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As filed with the Securities and Exchange Commission on October 6, 2000
Registration No. 333-____________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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STARBASE CORPORATION
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 7372 33-0567363
(State or other jurisdiction (Primary Standard Industrial (IRS employer
of incorporation or organization) Classification Code Number) Identification number)
</TABLE>
4 HUTTON CENTRE DRIVE, SUITE 800
SANTA ANA, CA 92707-8713
(714) 445-4400
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
DOUGLAS S. NORMAN
4 HUTTON CENTRE DRIVE, SUITE 800
SANTA ANA, CA 92707-8713
(714) 445-4400
(Name, address, including zip code, telephone number,
including area code, of agent for service)
COPY TO:
Martin Eric Weisberg, Esq.
Parker Chapin, LLP
The Chrysler Building, 7th Floor
405 Lexington Avenue
New York, NY 10174
(212) 704-6000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered pursuant
to dividend or interest 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. [ ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] _____________
If this Form is a post-effective amendment filed pursuant to Rule 462(b) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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Proposed
Amount Maximum
To Be Aggregate Proposed Maximum
Title of each class of Registered Price Per Aggregate Offering Amount of
Securities to be registered (1) Share(2) Price Registration Fee
--------------------------- ---------- --------- ------------------ ----------------
<S> <C> <C> <C> <C>
Common Stock, par value $0.01
per share 3,211,009 $4.8281 $15,503,152.83 $4,092.83
Common Stock, par value $0.01
per share 738,531 $6.8125 $5,031,242.44 $1,328.25
--------- -------------- ---------
Total 3,949,540 $20,534,395.27 $5,421.08
========= ============== =========
</TABLE>
(1) Represents the shares of common stock being registered for resale by the
selling stockholders. Pursuant to Rule 416, the shares of common stock
offered hereby also include such presently indeterminate number of shares
of common stock that may be issued as a result of anti-dilution provisions
included in the warrant agreements, including, among others, stock splits,
stock dividends and similar transactions.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) and (g) of the Securities Act of 1933, as amended,
based on the average ($4.8281) of the high ($5.125) and low ($4.53125)
price of the common stock on the Nasdaq National Market on October 4, 2000.
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 THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND
EXCHANGE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY DETERMINE.
An Exhibit Index appears on page E-1
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The information on this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement is filed with the
Securities and Exchange Commission and is effective. This prospectus is not an
offer to sell these securities and is not seeking an offer to buy these
securities in any state where the offer or sale is not permitted.
PROSPECTUS
3,949,540 SHARES
STARBASE CORPORATION
COMMON STOCK
o The shares of common stock offered by this prospectus are being sold
by the selling stockholders.
o We will not receive any proceeds from the sale of these shares. We
will receive proceeds from the exercise of warrants and those proceeds
will be used for our general corporate purposes.
o Our common stock is traded on the Nasdaq National Market under the
symbol "SBAS." On October 4, 2000, the last reported sale price for
our common stock as reported by the Nasdaq National Market was $4.875
per share.
THE SECURITIES OFFERED IN THIS PROSPECTUS INVOLVE A HIGH DEGREE OF RISK.
YOU SHOULD CAREFULLY CONSIDER THE FACTORS DESCRIBED UNDER THE HEADING "RISK
FACTORS" BEGINNING ON PAGE 3 OF THIS PROSPECTUS.
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THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED OF THESE SECURITIES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------------------------------------------------------
The date of this prospectus is October _____, 2000
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TABLE OF CONTENTS
Risk Factors...................................................................3
Forward-Looking Statements.....................................................9
Use of Proceeds................................................................9
Selling Stockholders...........................................................9
Plan of Distribution..........................................................11
Where You Can Find More Information...........................................12
Indemnification of Directors and Officers.....................................13
Legal Matters.................................................................13
Experts.......................................................................14
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RISK FACTORS
OUR BUSINESS IS SUBJECT TO A VARIETY OF RISKS AND SPECIAL CONSIDERATIONS. AS A
RESULT, PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED
BELOW AND THE OTHER INFORMATION IN THIS DOCUMENT AS WELL AS THE INFORMATION
INCORPORATED BY REFERENCE, BEFORE DECIDING TO INVEST IN OUR SHARES OF COMMON
STOCK.
OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS COULD BE ADVERSELY
AFFECTED BY ANY OF THE FOLLOWING RISKS. IF WE ARE ADVERSELY AFFECTED BY SUCH
RISKS, THEN THE TRADING PRICE OF OUR COMMON STOCK COULD DECLINE, AND YOU COULD
LOSE ALL OR PART OF YOUR INVESTMENT.
