UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549




                                   FORM 10-QSB




              |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                For the quarterly period ended September 30, 1997


                                       OR


              |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  For the transition period from _____ to _____




                         Commission File Number: 0-25612



                              STARBASE CORPORATION
             (Exact name of Registrant as specified in its charter)



               Delaware                                    33-0567363
    (State or other jurisdiction of                     (I.R.S. Employer
    incorporation or organization)                   Identification Number)


         18872 MacArthur Boulevard
            Irvine, California                                92612
 (Address of principal executive offices)                   (Zip code)


                                 (714) 442-4400
              (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required to file such reports), and (2) been subject to such filing requirements
for the past 90 days. Yes |X| No |_|


Number of shares outstanding as of October 31, 1997: Common Stock:   15,148,197

Transitional Small Business Disclosure Format:         Yes   |_|       No  |X|



<PAGE>


                                        
                              STARBASE CORPORATION

                                TABLE OF CONTENTS


PART I.       FINANCIAL INFORMATION

    ITEM 1.   Financial Statements

              Balance Sheets at September 30, 1997 (Unaudited)
              and March 31, 1997                                          3

              Statements of Operations (Unaudited) for the six month
              period ended September 30, 1997 and 1996                    4

              Statements of Cash Flows (Unaudited) for the six month
              period ended September 30, 1997 and 1996                    5

              Notes to Financial Statements (Unaudited)                   6

    ITEM 2.   Management's Discussion and Analysis of Financial
              Condition and Results of Operations                        10

PART II.      OTHER INFORMATION

    ITEM 4.   Submission of Matters to a Vote of Security Holders        13

    ITEM 5.   Other Information                                          13

    ITEM 6.   Exhibits and Reports on Form 8-K                           14


                                       2
<PAGE>


                                     PART I

                                     ITEM 1
                              FINANCIAL STATEMENTS

                              STARBASE CORPORATION
                          (a development stage company)

                                 BALANCE SHEETS
             (in thousands, except number of shares and par values)

<TABLE>
<CAPTION>

                                                                                September 30,         March 31,
                                                                                     1997                1997
                                                                                ---------------     ---------------
                                                                                 (unaudited)
     <S>                                                                        <C>                  <C> 

     ASSETS

     Current Assets:
       Cash and cash equivalents                                                $       2,924       $     2,722
       Accounts receivable, net of allowances of $52 and $65                              206               118
       Notes and other receivables                                                         57                83
       Prepaid expenses and deferred charges                                              285               312
       Inventories                                                                         23                34
                                                                                ---------------     ---------------

         Total current assets                                                           3,495             3,269

     Property and equipment, net                                                          550               524
     Note receivable from officer                                                          76                76
     Other non-current assets                                                             275                 7
                                                                                ---------------     ---------------

     Total assets                                                               $       4,396       $     3,876
                                                                                ===============     ===============


     LIABILITIES AND SHAREHOLDERS' EQUITY

     Current Liabilities:
       Accounts payable and accrued liabilities                                 $       1,010       $       885
       Current portion of capital lease obligation                                          8                 -
                                                                                ---------------     ---------------

         Total current liabilities                                                      1,018               885

     Long-term debt:
       Capitalized lease obligation, less current portion                                  43                 -
        6% Convertible Debentures, net of discount of $615                              2,485                 -
                                                                                ---------------     ---------------

         Total long-term debt                                                           2,528                 -

         Total liabilities                                                              3,546               885


     Shareholders' equity:
       Preferred stock,  $.01 par value;  $0 (September 30, 1997) and $75 (March
         31, 1997) liquidation value; authorized 10,000,000; issued
         and outstanding -0- shares (September 30, 1997) and 25,000 (March                  -                 -
         31, 1997)
       Common stock, $.01 par value; authorized 50,000,000; issued and
         outstanding 15,054,608 (September 30, 1997) and 13,319,487 (March                150               133
         31, 1997)
      Additional paid-in capital                                                       27,751            26,805
      Deficit accumulated during development stage                                    (27,051)          (23,947)
                                                                                ---------------     ---------------

       Total shareholders' equity                                                         850             2,991
                                                                                ---------------     ---------------

     Total liabilities and shareholders' equity                                 $       4,396       $     3,876
                                                                                ===============     ===============
</TABLE>



         The accompanying notes are an integral part of the financial statements

                                       3
<PAGE>


                              STARBASE CORPORATION
                          (a development stage company)

                            STATEMENTS OF OPERATIONS
                                   (Unaudited)
                    (in thousands, except per share amounts)

<TABLE>
<CAPTION>

                                                                                           
                                                                                              Sept. 6, 1991
                                         Three months ended          Six months ended            through
                                           September 30,               September 30,           September 30,
                                       --------------------------  --------------------------    1997
                                           1997          1996          1997          1996     (CUMULATIVE)
                                       ------------- ------------  ------------  ------------ --------------
<S>                                    <C>           <C>           <C>           <C>          <C>  

