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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 SEPTEMBER 30, 1997
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 (I.R.S. Employer Identification No.)
incorporation or organization)
1055 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
October 29, 1997, the latest practicable date, is as follows: 21,517,783 shares
of Common Stock, $.0001 par value.
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FORM 10-Q
PAGE 1
2
HARBINGER CORPORATION
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
TABLE OF CONTENTS
Page
Number
------------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets (unaudited) - September 30, 1997
and December 31, 1996 3
Consolidated Statements of Operations (unaudited) -
Three months and nine months ended September 30, 1997 and 1996 4
Consolidated Statements of Cash Flows (unaudited) -
Nine months ended September 30, 1997 and 1996 5
Notes to Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 20
PART III. SIGNATURES 21
FORM 10-Q
PAGE 2
3
ITEM 1. FINANCIAL STATEMENTS
HARBINGER CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
------------- -------------
1997 1996
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 48,066,000 $ 9,059,000
Accounts receivable, less allowances for returns and
doubtful accounts of $1,625,000 at September 30, 1997
and $2,077,000 at December 31, 1996 21,163,000 11,890,000
Deferred income taxes 1,627,000 1,517,000
Due from joint ventures -- 1,827,000
Other current assets 1,908,000 1,399,000
------------- -------------
Total current assets 72,764,000 25,692,000
------------- -------------
Property and equipment, less accumulated depreciation and amortization 11,949,000 8,226,000
Investments in joint ventures -- 407,000
Intangible assets, less accumulated amortization 16,011,000 13,147,000
Deferred income taxes and other assets -- 1,321,000
============= =============
$ 100,724,000 $ 48,793,000
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,236,000 $ 3,053,000
Accrued expenses 13,632,000 9,880,000
Deferred revenues 9,288,000 7,193,000
Note payable to bank -- 1,550,000
Current portion of long-term debt 371,000 907,000
------------- -------------
Total current liabilities 26,527,000 22,583,000
------------- -------------
Commitments and contingencies
Long-term debt, excluding current portion -- 1,368,000
Redeemable preferred stock:
Zero Coupon; 4,000,000 shares issued and outstanding
at September 30, 1997 and December 31, 1996 -- --
Shareholders' equity:
Common stock, $0.0001 par value; 100,000,000 shares
authorized, 21,500,070 shares and 18,690,265 shares issued
and outstanding at September 30, 1997 and December 31, 1996 2,000 2,000
Additional paid-in capital 118,537,000 45,291,000
Accumulated deficit (44,342,000) (20,451,000)
------------- -------------
Total shareholders' equity 74,197,000 24,842,000
============= =============
$ 100,724,000 $ 48,793,000
============= =============
See accompanying notes to consolidated financial statements
FORM 10-Q
PAGE 3
4
HARBINGER CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- ----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
Revenues:
Services $ 13,637,000 $ 9,849,000 $ 37,892,000 $ 26,718,000
Software 7,874,000 5,881,000 20,307,000 15,269,000
------------ ------------ ------------ ------------
Total revenues 21,511,000 15,730,000 58,199,000 41,987,000
------------ ------------ ------------ ------------
Direct costs:
Services 4,830,000 3,600,000 12,921,000 9,522,000
Software 880,000 559,000 2,520,000 1,925,000
------------ ------------ ------------ ------------
Total direct costs 5,710,000 4,159,000 15,441,000 11,447,000
------------ ------------ ------------ ------------
Gross margin 15,801,000 11,571,000 42,758,000 30,540,000
------------ ------------ ------------ ------------
Operating costs:
Selling and marketing 4,123,000 3,745,000 11,614,000 10,947,000
General and administrative 3,929,000 3,635,000 10,999,000 9,691,000
Depreciation and amortization 1,067,000 784,000 3,033,000 2,022,000
Product development 1,830,000 2,558,000 5,700,000 6,305,000
Charge for purchased in-process product
development and acquisition related charges 14,949,000 -- 31,185,000 8,350,000
------------ ------------ ------------ ------------
Total operating costs 25,898,000 10,722,000 62,531,000 37,315,000
------------ ------------ ------------ ------------
Operating income (loss) (10,097,000) 849,000 (19,773,000) (6,775,000)
Interest (income) expense, net (399,000) 32,000 (426,000) (95,000)
Equity in losses of joint ventures -- 2,144,000 38,000 5,005,000
------------ ------------ ------------ ------------
Loss before income tax expense and
extraordinary item (9,698,000) (1,327,000) (19,385,000) (11,685,000)
Income tax expense (benefit) -- (94,000) 1,419,000 38,000
------------ ------------ ------------ ------------
Loss before extraordinary item (9,698,000) (1,233,000) (20,804,000) (11,723,000)
Extraordinary loss on debt extinguishment -- -- 2,419,000 --
------------ ------------ ------------ ------------
Net loss (9,698,000) (1,233,000) (23,223,000) (11,723,000)
Preferred stock dividends -- -- -- (28,000)
------------ ------------ ------------ ------------
