As filed with the Securities and Exchange Commission on September 17, 1997
Registration No: 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
STARBASE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 33-0567363
(State or other jurisdiction (IRS employer
of incorporation or organization) identification number)
18872 MacArthur Boulevard
Irvine, CA 92612
(714) 442-4400
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Donald R. Farrow
President & Chief Operating Officer
18872 MacArthur Boulevard
Irvine, CA 92612
(714) 442-4400
(Name, address, including zip code, telephone number, including area code,
of agent for service)
COPY TO:
Martin Eric Weisberg, Esq.
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, NY 10036-8735
(212) 704-6050
- --------------------------------------------------------------------------------
Approximate date of commencement of proposed sale to the public: From time to
time after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered pursuant
to dividend reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
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CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
Proposed
Title of Each Maximum Proposed Maximum
Class of Amount Aggregate Aggregate Amount of
Securities to To Be Price Per Offering Registration
Be Registered Registered Unit (1) Price (1) Fee (4)
- ----------------- ------------ ---------- -------------- ----------------
Common Stock, par
value $0.01 per
share (2) 2,824,398 $ 1.531 $ 4,324,153.34 $ 1.310.35
Common Stock, par
value $0.01 per
share (3) 279,835 $ 1.531 $ 428,427.39 $ 129.83
- ----------------- ------------ ---------- --------------- ----------------
Total 3,104,233 $ 4,752,580.73 $ 1,440.18
- ----------------- ------------ ---------- --------------- ----------------
(1) Estimated solely for the purpose of calculating the registration fee. The
Proposed Maximum Aggregate Offering Price was calculated pursuant to Rule
457(c) under the Securities Act of 1933, as amended, on the basis of the
average of the bid and ask prices reported in the Nasdaq SmallCap Market
system on September 10, 1997.
(2) Issuable upon the conversion of 6% Convertible Debentures (the
"Debentures"), which is estimated based on conversion terms set forth in
the Debentures and the Registration Rights Agreements (the "Registration
Rights Agreements") between the Company and each of the Selling
Stockholders, and is subject to adjustment and could be materially less
than such estimated amount depending upon factors that cannot be predicted
by the Company at this time, including, among others, the future market
price of the Common Stock. This is not intended to constitute a prediction
as to the number of shares of Common Stock into which the Debentures will
be converted.
(3) Issuable upon exercise of warrants evidencing the right to purchase shares
of Common Stock, par value $0.01 per share.
(4) In accordance with Rule 457(g), the registration fee for these shares is
calculated based upon a price which represents the highest of: (i) the
price at which the warrants may be exercised; (ii) the offering price of
securities of the same class included in the registration statement; or
(iii) the price of securities of the same class, as determined pursuant to
Rule 457(c).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
An Exhibit Index appears on page 20
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED SEPTEMBER 17, 1997
PROSPECTUS
STARBASE CORPORATION
SHARES OF COMMON STOCK*
(par value $0.01 per share)
This Prospectus relates to the sale by certain persons (the "Selling
Stockholders") of 3,104,233 shares (the "Shares") of common stock, $0.01 par
value per share (the "Common Stock"), of StarBase Corporation, a Delaware
corporation (the "Company"). See "Selling Stockholders." The Company is not
offering any shares hereunder and will not receive any of the proceeds from the
sale of shares by the Selling Stockholders. Included in the number of shares
offered hereby are 279,835 shares issuable under outstanding warrants held by
the Selling Stockholders (the "Warrants"). The Company will receive proceeds
represented by the exercise price of the Warrants if exercised by the holders
thereof. It is anticipated that the Selling Stockholders will offer such shares
from time to time in the over-the-counter market at the then prevailing market
prices and terms or in negotiated transactions and without the payment of any
underwriting discounts or commissions, except for usual and customary selling
commissions paid to brokers or dealers. See "Plan of Distribution." The Selling
Stockholders also may sell such shares from time to time pursuant to Rule 144
under the Securities Act of 1933, as amended (the "Securities Act").
The Common Stock is traded on the Nasdaq SmallCap Market under the symbol
"SBAS." On September 10, 1997, the closing bid price of the Common Stock on the
Nasdaq SmallCap Market was $1.4375 per share.
*The shares of Common Stock offered hereby include the resale of such
presently indeterminated number of shares of Common Stock issuable upon
conversion of the Company's 6% Convertible Debentures (the "Debentures"), issued
in private placements in August and September 1997 (the "Private Placements").
The number of shares of Common Stock indicated to be issuable in connection with
such transactions and offered for resale hereby is an estimate based on the
conversion terms set forth in the Debentures and Registration Rights Agreements
(the "Registration Rights Agreements") between the Company and each of the
Selling Stockholders, and is subject to adjustment and could be materially less
than such estimated amount depending upon factors that cannot be predicted by
the Company at this time, including, among others, the future market price of
the Common Stock. If however, all of the Debentures currently outstanding were
converted, based on the closing bid price of the Common Stock as reported by
NASDAQ on September 10, 1997, and all Warrants were exercised, the Company would
be obligated to issue a total of 3,104,233 shares of the Common Stock. This
presentation is not intended to constitute a prediction as to the future market
price of the Common Stock or as to the number of shares of Common Stock into
which the Debentures will be converted. See "Risk Factors" on pages 5 - 11 of
this Prospectus.
(cover page continued on next page)
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THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK
AND SHOULD NOT BE PURCHASED BY ANYONE WHO CANNOT AFFORD THE LOSS OF HIS ENTIRE
INVESTMENT. SEE "RISK FACTORS" ON PAGES 5 - 11 OF THIS PROSPECTUS FOR A
DESCRIPTION OF RISK FACTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The Company has agreed to bear all of the expenses (other than selling
commissions and fees and expenses of counsel or other advisors to the Selling
Stockholders) in connection with the registration and sale of the Common Stock
being offered by the Selling Stockholders. See "Selling Stockholders" and "Plan
of Distribution." The Company has also agreed to indemnify the Selling
Stockholders against certain liabilities, including liabilities under the
Securities Act. The total expenses to be paid by the Company for this offering
are estimated at $8,440.
