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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
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: 0-25612
STARBASE CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 33-0567363
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
18872 MacArthur Boulevard
Irvine, California 92612
(Address of principal executive offices) (Zip code)
(714) 442-4400
(Registrant's telephone number, including area code)
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) been subject to such filing requirements
for the past 90 days. Yes |X| No |_|
Number of shares outstanding as of November 14, 1996:
Common Stock: 13,219,758
Series C Preferred Stock: 50,000
Transitional Small Business Disclosure Format: Yes |_| No |X|
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STARBASE CORPORATION
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Balance Sheets at September 30, 1996 (Unaudited)
and March 31, 1995 3
Statements of Operations (Unaudited) for the three
and six month periods ended September 30, 1996
and 1995 4
Statements of Cash Flows (Unaudited) for the six month
periods ended September 30, 1996 and 1995 5
Notes to Unaudited Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders 13
ITEM 5. Other Information 13
ITEM 6. Exhibits and Reports on Form 8-K 14
2
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PART I
ITEM 1
FINANCIAL STATEMENTS
STARBASE CORPORATION
(a development stage company)
BALANCE SHEETS
(in thousands, except number of shares and par values)
<TABLE>
<CAPTION>
September 30, March 31,
1996 1996
--------------- ---------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 5,579 $ 1,252
Accounts receivable, net of allowances of $18 and $44 57 3
Notes and other receivables 142 10
Prepaid expenses and deferred charges 161 137
Inventories 23 14
--------------- ---------------
Total current assets 5,962 1,416
Property and equipment, net 579 660
Note receivable from officer 76 76
Other non-current assets 7 21
--------------- ---------------
Total assets $ 6,624 $ 2,173
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 680 $ 1,375
Due to director - 280
Other current liabilities 1 111
Current portion of debt - 186
--------------- ---------------
Total current liabilities 681 1,952
Long-term debt - 153
--------------- ---------------
Total liabilities 681 2,105
Shareholders' equity:
Preferred stock, $.01 par value; $150 (September 30, 1996) and $4,456
(March 31, 1996) liquidation value; authorized 10,000,000;
issued and outstanding 50,000 (September 30, 1996) and 2,227,946 1 22
(March 31, 1996)
Common stock, $.01 par value; authorized 50,000,000; issued 13,188,347
(September 30, 1996) and 7,841,812 (March 31, 1996);
outstanding, 13,182,086 (September 30, 1996) and 7,835,551 (March 132 78
31, 1996)
Common stock pending authorization - 27
Additional paid-in capital 26,631 18,185
Treasury stock, 6,261 common shares (21) (21)
Deficit accumulated during development stage (20,800) (18,223)
--------------- ---------------
Total shareholders' equity 5,943 68
--------------- ---------------
Total liabilities and shareholders' equity $ 6,624 $ 2,173
=============== ===============
The accompanying notes are an integral part of the financial statements
</TABLE>
3
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STARBASE CORPORATION
(a development stage company)
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months ended Six months ended Sept. 6, 1991
September 30, September 30, through
-------------------------- ------------------------- September 30,
1996 1995 1996 1995 1996
(CUMULATIVE)
------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Consulting services $ - $ 136 $ - $ 497 $ 4,430
Consulting services-related party - - - - 281
Products, licenses and other 172 66 381 215 2,042
------------ ------------ ------------ ------------ ------------
Total revenues 172 202 381 712 6,753
Cost of Sales:
Consulting services - 141 - 625 4,716
Consulting services-related party - - - - 289
Products, licenses and other 27 44 28 72 359
------------ ------------ ------------ ------------ ------------
Total cost of sales 27 185 28 697 5,364
------------ ------------ ------------ ------------ ------------
Gross margin 145 17 353 15 1,389
Operating Expenses:
Research and development 355 688 687 1,496 8,122
Selling, general and 1,242 703 2,355 2,010 14,343
administrative ------------ ------------ ------------ ------------ ------------
Total operating expenses 1,597 1,391 3,042 3,506 22,465
------------ ------------ ------------ ------------ ------------
Operating loss (1,452) (1,374) (2,689) (3,491) (21,076)
Interest, other income and
(expense), net 85 (65) 113 (72) 285
------------ ------------ ------------ ------------ ------------
Loss before income taxes (1,367) (1,439) (2,576) (3,563) (20,791)
Provision for income taxes - - 1 1 9
------------ ------------ ------------ ------------ ------------
Net loss $ (1,367) $ (1,439) $ (2,577) $ (3,564) $ (20,800)