Net loss applicable to common shareholders $ (9,698,000) $ (1,233,000) $(23,223,000) $(11,751,000)
============ ============ ============ ============
Net loss per share:
Loss before extraordinary item applicable to
common shareholders $ (0.47) $ (0.07) $ (1.07) $ (0.64)
Extraordinary loss on debt extinguishment -- -- (0.12) --
------------ ------------ ------------ ------------
Net loss per common share $ (0.47) $ (0.07) $ (1.19) $ (0.64)
============ ============ ============ ============
Weighted average number of common and common
equivalent shares outstanding 20,646,000 18,597,000 19,587,000 18,396,000
============ ============ ============ ============
See accompanying notes to consolidated financial statements
FORM 10-Q
PAGE 4
5
HARBINGER CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
----------------------------
September 30,
----------------------------
1997 1996
------------ ------------
Cash flows (used in) provided by operating activities: $ (1,661,000) $ 1,888,000
------------ ------------
Cash flows from investing activities:
Purchases of property and equipment (4,629,000) (3,593,000)
Additions to software development costs (2,642,000) (1,829,000)
Acquisitions (13,709,000) (5,161,000)
------------ ------------
Net cash used in investing activities (20,980,000) (10,583,000)
------------ ------------
Cash flows from financing activities:
Dividends paid on preferred stock -- (28,000)
Exercise of stock options and warrants 2,657,000 745,000
Proceeds from stock issuance 60,757,000 --
Repayments of notes payable (3,544,000) (455,000)
Purchase of HNS subordinated debenture (1,500,000) --
------------ ------------
Net cash provided by financing activities 58,370,000 263,000
------------ ------------
Net increase (decrease) in cash and cash equivalents 35,729,000 (8,432,000)
Cash and cash equivalents at beginning of period 9,059,000 12,763,000
Effect of exchange rates on cash (48,000) (58,000)
Cash received from acquisitions 3,326,000 373,000
------------ ------------
Cash and cash equivalents at end of period $ 48,066,000 $ 4,646,000
============ ============
Supplemental disclosure of cash paid for interest $ 82,000 $ 120,000
============ ============
Supplemental disclosure of noncash investing activities:
Purchase of HNS subordinated debenture in exchange
for common stock $ 4,200,000 $ --
============ ============
Acquisition of HNS minority interest in exchange for
issuance of options $ 2,216,000 $ --
============ ============
Acquisition of businesses in exchange for assumption of
liabilities and issuance of common stock $ 3,277,000 $ --
============ ============
Acquisition of businesses in exchange for assumption of
liabilities and issuance of common stock and options
and warrants to acquire common stock $ -- $ 11,294,000
============ ============
Conversion of Series C preferred stock to common stock $ -- $ 2,485,000
============ ============
See accompanying notes to consolidated financial statements
FORM 10-Q
PAGE 5
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HARBINGER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
1. 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 fairly present the financial position,
results of operations, and cash flows for the interim periods. Operating
results for the three and nine months ended September 30, 1997 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1997. 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, 1996 and the Company's
current report on Form 8-K dated July 1, 1997.
2. ACQUISITIONS
1996 ACQUISITIONS
Effective March 31, 1996, the Company acquired all of the common stock
of NTEX Holding, B.V. ("NTEX"), a Dutch corporation based in Rotterdam, The
Netherlands, for $8.0 million, consisting of $3,195,000 in cash, 107,778 shares
of the Company's common stock valued at $1.2 million, warrants to acquire 18,750
shares of the Company's 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
$4,449,000 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.
Effective March 31, 1996, the Company acquired all of the common stock
of INOVIS GmbH & Co. ("INOVIS"), a German corporation based in Karlsruhe,
Germany for $6.1 million, consisting of $1,409,000 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 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,
$1,077,000 allocated to tangible assets and $1.1 million allocated to goodwill.
Effective March 31, 1996, the Company acquired the remaining
outstanding common stock of Harbinger N.V. ("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. 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.
Effective August 1, 1996, the Company acquired all of the common stock
of Comtech Management Systems, Inc. ("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.
FORM 10-Q
PAGE 6
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HARBINGER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
Effective October 15, 1996, the Company acquired all of the common
stock of EDI Integration Services Limited ("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.
1997 ACQUISITIONS
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, 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 early 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.