THE DATE OF THIS PROSPECTUS IS SEPTEMBER 17, 1997
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FORWARD-LOOKING STATEMENTS
Certain information incorporated by reference into this Prospectus under the
captions "Management's Discussion and Analysis of Financial Condition and
Results of Operations", "Business" and elsewhere include "forward looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995, and is subject to the safe harbor created by that act. There are
several important factors that could cause actual results to differ materially
from those anticipated by the forward-looking statements contained in such
discussions. Additional information on the risk factors which could affect the
Company's financial results is included in this Prospectus and in the Company's
Annual Report for the fiscal year ended March 31, 1997 on Form 10-KSB and in
other documents incorporated by reference herein.
AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company may be inspected and
copied at the public reference facilities of the Commission located at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at the New York Regional
Office of the Commission, Seven World Trade Center, Suite 1300, New York, New
York 10048, and at the Chicago Regional Office of the Commission, Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60621. Copies of
such material can also be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
Such materials may also be accessed electronically on the Internet at
http://www.sec.gov. The Common Stock is listed on the Nasdaq SmallCap Market
under the symbol "SBAS." Reports, proxy materials and other information
concerning the Company can also be inspected at the offices of the Nasdaq Stock
Market, Inc., 1735 K Street, NW, Washington, DC 20006-1500.
The Company has filed with the Commission a registration statement on Form S-3
(together with any and all amendments, the "Registration Statement") under the
Securities Act of 1933, as amended, with respect to the registration of the
Common Stock. This Prospectus does not contain all of the information set forth
in the Registration Statement and the exhibits thereto, certain portions of
which have been omitted as permitted by the rules and regulations of the
Commission. In addition, certain documents filed by the Company with the
Commission have been incorporated herein by reference. See "Incorporation of
Certain Documents by Reference." For further information regarding the Company
and the Common Stock reference is made to the Registration Statement, including
the exhibits and schedules thereto and the documents incorporated herein by
reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission, are incorporated herein by reference: (i) the Company's Quarterly
Report on Form 10-QSB for the quarter ended June 30, 1997; (ii) the Company's
Report on Form 10-KSB for the fiscal year ended March 31, 1997, (iii) Current
Reports on Form 8-K filed on September 16, 1997; (iv) the Company's Proxy
Statement dated August 26, 1997 related to the Annual Meeting of Stockholders to
be held on September 24, 1997; and (v) the description of Common Stock contained
in "Description of Securities" in the Company's Registration Statement on Form
10, as amended, dated April 27, 1995, filed pursuant to Section 12(g) of the
Exchange Act. In addition, each document filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to termination of the offering of Shares shall be
deemed to be incorporated by reference into this Prospectus and to be a part
hereof from the date such document is filed with the Commission.
Any statement contained herein, or any document, all or a portion of which is
incorporated or deemed to be incorporated by reference herein, shall be deemed
to be modified or superseded for purposes of the Registration Statement and this
Prospectus to the extent that a statement contained herein, or in any
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subsequently filed document that also is or is deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute part of the Registration Statement or this Prospectus.
The Company will provide without charge to each person, including any beneficial
owner, to whom a copy of this Prospectus has been delivered, upon written or
oral request of any such person, a copy of any or all of the information that
has been incorporated by reference herein, other than exhibits to such
documents, unless such exhibits are specifically incorporated by reference into
the information that this Prospectus incorporates. Written or oral requests for
such copies should be directed to: Investor Relations, StarBase Corporation,
18872 MacArthur Boulevard, Irvine, CA 92612; (714) 442-4400.
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THE COMPANY
StarBase 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. The Company 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. During 1993-1994,
however, the Company concluded that a next generation of individual productivity
tools would not be a lasting solution to the software productivity problem.
Based on focus group studies and market research, the Company decided to focus
entirely on the development and marketing of software designed to increase team
productivity, rather than individual programmer productivity. The Company was
reorganized in fiscal year 1996 to reflect this change in product and market
focus.
PRINCIPAL EXECUTIVE OFFICES
The principal executive offices of the Company are located at 18872 MacArthur
Boulevard, Irvine, CA 92612; its telephone number is (714) 442-4400 and its fax
number is (714) 442-4404.
RISK FACTORS
THIS OFFERING INVOLVES SUBSTANTIAL INVESTMENT RISK AND SHARES SHOULD BE
PURCHASED ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. IN
EVALUATING AN INVESTMENT IN THE COMPANY AND ITS BUSINESS, PROSPECTIVE INVESTORS
SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS AS WELL AS OTHER
INFORMATION SET FORTH ELSEWHERE IN THIS PROSPECTUS OR INCORPORATED HEREIN BY
REFERENCE.
SIGNIFICANT CASH REQUIREMENTS. The Company's cash requirements have been
and will continue to be significant. The Company's negative cash flow from
operations for the years ended March 31, 1995, 1996 and 1997 and the three
months ended June 30, 1997 was $6,179,000; $4,949,000; $6,506,000 and
$1,403,000, respectively. Continued operations will depend on its cash
flow, if any, from operations or its ability to raise additional funds
through equity, debt or other financing. There can be no assurance that the
Company will be able to obtain additional funding when needed, or that such
funding, if available, will be obtainable on terms favorable to the
Company. If the Company cannot obtain needed funds, it may be forced to cut
back or curtail its activities, in which case the business prospects of the
Company would be materially and adversely affected.
EARLY STAGE OF DEVELOPMENT; HISTORY OF LOSSES. The Company is a
development stage company and is subject to all of the risks inherent in a
development stage company. There can be no assurance that the Company's
product development efforts will result in a commercially viable business
or that the Company will be able to generate significant revenues or
operate profitably. Since its inception, the Company has had a history of
losses and as of June 30, 1997, the Company had a consolidated accumulated
deficit of approximately $25,279,000. From inception to date a substantial
portion of the Company's revenues was derived from the activities of its
Consulting Services division, which was discontinued in 1995, and from
sales of products that have been de-emphasized. The Company anticipates
incurring additional losses until it can successfully market and distribute
its existing integrated team environment ("ITE") products and successfully
develop, market, and distribute its planned future products. The
development of software products is difficult and time consuming, requiring
the coordinated participation of various technical and marketing personnel
and, at times, independent third-party suppliers. This development process
often encounters unanticipated delays and expenses, and unanticipated
changes in features and functionality extend projected time schedules and
increase estimated expenses. The likelihood of the success of the Company's
business must be considered in light of the problems, expenses, and
unforeseen delays frequently encountered in connection with the development
of new technologies. There can be no assurance that the Company will ever
achieve profitability.