============ ============ ============ ============ ============
Per share data:
Loss per common share $ (0.11) $ (0.19) $ (0.22) $ (0.53)
============ ============ ============ ============
Weighted average number of
common shares outstanding 12,714 7,727 11,471 6,666
============ ============ ============ ============
The accompanying notes are an integral part of the financial statements
</TABLE>
4
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STARBASE CORPORATION
(a development stage company)
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Sept. 6, 1991
Six months ended through
September 30, September 30,
------------------------------- 1996
1996 1995 (cumulative)
--------------- --------------- ---------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss $ (2,577) $ (3,564) $ (20,800)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 117 136 685
Provision for doubtful accounts and sales returns 34 - 164
Loss on disposition of property, equipment and capital lease 6 35 80
Write-down of assets - 22 50
Gain on debt restructuring - - (138)
Recognition of deferred income (66) - (301)
Other adjustments - - 75
Common stock to be issued for professional services - - -
Changes in assets and liabilities, excluding
the effect of non-cash transactions:
Accounts receivable (88) 708 (220)
Notes and other receivables (132) 2 (213)
Inventories (9) 36 (23)
Prepaid expenses and deferred charges (24) 62 (175)
Other assets 11 (17) (30)
Accounts payable and accrued liabilities (979) 258 1,126
--------------- --------------- ---------------
Net cash used by operations (3,707) (2,322) (19,720)
Cash Flows from Investing Activities:
Proceeds from disposition of property and equipment - - 4
Capital expenditures (39) (22) (1,284)
--------------- --------------- ---------------
Net cash used by investing activities (39) (22) (1,280)
Cash Flows from Financing Activities:
Proceeds from reverse acquisition - - 1,402
Proceeds from sale of preferred stock 1,021 - 7,294
Proceeds from issuance of common stock:
From stock purchase plan - - 10
From public offering - - 4,063
From private placements 6,300 304 10,698
From exercise of options 282 102 548
From exercise of warrants 1,555 - 2,579
Proceeds from convertible subordinated notes - - 381
Proceeds from promissory notes - 462 1,083
Payments on promissory notes (111) - (274)
Borrowings on line of credit - - 664
Payments on line of credit - (664) (664)
Payment of financing related costs (974) - (1,379)
Payments on capitalized lease obligations - (8) (40)
Loans from officers/directors - 137 365
Repayment of loans from officers/directors - - (75)
Repayment of (disbursement of) loan to officer - 55 (76)
--------------- --------------- ---------------
Net cash provided by financing activities 8,073 388 26,579
--------------- --------------- ---------------
Net increase (decrease) in cash 4,327 (1,956) 5,579
Cash and cash equivalents, beginning of period 1,252 1,972 -
--------------- --------------- ---------------
Cash and cash equivalents, end of period $ 5,579 $ 16 $ 5,579
============== =============== ===============
The accompanying notes are an integral part of the financial statements
</TABLE>
5
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STARBASE CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
StarBase Corporation (the "Company"), a Delaware corporation, develops, markets
and supports team-oriented product development software that addresses the
evolving needs of personal computer users involved in projects requiring
substantial collaboration. StarBase was founded in 1991 to address the inability
of software development projects to deliver software products on time and within
budget, initially through the improvement of individual programmer productivity
tools. The Company was reorganized in fiscal 1996 to focus entirely on the
development and marketing of software designed to increase team productivity,
rather than individual programmer productivity. In line with the reorganization,
the 26 person Consulting Division was discontinued.
2. BASIS OF PRESENTATION
The unaudited interim financial statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission. Accordingly,
certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have not been presented. The accompanying unaudited financial statements should
be read in conjunction with the financial statements and the notes thereto
included in the StarBase Corporation report to the Securities and Exchange
Commission on Form 10-K, as amended, for the year ended March 31, 1996.
The interim financial statements reflect all normal recurring adjustments which
are, in the opinion of management, necessary for a fair presentation of the
Company's financial position, results of operations and cash flows for the
period presented. Certain prior period balances have been reclassified to
conform to current period classifications. The results of operations for the six
months ended September 30, 1996 are not necessarily indicative of the operating
results for a full year.