OUR QUARTERLY REVENUES AND OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY, WHICH
MAY CAUSE THE PRICE OF OUR COMMON STOCK TO DECLINE
Our revenues and operating results for any quarter are not necessarily
indicative of results to be expected in future periods. We expect our common
stock price to vary with our operating results and, consequently, any adverse
fluctuations in our operating results could have an adverse effect on our stock
price. Our operating results have in the past been, and will continue to be,
subject to quarterly fluctuations as a result of a number of factors. These
factors include:
o the size and timing of customer orders and the recognition of revenue
from those orders;
o changes in budgets or purchasing patterns of our customers;
o increased pricing pressure from competitors in the software and
Internet industries;
o the introduction and market acceptance of new technologies and
standards;
o the integration of people, operations, and products from acquired
businesses and technologies;
o changes in operating expenses and personnel; and
o changes in general and specific economic conditions in the software
and Internet industries.
WE HAVE A HISTORY OF LOSSES AND EXPECT TO INCUR FUTURE LOSSES
Since our inception, we have had a history of losses and as of June 30, 2000, we
had an accumulated deficit of $62,193,000. Further, our cash requirements to run
our business have been and will continue to be significant. In the past, we have
had negative cash flow from operations. We anticipate incurring additional
losses until we can successfully develop, market and distribute our products.
Developing software products is difficult and time consuming and requires 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. The likelihood of the success of
our business must be considered in light of the problems, expenses,
difficulties, complications and unforeseen delays frequently encountered in
connection with the development of new software technologies. Further, our
ability to achieve or sustain our revenue or profit goals depends on a number of
factors outside of our control, including the extent to which:
o there is market acceptance of commercial services utilizing our
products;
o our competitors announce and develop competing products or
significantly lower their prices; and
o our customers promote our product.
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We may not be able to achieve our goals and become profitable.
WE RELY HEAVILY ON SALES OF STARTEAM AND IF IT DOES NOT SUSTAIN OR INCREASE
MARKET ACCEPTANCE, WE ARE LIKELY TO EXPERIENCE LARGER LOSSES
For the three months ended June 30, 2000, we generated 55% of our total revenues
and 76% of our licensing revenues from licenses of our StarTeam product line. We
believe that revenues generated from StarTeam will continue to account for a
large percentage of our revenues for the foreseeable future. A decline in the
price of, or demand for, StarTeam would have a material adverse effect on our
business, operating results and financial condition. The following events may
reduce the demand for StarTeam:
o competition from other products;
o flaws in our software products or incompatibility with third-party
hardware or software products;
o negative publicity or evaluation of our company; or
o obsolescence of the hardware platforms or software environments in
which our systems run.
In addition, our future financial performance will depend upon successfully
developing and selling enhanced versions of StarTeam. If we fail to deliver
product enhancements or new products for our customers it will be difficult for
us to succeed.
WE FACE INTENSE COMPETITION FOR EBUSINESS SOFTWARE, WHICH COULD MAKE IT
DIFFICULT TO ACQUIRE AND RETAIN CUSTOMERS
The eBusiness software market is intensely competitive and rapidly evolving. Our
customers' requirements and the technology available to satisfy those
requirements continually change. We expect competition to intensify in the
future. Our principal competitors include in-house development efforts by
potential customers or partners, vendors of code management software, and
vendors of content management software. Many of these companies have longer
operating histories and significantly greater financial, technical, marketing
and other resources than we do. Many of these companies can also leverage
extensive customer bases and adopt aggressive pricing policies to gain market
share. Potential competitors may bundle their products in a manner that may
discourage users from purchasing our products. In addition, it is possible that
new competitors or alliances among competitors may emerge and rapidly acquire
significant market share.
Competitive pressures may make it difficult for us to acquire and retain
customers and may require us to reduce the price of our software. If we fail to
compete successfully against current or future competitors, we could lose
customers and our business, operating results and financial condition would
suffer.
THE SALES CYCLE FOR OUR PRODUCTS CAN BE LONG AND MAY HARM OUR OPERATING RESULTS
The period of time between initial customer contact and an actual sales order
may span several months. This long sales cycle increases the risk that we will
not forecast our revenue accurately and adjust our expenditures accordingly. The
longer the sales cycle, the more likely a customer is to decide not to purchase
our products or to scale down its order of our products for various reasons,
including changes in our customers' budgets and purchasing priorities and
actions by competitors, including introduction of new products and price
reductions. In addition, we often must provide a significant level of education
to our prospective customers regarding the use and benefit of our products,
which may cause additional delays during the evaluation process.