Revenues:
  Consulting services                  $      -      $      -      $      -      $      -      $  4,430
  Consulting services-related party           -             -             -             -           281
  Products                                  330            69           598           149         2,556
  License and royalty                        36           103           106           232           784
  Other                                       -             -             -             -            64
                                       ------------- ------------  ------------  ------------  ------------

    Total revenues                          366           172           704           381         8,115

Cost of Sales:
  Consulting services                         -             -             -             -         4,716
  Consulting services-related party           -             -             -             -           289
  Products, licenses and other               23            27            55            28           482
                                       ------------- ------------  ------------  ------------  ------------

    Total cost of sales                      23            27            55            28         5,487
                                       ------------- ------------  ------------  ------------  ------------
Gross margin                                343           145           649           353         2,628

Operating Expenses:
  Research and development                  515           355         1,013           687        10,069
  Selling, general and administrative     1,249         1,242         2,413         2,355        19,621
                                       ------------- ------------  ------------  ------------  ------------

    Total operating expenses              1,764         1,597         3,426         3,042        29,690
                                       ------------- ------------  ------------  ------------  ------------

  Operating loss                         (1,421)       (1,452)       (2,777)       (2,689)      (27,062)

  Interest income                            24            79            49           122           438
  Interest expense                         (360)            5          (361)           (4)         (446)
  Other income and expense                  (14)            1           (14)           (5)           52
                                       ------------- ------------  ------------  ------------  ------------
  Total interest and other income          (350)           85          (326)          113            44
and expense

Loss before income taxes                 (1,771)       (1,367)       (3,103)       (2,576)      (27,018)

  Provision for income taxes                  1             -             1             1            12
                                       ------------- ------------  ------------  ------------  ------------

    Net loss                           $ (1,772)     $ (1,367)     $ (3,104)     $ (2,577)     $(27,030)
                                       ============= ============  ============  ============  ============

Per share data:
  Loss per common share                $  (0.13)     $  (0.12)     $  (0.24)     $  (0.26)
                                       ============= ============  ============  ============

  Weighted average number of
   common shares outstanding             13,629        11,296        12,820        10,053
                                       ============= ============  ============  ============


</TABLE>

         The accompanying notes are an integral part of the financial statements
                                       
                                       4
<PAGE>


                              STARBASE CORPORATION
                          (a development stage company)

                            STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                 (in thousands)
 
<TABLE>
<CAPTION>
                                                                                                     Sept. 6, 1991
                                                                            Six months ended            through
                                                                             September 30,           September 30,
                                                                     -------------------------------      1997
                                                                          1997            1996        (cumulative)
                                                                     --------------- --------------- ---------------
<S>                                                                  <C>             <C>             <C>

Cash Flows from Operating Activities:
  Net loss                                                           $    (3,104)    $    (2,577)    $   (27,030)
  Adjustments to reconcile net loss to
    net cash used in operating activities:
    Depreciation and amortization                                            107             117             911
    Provision for doubtful accounts and sales                                 58              34             285
     returns
    Loss on disposition of property, equipment and
     capital lease                                                             -               6              99
    Write-down of assets                                                       -               -              50
    Gain on debt restructuring                                                 -               -            (138)
    Recognition of deferred income                                             -             (66)           (370)
    Amortization of financing costs                                           13               -              13
    Amortization of debt discount                                            340               -             340
    Other adjustments                                                          -               -              87
    Changes in assets and liabilities, excluding
     the effect of Non-cash transactions:
      Accounts receivable                                                   (146)            (88)           (490)
      Notes and other receivables                                             26            (132)           (128)
      Inventories                                                             11              (9)            (23)
      Prepaid expenses and deferred charges                                   14             (24)           (249)
      Other assets                                                            (1)             11             (32)
      Accounts payable and accrued liabilities                               125            (979)          1,599
                                                                     --------------- --------------- ---------------

Net cash used by operations                                               (2,557)         (3,707)        (25,076)

Cash Flows from Investing Activities:
  Proceeds from disposition of property and
   equipment                                                                   -               -               7
  Capital expenditures                                                       (64)            (39)         (1,433)
                                                                     --------------- --------------- ---------------

Net cash used by investing activities                                        (64)            (39)         (1,426)

Cash Flows from Financing Activities:
  Proceeds from reverse acquisition                                            -               -           1,402
  Proceeds from sale of preferred stock                                        -           1,021           7,294
  Proceeds from  sale of convertible debentures                            3,100               -           3,100
  Proceeds from issuance of common stock:
    From stock purchase plan                                                   -               -              10
    From public offering                                                       -               -           4,063
    From private placements                                                    -           6,300          10,698
    From exercise of options                                                  12             282             560
    From exercise of warrants                                                  -           1,555           2,654
  Proceeds from convertible subordinated notes                                 -               -             381
  Proceeds from promissory notes                                               -               -           1,083
  Payments on promissory notes                                                 -            (111)           (274)
  Borrowings on line of credit                                                 -               -             664
  Payments on line of credit                                                   -               -            (664)
  Payment of financing related costs                                        (286)           (974)         (1,716)
  Payments on capitalized lease obligations                                   (3)              -             (43)
  Loans from officers/directors                                                -               -             365
  Repayment of loans from officers/directors                                   -               -             (75)
  Repayment of (disbursement of) loan to officer                               -               -             (76)
                                                                     --------------- --------------- ---------------