EARNINGS PER COMMON SHARE
Earnings per common share are calculated by dividing the net loss by the
weighted average shares of common stock outstanding. Common stock equivalents
are considered anti-dilutive and are excluded from this calculation.
6
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STARBASE CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
3. COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS
(In thousands)
<TABLE>
<CAPTION>
September 30, March 31,
1996 1996
----------------- -----------
<S> <C> <C>
ACCOUNTS RECEIVABLE
Trade accounts receivable $ 75 $ 47
Less allowance for doubtful accounts (18) (44)
----------------- -----------
$ 57 $ 3
================= ===========
PROPERTY AND EQUIPMENT
Computer hardware $ 896 $ 869
Furniture and fixtures 130 125
Computer software 123 115
Leasehold improvements 29 41
----------------- -----------
1,178 1,150
Less accumulated depreciation and amortization (599) (490)
----------------- -----------
$ 579 $ 660
================= ===========
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Trade accounts payable $ 310 $ 910
Accrued professional fees 135 135
Accrued wages and bonuses 94 70
Other accrued expenses 141 260
----------------- -----------
$ 680 $ 1,375
================= ===========
</TABLE>
4. EQUITY TRANSACTIONS
PRIVATE PLACEMENTS
The Company has authorized 50,000,000 shares of common stock and 10,000,000
shares of preferred stock with a par value of $0.01 per share. Of the preferred
stock, 2,500,000 shares have been designated as Series B Preferred Stock, of
which no shares are issued and outstanding at September 30, 1996, and 366,666
shares have been designated as Series C Preferred Stock, of which 50,000 shares
are outstanding at September 30, 1996.
On May 13, 1996, a private placement of common stock was completed. In this
private placement, 2,099,832 Units were issued, each Unit consisting of one
share of common stock and one non-transferable warrant to purchase one share of
common stock. The warrants are exercisable at $2.00 per share through January
31, 1997 and thereafter exercisable at $2.50 per share through January 31, 1998,
after which date the warrants expire. In addition, warrants to purchase 120,000
shares of the Company's common stock were issued as a placement agent fee.
As a result of the May 13, 1996 private placement of common stock, the 2,227,946
shares of the Company's Series B Preferred Stock, issued in a fiscal 1996
private placement, automatically converted into 2,227,946 shares of the
Company's common stock.
7
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STARBASE CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
During June 1996, the private placement of Series C Preferred Stock was
completed. In this private placement, 365,496 Units were issued, each Unit
consisting of one share of Series C Preferred Stock and one non-transferable
warrant to purchase one share of common stock. The warrants are exercisable at
$2.00 per share through January 31, 1997 and thereafter exercisable at $2.50 per
share through January 31, 1998, after which date the warrants expire. The Series
C Preferred Stock is not redeemable and has a liquidation preference of $3.00
per share. The holders of Series C Preferred Stock are not entitled to receive
any dividends nor, except as provided by law, vote upon any matter relating to
the business or affairs of the Company or for any other purpose. Each share of
Series C Preferred Stock is convertible, at the option of the holder, at any
time into the Company's common stock, of which the conversion rate will be
determined by dividing $3.00 by the Conversion Price. The Conversion Price shall
be the lesser of (a) $3.00 per share or (b) 80% of the average closing bid price
of the common stock as reported by Bloomberg, L.P. for shares traded in the
United States for the five consecutive trading days preceding the conversion
date. At September 30, 1996, 315,496 shares of Series C Preferred Stock had been
converted into 382,609 shares of common stock.
CONVERSION OF NOTE PAYABLE
A promissory note payable with a face value of $75,000 was converted into
Series C Preferred Stock at a price of $3.00 per Unit.