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WE MUST ATTRACT AND RETAIN QUALIFIED PERSONNEL, WHICH IS PARTICULARLY DIFFICULT
FOR US BECAUSE WE COMPETE WITH OTHER SOFTWARE COMPANIES WHERE COMPETITION FOR
PERSONNEL IS EXTREMELY INTENSE
Our success depends on our ability to attract and retain qualified, experienced
employees. We compete in a relatively new market and there are a limited number
of people who have acquired the skills needed to provide the services that our
clients demand. We compete for experienced engineering, sales and consulting
personnel with Internet professional services firms, software vendors,
consulting firms and professional services companies. Since we may issue options
as compensation to recruit employees, the volatility of the market price of our
common stock may make it difficult for us to attract and retain highly qualified
employees.
In addition, our customers that license our software generally engage our
professional services organization to assist with support, training, consulting
and implementation of their Web solutions. While we have recently established
relationships with some third-party service providers, we continue to be the
primary provider of these services. Competition for qualified services personnel
with the appropriate Internet specific knowledge is intense. We could also
experience deterioration in service levels or decreased customer satisfaction.
Any of these events could disrupt our business and have a materially adverse
effect on our business, operating results and financial condition.
IF WE DO NOT DEVELOP OUR INDIRECT SALES CHANNEL, OUR REVENUES MAY DECLINE
Domestic and international resellers and original equipment manufacturers may be
able to reach new customers more quickly or more effectively than our direct
sales force. Although we are currently investing and plan to continue to invest
significant resources to develop these indirect sales channels, we may not
succeed in establishing a channel that can market our products effectively and
provide timely and cost-effective customer support and services. In addition, we
may not be able to manage conflicts across our various sales channels, and our
focus on increasing sales through our indirect channel may divert management
resources and attention from our direct sales efforts.
IF WE DO NOT CONTINUE TO RECEIVE REPEAT BUSINESS FROM EXISTING CUSTOMERS, OUR
REVENUE WILL SUFFER
We generate a significant amount of our software license revenues from existing
customers. Most of our current customers initially purchase a limited number of
licenses as they implement and adopt our products. Even if the customer
successfully uses our products, customers may not purchase additional licenses
to expand the use of our products. Purchases of expanded licenses by these
customers will depend on their success in deploying our products, their
satisfaction with our products and support services and their use of competitive
alternatives. A customer's decision to widely deploy our products and purchase
additional licenses may also be affected by factors that are outside of our
control or which are not related to our products or services. In addition, as we
deploy new versions of our products or introduce new products, our current
customers may not require the functionality of our new products and may decide
not to license these products.
OUR PRODUCTS COULD BECOME OBSOLETE IF WE ARE UNABLE TO ADAPT TO THE RAPID
CHANGES IN THE EBUSINESS MARKET
Rapidly changing Internet technology and standards may impede market acceptance
of our products. The continued success of our products will require us to
develop and introduce new technologies and to offer functionality that we do not
currently provide. We may not be able to quickly adapt our products to new
Internet technology. If Internet technologies emerge that are incompatible with
StarTeam or other new Internet products that we develop, our products may
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become obsolete and existing and potential new customers may seek alternatives.
The following factors characterize the markets for our products:
o rapid technological advances;
o evolving industry standards, including operating systems;
o changes in end-user requirements; and
o frequent new product introductions and enhancements.
To succeed, we will need to enhance our current products and develop new
products on a timely basis to stay current with developments related to Internet
technology and to satisfy the increasingly sophisticated requirements of our
customers. Internet commerce technology, particularly eBusiness software
technology, is complex and new products and product enhancements can require
long development and testing periods. Any delays in developing and releasing
enhanced or new products could cause us to lose market share and have a material
adverse effect on our business, operating results and financial condition.