Net cash provided (used) by financing activities                           2,823           8,073          29,426
                                                                     --------------- --------------- ---------------

Net increase (decrease) in cash                                              202           4,327           2,924

Cash and cash equivalents, beginning of period                             2,722           1,252               -
                                                                     --------------- --------------- ---------------

Cash and cash equivalents, end of period                             $     2,924     $     5,579     $     2,924
                                                                     =============== =============== ===============  

</TABLE>
                 
     The accompanying notes are an integral part of the financial statements

                                       5
<PAGE>
                                               
                              STARBASE CORPORATION
                          (a development stage company)

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)


1.    DESCRIPTION OF BUSINESS

StarBase Corporation (the "Company"), a Delaware corporation,  develops, markets
and supports  team-oriented  product  development  software  that  addresses the
evolving  needs of  personal  computer  users  involved  in  projects  requiring
substantial collaboration. StarBase was founded in 1991 to address the inability
of software development projects to deliver software products on time and within
budget,  initially through the improvement of individual programmer productivity
tools.  During  fiscal  1994,  however,  the  Company  determined  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, StarBase 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 1996 to reflect
this change in product and market focus. In line with the reorganization, the 26
person Consulting Division was discontinued.

2.   BASIS OF PRESENTATION

The unaudited  interim  financial  statements have been prepared pursuant to the
rules and  regulations of the Securities and Exchange  Commission.  Accordingly,
certain  information  and footnote  disclosures  normally  included in financial
statements prepared in accordance with generally accepted accounting  principles
have not been presented.  The accompanying unaudited financial statements should
be read in  conjunction  with the  financial  statements  and the notes  thereto
included in the  StarBase  Corporation  report to the  Securities  and  Exchange
Commission on Form 10-KSB, for the year ended March 31, 1997.

The interim financial statements reflect all normal recurring  adjustments which
are, in the opinion of  management,  necessary  for a fair  presentation  of the
Company's  financial  position,  results  of  operations  and cash flows for the
period  presented.  Certain  prior period  balances  have been  reclassified  to
conform to current period classifications. The results of operations for the six
months ended September 30, 1997 are not necessarily  indicative of the operating
results for a full year.

LOSS PER COMMON SHARE
Earnings per common share is calculated by dividing the net loss by the weighted
average  shares of common  stock  outstanding  excluding  1,418,638  outstanding
common  shares  held  in  escrow.   Common  stock   equivalents  are  considered
anti-dilutive and are excluded from this calculation.

In February 1997, the Financial  Accounting  Standard Board issued  Statement of
Financial  Accounting  Standards No. 128,  "Earnings Per Share" ("FAS 128"). FAS
128  establishes  standards  for  computing  and  presenting  earnings per share
("EPS").  It replaces the  presentation  of primary EPS with a  presentation  of
basic EPS.  Basic EPS  excludes  dilution  and is computed  by  dividing  income
available to common stockholders by the weighted-average number of common shares
outstanding for the period.  It also requires a reconciliation  of the numerator
and denominator of the basic EPS computation to the numerator and denominator of
the diluted EPS computation.  Diluted EPS is computed similarly to fully diluted
EPS pursuant to Accounting  Principles  Board Opinion No. 15. This  statement is
effective for the Company beginning with its quarterly period ended December 31,
1997,  earlier  adoption is not  permitted.  Since the Company is  considered  a
simple  capital  structure for reporting  EPS, the adoption of this principle is
not expected to have a material impact on reported EPS.

                                       6
<PAGE>


                              STARBASE CORPORATION
                          (a development stage company)

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)

3.   COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS
       (In thousands)                             September 30,     March 31,
                                                      1997            1997
                                                 --------------    ------------
       ACCOUNTS RECEIVABLE
       Trade accounts receivable                $      258        $      183
       Less allowance for doubtful accounts            (52)              (65)
                                                 --------------    ------------
                                                $      206        $      118
                                                 ==============    ============


       PROPERTY AND EQUIPMENT
       Computer hardware                        $      909        $      888
       Furniture and fixtures                          237               164
       Computer software                               170               132
       Leasehold improvements                           29                29
                                                 --------------    ------------
                                                     1,345             1,213
       Less accumulated depreciation and 
         amortization                                 (795)             (689)
                                                 --------------    ------------
                                                $      550        $      524
                                                 ==============    ============


       ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
       Trade accounts payable                   $      424        $      431
       Accrued professional fees                       211               179
       Accrued wages and bonuses                       151               139
       Other accrued expenses                          224               136
                                                  --------------    ------------
                                                $    1,010        $      885
                                                  ==============    ============