WARRANTS
Warrant activity for the six month period ended September 30, 1996 is as
follows:
Warrant Price
Shares Per Share
---------------- ------------------
Outstanding at March 31, 1996 2,949,595
Issued in connection with stock offerings 2,585,328 $2.00
Exercised (403,711) $2.00-$5.67
Expired (5,006) $5.67
-----------------
Outstanding at September 30, 1996 5,126,206
=================
8
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STARBASE CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
5. SUPPLEMENTAL CASH FLOW INFORMATION
Six months
ended September 30,
--------------------
(In thousands) 1996 1995
--------- --------
Interest paid $ 20 $ 25
Income taxes paid 1 1
Non-cash investing and financing transactions:
Conversion of Series A Preferred Stock to
common stock - 2,710
Conversion of Series B Preferred Stock to
common stock (Note 4) 22 -
Conversion of Series C Preferred Stock to
common stock (Note 4) 3 -
Conversion of promissory notes to Series C Preferred
Stock (Note 4) 75 -
Common Stock issued for non-cash consideration 28 -
6. COMMITMENTS AND CONTINGENCIES
There have been no other significant subsequent developments relating to the
commitments and contingencies reported on the Company's most recent Form 10-K,
as amended.
9
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PART I
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
The following discussion contains forward-looking statements within the meaning
of Sections 21E and 27A of the Securities Exchange Act of 1934. These forward
looking statements are subject to risks and uncertainties. There are several
important factors that could cause actual results to differ materially from
those anticipated by the forward-looking statements contained in the following
discussion. Such factors include, but are not limited to, the growth rates of
certain market segments, the positioning of the Company's products in those
segments, price pressures and the rapidly changing competitive environment in
the software industry, the Company's ability to manage its business in its
evolution from a development stage company, and the Company's ability to
establish strategic alliances. Additional information on these and other risk
factors which could affect the Company's financial results is included in the
Company's Annual Report for the fiscal year ended March 31, 1996 on Form 10-K,
as amended, on file with the Securities and Exchange Commission.
REVENUES
In the spring of 1995 the management of StarBase made the decision to focus the
Company's business on the development and marketing of software designed to
increase team productivity, rather than individual programmer productivity. The
Company was reorganized in fiscal 1996 to reflect this change in product and
market focus and, in line with the reorganization, the 26 person Consulting
Division was discontinued. Thus, consulting services revenue for the quarter and
six month period ended September 30, 1996 decreased to nil compared to $136,000
for the quarter and $497,000 for the six months of the previous year. Revenue
from products and licenses for the quarter and six months was $172,000 and
$381,000 compared to $66,000 and $215,000 for the same periods of the previous
year. Revenue from products and licenses for the quarter and six months ended
September 30, 1996 consisted primarily of license fee income and sales of the
StarTeam products.
Product revenue to date has been limited by a number of factors, including the
introductory cycle for new software development tools such as StarTeam. StarTeam
1.0 was introduced in January 1996, followed by StarTeam 2.0 in late August of
1996. Sufficient working capital was not available to support a major StarTeam
1.0 marketing and sales program. The StarTeam 1.0 marketing strategy was
therefore to sell the product to a limited number of strategic customers, who,
with a successful initial experience, had the potential to generate significant
additional business. In June 1996, sufficient working capital was raised through
a private placement to support a major marketing and sales program for StarTeam
2.0. Commercial shipments of StarTeam 2.0 began in the final week of August,
1996, providing five weeks of contribution to the revenue for the quarter ending
September 30, 1996.
StarTeam is a new software product line whose target market consists of
technical software professionals (developers). Marketing to technical
professionals is an educational process. In the typical sales cycle, the product
is purchased as a pilot test program, installed and evaluated on a small scale
(3-10 seats), and, if the evaluation is satisfactory, implemented on a larger
project which may involve 10 to 25 developers. Successful implementation in the
project may lead to broader acceptance within the organization. The time span
from an initial test order to implementation throughout the customer's
organization varies depending on the organization and the level of
standardization within the individual company, but in very large companies, may
take 6 months to a year.
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Since mid-May of 1996, when additional working capital became available, the
Company has been focused on strengthening its sales and marketing effort. Due to
the technical nature of the product line, the Company determined that its
primary sales effort would be through direct tele-sales as well as targeted
programs toward original equipment manufacturers (OEM) and large accounts. Prior
to the availability of additional working capital in May 1996, several key
positions in sales and marketing were either not filled or were occupied by
personnel with inappropriate skill sets. As of September 30, 1996 the Company
has filled open sales and marketing positions and replaced certain key
management positions.
COST OF SERVICES AND PRODUCTS
There was no consulting service revenue or cost of service revenue during the
quarter and for the six months ended September 30, 1996 due to the
discontinuation of the Company's Consulting Division. The negative gross margin
resulting from services for the quarter ended September 30, 1995 reflects
decreased staff utilization as the Company reduced the scope of its consulting
operations.