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PRODUCT LINES UNDER DEVELOPMENT; DEVELOPING MARKET. At present, the
Company has commercially introduced its products with limited marketing.
The Company's success will be dependent in large part upon its ability to
market its StarTeam products and to quickly introduce and market additional
products. While the Company is in various stages of developing additional
products, there can be no assurance that such additional products will be
completed or successfully marketed. User preferences for software products
are difficult to predict and, historically, only a limited number of
software products have achieved sustained market acceptance. Demand for
software products is subject to a number of variables, including user
preferences and the size of the installed base of personal computers
capable of running the products. Further, the market for ITE software
products is evolving. There can be no assurance that the products
introduced by the Company will achieve acceptance, or that other software
vendors will not develop and market products which render the Company's
products obsolete or less competitive. Failure to obtain significant
customer satisfaction or market share for the Company's products would have
a material adverse effect on the Company.
FLUCTUATIONS IN QUARTERLY RESULTS. The Company's results of operations
have historically varied substantially from quarter to quarter and the
Company expects they will continue to do so. In the past, the operating
results varied significantly as a result of a number of factors, including
the size and timing of customer orders or consulting agreements, product
mix, seasonality, the timing of the introduction and customer acceptance of
new products or product enhancements by the Company's competitors, new
products or version releases by the Company, changes in pricing policies by
the Company or its competitors, marketing and promotional expenditures,
research and development expenditures, and changes in general economic
conditions.
The Company's operating expenses are relatively fixed in the short term.
For example, the Company intends to make significant expenditures to
enhance its sales and marketing and research and development activities.
Once such expenditures are implemented, the Company may be unable to reduce
them quickly if revenue is less than expected. As a result, fluctuations in
revenues can cause significant variations in quarterly results of
operations. The Company does not operate with an order backlog and a
substantial portion of its revenue in any quarter is derived from orders
booked in that quarter. Accordingly, the Company's sales expectations are
based almost entirely on its internal estimates of future demand and not on
firm customer orders. Due to the foregoing factors, the Company believes
that quarter to quarter comparisons of its results of operations are not
necessarily meaningful and should not be relied upon as indications of
future performance. In addition, there can be no assurance that the Company
will be profitable on a quarter to quarter or any other basis in the
future.
INTENSE COMPETITION. The software industry is highly competitive, and user
demand for particular software may be adversely affected by the number of
competitive products from which to choose. The Company's competitors
include a broad range of companies that develop and market tools for
software application development. Many of the Company's current and
prospective competitors have significantly greater financial, technical,
manufacturing, sales, and marketing resources than the Company. There can
also be no assurance that the Company's competitors have not or will be
unable to develop products comparable or superior to those developed by the
Company or to adapt more quickly than the Company to new technologies,
evolving industry trends or customer requirements.
The Company believes that its ability to compete depends on factors both
within and outside its control, including the timing and success of new
products developed by it and its competitors, product performance and
price, ease of use, support of industry standards, and customer support and
service. There can be no assurance that the Company will be able to compete
successfully with respect to these factors. In particular, competitive
pressures from existing and new competitors who offer lower prices could
result in loss of sales, cause the Company to institute price reductions,
or result in reduced margins and loss of market share, all of which would
adversely affect the Company's results of operations.
DEPENDENCE ON AND INTENSE COMPETITION FOR KEY PERSONNEL. The Company's
success depends in large part on the continued service and performance of
certain key technical, marketing, sales, and management personnel. None of
the Company's management is covered by an employment contract or key person
life insurance. In addition, competition for such personnel in the software
industry is intense and the process of locating highly qualified technical
and management personnel with the combination of skills and attributes
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required to execute the Company's strategy is often lengthy. There can be
no assurance that the Company will be successful in hiring or retaining
qualified personnel. Loss of key personnel or the inability to hire and
retain qualified personnel could have a material adverse effect upon the
Company's business, results of operations, and research and development
efforts.
STRATEGIC ALLIANCES. The development of alliances with selected software
companies that complement the Company's market and sales direction is an
element in the Company's marketing strategy. These alliances typically
involve joint marketing agreements and the inclusion of the Company's
products in the product line of the strategic partner. To date, the Company
has entered into bundling agreements with companies including, among
others, Oracle, Aonix, Haht Software, Penumbra, SoftQuad and Visix. There
can be no assurance, however, of increased revenues as a result of these
bundling agreements or any other such alliance.
DEPENDENCE ON NEW PRODUCTS AND ADAPTATION TO TECHNOLOGICAL CHANGE. The
market for the Company's products is characterized by rapidly changing
technology, evolving industry standards, changes in customer needs, and
frequent new product introductions. The Company's future success will
depend on its ability to enhance its current products, to develop new
products on a timely and cost-effective basis to meet changing customer
needs and to respond to emerging industry standards and other technological
changes. Any failure by the Company to anticipate or respond adequately to
changes in technology and customer preferences, or any significant delays
in product development or introduction, could have a material adverse
effect on the Company's results of operations.
Software products as complex as those offered by the Company may contain
undetected errors when first introduced or as new versions are released.
There can be no assurance that, despite extensive testing by the Company
and by current and potential customers, errors will not be found in new
products after commencement of commercial shipments, resulting in loss of
or delay in market acceptance.