4.   LONG-TERM DEBT

CONVERTIBLE DEBENTURES
In August and September of 1997,  the Company  issued,  in the  aggregate,  $3.1
million of its 6%  Convertible  Debentures,  $1.5 million of which is due August
18,  1999  and $1.6  million  is due  September  5,  1999.  In  addition  to the
Debentures,  the  purchasers  received  non-transferable  warrants to purchase a
total of  82,667  shares  of the  Company's  common  stock,  40,000 of which are
exercisable  at $1.58 per share  through  August 18, 2000 and the  remainder  at
$1.80 per share through  September 5, 2000,  after which dates the warrants will
expire. The holders of the Debentures may convert,  at their option, at any time
after October 6, 1997, the effective date of the  Registration  Statement  filed
pursuant to the Registration  Rights  Agreement,  at a conversion price for each
share of common stock equal to the lesser of (a) 100% of the Market Price on the
Issuance Date; and (b)(i) 84% of the Market Price on the Conversion Date if such
date is between 90 and 120 days from the Issuance  Date;  (ii) 80% of the Market
Price if the date is between 121 days and 150 days from the  Issuance  Date,  or
(iii) 78% of the Market Price thereafter.  The Market Price shall be the average
closing  bid  price  of the  common  stock  on the 5  trading  days  immediately
preceding  the  Issuance  Date or  Conversion  Date,  as may be  applicable,  as
reported by the NASD, or the closing bid price on the over-the-counter market on
such date or, in the event the common stock is listed on a stock  exchange,  the
Market  Price  shall be the  closing  price on the  exchange  on such  date,  as
reported in the Wall Street  Journal.  The holders of 6% Convertible  Debentures
are not entitled to receive any dividends nor receive notice as a shareholder in
respect of any meeting of shareholders or any rights whatsoever as a shareholder
of the Company,  unless and to the extent converted in accordance with the terms
of the Debenture.


                                       7
<PAGE>


                              STARBASE CORPORATION
                          (a development stage company)

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)

The unamortized debt discount, consists of the estimated value of the conversion
feature of the Debentures, which is the difference between the fair market value
at issuance and the  conversion  price which is most  favorable to the investor,
$870  thousand,  and the estimated  value of the  warrants,  utilizing the Black
Sholes  Model,  $85  thousand,  net of the related  amortization  to date,  $340
thousand.  The debt discount related to the conversion feature and warrant value
is being amortized as interest expense over a 90-day period and two-year period,
respectively, which commenced on the issuance date of the respective debentures.
The face value of the 6% Convertible Debentures and unamortized debt discount at
September 30, 1997 are as follows:

                                                                   Unamortized
   (in thousands)                                       Principal    Discount
                                                       ----------- -----------
   6% Convertible Debentures (due August 18, 1999)     $  1,500    $    257

   6% Convertible Debentures (due September 5, 1999)      1,600         358
                                                       ----------- -----------
          Total                                         $ 3,100       $ 615
                                                       =========== ===========


5.   EQUITY TRANSACTIONS

PRIVATE PLACEMENTS
The Company has  authorized  50,000,000  shares of common  stock and  10,000,000
shares of preferred  stock with a par value of $0.01 per share. Of the preferred
stock,  2,500,000  shares have been  designated as Series B Preferred  Stock, of
which no shares are issued and  outstanding  at September 30, 1997,  and 366,666
shares have been designated as Series C Preferred  Stock, of which no shares are
outstanding at September 30, 1997.

During  June  1996,  the  private  placement  of  Series C  Preferred  Stock was
completed.  In this private  placement,  365,496  Units were  issued,  each Unit
consisting  of one share of Series C  Preferred  Stock and one  non-transferable
warrant to purchase one share of common stock.  The warrants are  exercisable at
$2.50 per share through January 31, 1998,  after which date the warrants expire.
The Series C Preferred Stock is not redeemable and has a liquidation  preference
of $3.00 per share.  The holders of Series C Preferred Stock are not entitled to
receive any  dividends  nor,  except as  provided  by law,  vote upon any matter
relating to the  business  or affairs of the  Company or for any other  purpose.
Each  share of Series C  Preferred  Stock is  convertible,  at the option of the
holder,  at any time into the Company's  common stock,  of which the  conversion
rate  will  be  determined  by  dividing  $3.00  by the  Conversion  Price.  The
Conversion  Price  shall be the  lesser of (a) $3.00 per share or (b) 80% of the
average closing bid price of the common stock as reported by Bloomberg, L.P. for
shares  traded  in the  United  States  for the five  consecutive  trading  days
preceding the  conversion  date. At September  30, 1997,  all 365,496  shares of
Series C Preferred Stock issued had been converted into 572,851 shares of common
stock.