Cost of products consists primarily of manufacturing and related costs such as
media, documentation, product assembly and third party royalties. The Company
currently outsources manufacturing for all software products. The decrease in
cost of products as a percentage of product revenues is primarily the result of
increased license and maintenance revenue for which no related costs were
incurred.
OPERATING EXPENSES
Compared to the same quarter in the prior year, operating expenses increased
approximately $206,000, 15%, due to an increase in sales and marketing
expenditures offset by a decrease in research and development expenses. The
increase in sales and marketing expenses for the quarter is due to increased
promotional activities as well as increased headcount. Research and development
expenses decreased due to headcount reductions. At September 30, 1996, the
Company had 36 full-time employees, 11 in sales and marketing, 8 in general and
administrative, and 17 in research and development. As of September 30, 1995,
the Company had 39 full-time employees, 3 in consulting, 6 in sales and
marketing, 7 in general and administrative, and 23 in research and development.
RESEARCH AND DEVELOPMENT EXPENSES. While StarBase continues to make significant
investments in research and development intended to bring its products to market
and to support existing products, overall research and development expenses have
been reduced. The Company has not capitalized any software development costs
since inception. For the current quarter research and development expenses were
reduced by $333,000, approximately 48% of total research and development
expenses for the same quarter in the prior year. For the six month period,
research and development expenses decreased $809,000 over the same period in the
prior year. The primary cause for the decrease is the reduction in headcount
which is a reflection of the completion of the StarTeam product line and the
migration into a product improvement and maintenance mode. At the same time the
company's research and development resources have been re-allocated between
on-going projects as well as conceptual, future-business projects.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the quarter and six months ended September 30, 1996
compared to the same periods of 1995 increased due to greater product marketing
and sales expenses incurred since May 1996.
INTEREST, OTHER INCOME AND EXPENSE, NET
Interest and other income and expense, net consisted primarily of interest
income generated by placing available funds in short-term US Treasury Bills. For
the comparative periods in the prior year, the amounts consisted of interest
expense payable on the credit line and promissory notes.
11
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INCOME TAXES
The Company has incurred minimal income taxes due to its cumulative losses. The
provision for income taxes for the quarter represented minimum state franchise
taxes.
INFLATION
Management believes that inflation has not had a material impact on the
Company's results of operations.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents on hand totaled $5.6 million at September 30, 1996 and
$1.3 million at March 31, 1996. During the six months ended September 30, 1996
the Company generated $8.1 million (net) in cash from financing activities,
including $8.2 million (net) from the sale of additional equity. The Company
completed a private placement of preferred stock for net proceeds of
approximately $1.0 million, a private placement of common stock for
approximately $5.4 million, exercise of options for $0.3 million, and exercise
of warrants for $1.5 million. Offsetting the proceeds from financings, the
Company made payments on promissory notes of approximately $0.1 million.
During the past six months, the Company used $3.7 million for operations, an
increase of approximately $1.4 million over the amount used by operations in the
same six month period of the prior year. The increase in cash used for
operations was primarily due to the substantial pay down of accounts payable
compared to the same period in the prior year when accounts payable were allowed
to cumulate due a cash shortage. Capital expenditures were approximately $39,000
for the six months ended September 30, 1996.
The Company believes that proceeds from the sale of equity securities since
March 31, 1996 will at least be sufficient to allow the Company to conduct its
operations through August 1997. Continuing operations thereafter will depend on
increased cash flow from operations or the Company's ability to raise additional
funds through equity, debt, or other financing. There can be no assurance,
however, that such funds will be available.
12
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PART II
ITEM 4
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Company held its annual meeting of stockholders on September 25, 1996.
(b) Pursuant to the election of the eight directors listed under Item 4 (c)
(i), Messrs. Davis, Ferguson, Gratny, Lyons, Pearce, Sexton, Snedegar, and
Stow were elected to hold office until the next annual meeting and until
their successors are elected and qualified.
(c) The Company's stockholders voted on the following matters:
(i) Election of eight directors. All eight directors nominated were
elected.