RELIANCE ON MICROSOFT. Microsoft Windows has gained widespread market
acceptance as the dominant computer operating system. Accordingly, the
Company has developed and is developing software products that function in
the Microsoft Windows, Windows 95 or Windows NT environments, and
anticipates that future products will also be designed for use in these
Microsoft environments. Because the Company expects that its
Microsoft-based applications will account for a significant portion of new
revenue for the foreseeable future, sales of the Company's new products
would be materially and adversely affected by market developments adverse
to Microsoft Windows, Windows 95 and Windows NT. The Company's ability to
develop products using the Microsoft Windows, Windows 95, and Windows NT
environments is substantially dependent on its ability to gain timely
access to, and to develop expertise in, current and future developments by
Microsoft, of which there can be no assurance. Moreover, the abandonment by
Microsoft of its current operating system, product line or strategy, or the
decision by Microsoft to develop and market products that directly or
indirectly compete with the Company's products would have a material
adverse effect on the Company's business, financial condition, and results
of operations.
PRODUCT RETURNS. Consistent with industry practice, the Company allows
distributors, retailers, and end users to return products for credits
towards the purchase of additional products. In addition, the Company's
promotional activities, including free trial and satisfaction guaranteed
offers, and competitors' promotional or other activities could cause
returns to increase sharply at any time. The Company expects that the rate
of product returns may increase as it introduces new versions of its
existing products and records additional reserves accordingly. Product
returns that exceed the Company's reserves could have a material adverse
effect on the Company's business, financial condition, and results of
operations.
PRICE PROTECTION. In the event the Company reduces its prices, the Company
credits its distributors for the difference between the purchase price of
products remaining in their inventory and the Company's reduced price for
such product ("Price Protection"). Price Protection may have a material
adverse effect on future operating results, since the Company seeks to
continually introduce new and enhanced products and is likely to face
increasing price competition.
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RESEARCH AND DEVELOPMENT COSTS. The development of sophisticated software
products is a lengthy and capital intensive process and is subject to
unforeseen risks, delays, problems and costs. There can be no assurance
that the Company will be able to successfully develop any additional
products or enhance existing products, or that unanticipated technical or
other problems will not occur which would result in delays in the Company's
development program. Failure to complete development of a product could
result in the complete loss of the funds committed by the Company to that
product, which could be substantial.
UTILIZATION OF NET OPERATING LOSS CARRYFORWARD. Realization of future tax
benefits from utilization of the Company's net operating loss carryforwards
for income tax purposes is limited by changes in ownership.
RISK OF EXPANSION STRATEGY. The expansion of the Company's product line
has extended its resources, and is expected to continue to extend the
Company's management and operations, including its sales, marketing,
customer support, research and development, and finance and administrative
operations. The Company's future performance will depend in part on its
ability to manage growth, should that occur, and to adapt its operational
and financial control systems, if necessary, to respond to changes
resulting from such growth. The failure of the Company's management to
respond to and manage growth effectively could have a material adverse
effect on the Company's business, financial condition, and results of
operations.
PROTECTION OF PROPRIETARY RIGHTS. The Company's success depends heavily
upon its proprietary technology. It relies on a combination of copyright,
trademark, and trade secret laws, confidentiality procedures, and licensing
arrangements to establish and protect its proprietary rights. As part of
its confidentiality procedures, the Company generally enters into
non-disclosure agreements with its employees and distributors, and limits
access to and distribution of its software, documentation, and other
proprietary information. Despite these precautions, it may be possible for
a third party to copy or otherwise obtain and use the Company's products or
technology without authorization, or to develop similar technology
independently. In addition, effective protection of intellectual property
rights may fluctuate depending on judicial interpretation of applicable law
and may be unavailable or limited in certain foreign countries.
The Company provides its products to end-users primarily under
"shrink-wrap" license agreements included within the packaged software.
These agreements are not negotiated with or signed by the licensee, and
thus these agreements may not be enforceable in certain jurisdictions where
enforcement is either expensive or limited for other reasons. Protection of
intellectual property can be extremely costly.
The Company is not aware of any instances where any of its products
infringe the proprietary rights of third parties. There can be no
assurance, however, that third parties will not claim such infringement by
the Company with respect to current or future products or that management
of the Company is aware of all potential claims of infringements. Any such
claims, with or without merit, could result in costly litigation or might
require the Company to enter into royalty or licensing agreements.
POSSIBLE DILUTION DUE TO ISSUANCE OF ADDITIONAL COMMON STOCK; MARKET
OVERHANG. As of August 31, 1997, the Company had issued 15,044,867 shares
of Common Stock; 90,000 shares of Common Stock were issuable upon the
exercise of outstanding warrants issued by the Company, and 902,270 shares
of Common Stock were issuable upon the exercise of outstanding options
issued by the Company. As of September 5, 1997, as a result of the Private
Placements, an estimated 2,824,398 shares of Common Stock, calculated based
on the Debentures, were issuable upon the conversion of the Debentures and
(ii) an additional 199,835 shares of Common Stock were issuable upon the
exercise of outstanding warrants issued by the Company in the Private
Placements. Furthermore, the Company may conduct additional offerings of
its Common Stock or securities convertible into Common Stock.
As a result of the above transactions, the voting power of each holder of
Common Stock may be diluted by the issuance of additional shares of Common
Stock. Also, the book value per share of Common Stock may be reduced upon
the exercise of outstanding options or warrants or the conversion of
outstanding Debentures, depending upon the exercise price of the options or
warrants and the conversion ratio of the Debentures, and the book value per
share of Common Stock, at the time of such exercise or conversion.
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Furthermore, the prevailing market price for the Common Stock may be
materially and adversely affected by the addition of a substantial number
of shares of Common Stock, including the shares offered hereby, into the
market or by the registration under the Securities Act of such additional
shares. In addition, the prospect of future sales of shares of Common Stock
issuable upon the exercise of outstanding warrants and options may have a
depressive effect upon the market price of the Common Stock, as such
warrants and options would be more likely to be exercised at a time when
the price of the Common Stock is in excess of the applicable exercise
price.
CONCENTRATION OF SHARE OWNERSHIP. Based upon the shares outstanding as of
August 31, 1997, the Company's Chairman of the Board of Directors and the
Company's officers, directors and their affiliates as a group, beneficially
own approximately 4.5% and 11%, respectively, of the Company's outstanding
Common Stock. These amounts include Common Stock issuable upon the exercise
of warrants and/or options as well as indirect ownership of Common Stock.
As a result, these stockholders will be able to exercise significant
influence over matters requiring stockholder approval, including the
election of directors and approval of significant corporate transactions.