WARRANT CONVERSION
In June 1997, the Company offered,  to the holders of the Company's  outstanding
warrants,  to exchange  all issued and  outstanding  warrants  for shares of the
Company's  common stock.  Each warrant  holder  accepting the offer by midnight,
Pacific Standard Time, on June 30, 1997, the expiration date of the offer, would
receive one share of common stock for every three  warrants  held.  The warrants
which remain  unexchanged  subsequent to the  expiration  date of the offer will
continue under the original terms of each warrant.  At June 30, 1997,  4,734,534
warrants  were  converted  and  1,581,150  common  shares had been  issued  upon
conversion of such warrants.


                                       8
<PAGE>



                              STARBASE CORPORATION
                          (a development stage company)

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)

WARRANTS
Warrant  activity  for the six  month  period  ended  September  30,  1997 is as
follows:

                                                                  Warrant Price
                                                     Shares         Per Share
                                               ----------------- ---------------

Outstanding at March 31, 1997                      4,833,534

Granted                                              199,835        US$1.58-
                                                                      $1.80

Exercised (converted)                             (4,743,534)       CDN$2.51-
                                                                     US$2.00
Expired                                              (10,000)       CDN$3.51
                                               -----------------
Outstanding at September 30, 1997                    279,835
                                               =================


5.   SUPPLEMENTAL CASH FLOW INFORMATION

                                                             Six months
                                                        Ended September 30,
                                                   ----------------------------
  (In thousands)                                      1997             1996
                                                   ------------   -------------

  Interest paid                                    $         4     $        20
Income taxes paid                                            1               1

Non-cash investing and financing transactions:
  Conversion of Series B Preferred Stock to
     common stock                                            -              22
  Conversion of Series C Preferred Stock to
     common stock (Note 5)                                   2               3
  Conversion of promissory notes to Series C
     Preferred  Stock                                        -              75
  Common stock issued in 3-for-1 warrant
     conversion  (Note 5)                                   15               -
  Common stock issued for non-cash consideration             -              28
  Equipment purchased under capitalized lease               54               -


6.   COMMITMENTS AND CONTINGENCIES

There have been no other  significant  subsequent  developments  relating to the
commitments and contingencies reported on the Company's most recent Form 10-KSB.

7.    SUBSEQUENT EVENTS

On October 31,1997 and November 5, 1997, an investor converted $100 thousand and
$750 thousand face value of the 6% Convertible  Debentures plus accrued interest
into 93,589 and 716,398 shares, respectively, of the Company's common stock.


                                       9
<PAGE>


                                     PART I

                                     ITEM 2
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS




RESULTS OF OPERATIONS

Total  revenue  increased  in the six month  period  ended  September  30,  1997
$323,000 or 85%, to $704,000,  from $381,000 in the same six month period of the
previous year.  Product revenue increased  $449,000 or 301%, which was offset by
the  decrease in license  and  royalty  revenue  from the  Company's  Roundtable
product,  $126,000 or 54%.  The increase in product  revenue has been  favorably
affected by the April 1997 release of the StarTeam 2.1 family of products, which
include  enhanced  security,  encryption  capability  across  the  Internet  and
advanced configuration management.

Product  revenue to date has been limited by a number of factors,  including the
introductory cycle for new software development tools such as StarTeam. StarTeam
1.0 was  introduced in January 1996,  followed by StarTeam 2.0 in late August of
1996.  Sufficient  working  capital was not  available to support a StarTeam 1.0
marketing and sales program.  The StarTeam 1.0 marketing  strategy was therefore
to sell the product to  strategic  customers,  who,  with a  successful  initial
experience,  had the potential to generate significant  additional business.  In
June 1996,  sufficient working capital was raised through a private placement to
support a marketing  and sales  program for StarTeam 2.0 that focused on seeding
the market by targeting  several hundred companies for intial sales of StarTeam.
Commercial shipments of StarTeam 2.0 and StarTeam 2.1 began in the final week of
August  1996 and April  1997,  respectively.  In  addition,  Versions  2.0 sales
commenced during the final week of December 1996.

StarTeam  is a new  software  product  line  whose  target  market  consists  of
technical  software  professionals  (developers,  testers,  etc.).  Marketing to
technical  professionals is an educational  process. In the typical sales cycle,
the product is purchased as a pilot test  program,  installed and evaluated on a
small scale (3-10 seats), and, if the evaluation is satisfactory, implemented on
a  larger   project   which  may  involve  10  to  25   developers.   Successful
implementation  in the  project  may  lead  to  broader  acceptance  within  the
organization.  The time  span  from an  initial  test  order  to  implementation
throughout the customer's  organization varies depending on the organization and
the level of standardization  within the individual  company,  but in very large
companies, may take 6 months to a year.

Gross profit increased in the second quarter of fiscal 1998 $198,000 or 137%, to
$343,000,  from $145,000 in the same quarter of the previous year chiefly due to
the  increase  in product  sales.  Product  cost of sales,  as a  percentage  of
revenues, decreased from the same period in the prior year due to an increase in
the average  revenue per seat for  StarTeam  Workstation  2.1 and  StarTeam  Pro
Edition 2.1 over StarTeam  2.0,  from which  product  revenue was derived in the
prior year.

