, the
singular number shall include the plural and the plural shall include the
singular, and the gender of any pronoun shall include the other gender.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed on its behalf and its corporate seal to be hereunto affixed by its duly
authorized officers and the Shareholders have executed this Agreement, as of the
day and year first above written.
ATTEST: HARBINGER CORPORATION
By: /s/ Cheryl A. Vota By: /s/ James C. Davis
------------------------ ---------------------------------------------
Name: James C. Davis
-------------------------------------------
Title: President and Chief Operating Officer
------------------------------------------
SHAREHOLDERS:
/s/ Carol G. Croom
------------------------------------------------
Carol G. Croom
/s/ Charles E. Webber
------------------------------------------------
Charles E. Webber
/s/ Nine-Min Cheng
------------------------------------------------
Nine-Min Cheng
/s/ Judy A. Bailey
------------------------------------------------
Judy A. Bailey
/s/ Krish R. Sampat
------------------------------------------------
Krish R. Sampat
Page 24 of 30
<PAGE> 9
The undersigned, spouse of Krish Sampat, hereby agrees and consents by his/her
signature below to be bound by the terms and conditions hereof as to his/her
interests, whether as community property or otherwise, if any, in the EDI Works!
Stock which is subject to this Agreement.
/s/ Linda Kumazawa /s/ K. K. Sampat
- ---------------------------------- --------------------------------
Witness
Page 25 of 30
<PAGE> 10
The undersigned, spouse of Nine-Min Cheng hereby agrees and consents by his/her
signature below to be bound by the terms and conditions hereof as to his/her
interests, whether as community property or otherwise, if any, in the EDI Works!
Stock which is subject to this Agreement.
/s/ Linda Kumazawa /s/ Jsun Chein Cheng
- ---------------------------------- --------------------------------
Witness
Page 26 of 30
<PAGE> 11
The undersigned, spouse of Carol Croom, hereby agrees and consents by his/her
signature below to be bound by the terms and conditions hereof as to his/her
interests, whether as community property or otherwise, if any, in the EDI Works!
Stock which is subject to this Agreement.
/s/ Linda Kumazawa /s/ Pat Croom
- ---------------------------------- --------------------------------
Witness
Page 27 of 30
<PAGE> 12
SCHEDULE I
<TABLE>
<CAPTION>
Shareholder Number of Shares
----------- ----------------
<S> <C>
Carol G. Croom 23,340
Carol G. Croom 2,593
Charles E. Webber 23,340
Charles E. Webber 2,593
Nine-Min Cheng 23,340
Nine-Min Cheng 2,593
Judy A. Bailey 23,340
Judy A. Bailey 2,593
Krish R. Sampat 23,340
Krish R. Sampat 2,593
</TABLE>
Page 28 of 30
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF HARBINGER CORPORATION FOR THE QUARTER END
MAR-31-98 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED
FINANCIAL STATEMENTS. ALL AMOUNTS HAVE BEEN RETROACTIVELY RESTATED TO REFLECT A
THREE-FOR-TWO STOCK SPLIT IN THE FORM OF A STOCK DIVIDEND PAYABLE ON MAY-15-98.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 75,254
<SECURITIES> 31,050
<RECEIVABLES> 32,988
<ALLOWANCES> 2,773
<INVENTORY> 0
<CURRENT-ASSETS> 149,862
<PP&E> 34,944
<DEPRECIATION> 16,164
<TOTAL-ASSETS> 186,421
<CURRENT-LIABILITIES> 51,070
<BONDS> 0
0
0
<COMMON> 4
<OTHER-SE> 135,347
<TOTAL-LIABILITY-AND-EQUITY> 186,421
<SALES> 10,426
<TOTAL-REVENUES> 31,100
<CGS> 980
<TOTAL-COSTS> 8,639
<OTHER-EXPENSES> 24,974
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27
<INCOME-PRETAX> (1,202)
<INCOME-TAX> 136
<INCOME-CONTINUING> (1,338)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,338)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE RESTATED
CONSOLIDATED FINANCIAL STATEMENTS OF HARBINGER CORPORATION FOR THE QUARTER ENDED
MAR-31-97 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED
FINANCIAL STATEMENTS. ALL AMOUNTS HAVE BEEN RETROACTIVELY RESTATED TO REFLECT A
THREE-FOR-TWO STOCK SPLIT IN THE FORM OF A STOCK DIVIDEND PAYABLE ON MAY-15-98.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 62,263
<SECURITIES> 0
<RECEIVABLES> 24,703
<ALLOWANCES> 2,037
<INVENTORY> 0
<CURRENT-ASSETS> 92,651
<PP&E> 28,927
<DEPRECIATION> 12,631
<TOTAL-ASSETS> 129,302
<CURRENT-LIABILITIES> 38,505
<BONDS> 0
0
0
<COMMON> 4
<OTHER-SE> 87,617
<TOTAL-LIABILITY-AND-EQUITY> 129,302
<SALES> 9,570
<TOTAL-REVENUES> 24,320
<CGS> 1,846
<TOTAL-COSTS> 6,682
<OTHER-EXPENSES> 32,549
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 69
<INCOME-PRETAX> (14,316)
<INCOME-TAX> (335)
<INCOME-CONTINUING> (13,981)
<DISCONTINUED> 47
<EXTRAORDINARY> (2,419)
<CHANGES> 0
<NET-INCOME> (16,353)
<EPS-PRIMARY> (0.45)
<EPS-DILUTED> (0.45)
</TABLE>