NO DIVIDENDS. The Company has not paid any dividends on its Common Stock
since inception. Under the corporate law of Delaware, the Company is
prohibited from paying dividends except in certain defined circumstances.
Included in these restrictions is the requirement that dividends be paid
out of the Company's surplus (retained earnings) or, if there is no
surplus, out of the Company's net profits for the fiscal year in which the
dividend is declared and/or the preceding fiscal year. At June 30, 1997,
the Company's balance sheet reflected an accumulated deficit of
approximately $25,279,000, which prevents it from paying dividends in the
foreseeable future.
FLUCTUATIONS IN THE COMPANY'S STOCK PRICE. The trading price of the
Company's Common Stock has historically been subject to wide fluctuation in
response to variations in the actual or anticipated operating results of
the Company, announcements of new products or technological innovations by
the Company or its competitors, and general conditions in the industry. In
addition, stock markets have experienced extreme price and volume trading
volatility in recent years. This volatility has had a substantial effect on
the market prices of securities of many high-technology companies for
reasons frequently unrelated to the operating performance of the specific
companies. These broad market fluctuations may adversely affect the market
price of the Company's Common Stock.
SHARES ELIGIBLE FOR SALE. As of August 31, 1997, the Company had
outstanding 15,044,867 shares of Common Stock of which 13,616,499 shares
are freely transferable without restriction or further registration under
the Securities Act. Of the 13,616,499 shares which are freely transferable,
679,857 are owned by affiliates and are subject to the volume limitations
of Rule 144. Under Rule 144, as amended, if certain conditions are met,
persons who are affiliates of the Company and persons who satisfy a one
year "holding period" may sell within any three month period a number of
shares which does not exceed the greater of one percent of the total number
of shares outstanding or the average weekly trading volume of such shares
during the four calendar weeks prior to such sale. After a two year holding
period is satisfied, persons who are not "Affiliates" of the Company are
permitted to sell such shares without regard to these volume restrictions.
"Affiliates" of the Company consist of all officers and directors of the
Company and all holders of ten percent (10%) or more of the outstanding
shares of Common Stock.
An additional 1,182,105 shares of Common Stock which are not issued and
outstanding but which are issuable upon the exercise of warrants and
options are or may be included in currently effective registration
statements (of which 279,835 are covered by this Prospectus) and upon
issuance will be freely transferable during the effectiveness of such
registration statements. The shares of Common Stock issuable upon the
exercise of options are subject to various vesting periods.
9
<PAGE>
Also included on this registration statement are a presently indeterminated
number of shares of Common Stock issuable upon conversion of the Company's
Debentures. If however, all of the Debentures currently outstanding were
converted based on the closing bid price of the Common Stock as reported by
NASDAQ on September 10, 1997, the Company would be obligated to issue a
total of 2,824,398 shares of the Common Stock.
OUTSTANDING RIGHTS TO ACQUIRE COMMON STOCK. To the extent that outstanding
options and warrants are exercised prior to their expiration dates,
additional equity investment funds will be paid into the Company at the
expense of dilution to the interests of the Company's stockholders.
Moreover, the terms upon which the Company will be able to obtain
additional equity capital may be adversely affected since the holders of
outstanding options and warrants and other securities can be expected to
exercise or convert them at a time when the Company would, in all
likelihood, be able to obtain any needed capital on terms more favorable to
the Company than those provided in such securities.
AUTHORIZATION AND ISSUANCE OF PREFERRED STOCK. The Company's Board of
Directors is authorized to issue up to 10,000,000 shares of Preferred
Stock. The Board of Directors has the power to establish the dividend
rates, liquidation preferences, voting rights, redemption and conversion
terms and privileges with respect to any series of Preferred Stock. The
issuance of any shares of Preferred Stock having rights superior to those
of the Common Stock may result in a decrease in the value or market price
of the Common Stock. Holders of Preferred Stock may have the right to
receive dividends, certain preferences in liquidation and conversion
rights. The issuance of Preferred Stock could, under certain circumstances,
have the effect of delaying, deferring or preventing a change in control of
the Company without further vote or action by the stockholders and may
adversely affect the voting and other rights of the holders of Common
Stock.
NASDAQ SMALLCAP MARKET MAINTENANCE REQUIREMENTS; POSSIBLE DELISTING OF
SECURITIES FROM NASDAQ SMALLCAP MARKET. The Board of Governors of the
National Association of Securities Dealers, Inc. has established certain
standards for the continued listing of a security on the Nasdaq SmallCap
Market ("SmallCap"). The maintenance standards for continued listing of the
Company's Common Stock on the SmallCap require, among other things, that
(i) an issuer have assets of at least $2 million; (ii) have capital and
surplus of at least $1 million; (iii) the market value of its publicly held
shares is at least $0.2 million (in the event that the minimum bid price
per share of the Company's Common stock should fall below $1.00 per share,
the Company must maintain the market value of the public float of the
Company's shares at $1 million and $2 million in capital and surplus); (iv)
at least 100,000 shares of Common Stock are publicly held; and (v) the
issuer has at least 300 shareholders. As of June 30, 1997, the Company's
assets were approximately $2,465,000 and capital and surplus was
$1,659,000. There can be no assurance that the Company will continue to
satisfy the requirements for maintaining a SmallCap listing in the future.
If the Company's securities were excluded from SmallCap, it may adversely
affect the prices of such securities and the ability of holders to sell
them. If the Company's securities were excluded from SmallCap, the Company
would seek to re-list its securities on the Nasdaq Electronic Bulletin
Board system.
PENNY STOCK REGULATION. In the event that the Company's securities are not
listed on the SmallCap, trading would be conducted in the "pink sheets" or
through the NASD's Electronic Bulletin Board. In the absence of the Common
Stock being quoted on Nasdaq, trading in the Common Stock would be covered
by Rule 15g-9 promulgated under the Securities Exchange Act of 1934 for
non-Nasdaq and non-exchange listed securities. Under such rule,
broker/dealers who recommend such securities to persons other than
established customers and accredited investors must make a special written
suitability determination for the purchaser and receive the purchaser's
written agreement to a transaction prior to sale. Securities are exempt
from this rule if the market price is at least $5.00 per share.