Immediately after this transaction, the Company acquired the minority
interest in HNS, consisting of 585,335 shares of HNS common stock and stock
options to acquire 564,727 shares of HNS common stock at exercise prices ranging
from $0.70 per share to $1.65 per share, by exchanging cash of $1.6 million and
stock options to acquire 355,317 shares of the Company's common stock at
exercise prices ranging from $15.22 per share to $16.53 per share which were
valued by the Company at $2.2 million. Including transaction and other costs of
$350,000, the Company paid $4.1 million for the acquisition of the HNS minority
interest which 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 integration costs during the first quarter of 1997 related to this
acquisition of $1.6 million which have been reflected in the acquisition related
charges in the accompanying consolidated statement of operations. 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.
Smart Solutions for Electronic Commerce, Inc. ("Smart Solutions"),
Effective May 1, 1997, the Company acquired all of the common stock of
Smart Solutions for Electronic Commerce Inc. ("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.
Effective August 22, 1997, the Company acquired all of the common stock
of Acquion, Inc. ("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
FORM 10-Q
PAGE 7
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HARBINGER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
August 22, 1997, $641,000 allocated to purchased technology and $2.0 million
allocated to goodwill. The Company also incurred integration costs during the
third quarter of 1997 related to this acquisition of $2.3 million. In addition,
the Company incurred integration charges of $1.1 million related to additional
costs identified in connection with the HNS and STI acquisitions and $630,000 in
restructuring charges related to increasing synergies among all operating
divisions as a result of recent acquisitions. 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.
PRO FORMA FINANCIAL INFORMATION
The balance sheets of the above companies have been included in the
Company's consolidated balance sheet as of September 30, 1997 and the results of
operations of the acquired companies have been included in the Company's
consolidated statements of operations beginning on March 31, 1996, except for
Comtech, EISL, HNS, Smart Solutions and Acquion, which have been included
beginning on August 1, 1996, October 15, 1996, January 1, 1997, May 1, 1997 and
August 22, 1997, respectively.
The unaudited pro forma results of operations of the Company for the
three and nine months ended September 30, 1997 and 1996 as if the acquisitions
described above had been effected on January 1, 1996 is summarized as follows:
Three months Nine months Three months Nine months
ended ended ended ended
------------ ------------ ------------ ------------
September 30, 1997 September 30, 1996
-------------------------- --------------------------
Revenues $21,632,000 $ 58,683,000 $15,996,000 $ 44,082,000
=========== ============ =========== ============
Net income (loss) applicable to common
shareholders $ 68,000 $(11,791,000) $(2,751,000) $(16,949,000)
=========== ============ =========== ============
Net loss per share applicable to common
shareholders $ -- $ (0.60) $ (0.15) $ (0.92)
=========== ============ =========== ============
Weighted average outstanding common
share and common share equivalent 20,646,000 19,587,000 18,597,000 18,490,000
=========== ============ =========== ============
The unaudited pro forma results do not reflect the charges for
in-process product development or loss on extinguishment of the debenture
discussed above. 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.
STI ACQUISITION
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 $7.1 million in January 1997 for acquisition related expenses and asset write
downs and incurred integration costs of $4.8 million during the first
FORM 10-Q
PAGE 8
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HARBINGER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
quarter of 1997. The Company recorded a net deferred income tax asset during the
first quarter 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.
Total revenues and net loss for the individual companies as previously
reported are as follows:
Three months Nine months
ended ended
September 30, September 30,
1996 1996
------------- -------------
Total revenues
Harbinger Corporation $11,154,000 $ 28,397,000
STI 4,576,000 13,590,000
----------- ------------
$15,730,000 $ 41,987,000
=========== ============
Net loss
Harbinger Corporation $ (246,000) $ (8,654,000)
STI (987,000) (3,097,000)
=========== ============
$(1,233,000) $(11,751,000)
=========== ============
3. SHAREHOLDERS' EQUITY
Stock Split
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.
Secondary Stock Offering
On July 29, 1997, the Company completed the public offering of 3.3
million shares of Common Stock, consisting of 2.1 million shares sold by the
Company and 1.2 million shares sold by selling shareholders, at a public
offering price of $30.75 per share. The offering resulted in net proceeds to the
Company of approximately $60.8 million.
4. CREDIT FACILITY
Effective April 16, 1997, the Company increased its credit facility to
$10 million with an interest rate of Prime and a commitment fee on the unused
portion of .375%.
FORM 10-Q
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HARBINGER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
5. NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings
Per Share." SFAS No. 128 requires companies that have publicly held common stock
or common stock equivalents to present both basic and diluted earnings per share
("EPS") on the face of the income statement. Basic EPS is calculated as income
available to common stockholders divided by the weighted average number of
common shares outstanding during the period. Diluted EPS is calculated to
reflect the potential dilution that would occur if stock options or other
contracts to issue common stock were exercised and results in additional common
stock that would share in the earnings of the Company. This statement is
effective for financial statements issued for interim and annual periods ending
after December 15, 1997. The Company does not believe the adoption of SFAS No.