IF WE FAIL TO ESTABLISH AND MAINTAIN STRATEGIC RELATIONSHIPS, THE MARKET
ACCEPTANCE OF OUR PRODUCTS AND OUR FINANCIAL PERFORMANCE MAY SUFFER
To offer products and services to a larger customer base our direct sales force
depends on strategic partnerships and marketing alliances to obtain customer
leads, referrals and distribution. If we are unable to maintain our existing
strategic relationships or fail to enter into additional strategic
relationships, our ability to increase our sales will be harmed. We would also
lose anticipated customer introductions and co-marketing benefits. In addition,
our strategic partners may not regard us as significant for their own
businesses. Therefore, they could reduce their commitment to us or terminate
their relationships with us, pursue other partnerships or relationships, or
attempt to develop or acquire products or services that compete with our
products and services. Even if we succeed in establishing these relationships,
they may not result in additional customers or revenues.
WE MAY NOT BE ABLE TO SUCCESSFULLY INTEGRATE OUR RECENT ACQUISITION OF PREMIA
CORPORATION
We acquired Premia Corporation on March 8, 2000. The success of this acquisition
will depend on our ability to:
o successfully integrate and manage Premia's technology and operations;
o retain Premia's software developers;
o develop and market new products and enhance existing products based on
Premia's technology; and
o retain Premia's customer base.
Our failure to successfully address the risks associated with our acquisition of
Premia could hurt our ability to develop and market products based on Premia's
technology.
WE MAY ACQUIRE ADDITIONAL TECHNOLOGIES OR COMPANIES IN THE FUTURE AND THESE
ACQUISITIONS COULD RESULT IN DILUTION TO OUR STOCKHOLDERS AND/OR DISRUPT OUR
BUSINESS
We may acquire additional technologies or companies in the future through a
merger, acquisition, joint venture or other structure. We may not be able to
identify, acquire, profitably manage or successfully integrate any acquired
business without substantial expense, delay or other operational or financial
problems. Entering into an acquisition entails many risks, including:
o diversion of management's attention from other business concerns;
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o failure to integrate and manage the combined company's business;
o potential loss of key employees, including software developers and
other information technology, or IT, professionals, from either our
business or an acquired business;
o dilution to our existing stockholders as a result of issuing common
stock or other securities; and
o assumption of liabilities of an acquired company.
Any of these risks could significantly harm our business, operating results or
financial condition or result in dilution to our stockholders. We have no
current agreements with respect to any future acquisitions.
WE HAVE LIMITED EXPERIENCE CONDUCTING OPERATIONS INTERNATIONALLY, WHICH MAY MAKE
OVERSEAS EXPANSION MORE DIFFICULT AND COSTLY
To date, we have derived most of our revenues from sales to North American
customers. We plan to expand our international operations in the future. There
are many barriers and risks to competing successfully in the international
marketplace, including:
o costs of customizing products for foreign countries;
o foreign currency risks;
o dependence on local vendors;
o compliance with multiple, conflicting and changing governmental laws
and regulations;
o longer sales cycles; and
o import and export restrictions and tariffs.
As a result of these competitive barriers to entry and risks, we cannot assure
you that we will be able to successfully market, sell and deliver our products
and services in international markets.
WE MAY FAIL TO EFFECTIVELY MANAGE AND SUPPORT OUR ANTICIPATED GROWTH IN
OPERATIONS
To succeed in the implementation of our business strategy, we must rapidly
execute our sales strategy, further develop and enhance products and expand our
service capabilities. To manage anticipated growth resulting from this strategy,
we must:
o continue to implement and improve our operational, financial and
management information systems;
o hire, train and retain qualified personnel;
o continue to expand and upgrade core technologies; and
o effectively manage multiple relationships with our customers,
applications developers and other third parties.
If we fail to manage and support our growth as planned, our business strategy
and the anticipated growth in revenues and our profitability may not be
achieved.
WE MAY BE UNABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY RIGHTS
Our success depends significantly on our ability to protect our proprietary
technologies. If we are not adequately protected, our competitors could use the
intellectual property that we have developed to enhance their products and
services to our detriment. We rely on a combination of trade secrets,
confidentiality provisions and other contractual provisions to protect our
proprietary rights, but these legal means provide only limited protection.
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OUR PRODUCTS USE TECHNOLOGY THAT MAY INFRINGE ON THE PROPRIETARY RIGHTS OF THIRD
PARTIES, WHICH MAY EXPOSE US TO LITIGATION AND OTHER COSTS
As the number of entrants into our market increases, the possibility of a patent
infringement claim against us grows. For example, we inadvertently may be
infringing a patent of which we are unaware. In addition, because patent
applications can take many years to issue, there may be a patent application now
pending of which we are unaware, which will cause us to be infringing such
patent when it issues in the future. To address any patent infringement claims,
we may have to enter into royalty or licensing agreements on commercial terms
that are not favorable to us. A successful claim of product infringement against
us, or our failure to license the infringed or similar technology, may cause us
to delay or cancel shipment of our products or result in significant costs. This
could hurt our revenues and profitability and result in a material adverse
effect on our business, operating results and financial condition. In addition,
any infringement claims, with or without merit, would be time-consuming and
expensive to litigate or settle and could divert management attention from
administering our core business.