The Commission adopted regulations that generally define a penny stock to
be any equity security that has a market price of less than $5.00 per
share, subject to certain exceptions. Such exceptions include an equity
security listed on NASDAQ and an equity security issued by an issuer that
has (i) net tangible assets of at least $2,000,000, if such issuer has been
in continuous operation for three years, (ii) net tangible assets of at
10
<PAGE>
least $5,000,000, if such issuer has been in continuous operation for less
than three years, or (iii) average revenue of at least $6,000,000 for the
preceding three years. Unless an exception is available, the regulations
require the delivery, prior to any transaction involving a penny stock, of
a disclosure schedule explaining the penny stock market and the risks
associated therewith. If the Company's Common Stock were subject to the
regulations on penny stocks, the market liquidity for the Common Stock
would be severely affected by limiting the ability of broker/dealers to
sell the Common Stock and the ability of purchasers in this offering to
sell their securities in the secondary market. There is no assurance that
trading in the Company's securities will not be subject to these or other
regulations in the future which would adversely affect the market for such
securities.
USE OF PROCEEDS
The proceeds from the sale of the shares of Common Stock offered hereby are
solely for the account of the Selling Stockholders. Accordingly, the Company
will receive none of the proceeds from sales thereof. Certain of the shares
offered hereby, however, are issuable upon exercise of the Warrants held by the
Selling Stockholders. A portion of the Warrants included in this Prospectus are
exercisable at $2.50 per share through January 31, 1998, after which date the
Warrants expire. The remaining Warrants are exercisable at $1.58 per share and
$1.80 per share through August 18, 2000 and September 5, 2000, respectively,
after which date the Warrants expire. If all Warrants representing shares of
Common Stock in this offering are exercised before January 31, 1998, the Company
will receive aggregate proceeds therefrom of approximately $547,000. If all
Warrants representing shares of Common Stock in this offering are exercised
after January 31, 1998 but prior to August 18, 2000, the Company will receive
aggregate proceeds therefrom of approximately $347,000. If all Warrants
representing shares of Common Stock in this offering are exercised after August
18, 2000 but before September 5, 1997, the Company will receive aggregate
proceeds therefrom of approximately $252,000. The proceeds from any and all
Warrants exercised will be used for working capital and general corporate
purposes.
SELLING STOCKHOLDERS
In connection with the issuance of the Debentures to the Selling Stockholders,
the Company agreed to file and use its best efforts to cause to be declared
effective the Registration Statement of which this Prospectus is a part. The
Company has also agreed to use its best efforts to keep the Registration
Statement effective until the earliest of (A) September 5, 1999, (B) such time
as all of the shares have been sold, and (C) such date as all of the shares may
be sold under Rule 144. The Company has agreed to indemnify the Selling
Stockholders and each of their officers, directors, employees, partners, legal
counsel and accountants, and each underwriter, if any, and each person who
controls any such underwriter, against certain expenses, claims, losses, damages
and liabilities (or action in respect thereof). The Company has agreed to pay
its expenses of registering the shares under the Securities Act, including
registration and filing fees, blue sky expenses, printing expenses, accounting
fees, administrative expenses and its own counsel fees.
The following table sets forth the name of each Selling Stockholder and the
number of shares of Common Stock being offered by each Selling Stockholder. The
shares of Common Stock being offered hereby are being registered to permit
public secondary trading, and the Selling Stockholders may offer all or part of
the shares for resale from time to time. See "Plan of Distribution."
11
<PAGE>
<TABLE>
<CAPTION>
Amount Percentage
Amount Beneficially Beneficially
Beneficially Owned Owned
Owned Prior Amount Following Following
Name to Offering (14) Offered (14) Offering (3) Offering
- ---------------------------------- --------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Countrywide Investments 1,496,876(4) 1,496,876(4) 0 *
Tonga Partners L.P. 308,478(5) 308,478(5) 0 *
The Cuttyhunk Fund Ltd. 132,205(6) 132,205(6) 0 *
GundyCo in Trust for RRSP 5509886718 303,675(7) 220,342(7) 83,333 *
American High Growth Equities
Retirement Trust 440,683(8) 440,683(8) 0 *
CB Equities Retirement Trust 88,137(9) 88,137(9) 0 *
Alain Oberrotman 34,285(10) 30,035(10) 4,250 *
Robert McCullough, Jr. 72,035(11) 22,035(11) 50,000 *
Robert F. McCullough Family
Foundation 88,137(9) 88,137(9) 0 *
McCullough Living Trust Dtd
11/30/92 158,137(9) 88,137(9) 70,000 *
Settondown Capital 26,667(13) 26,667(13) 0 *
The Seidler Companies, Inc. 21,000(2) 21,000(2) 0 *
Klindt Ginsberg 20,000(2) 20,000(2) 0 *
Eric Appell 82,400(12) 25,000(12) 57,400 *
John Merriman 16,500(2) 16,500(2) 0 *
David Cantrell 10,000(2) 10,000(2) 0 *
A.Tod Hindin and Marion L. Hindin 10,000(1) 10,000(1) 0 *
Stephen T. Sohmer Trust 4/20/93 50,000(1) 50,000(1) 0 *
Apex Limited Partners, L.P. 20,000(1) 20,000(1) 0 *
- ------------
<FN>
(1) These shares may be acquired upon the exercise of warrants to purchase
Common Stock at an exercise price of $2.50 per share through January 31,
1998.
(2) Includes shares of Common Stock issuable upon the exercise of warrants to
purchase Common Stock at an exercise price of $1.80 through September 5,
2000.
(3) Assumes no sales are effected by the Selling Security Holder during the
offering period other than pursuant to this Registration Statement.
(4) Includes 40,000 shares of Common Stock issuable upon the exercise of
warrants at an exercise price of $1.58 per share through August 18, 2000.
(5) Includes 9,333 shares of Common Stock issuable upon the exercise of
warrants at an exercise price of $1.80 per share through
September 5, 2000.
(6) Includes 4,000 shares of Common Stock issuable upon the exercise of
warrants at an exercise price of $1.80 per share through
September 5, 2000.