128 will have a significant impact on its reported EPS.
In February 1997, the FASB issued SFAS No. 129, "Disclosure of
Information about Capital Structure." SFAS No. 129 is effective for financial
statements for periods ending after December 15, 1997. The Company does not
expect that SFAS No. 129 will require significant revision of prior disclosures
since SFAS No. 129 lists required disclosures that had been included in a number
of previously existing separate statements or opinions.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." 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 Financial Accounting Standards Board issued SFAS 131,
"Disclosures about Segments of an Enterprise and Related Information". SFAS 131
requires that an enterprise disclose certain information about operating
segments. SFAS 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.
6. SUBSEQUENT EVENTS
On October 23, 1997, the Company acquired Atlas Products International,
Limited, a company organized under the laws of England, based in Manchester,
England, for approximately 311,000 unregistered shares of the Company's common
stock, par value of $0.0001 per share. In connection with the transaction, which
will be accounted for as a pooling of interests, the Company expects to take a
charge for acquisition and integration related expenses between $3.0 and $5.0
million.
On October 23, 1997, the Company entered a definitive agreement to
acquire Premenos Technology Corp., a Delaware corporation based in Concord,
California. The Company will issue 0.45 of a share of its common stock in
exchange for each share of Premenos common stock. As of October 15, 1997,
approximately 11.8 million shares of Premenos common stock was outstanding. All
Premenos options and warrants will be converted into the Company's options and
warrants, and adjusted in accordance with the exchange ratio. In connection with
the transaction, which will be accounted for as a pooling of interests, the
Company expects to take a charge between $20.0 and $30.0 million for expenses
related to the transaction, which is expected to close on or before December 31,
1997.
FORM 10-Q
PAGE 10
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HARBINGER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
In October, 1997, the Company entered into a lease agreement with its
current landlord to occupy space in an adjoining building. The expected
occupancy date 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 10 years with the right to cancel after 7 years and requires annual rent
payments of approximately $2,100,000. The Company anticipates incurring a charge
in the fourth quarter of $722,000, related to a write down of leasehold
improvements and deferred professional costs associated with moving to the new
facility.
FORM 10-Q
PAGE 11
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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 ending December 31, 1996 and the
Company's current report on Form 8-K dated July 1, 1997.
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 the Company's distribution agreement
with a third party distributor which are recognized based upon sales to end
users by that distributor. During the first nine months of the year, the Company
incurred $31.2 million in in-process R&D, and acquisition related costs
primarily associated with its purchases of HNS, STI, and Acquion. These
acquisition-related costs included integration charges related to the HNS, STI,
and Acquion business combinations related to activities such as cross training,
planning, product integration, and marketing ("Integration Activities"). Due to
Integration Activities in the first and third quarters of 1997, certain internal
expense allocations ("Integration Activity Costs") included in the
acquisition-related charges category 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.
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 two other acquisitions during 1996, the
acquisition of the remaining outstanding common stock of Harbinger N.V. ("HNV")
and the acquisition of Comtech Management Systems, Inc., which did not have a
significant impact on the Company's financial position or results of operations.
1997 ACQUISITIONS
Harbinger Net Services LLC ("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, 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.
FORM 10-Q
PAGE 12
13
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 early 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.
Immediately after this transaction, the Company acquired the minority
interest in HNS, consisting of 585,335 shares of HNS common stock and stock
options to acquire 564,727 shares of HNS common stock at exercise prices ranging
from $0.70 per share to $1.65 per share, by exchanging cash of $1.6 million and
stock options to acquire 355,317 shares of the Company's common stock at
exercise prices ranging from $15.22 per share to $16.53 per share which were
valued by the Company at $2.2 million. Including transaction and other costs of
$350,000, the Company paid $4.1 million for the acquisition of the HNS minority
interest which 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 charges for Integration Activities during the first quarter of 1997
related to this acquisition of $1.6 million which has been reflected in the
acquisition related charges in the accompanying consolidated statement of
operations. 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 $7.1 million in January 1997 for acquisition related expenses and asset write
downs and incurred integration costs of $4.8 million during the first quarter of
1997. The Company recorded a net deferred income tax asset during the first
quarter 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.
Smart Solutions for Electronic Commerce, Inc. ("Smart Solutions")
On May 1, 1997, the Company acquired Smart Solutions, which is not
expected to have a significant impact on the Company's financial position or
results of operations. Smart Solutions, located in Traverse City, Michigan, is a
provider of advanced ship notice and bar coding software.