Cost of products  consists  primarily of manufacturing and related costs such as
media,  documentation,  product assembly and third party royalties.  The Company
out-sources  manufacturing for all software products,  with the exception of the
Company's Roundtable product.

There was no consulting  service  revenue or cost of service  revenue during the
six months ended  September 30, 1997 or for the same period in the previous year
due to the discontinuation of the Company's Consulting Division.

Operating expenses increased by approximately $167 thousand or 10% from the same
quarter in the  previous  year.  This  increase was  primarily  due to increased
research &  development  efforts,  as well as increased  product  sales  efforts
related to the market  introduction  of the StarTeam 2.1 family of products (the
ITE  product  line).  Early in the fiscal year that ended  March 31,  1997,  the
Company focused on strengthening its sales and marketing efforts, which included
filling key  marketing  and sales  positions  as well as  increased  promotional
activities. At September 30, 1996, the Company had 36 employees, which consisted
of 11 in sales &  marketing,  17 in  research &  development  and 8 in general &
administrative.  At September  30,  1997,  the Company had 48  employees,  which
consisted  of 15 in sales &  marketing,  24 in research &  development  and 9 in
general & administrative.

                                       10
<PAGE>


RESEARCH  AND  DEVELOPMENT  EXPENSES.  StarBase  continues  to make  significant
investments in research and development intended to bring its products to market
and to support  existing  products.  Overall  research and development  expenses
increased $160 thousand or 45% of the total research & development  expenses for
the same  quarter in the prior year as a result of the  increase in  development
staff.  For the six month period,  research and development  expenses  increased
$326  thousand  or 47%  over the same  period  in the  prior  year.  Research  &
development staff increased from 17 at September 30, 1996 to 24 at September 30,
1997. As a result,  compensation related expenses and recruiting costs increased
approximately $263 thousand and $23 thousand,  respectively,  from the six month
period ended September 30, 1996.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  Selling, general & administrative
expenses  for the  three and six  months  ended  September  30,  1997  increased
approximately $58 thousand or 2% and $7 thousand or 1%,  respectively,  over the
same  period in the prior year which was  mainly the result of the  increase  in
sales and marketing personnel coupled with commissions paid on increased product
sales offset by a decrease in marketing  expenses.  Marketing  expenses  include
advertising, trade shows and other promotional expenses.

INTEREST INCOME
Interest  income for Q2 1998  decreased by $55 thousand or 70% from quarter that
ended  September 30, 1996 due to a decrease in the amount of cash available for 
investment.

INTEREST EXPENSE
Interest  expense for Q2 1998 increased  significantly  from the same quarter in
the prior year due to the 6% Convertible  Debenture debt discount  amortization,
$340  thousand,  and  interest  accrued on the 6%  Convertible  Debentures,  $17
thousand.

OTHER INCOME AND EXPENSE
Other income and expense  consists  primarily of the  amortization  of financing
costs. The costs of issuing the 6% Convertible Debentures during the quarter are
being amortized over the two-year term of the Debentures.

INCOME TAXES

The Company  incurred  minimal  income taxes in the last two fiscal years due to
its cumulative  losses.  The Company adopted  Statement of Financial  Accounting
Standards  No. 109,  "Accounting  for Income Taxes" ("SFAS 109") in fiscal 1994.
SFAS 109 requires that deferred taxes be calculated using an asset and liability
approach  at  currently   enacted  tax  rates.   SFAS  109  also   requires  the
establishment of a valuation  allowance to reflect the likelihood of realization
of deferred tax assets.  Upon adoption of SFAS 109, the Company did not record a
net benefit from income taxes resulting from net operating loss carryforwards; a
valuation  allowance  of equal  amount was  provided  for the deferred tax asset
which would have been otherwise recorded.

FORWARD LOOKING STATEMENTS AND FACTORS THAT MAY EFFECT FUTURE RESULTS

The following discussion contains forward-looking  statements within the meaning
of Sections 21E and 27A of the  Securities  Exchange Act of 1934.  These forward
looking  statements  are subject to risks and  uncertainties.  There are several
important  factors that could cause  actual  results to differ  materially  from
those anticipated by the forward-looking  statements  contained in the following
discussion.  Such factors  include,  but are not limited to, the growth rates of
certain market segments,  the timing of software product  introductions,  market
acceptance of product  introductions,  the positioning of the Company's products
in  those  segments,  price  pressures  and  the  rapidly  changing  competitive
environment  in the software  industry,  success in  technological  advances and
their implementation, business conditions and the general economy, the Company's
ability  to manage  its  business  in its  evolution  from a  development  stage
company, and the Company's ability to establish strategic alliances.  Additional
information  on these and other risk factors  which could  affect the  Company's
financial results is included in the Company's Annual Report for the fiscal year
ended  March 31, 1997 on Form 10-KSB on file with the  Securities  and  Exchange
Commission.