Number of Votes # of Votes # of Votes
Name of Nominee For Against Withheld
- ----------------------------- ------------------- ---------------- -------------
Alan M. Davis 9,877,348 48,672
Roger C. Ferguson 9,877,348 48,672
Gary E. Gratny 9,877,348 48,672
Michael G. Lyons 9,877,348 48,672
Phillip E. Pearce 9,877,348 48,672
Kenneth A. Sexton 9,877,348 48,672
John R. Snedegar 9,877,348 48,672
William R. Stow III 9,877,348 48,672
(ii) Approval of amendment and restatement of incentive stock option,
non-qualified stock option and restricted stock purchase plan - 1992. A total of
7,469,585 votes were voted for the amendment; 295,048 votes were voted against;
and 22,111 votes were withheld.
(iii) Proposal to reserve an additional 1,500,000 shares of common
stock to the Company's 1992 stock option plan. A total of 7,521,507 votes were
voted for the proposal; 243,059 votes were voted against; and 21,095 votes were
withheld.
(iv) Approval of the selection of Price Waterhouse LLP as the company's
independent auditors for the year ended March 31, 1997. A total of 9,904,711
votes were voted for the selection; 13,691 votes were voted against; and 9,277
votes were withheld.
ITEM 5
OTHER INFORMATION
On November 4, 1996, a registration statement on Form S-3 filed by the
Company was declared effective by the Securities and Exchange Commission. The
registration statement covered 9,853,295 shares of common stock of the Company
(including 3,800,945 shares issuable under outstanding warrants held by the
investors) which were issued to investors in the eligible private placements.
Other than proceeds represented by the exercise price of the warrants if
exercised by the investors, the Company will not receive any of the proceeds
from the sale of the shares of common stock by the investors.
13
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ITEM 6
EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit Ref./
Number Description Of Document Page
- ------------ ---------------------------------------------------------------------------------------- ----------
<S> <C> <C>
1.1 Underwriting Agreement between the Company and Dabney/ Resnick, Inc. (F)
3.1 Amended and Restated Certificate of Incorporation of the Company. (B)
3.2 Amended and Restated Bylaws of the Company. (A)
3.3 Certificate of Designation, Series C Preferred Stock. (F)
3.4 Certificate of Amendment of Certificate of Designation, Series C Preferred Stock. (F)
4.1 Investor's Rights Agreement date September 16, 1994 among the Company and certain
investors. (B)
4.2 Registration Rights Agreement dated December 15, 1994. (B)
4.3 Registration Rights Agreement dated December 1995. (E)
4.4 Registration Rights Agreement dated May 1996. (D)
4.5 Registration Rights Agreement dated June 1996. (F)
10.1 Form of Indemnity Agreement for Directors. (A)
10.2 Form of Indemnity Agreement for Officers. (A)
10.3 Performance Share Escrow Agreement, as amended, among the Company, Montreal Trust
Company of Canada as Escrow Agent, and certain of the Company's stockholders. (A)
10.4 Sublease dated December 2, 1993 between McDonnell Douglas Travel Company and StarBase
Corporation, for the Company's Irvine, California facilities. (B)
10.5 1996 Stock Option Plan, as amended. (*) (G)
10.6 Form of Restricted Stock Issuance Agreement. (A)
10.7 Form of Restricted Stock Purchase Agreement. (A)
10.8 Forms of Common Stock Subscription Agreements and Warrants used from time to time
between the Company and certain of its stockholders in connection with certain equity
financings, together with a list of equity investors. (A)
10.9 Forms of Common Stock Subscription Agreement and Warrants used in November 1994
Private Placement. (B)
10.10 Forms of Common Stock Subscription Agreement and Warrants used in March 1995 Private
Placement. (C)
10.11 Regional Prototype Defined Contribution Plan and Trust of the Company. (*) (A)
10.12 Fiscal Agency Agreement between the Company and Canaccord Capital Corporation. (B)
10.13 Form of Agents' Warrant. (B)
10.14 Silicon Valley Bank Warrant dated December 15, 1994. (B)
10.15 Promissory Note dated November 8, 1995 payable to William R. Stow III. (E)
10.16 Promissory Note dated December 11, 1995 payable to Michael G. Lyons. (E)