Acquion, Inc.
Effective August 22, 1997, the Company acquired all of the common stock
of Acquion, Inc. ("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 September 30, 1997,
$641,000
FORM 10-Q
PAGE 13
14
allocated to purchased technology and $2.0 million allocated to goodwill. The
Company also incurred integration costs during the third quarter of 1997 related
to this acquisition of $2.3 million. In addition, the Company incurred
integration charges of $1.1 million related to additional costs identified in
connection with the HNS and STI acquisitions and $630,000 in restructuring
charges related to increasing synergies among all operating divisions as a
result of recent acquisitions. 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.
RESULTS OF OPERATIONS
REVENUES
Total revenues increased 39% from $42.0 million in the nine months
ended September 30, 1996 to $58.2 million in the same period in 1997. Revenues
for services increased 42% from $26.7 million in the nine months ended September
30, 1996 to $37.9 million in the same period in 1997, reflecting an increase in
the number of subscribers utilizing the Company's VAN, increases in the average
volume of transmissions by subscribers, and an increase in professional services
revenues. In addition, increases in revenues for services reflect revenues
generated from the Company's European subsidiaries and Acquion which were
acquired at the end of the first quarter of 1996 and in the third quarter of
1997, respectively. Revenues from software maintenance and implementation also
increased, reflecting primarily an increase in the number of customers. Revenue
from software sales increased 33% from $15.3 million in the nine months ended
September 30, 1996 to $20.3 million in the same period in 1997. This increase
primarily reflects increases in licensed PC software, software revenues
generated from the Company's European subsidiaries and Acquion which were
acquired at the end of the first quarter of 1996, and in the third quarter 1997,
respectively, and increases in software license fees attributable to the
licensing of enterprise-wide software products. The increase in software license
fees was offset by a $2.4 million decrease in royalties recognized for software
products licensed through a third party distributor.
Total revenues increased 37% from $15.7 million in the three months
ended September 30, 1996 to $21.5 million in the same period in 1997. Revenues
for services increased 38% from $9.8 million in the three months ended September
30, 1996 to $13.6 million in the same period in 1997, reflecting an increase in
the number of subscribers utilizing the Company's VAN, increases in the average
volume of transmissions by subscribers, increases in professional services
revenues and revenue generated from Acquion which was acquired in the third
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 34% from $5.9 million in the three months
ended September 30, 1996 to $7.9 million in the same period in 1997. This
increase primarily reflects increases in licensed PC and enterprise-wide
software products. The increase in software license fees was offset by a
$725,000 decrease in royalties recognized for software products licensed through
a third party distributor and a decrease in software sales at the European
divisions. During the third quarter, the Company'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.
DIRECT COSTS
Direct costs for services increased from $9.5 million, or 35.7% of
services revenues, in the nine months ended September 30, 1996, to $12.9
million, or 34.1% of services revenues, in the nine months ended September 30,
1997. Direct costs for software increased from $1.9 million, or 12.6% of
software revenues, in the nine months ended September 30, 1996, to $2.5 million,
or 12.4% of software revenues, in the nine months ended September 30, 1997.
Direct costs for services increased from $3.6 million, or 36.6% of
services revenue in the three months ended September 30, 1996, to $4.8 million,
or 35.4% of services revenue in the three months ended September 30, 1997.
Direct costs for software increased from $559,000, or 9.5% of software revenues,
in the three months ended September 30, 1996, to $880,000, or 11.2% of software
revenues, in the three months ended September 30, 1997.
FORM 10-Q
PAGE 14
15
The increase in direct costs for software as a percentage of revenues is due to
royalties paid to a third party distributor on certain software products.
SELLING AND MARKETING
Selling and marketing expenses increased 6% from $10.9 million or 26.1%
of revenues in the nine months ended September 30, 1996 to $11.6 million or
20.0% of revenues in the nine months ended September 30, 1997. The decrease in
selling and marketing expenses as a percentage of revenues is primarily due to
the effect of increased revenues and efficiencies associated with other costs to
support increased sales activity, efficiencies associated with the STI merger,
and Integration Activities.
Selling and marketing expenses increased 10% from $3.7 million, or
23.8% of revenues in the three months ended September 30, 1996 to $4.1 million,
or 19.2% of revenues in the three months ended September 30, 1997. The decrease
in selling and marketing expenses as a percentage of revenues is primarily due
to the effect of increased revenues and efficiencies associated with other costs
to support increased sales activity, efficiencies associated with the STI
merger, and Integration Activities during the quarter.