                                       11
<PAGE>


The Company  continues  its efforts to gain broad market  exposure and, in turn,
revenue opportunities through, among others, OEM bundling agreements,  licensing
agreements,  and value  added  reseller  ("VAR")  and  distribution  agreements.
Management  believes  that  in  doing  so,  the  Company  will be  provided  the
opportunity  to leverage  off the market  strength  of its  partners at both the
entry level and high end of the market,  while selling to the rest of the market
through its direct and existing channel sales organizations.  During the current
quarter the Company signed bundling agreements for Versions 2.0, its entry level
product,  with Allaire  Corporation and PowerBASIC,  Inc. as well as several VAR
and sales referral agreements.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash  equivalents on hand as of September 30, 1997 totaled $2.9 million
and $5.6 million as of September 30, 1996. At September 30, 1997 the Company had
positive working capital of $2.5 million,  compared to $5.3 million at September
30, 1996.  During the six months ended September 30, 1997, the Company generated
$2.8 million from financing  activities,  including net proceeds of $2.8 million
from the private  placement of 6%  Convertible  Debentures and $12 thousand from
the exercise of stock options.

During the six months ended  September  30, 1997,  the Company used $2.6 million
for operations,  a decrease of  approximately  $1.1 million over the amount used
for operations in the prior year. The decrease was primarily due to the pay down
of accounts  payable during the six months ended  September 30, 1996,  which had
accumulated  in the prior year.  Capital  expenditures  were  approximately  $64
thousand and $39  thousand  during the six months  ended  September  30,1997 and
September 30, 1996, respectively.

StarBase's  distributors and direct purchasers are generally  permitted a 30-day
right to return the software  purchased  by them.  The Company may, on occasion,
grant more liberal rights of return to its distributors,  particularly where new
products or major upgrades are  introduced  and sales do not meet  expectations.
Although  such returns are generally  exchanged  for other  products or credited
against future orders,  StarBase may be required to accept major product returns
for cash or a credit  against  accounts  receivable.  The Company  has  reserved
approximately  $52,000  at  September  30,  1997 for  future  returns  and other
collection issues.

The Company  anticipates  raising  additional  funds,  between $3 million and $5
million,  during the third and fourth quarter of the fiscal year that ends March
31,  1998,  through a  combination  of debt and equity  securities.  The Company
believes that proceeds from the sale of debt and equity securities during fiscal
1998, combined with operating revenues,  will be sufficient to allow the Company
to conduct  its  operations  during the  fiscal  year that ends March 31,  1998.
Continuing operations thereafter will depend on cash flow from operations or the
Company's  ability to raise  additional  funds  through  equity,  debt, or other
financing.  There  can  be no  assurance,  however,  that  such  funds  will  be
available.

                                       12
<PAGE>


                                     PART II

                                     ITEM 4
               SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

(a) The Company held its annual meeting of stockholders on September 24, 1997.

(b)     Pursuant to the election of the eight directors  listed under Item 4 (c)
        (i),  Messrs.  Farrow,  Ginns,  Pearce,  Sexton,  Snedegar and Stow were
        elected to hold  office  until the next  annual  meeting and until their
        successors are elected and qualified.

(c) The Company's stockholders voted on the following matters:

        (i)Election of six directors.  All six directors nominated were elected.

          --------------------- -------------------- --------------------
                                     Number of            Number of
             Name of Nominee         Votes For          Votes Withheld
          --------------------- -------------------- --------------------
          Donald R. Farrow            9,871,907              31,074
          --------------------- -------------------- --------------------
          Daniel P. Ginns             9,826,539              76,442
          --------------------- -------------------- --------------------
          Phillip E. Pearce           9,877,457              25,524
          --------------------- -------------------- --------------------
          Kenneth A. Sexton           9,877,457              25,524
          --------------------- -------------------- --------------------
          John R. Snedegar            9,877,457              25,524
          --------------------- -------------------- --------------------
          William R. Stow III         9,877,457              25,524
          --------------------- -------------------- --------------------


         (ii)Approval of the selection of Price Waterhouse LLP as the Company's
        independent  auditors  for the year  ended  March 31,  1998.  A total of
        9,863,132  votes were voted for the  selection;  4,516  votes were voted
        against; and 35,333 votes were withheld.


                                     ITEM 5
                                OTHER INFORMATION

On October 6, 1997,  a  registration  statement on Form S-3 filed by the Company
was  declared  effective  by  the  Securities  and  Exchange   Commission.   The
registration  statement  covered 3,104,233 shares of common stock of the Company
(including  279,835  shares  issuable  under  outstanding  warrants  held by the
investors)  which were issued to investors in eligible private  placements.  The
Company  did not  receive  any of the  proceeds  from the sale of the  shares of
common stock by the investors.