(7) Includes 83,333 shares of Common Stock and 6,667 shares of Common Stock
issuable upon the exercise of warrants at an exercise price of $1.80 per
share through September 5, 2000.
(8) Includes 13,333 shares of Common Stock issuable upon the exercise of
warrants at an exercise price of $1.80 per share through
September 5, 2000.
(9) Includes 2,667 shares of Common Stock issuable upon the exercise of
warrants at an exercise price of $1.80 per share through
September 5, 2000.
12
<PAGE>
(10) Includes 8,667 shares of Common Stock issuable upon the exercise of
warrants at an exercise price $1.80 per share through
September 5, 2000.
(11) Includes 667 shares of Common Stock issuable upon the exercise of
warrants at an exercise price $1.80 per share through
September 5, 2000.
(12) Includes 57,400 shares of Common Stock and 25,000 shares of Common Stock
issuable upon the exercise of warrants at an exercise price of $1.80 per
share through September 5, 2000.
(13) Includes 20,000 shares of Common Stock issuable upon the exercise of
warrants at an exercise price of $1.58 per share through August 18, 2000
and 6,667 shares of Common Stock issuable upon the exercise of warrants
at an exercise price of $1.80 per share through September 5, 2000.
(14) The number of shares of Common Stock indicated is an estimate and is
subject to adjustment. The actual amount could be materially more or
less than such estimated amount depending upon factors that cannot be
predicted by the Company at this time.
* Represents less than one percent.
Except as set forth in the Notes above, no Selling Stockholder has held any
position or office, or has had any material relationship, with the Company or
any of its affiliates within the past three years.
</FN>
</TABLE>
PLAN OF DISTRIBUTION
The Selling Stockholders may sell Shares in any of the following transactions:
(i) through dealers; (ii) through agents; or (iii) directly to one or more
purchasers. The distribution of the Shares by the Selling Stockholders may be
effected from time to time in one or more transactions in the over-the-counter
market, in the Nasdaq SmallCap Market or in privately negotiated transactions at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. The Selling Stockholders and
any underwriters, dealers or agents that participate in the distribution of the
Shares may be deemed to be underwriters within the meaning of Section 2(11) of
the Securities Act, and any profit on the sale of the Shares by them and any
discounts, concessions or commissions received by any such underwriters, dealers
or agents might be deemed to be underwriting discounts and commissions under the
Securities Act. At the time a particular offer of shares is made, to the extent
required, a Prospectus Supplement will be distributed which will set forth the
aggregate number of Shares being offered and the terms of the offering,
including the name or names of any underwriters, dealers or agents, any
discounts, concessions or commissions and other items constituting compensation
from the Selling Stockholders and any discounts, commissions or concessions
allowed or re-allowed or paid to dealers.
Certain of the underwriters, dealers or agents may have other business
relationships with the Company and its affiliates in the ordinary course of
business.
TRANSFER AGENT
The Transfer Agent and Registrar for the Common Stock is American Stock Transfer
& Trust Company, 40 Wall Street, New York, New York 10005; its telephone number
is (212) 936-5100.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby has been passed upon
for the Company by Parker Chapin Flattau & Klimpl, LLP, 1211 Avenue of the
Americas, New York, New York 10036-8735; its telephone number is (212) 704-6000.
EXPERTS
The financial statements incorporated in this Prospectus by reference to the
Annual Report on Form 10-KSB for the year ended March 31, 1997 have been so
incorporated in reliance on the report (which contains an explanatory paragraph
relating to the Company's ability to continue as a going concern as described in
Note 2 to the financial statements and an explanatory paragraph relating to the
Company's change in its method of calculating loss per common share as described
in Note 3 to the financial statements) of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in accounting and
auditing.
13
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS IN
CONNECTION WITH THIS OFFERING MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR BY THE SELLING STOCKHOLDERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE OF THIS PROSPECTUS.
----------------
TABLE OF CONTENTS PAGE
- -------------------------------------------------------------- -----------
Available Information 3
Incorporation of Certain Documents by Reference 3
Risk Factors 5
Use of Proceeds 11
Selling Stockholders 11
Plan of Distribution 13
Legal Matters 13
Experts 13
- -----------------------------------------------------------------------------
SHARES OF COMMON STOCK
(Par Value $0.01 per Share)
STARBASE CORPORATION
-------------
PROSPECTUS
--------------
September 17, 1997
14
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the fees and expenses payable by the Company in
connection with the issuance and distribution of the securities being registered
hereunder, other than underwriting discounts and commissions. Except for the
SEC registration fee, all amounts are estimates.
SEC Registration Fee $ 1,440
Printing and Engraving Expenses 500
Legal Fees and Expenses 2,000
Accounting Fees and Expenses 1,000
Registrar and Transfer Agent Fees and Expenses 500
Blue Sky Fees and Expenses 2,000
Miscellaneous Expenses 1,000
---------
Total $ 8,440
=========
All of the costs identified above will be paid by the Company.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102(b)(7) of the General Corporation Law of Delaware ("Delaware Law")
enables a corporation in its original certificate of incorporation or an
amendment thereto to eliminate or limit the personal liability of a director to
a corporation or its stockholders for violations of the director's fiduciary
duty, except (i) for any breach of a director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
pursuant to Section 174 of the Delaware Law (providing for liability of
directors for unlawful payment of dividends or unlawful stock purchases or
redemptions), or (iv) for any transaction from which a director derived an
improper personal benefit. The Certificate of Incorporation of the Company, as
amended, provides in effect for the elimination of the liability of directors to
the extent permitted by Delaware Law.
Section 145 of the Delaware Law provides, in summary, that directors and
officers of Delaware corporations are entitled, under certain circumstances, to
be indemnified against all expenses and liabilities (including attorney's fees)
incurred by them as a result of suits brought against them in their capacity as
a director or officer, if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, if they had
no reasonable cause to believe their conduct was unlawful; provided, that no
indemnification may be made against expenses in respect of any claim, issue or
matter as to which they shall have been adjudged to be liable to the
corporation, unless and only to the extent that the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, they
are fairly and reasonably entitled to indemnity for such expenses which the
court shall deem proper. Any such indemnification may be made by the corporation
only as authorized in each specific case upon a determination by the
stockholders or disinterested directors that indemnification is proper because
the indemnitee has met the applicable standard of conduct. The Company's By-laws
entitle officers and directors of the Company to indemnification to the fullest
extent permitted by Delaware Law.