GENERAL AND ADMINISTRATIVE
General and administrative expenses increased 13% from $9.7 million in
the nine months ended September 30, 1996 to $11.0 million in the nine months
ended September 30, 1997. As a percentage of revenues, these expenses decreased
from 23.1% of revenues in the nine months ended September 30, 1996 to 18.9% of
revenues in the nine months ended September 30, 1997. The decrease as a
percentage of revenues reflects efficiencies associated with expanding the
Company's operations and the effect of increases in software and services
revenue, efficiencies associated with the STI merger, and Integration
Activities.
General and administrative expenses increased 8% from $3.6 million in
the three months ended September 30, 1996 to $3.9 million in the three months
ended September 30, 1997. As a percentage of revenues, these expenses decreased
from 23.1% of revenues in the three months ended September 30, 1996 to 18.3% of
revenues in the three months ended September 30, 1997. The decrease as a
percentage of revenues reflects efficiencies associated with expanding the
Company's operations and the effect of increases in software and services
revenue, efficiencies associated with the STI merger, and Integration Activities
during the quarter.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased 50% from $2.0 million in the
nine months ended September 30, 1996 to $3.0 million in the nine months ended
September 30, 1997. As a percentage of revenues, these expenses increased from
4.8% of revenues in the nine months ended September 30, 1996 to 5.2% of revenues
in the nine months ended September 30, 1997. The increase as a percentage of
revenues is primarily the result of the amortization of the intangible assets
related to the acquisitions of the European divisions completed at the end of
first quarter 1996, the acquisition of HNS at the beginning of 1997, and
increases in capital expenditures purchased during 1996 and 1997.
Depreciation and amortization increased 36% from $784,000 in the three
months ended September 30, 1996 to $1.1 million in the three months ended
September 30, 1997. As a percentage of revenues, these expenses represented 5.0%
of revenues in the three months ended September 30, 1996 and 1997.
FORM 10-Q
PAGE 15
16
PRODUCT DEVELOPMENT
Total expenditures for product development, including capitalized
software development costs, increased from $8.1 million in the nine months ended
September 30, 1996 to $8.3 million in the same period in 1997. This increase
primarily reflects the additional product development personnel related costs
associated with the acquisitions. The Company capitalized product development
costs of $1.8 million and $2.6 million, in the nine months ended September 30,
1996 and 1997, respectively, which represented 22.5% and 31.7% of total
expenditures for product development in these respective periods. As a
percentage of total revenues, expenditures for product development costs
decreased from 19.4% of revenues in the nine months ended September 30, 1996 to
14.3% of revenues in the nine months ended September 30, 1997. The decrease in
product development expenditures as a percentage of revenue is primarily
attributable to increased revenues. Amortization of capitalized software
development costs is charged to direct costs of software revenues and totaled
$1.2 million in the nine months ended September 30, 1996 and 1997.
Total expenditures for product development, including capitalized
software development costs, decreased from $3.1 million in the three months
ended September 30, 1996 to $2.8 million in the same period in 1997. This
decrease is due to increased synergies realized from the STI merger and
Integration Activities. The Company capitalized software development costs of
$508,000 and $928,000 in the three months ended September 30, 1996 and 1997,
respectively, which represented 16.6% and 33.6% of total expenditures for
product development in these respective periods. The increase in capitalized
software development costs as a percentage of total expenditures for product
development is due to development activities on products that have reached
technological feasibility. As a percentage of total revenues, expenditures for
product development costs were 19% of revenues in the three months ended
September 30, 1996 and 13% in the three months ended September 30, 1997. The
decrease in product development expenditures as a percentage of revenue is
primarily attributable to increased revenues and Integration Activities.
Amortization of capitalized software development costs is charged to direct cost
of software revenues and totaled $386,000 and $400,000 in the three months ended
September 30, 1996 and 1997, respectively.
CHARGE FOR PURCHASED IN-PROCESS PRODUCT DEVELOPMENT AND OTHER ACQUISITION
RELATED CHARGES
The Company incurred a $31.2 million charge for acquired research and
development and other acquisition related charges during the nine months ended
September 30, 1997. In connection with the HNS and Acquion acquisitions
described above, 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
STI acquisition, the Company incurred approximately $7.1 million for acquisition
related expenses and asset write downs. Additionally, the Company incurred
integration costs of $6.4 million in connection with both the HNS and STI
acquisitions and $2.3 million in connection with the Acquion acquisition. During
the third quarter of 1997, the Company incurred additional integration charges
of $1.1 million related to additional costs identified in connection with the
HNS and STI acquisitions. The Company also incurred $630,000 in restructuring
charges related to increased synergies among all operating divisions as a result
of recent acquisitions. Approximately $4.3 million of the costs and expenses
incurred in connection with HNS, STI, and Acquion 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 revenue. In 1996,
the Company incurred an $8.4 million charge for acquired in-process product
development in connection with the European acquisitions.