OUR FAILURE TO DELIVER DEFECT-FREE SOFTWARE COULD RESULT IN GREATER LOSSES AND
HARMFUL PUBLICITY
Our software products are complex and may contain defects or failures. Moreover,
third parties may develop and spread computer viruses that may damage the
functionality of our software products. Any of these events may result in
delayed or lost revenues, loss of market share, failure to achieve market
acceptance, reduced customer satisfaction, diversion of development resources,
product liability or warranty claims against us, and damage to our reputation.
Although we maintain liability insurance, this insurance coverage may not be
adequate to cover losses from claims against us. Further, defending a product
liability lawsuit, regardless of its merits, could harm our business because it
entails substantial expense and diverts the time and attention of key management
personnel.
OUR PERFORMANCE WILL DEPEND ON THE GROWTH OF THE INTERNET FOR EBUSINESS
Our future success depends heavily on the Internet being accepted and widely
used for commerce. If Internet commerce does not continue to grow or grows more
slowly than expected, our business, operating results and financial condition
would be materially adversely affected. Consumers and businesses may reject the
Internet as a viable commercial medium for a number of reasons, including
potentially inadequate network infrastructure, slow development of enabling
technologies or insufficient commercial support. The Internet infrastructure may
not be able to support the demands placed on it by increased Internet usage and
bandwidth requirements. Enterprises that have already invested substantial
resources in other methods of conducting eBusiness may be reluctant or slow to
adopt a new approach that may replace, limit or compete with their existing
systems. Any of these factors could inhibit the growth of eBusiness solutions
and in particular the market's acceptance of our products and services. In
addition, delays in the development or adoption of new standards and protocols
required to handle increased levels of Internet activity, or increased
government regulation, could cause the Internet to lose its viability as a
commercial medium. Even if the required infrastructure, standards, protocols or
complementary products, services or facilities are developed, we may incur
substantial expenses adapting our solutions to changing or emerging
technologies.
THERE IS SUBSTANTIAL RISK THAT FUTURE REGULATIONS COULD BE ENACTED THAT EITHER
DIRECTLY RESTRICT OUR BUSINESS OR INDIRECTLY IMPACT OUR BUSINESS BY LIMITING THE
GROWTH OF INTERNET COMMERCE
As Internet commerce evolves, we expect that federal, state or foreign agencies
will adopt new legislation or regulations covering issues such as user privacy,
pricing, content and quality of products and services. If enacted, these laws,
rules or regulations could directly or indirectly harm
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us to the extent that they impact our business, customers and potential
customers. We cannot predict if or how any future legislation or regulations
would impact our business. Although many of these regulations may not apply to
our business directly, we expect that laws regulating or affecting commerce on
the Internet could indirectly harm our business.
WE MAY BE UNABLE TO MEET OUR FUTURE CAPITAL REQUIREMENTS
We expect cash on hand, cash equivalents, our line of credit and cash from
future operations to meet our current working capital and capital expenditure
needs. We may need to raise additional funds for other purposes and we cannot be
certain that we would be able to obtain additional financing on favorable terms,
if at all. If we cannot raise necessary funds on acceptable terms, we may not be
able to develop or enhance our products, take advantage of future opportunities
or respond to competitive pressures or unanticipated capital requirements, which
could have a material adverse effect on our business, operating results and
financial condition.
FORWARD - LOOKING STATEMENTS
In this prospectus, we make statements about our future financial
condition, results of operations and business. These are based on estimates and
assumptions made from information currently available to us. Although we believe
these estimates and assumptions are reasonable, they are uncertain. These
forward-looking statements can generally be identified because the context of
the statement includes words such as may, will, except, anticipate, intend,
estimate, continue, believe or other similar words. Similarly, statements that
describe our future expectations, objectives and goals or contain projections of
our future results of operations or financial condition are also forward-looking
statements. Our future results, performance or achievements could differ
materially from those expressed or implied in these forward-looking statements,
including those listed under the heading "Risk Factors" and other cautionary
statements in this prospectus.