10.17 Promissory Note dated December 11, 1995 payable to John Snedegar. (E)
10.18 Secured Promissory Note dated July 1, 1995 from William R. Stow III. (E)
10.19 Forms of Preferred Stock Subscription Agreements and Warrants used in January 1996
Private Placement, together with a list of equity investors. (E)
10.20 Amendment No. 1 to the Sublease dated December 1, 1994 between McDonnell Douglas
Travel Company and StarBase Corporation, for the Company's Irvine, California
facilities. (E)
10.21 Amendment No. 2 to the Sublease dated September 1, 1995 between McDonnell Douglas
Travel Company and StarBase Corporation, for the Company's Irvine, California
facilities. (E)
</TABLE>
14
<PAGE> 15
<TABLE>
<CAPTION>
- ------------ ---------------------------------------------------------------------------------------- ----------
Exhibit Ref./
Number Description Of Document Page
- ------------ ---------------------------------------------------------------------------------------- ----------
<S> <C> <C>
10.22 Forms of Common Stock Subscription Agreement and Warrants used in July 1995 Private
Placement, together with a list of equity investors. (E)
10.23 Form of Warrant used in the May 13, 1996 Private Placement. (D)
10.24 Form of Subscription Agreement used in the May 13, 1996 Private Placement. (D)
10.25 Form of Preferred Stock Subscription Agreement and Warrant used in the June 1996
Private Placement, together with a list of equity investors and placement agent. (F)
27 Financial Data Schedule. 17
<FN>
- -------------------------
(A) Incorporated herein by reference to the Company's Registration
Statement on Form SB-2 (file number 33-68228) filed with the
Commission on November 2, 1993.
(B) Incorporated herein by reference to the Company's Registration
Statement on Form 10 (file number 0-25612) filed with the
Commission on February 23, 1995.
(C) Incorporated herein by reference to the Company's Form 10-K (file
number 0-25612) filed with the Commission on July 14, 1995.
(D) Incorporated herein by reference to the Company's Form 8-K (file
number 0-25612) filed with the Commission on May 16, 1996.
(E) Incorporated herein by reference to the Company's Form 10-K, as
amended, (file number 0-25612) filed with the Commission on July
1, 1996.
(F) Incorporated herein by reference to the Company's Form 10-QSB
(file number 0-25612) filed with the Commission on August 14,
1996.
(G) Incorporated herein by reference to the Company's Definitive
Proxy Statement (file number 0-25612) filed with the Commission
on July 29, 1996.
* Denotes a management contract or compensatory plan or arrangement.
</FN>
</TABLE>
(b) Reports on Form 8-K
In a report filed on Form 8-K dated August 13, 1996, the Company
reported a press release announcing the election of Alan M. Davis as President
and CEO and William R. Stow III as Chairman. In addition, Michael G. Lyons
relinquished the position of Co-Chairman but will continue as a Director of the
Company.
In a report filed on Form 8-K dated August 16, 1996, the Company
reported a press release announcing a voluntary request to delist from the
Vancouver Stock Exchange.
In a report filed on Form 8-K dated September 9, 1996, the Company
reported a press release announcing that the trading of its common stock had
commenced on the NASDAQ SmallCap Market.
15
<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.
STARBASE CORPORATION
(Registrant)
NOVEMBER 14, 1996 /S/ ROBERT W. LEIMENA
- ------------------- --------------------------
Date Robert W. Leimena
Chief Financial Officer
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STARBASE
CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> SEP-30-1996
<CASH> 5,579
<SECURITIES> 0
<RECEIVABLES> 75
<ALLOWANCES> 18
<INVENTORY> 23
<CURRENT-ASSETS> 5,962
<PP&E> 1,178
<DEPRECIATION> 599
<TOTAL-ASSETS> 6,624
<CURRENT-LIABILITIES> 681
<BONDS> 0
0
1
<COMMON> 132
<OTHER-SE> 5,810
<TOTAL-LIABILITY-AND-EQUITY> 6,624
<SALES> 149
<TOTAL-REVENUES> 381
<CGS> 28
<TOTAL-COSTS> 28
<OTHER-EXPENSES> 3,042
<LOSS-PROVISION> 8
<INTEREST-EXPENSE> 4
<INCOME-PRETAX> (2,576)
<INCOME-TAX> 1
<INCOME-CONTINUING> (2,577)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,577)
<EPS-PRIMARY> (.22)
<EPS-DILUTED> (.22)
</TABLE>