FORM 10-Q
PAGE 16
17
The Company incurred a $14.9 million charge for acquired research and
development and other acquisition related charges during the three months ended
September 30, 1997. In connection with the Acquion acquisition described above,
the Company acquired in-process product development of approximately $10.9
million. 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. The Company
incurred integration costs of $2.3 million in connection with the Acquion
acquisition. Additionally, in the third quarter of 1997, the Company incurred
additional integration charges of $1.1 million related to additional costs
identified in connection with the HNS and STI acquisitions. The Company also
incurred $630,000 in restructuring charges related to increased synergies among
all operating divisions as a result of recent acquisitions. Approximately $1.5
million of the costs and expenses incurred in connection with HNS, STI, and
Acquion 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 revenue.
INTEREST INCOME AND EXPENSE
The Company recorded net interest income of $426,000 for the nine
months ended September 30, 1997 as compared to net interest income of $95,000
for the nine months ended September 30, 1996. This increase is primarily due to
the increase in cash balances available for investment resulting from the
proceeds received upon completion of the Company's stock offering in the third
quarter of 1997.
The Company recorded net interest income of $399,000 for the three
months ended September 30, 1997 as compared to net interest expense of $32,000
for the three months ended September 30, 1996. This increase is primarily due to
the increase in cash balances available for investment resulting from the
proceeds received upon completion of the Company's stock offering in the third
quarter of 1997.
EQUITY IN LOSSES OF JOINT VENTURES
The Company recognized equity in loss of SupplyTech Australia, Pty., a
joint venture investment formed in the second quarter of 1996, in the nine
months ended September 30, 1997 as compared to equity losses of Harbinger NV
("HNV") and HNS in the three and nine months ended September 30, 1996. Effective
March 31, 1996, the Company acquired the remaining outstanding stock of HNV.
Effective January 1, 1997, the Company acquired the remaining outstanding
minority interest of HNS.
INCOME TAXES
The Company recorded income tax expense of $1.4 million for the nine
months ended September 30, 1997 as compared to income tax expense of $38,000 for
the nine months ended September 30, 1996. The Company recorded an income tax
benefit of $94,000 for the three months ended September 30, 1996. The income tax
expense provided during 1997 reflects the nondeductible nature of certain of the
1997 acquisition related charges.
LOSS ON EARLY EXTINGUISHMENT OF DEBT
The Company recorded a loss of $2.4 million on early debt
extinguishment in the first quarter of 1997 related to the HNS transactions.
NET INCOME (LOSS) AND EARNINGS PER SHARE
The Company realized a net loss of $23.2 million for the nine months
ended September 30, 1997 as compared to a net loss of $11.8 million for the nine
months ended September 30, 1996. The net loss in the period ended September 30,
1997 reflects the effect of the charge for purchased in-process product
development and acquisition related charges of $31.2 million and the
extraordinary loss on early debt extinguishment of $2.4 million as compared to
the effect of the $8.4 million charge for purchased in-process product
development and other acquisition related charges resulting from the
acquisition of the European subsidiaries at the end of the first quarter
FORM 10-Q
PAGE 17
18
of 1996. The Company realized a loss per share of $1.19 for the nine months
ended September 30, 1997 as compared to the loss per share of $0.64 for the nine
months ended September 30, 1996. Excluding the charges for purchased in-process
product development, extraordinary loss on debt extinguishment, equity loss of
HNS in 1996, and the related income tax effects, the Company would have reported
net income of $7.3 million or $0.34 per share as compared to net income of
$929,000 or $0.05 per share for the nine months ended September 30, 1997 and
1996, respectively.
The Company realized a net loss of $9.7 million for the three months
ended September 30, 1997 as compared to a net loss of $1.2 million for the three
months ended September 30, 1996. The Company realized a loss per share of $0.47
for the three months ended September 30, 1997 as compared to the loss of $0.07
for the three months ended September 30, 1996. Excluding the charges for
purchased in-process product development, equity loss of HNS in 1996, and the
related income tax effects, the Company would have reported net income of $3.3
million or $0.15 per share in the three months ended September 30, 1997 as
compared to net income of $498,000 or $0.03 per share for the three months ended
September 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital increased $43.1 million from $3.1 million
as of December 31, 1996 to $46.2 million as of September 30, 1997. This increase
principally reflects proceeds received from the Company's stock offering in
third quarter of 1997. In the nine months ended September 30, 1997, the Company
used cash in operating activities of $1.7 million as compared to cash provided
by operations of $1.9 million for the nine months ended September 30, 1996. This
decrease is primarily due to the merger and integration costs incurred related
to the acquisitions which occurred in the first quarter and third quarter of
1997. The Company used net cash in investing activities of $21.0 million for the
nine months ended September 30, 1997 as compared to $10.6 million for the nine
months ended September 30, 1996. Cash used in investing activities for the
period ended September 30, 1997 included cash used in acquisitions, purchases of
property and equipment and additions to capitalized software development costs.