USE OF PROCEEDS
The selling stockholders are selling all of the shares covered by this
prospectus for their own accounts. Accordingly, we will not receive any proceeds
from the resale of the shares. We will receive proceeds from the exercise of the
warrants. If all the warrants were exercised, we would receive $5,031,242. We
will use the net proceeds for general corporate purposes. We will bear all
expenses relating to this registration except for brokerage or underwriting
commissions and expenses, if any, which the selling stockholders will pay.
SELLING STOCKHOLDERS
This prospectus covers the resale by the selling stockholders of 3,211,009
shares of our common stock issued according to the terms of a private placement.
This prospectus also covers the resale by selling stockholders of 738,531 shares
of our common stock issuable upon exercise of warrants issued in connection with
the private placement.
COMMON STOCK PRIVATE PLACEMENT
The holders of our common stock and warrants issued in connection with the
private placement have the material rights and obligations discussed below. The
agreements relating to these rights and obligations are filed with this document
and you are urged to read them in their entirety.
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SECURITIES PURCHASE AGREEMENT
The investors listed in the table below agreed to purchase a total of
3,211,009 shares of our common stock for an aggregate purchase price of
$17,500,000.
REGISTRATION RIGHTS AGREEMENT
In connection with our sale of common stock, we agreed to file a
registration statement covering the resale of the common stock and the common
stock issuable upon the exercise of warrants by October 5, 2000 and cause the
registration statement to be declared effective by the SEC by January 3, 2001.
If the registration statement is not declared effective by January 3, 2001, we
will have to pay to the holders liquidated damages equal to 1% of the purchase
price for each 30-day period until the default has been cured.
WARRANTS
The investors in our common stock also received warrants to purchase
642,201 shares of common stock at an exercise price of $6.8125. All of the
warrants have adjustment provisions for standard dilution events including stock
splits, stock dividends and similar transactions.
INVESTORS
This prospectus covers the resale of common stock by investors in the
private placement, none of which, to our knowledge, are broker-dealers or
affiliates of a broker-dealer. Baystar Capital LP is selling 3,082,568 shares of
common stock, of which 513,761 shares are issuable upon the exercise of
warrants. Baystar International Ltd. is selling 770,642 shares of common stock,
of which 128,440 shares are issuable upon the exercise of warrants.
FINDER'S FEES
This prospectus also covers the resale of 96,330 shares of common stock
issuable upon the exercise of warrants granted to SG Cowen Securities
Corporation for acting as a finder in connection with the sale of the common
stock to Baystar Capital LP and Baystar International Ltd.
We are registering the shares of common stock offered in this prospectus
with the SEC to permit public secondary trading. As a result, the selling
stockholders may offer all or part of the shares for resale to the public from
time to time.
The table below lists information regarding the selling stockholders'
ownership of shares of our common stock. Information concerning the selling
stockholders may change from time to time. To the extent that the selling
stockholders or any of its representatives advise us of such changes and if
required, we will report those changes in a supplement to this document. Except
as set forth in this prospectus, to our knowledge, no selling stockholder has
held any position of office, or has had any material relationship, with us or
any parties related to us within the past three years.
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The Amount Offered column assumes no sales are effected by the selling
stockholders during the offering period other than under the registration
statement.
<TABLE>
<CAPTION>
Amount Percentage
Amount Percentage Beneficially Beneficially
Beneficially Beneficially Owned Owned
Owned Prior Owned Prior Amount Following Following
Name to Offering to Offering Offered Offering Offering
----------------------------------- ------------- ------------ --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Baystar Capital LP.(1) 3,082,568 6.1% 3,082,568 0 0%
Baystar International Ltd.(2) 770,642 1.5% 770,642 0 0
SG Cowen Securities Corporation (3) 96,330 *% 96,330 0 0
</TABLE>
------------------------
* Represents less than one percent.
(1) Includes 2,568,807 shares of common stock. Includes 513,761 shares of
common stock issuable upon the exercise of warrants. The natural person who
exercises control over these shares is Mr. Brian Stark.
(2) Includes 642,202 shares of common stock. Includes 128,440 shares of common
stock issuable upon the exercise of warrants. The natural person who
exercises control over these shares is Mr. Brian Stark.
(3) Includes 96,330 shares of common stock issuable upon the exercise of
warrants. An internal management committee will determine whether to sell
their shares of common stock.
The warrants issued to the selling stockholders contain a provision
limiting the selling stockholders' ability to exercise their warrants to
the extent that such exercise would result in the selling stockholders and
their affiliates owning more than 4.99% of our common stock. This
limitation may be waived by the selling stockholders by providing us at
least 61 days prior written notice.