The Company has entered into an agreement with each of its directors and certain
officers which provide for indemnification by the Company against certain
liabilities, including liabilities under the Securities Act. In addition, the
II-1
15
<PAGE>
Company maintains an insurance policy with respect to potential liabilities of
its directors and officers, including potential liabilities under the Securities
Act.
See Item 17 of this Registration Statement regarding the opinion of the
Securities and Exchange Commission with respect to indemnification for
liabilities arising under the Securities Act.
ITEM 16. EXHIBITS.
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ------- -----------------------------------------------------------------------
4.1 Amended and Restated Certificate of Incorporation of the Company
4.2 Amended and Restated By-Laws of the Company
4.3 Registration Rights Agreement Dated August 1997
4.4 Registration Rights Agreement Dated September 1997
5.1 Opinion of Parker Chapin Flattau & Klimpl, LLP
23.1 Consent of Parker Chapin Flattau & Klimpl, LLP (included in Exhibit 5.1)
23.2 Consent of Price Waterhouse LLP
24.1 Powers of Attorney of certain directors and officers of the Company
(included as part of Signature Pages)
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in the volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high and of
the estimated maximum offering range may be reflected in the form of prospectus
filed with he Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
The undersigned registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act, each filing of the registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and,
II-2
16
<PAGE>
where applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Exchange Act) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended, may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described under Item 15
above, or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer,
or controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer of controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-3
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Irvine, State of California, on September 17, 1997.
STARBASE CORPORATION
By: /s/ Donald R. Farrow
------------------------
Donald R. Farrow
President & Chief Executive Officer
II-4
18
<PAGE>
The undersigned officers and directors of StarBase Corporation, whose signatures
appear below, hereby constitute and appoint William R. Stow III and Donald R.
Farrow, each acting alone, as his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with exhibits thereto, and other documents in connection
therewith with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as full and to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities indicated.
SIGNATURE TITLE DATE
--------- ----- ----
* Chief Executive Officer and September 17, 1997
Chairman of the Board
- ---------------------------
William R. Stow III
* President, Chief Operating September 17, 1997
- --------------------------- Officer, and Director
Donald R. Farrow
* Director September 17, 1997
- ---------------------------
John R. Snedegar
* Director September 17, 1997
- ---------------------------
Kenneth A. Sexton
* Director September 17, 1997
- ---------------------------
Phillip E. Pearce
* Director September 17, 1997
- ---------------------------
Daniel P. Ginns
* by William R. Stow III
attorney-in-fact
II-5
19
<PAGE>
EXHIBIT INDEX
SEQUENTIAL
EXHIBIT PAGE
NO. DESCRIPTION OF EXHIBIT NO./REF.
- ------- -------------------------------------------------------- ------------
4.1 Amended and Restated Certificate of Incorporation of
the Company (B)
4.2 Amended and Restated By-Laws of the Company (A)
4.3 Registration Rights Agreement Dated August 1997 (C)
4.4 Registration Rights Agreement Dated September 1997 (C)
5.1 Opinion of Parker Chapin Flattau & Klimpl, LLP II-7
23.1 Consent of Parker Chapin Flattau & Klimpl, LLP
(included in Exhibit 5.1) II-7
23.2 Consent of Price Waterhouse LLP II-8
24.1 Powers of Attorney of certain directors and officers
of the Company (D)
(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 8-K (file number
0-25612) filed with the Commission on September 16, 1997.
(D) Included as part of the signature page on page II-5 of this filing.
II-6
20
<PAGE>
Exhibit 5.1
OPINION OF PARKER CHAPIN FLATTAU & KLIMPL, LLP
September 16, 1997
StarBase Corporation
18872 MacArthur Boulevard
Irvine, CA 92612
Ladies and Gentlemen:
We have acted as counsel to StarBase Corporation (the "Company") in connection
with a Registration Statement of Form S-3 (file no. 333-______) filed by the
Company with the Securities and Exchange Commission (the "Registration
Statement") relating to up to 3,104,233 shares (the "Shares") of the Company's
Common Stock, par value $0.01 per share (the "Common Stock"). Of such Shares,
2,824,398 may be issued upon conversion of the 6% Convertible Debentures which
were issued to the holders of the Shares (the "Debentures"), and 279,835 may be
issued upon the exercise of warrants which were issued to the holders of the
Shares (the "Warrants").
In connection with the foregoing, we have examined, among other things, the
Registration Statement, the Warrants and originals or copies, satisfactory to
us, of all such corporate records and of all such agreements, certificates and
other documents as we have deemed relevant and necessary as a basis for the
opinion hereinafter expressed. In such examination, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity with the original documents submitted to us as
copies. As to any facts material to such opinion, we have, to the extent that
relevant facts were not independently established by us, relied on certificates
of public officials and certificates, oaths and declarations of officers or
other representatives of the Company.
Based upon the foregoing, we are of the opinion that (i) the Shares issuable
upon conversion of the Debentures (when such shares are paid for and issued in
accordance with the terms of the Debentures) will be legally issued, fully paid
and non-assessable; and (ii) the Shares issuable upon the exercise of the
Warrants (when such Shares are paid for and issued in accordance with the terms
of the Warrants) will be legally issued, fully paid and non-assessable.
We hereby consent to the use of our name under the caption "Legal Matters" in
the Prospectus constituting a part of the Registration Statement and to the
filing of a copy of this opinion as an exhibit.
Very truly yours,
/s/ Parker Chapin Flattau & Klimpl, LLP
PARKER CHAPIN FLATTAU & KLIMPL, LLP
II-7
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Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
June 20, 1997, appearing on page 26 of StarBase Corporation's Annual Report on
Form 10-KSB for the year ended March 31, 1997. We also consent to the reference
to us under the heading "Experts" in such Prospectus.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Costa Mesa, California
September 16, 1997
II-8
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