Cash provided by financing activities of $58.4 million in the nine months ended
September 30, 1997 as compared to $263,000 for the nine months ended September
30, 1996, resulted from proceeds received from the Company's stock offering in
third quarter 1997 and exercises of stock options.
In October, 1997, the Company entered into a lease agreement with the
current landlord to occupy space in an adjoining building. The expected
occupancy date 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 10 years with the right to cancel after 7 years and requires annual rent
payments of approximately $2,100,000. The Company anticipates incurring a charge
in the fourth quarter of $722,000, related to a write down of leasehold
improvements and deferred professional costs associated with moving to the new
facility.
Management expects that the Company will continue to be able to fund
its acquisitions, operations, investment needs and capital expenditures through
cash flows generated from operations, cash on hand, borrowings under a line of
credit and additional equity capital. Management believes that outside sources
for debt and additional equity capital, if needed, will be available to finance
expansion projects and any possible 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 securities. However, there can be no assurances that funds
will be available on terms acceptable to the Company.
FORM 10-Q
PAGE 18
19
This document contains statements which may constitute "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. 15 U.S.C.A. Sections 77Z-2 and 18U-5 (Supp. 1996). 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 are set forth in the Safe
Harbor Compliance Statement for Forward-Looking Statements included as Exhibit
99.1 to the Company's Current Report on Form 8-K dated and filed October 29,
1997. 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 over time.
SECONDARY STOCK OFFERING
On July 29, 1997, the Company completed the public offering of 3.3
million shares of Common Stock, consisting of 2.1 million shares sold by the
Company and 1.2 million shares sold by selling shareholders, at a public
offering price of $30.75 per share. The offering resulted in net proceeds to the
Company of approximately $60.8 million.
NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings
Per Share." SFAS No. 128 requires companies that have publicly held common stock
or common stock equivalents to present both basic and diluted earnings per share
("EPS") on the face of the income statement. Basic EPS is calculated as income
available to common stockholders divided by the weighted average number of
common shares outstanding during the period. Diluted EPS is calculated to
reflect the potential dilution that would occur if stock options or other
contracts to issue common stock were exercised and results in additional common
stock that would share in the earnings of the Company. This statement is
effective for financial statements issued for interim and annual periods ending
after December 15, 1997. The Company does not believe the adoption of SFAS No.
128 will have a significant impact on its reported EPS.
In February 1997, the FASB issued SFAS No. 129, "Disclosure of
Information about Capital Structure." SFAS No. 129 is effective for financial
statements for periods ending after December 15, 1997. The Company does not
expect that SFAS No. 129 will require significant revision of prior disclosures
since SFAS No. 129 lists required disclosures that had been included in a number
of previously existing separate statements or opinions.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." 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 Financial Accounting Standards Board issues SFAS 131,
"Disclosures about Segments of an Enterprise and Related Information". SFAS 131
requires that an enterprise disclose certain information about operating
segments. SFAS 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.
FORM 10-Q
PAGE 19
20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 11. Computation of earnings per share
Exhibit 27. Financial Data Schedule (for SEC use only)
Exhibit 99A. Employment Agreement for European General
Manager
Exhibit 99B. Letter of Credit
Exhibit 99C. Building Lease Agreement
(b) Reports on Form 8-K
Form 8-K dated July 1, 1997 reporting under Item 5 the
retroactively restated financial information related to the
pooling-of-interests business combination of Harbinger
Corporation and SupplyTech, Inc. and SupplyTech International,
LLC and subsidiaries.
Form 8-K dated July 16, 1997 reporting under Item 5 the Safe
Harbor Compliance Statement for Forward-Looking Statements
filed as Exhibit 99.1 to the Harbinger Annual Report on Form
10-K for the year ended December 31, 1996.
Form 8-K dated September 2, 1997 reporting under Item 2 the
acquisition of Acquion, Inc.
FORM 10-Q
PAGE 20
21
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: October 29, 1997 /s/ David T. Leach
--------------------------------- -----------------------------------
David T. Leach
Chief Executive Officer
(Principal Executive Officer)
Date: October 29, 1997 /s/ Joel G. Katz
--------------------------------- -----------------------------------
Joel G. Katz
Chief Financial Officer
(Principal Financial Officer;
Principal Accounting Officer)
FORM 10-Q
PAGE 21