PLAN OF DISTRIBUTION
The selling stockholders may offer their shares of common stock at various
times in one or more of the following transactions:
o On any U.S. securities exchange on which our common stock may be
listed at the time of such sale;
o In the over-the-counter market;
o In transactions other than on such exchanges or in the
over-the-counter market;
o In connection with short sales; or
o In a combination of any of the above transactions.
The selling stockholders may offer their shares of common stock at
prevailing market prices, at prices related to such prevailing market prices, at
negotiated prices or at fixed prices.
The selling stockholders may use broker-dealers to sell their shares of
common stock. If this occurs, broker-dealers may either receive discounts or
commission from the selling stockholder, or they may receive commissions from
the purchasers of shares of common stock for whom they acted as agents. Such
brokers may act as dealers by purchasing any and all of the shares covered by
this prospectus either as agents for others or as principals for their own
accounts and reselling such securities under the prospectus.
The selling stockholders and any broker-dealers or other persons acting on
the behalf of parties that participate in the distribution of the shares may be
considered underwriters under the
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Securities Act. As such, any commissions or profits they receive on the resale
of the shares may be considered underwriting discounts and commissions under the
Securities Act.
As of the date of this prospectus, we are not aware of any agreement,
arrangement or understanding between any broker or dealer and the selling
stockholders with respect to the offer to sell the shares under this prospectus.
If we become aware of any agreement, arrangement or understanding, to the extent
required under the Securities Act, we will file a supplemental prospectus to
disclose:
(1) the name of any such broker-dealers;
(2) the number of shares involved;
(3) the price at which such shares are to be sold;
(4) the commissions paid or discounts or concessions allowed to such
broker-dealers, where applicable;
(5) that such broker-dealers did not conduct any investigation to
verify the information set out in this prospectus, as
supplemented; and
(6) other facts material to the transaction.
The stock purchase agreements have reciprocal indemnification provisions
between us and each selling stockholder to indemnify each other against
liabilities under the Securities Act, which may be based upon, among other
things, any untrue statement or alleged untrue statement of a material fact or
any omission or alleged omission of a material fact. We have agreed to bear
customary expenses incident to the registration of the shares for the benefit of
the selling stockholders in accordance with such agreements, other than
underwriting discounts and commissions directly attributable to the sale of such
securities by or on behalf of the investor.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, DC, New York, NY, and Chicago, IL.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. Our SEC filings are also available to the public from the SEC's
website at http://www.sec.gov.
We have filed a registration statement on Form S-3 with the SEC to register
shares of our common stock. This prospectus is part of that registration
statement and, as permitted by the SEC's rules, does not contain all of the
information included in the registration statement. For further information
about us and about this offering, you may refer to the registration statement
and its exhibits. You can review and copy the registration statement and its
exhibits at the public reference facilities maintained by the SEC or on the
SEC's website described above.
This prospectus may contain summaries of contracts or other documents.
Because they are summaries, they will not contain all of the information that
may be important to you. If you would like complete information about a contract
or other document, you should read the copy filed as an exhibit to the
registration statement.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information we incorporate by reference is
considered to be a part of this prospectus, and information that we file with
the SEC at a later date will automatically update or supersede this information.
We incorporate by reference the following documents as well as any
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future filing we will make with the SEC under Sections 13(a), 13(c), 14 or 15(d)
of the Securities Exchange Act of 1934:
1. Annual Report on Form 10-K for the fiscal year ended March 31,
2000;
2. Quarterly Report on Form 10-Q for the period ended June 30, 2000;
and
3. Registration Statement on Form 10, as amended, containing the
description of our common stock, dated April 27, 1995.
You may request a copy of these filings, at no cost, by writing to us at 4
Hutton Centre Drive, Suite 800, Santa Ana, CA 92707-8713, Attention: Investor
Relations.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law allows companies to
indemnify their directors and officers against expenses, judgments, fines and
amounts paid in settlement under the conditions and limitations described in the
law.
Our certificate of incorporation provides that a director is not personally
liable for monetary damages to us or to our stockholders for breach of his or
her fiduciary duties as a director. A director will be held liable for a breach
of his or her duty of loyalty to us or our stockholders, his or her intentional
misconduct or willful violation of law, actions or inactions not in good faith,
an unlawful stock purchase or payment of a dividend under Delaware law, or
transactions from which the director derives an improper personal benefit. This
limitation of liability does not affect the availability of equitable remedies
against the director including injunctive relief or rescission. Our certificate
of incorporation authorizes us to indemnify our officers, directors and other
agent to the fullest extent permitted under Delaware law.
We have entered into an indemnification agreement with each of our
directors and officers. In some cases, the provisions of the indemnification
agreement may be broader than the specific indemnification provisions contained
in our certificate of incorporation or otherwise permitted under Delaware law.
Each indemnification agreement may require us to indemnify an officer or
director against liabilities that may arise by reason of his status or service
as an officer or director, or against liabilities arising from the director's
willful misconduct of a culpable nature. The indemnification agreement may also
require us to obtain directors' and officers' liability insurance, if available
on reasonable terms. We maintain a directors and officers liability policy with
Lloyds of London and General Star Indemnity Corporation that contains an
aggregate limit of liability of $10,000,000 through 2001.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to our directors, officers and controlling persons
pursuant to these provisions, or otherwise, we have been advised that, in the
opinion of the SEC, such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable.
LEGAL MATTERS
Parker Chapin, LLP, New York, New York will pass upon the validity of the
securities offered hereby. Martin Eric Weisberg, Esq., a member of the firm, is
our Secretary.
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EXPERTS
The financial statements for the years ended March 31, 2000 and 1999,
incorporated by reference in this Prospectus from the Annual Report on Form 10-K
of StarBase Corporation for the year ended March 31, 2000, have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
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<PAGE> 17
WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR ANY OTHER PERSON TO GIVE ANY
INFORMATION OR TO REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST
NOT RELY ON ANY UNAUTHORIZED INFORMATION. THIS PROSPECTUS DOES NOT OFFER TO SELL
OR BUY ANY SHARES IN ANY JURISDICTION WHERE IT IS UNLAWFUL. THE INFORMATION IN
THIS PROSPECTUS IS CURRENT AS OF ____________.
----------------
TABLE OF CONTENTS PAGE
---------------------------------------------------------------- ----
Risk Factors 3
Forward-Looking Statements 9
Use of Proceeds 9
Selling Stockholders 9
Plan of Distribution 11
Where You Can Find More Information 12
Indemnification of Directors and Officers 13
Legal Matters 13
Experts 14
--------------------------------------------------------------------------------
3,949,540 SHARES OF COMMON STOCK
STARBASE CORPORATION
-------------
PROSPECTUS
-------------
OCTOBER ___, 2000
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<PAGE> 18
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints William R. Stow III and Douglas S. Norman, each acting
alone, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place an stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this registration statement (or any other registration statement
for the same offering) that is to be effective upon filing pursuant to Rule
462(b) under 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 or necessary to be done in and about the premises,
as fully 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 either of
them or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
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.
<TABLE>
<CAPTION>
<S> <C> <C>
Signature Title Date
/s/ William R. Stow III President, Chief Executive Officer October 5, 2000
---------------------------------------- and Chairman of the Board
William R. Stow III
/s/ Donald R. Farrow Executive Vice President October 5, 2000
---------------------------------------- and Director
Donald R. Farrow
/s/ Frank R. Caccamo Director October 5, 2000
----------------------------------------
Frank R. Caccamo
/s/ John R. Snedegar Director October 5, 2000
----------------------------------------
John R. Snedegar
/s/ Phillip E. Pearce Director October 5, 2000
----------------------------------------
Phillip E. Pearce
/s/ Daniel P. Ginns Director October 5, 2000
----------------------------------------
Daniel P. Ginns
/s/ Barry W. Sullivan Director October 5, 2000
----------------------------------------
Barry W. Sullivan
/s/ Douglas S. Norman Chief Financial Officer and October 5, 2000
---------------------------------------- Assistant Secretary
Douglas S. Norman
</TABLE>
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<PAGE> 19
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
-------- -------------------------------------------------------------- -----------
<S> <C> <C>
4.1 Form of Registration Rights Agreement.
4.2 Form of Securities Purchase Agreement.
4.3 Form of Warrant.
5.1 Opinion of Parker Chapin, LLP.
23.1 Consent of Parker Chapin, LLP. Included in Exhibit 5.1.
23.2 Consent of PricewaterhouseCoopers LLP
23.3 Consent of Deloitte & Touche LLP
24.1 Powers of Attorney of certain directors and officers of StarBase.
Included as part of the signature page on page 16 of this filing.
</TABLE>
---------------------
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