                                       13
<PAGE>


                                     ITEM 6
                        EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits

<TABLE>
<CAPTION>

  Exhibit                                                                                                   Ref./
  Number                                       Description Of Document                                      Page
------------   ----------------------------------------------------------------------------------------   ----------
<S>            <C>                                                                                         <C>

    1.1        Underwriting Agreement between the Company and Dabney/ Resnick, Inc.                          (F)
    3.1        Amended and Restated Certificate of Incorporation of the Company.                             (B)
    3.2        Amended and Restated Bylaws of the Company.                                                   (A)
    3.3        Certificate of Designation, Series C Preferred Stock.                                         (F)
    3.4        Certificate of Amendment of Certificate of Designation, Series C Preferred Stock.             (F)
    4.1        Investor's  Rights  Agreement  date  September  16,  1994 among the Company and certain
               investors.                                                                                    (B)
    4.2        Registration Rights Agreement dated December 15, 1994.                                        (B)
    4.3        Registration Rights Agreement dated December 1995.                                            (E)
    4.4        Registration Rights Agreement dated May 1996.                                                 (D)
    4.5        Registration Rights Agreement dated June 1996.                                                (F)
    4.6        Registration Rights Agreement dated August 18, 1997                                           (I)
    4.7        Registration Rights Agreement dated September 5, 1997                                         (I)
   10.1        Form of Indemnity Agreement for Directors.                                                    (A)
   10.2        Form of Indemnity Agreement for Officers.                                                     (A)
   10.3        Performance  Share Escrow  Agreement,  as amended,  among the Company,  Montreal  Trust
               Company of Canada as Escrow Agent, and certain of the Company's stockholders.                 (A)
   10.4        1996 Stock Option Plan, as amended. (*)                                                       (G)
   10.5        Form of Restricted Stock Issuance Agreement.                                                  (A)
   10.6        Form of Restricted Stock Purchase Agreement.                                                  (A)
   10.7        Forms of Common Stock Subscription Agreements and Warrants used from time to time
               between the Company and certain of its stockholders in connection with certain equity
               financings, together with a list of equity investors.                                         (A)
   10.8        Forms of Common Stock Subscription Agreement and Warrants used in November 1994
               Private Placement.                                                                            (B)
   10.9        Forms of Common Stock  Subscription  Agreement  and Warrants used in March 1995 Private
               Placement.                                                                                    (C)
   10.10       Regional Prototype Defined Contribution Plan and Trust of the Company. (*)                    (A)
   10.11       Fiscal Agency Agreement between the Company and Canaccord Capital Corporation.                (B)
   10.12       Secured Promissory Note dated July 1, 1995 from William R. Stow III.                          (E)
   10.13       Forms of Preferred  Stock  Subscription  Agreements  and Warrants  used in January 1996
               Private Placement, together with a list of equity investors.                                  (E)
   10.14       Forms of Common Stock  Subscription  Agreement  and Warrants  used in July 1995 Private
               Placement, together with a list of equity investors.                                          (E)
   10.15       Form of Warrant used in the May 13, 1996 Private Placement.                                   (D)
   10.16       Form of Subscription Agreement used in the May 13, 1996 Private Placement.                    (D)
   10.17       Form of  Preferred  Stock  Subscription  Agreement  and  Warrant  used in the June 1996
               Private  Placement,  together with a list of equity investors and placement agent.            (F)
   10.18       Lease dated November 22, 1996 between The Provider Fund and StarBase Corporation,
               for the Company's Irvine, California facilities.                                              (H)
   10.19       Form of Warrant dated August 18, 1997.                                                        (I)
   10.20       Form of Debenture dated August 18, 1997.                                                      (I)
   10.21       Form of Warrant dated September 5, 1997.                                                      (I)
   10.22       Form of Debenture dated September 5, 1997.                                                    (I)
    27         Financial data schedule                                                                       16

-------------------------
                                       14
<PAGE>


<FN>

    (A)        Incorporated  herein by reference to the  Company's  Registration
               Statement  on Form SB-2  (file  number  33-68228)  filed with the
               Commission on November 2, 1993.

    (B)        Incorporated  herein by reference to the  Company's  Registration
               Statement  on  Form 10  (file  number  0-25612)  filed  with  the
               Commission on February 23, 1995.

    (C)        Incorporated herein by reference to the Company's Form 10-K (file
               number 0-25612) filed with the Commission on July 14, 1995.

    (D)        Incorporated  herein by reference to the Company's Form 8-K (file
               number 0-25612) filed with the Commission on May 16, 1996.

    (E)        Incorporated  herein by reference to the Company's  Form 10-K, as
               amended,  (file number 0-25612) filed with the Commission on July
               1, 1996.

    (F)        Incorporated  herein by  reference to the  Company's  Form 10-QSB
               (file number  0-25612)  filed with the  Commission  on August 14,
               1996.

    (G)        Incorporated  herein by  reference  to the  Company's  Definitive
               Proxy  Statement  (file number 0-25612) filed with the Commission
               on July 29, 1996.

    (H)        Incorporated  herein by  reference to the  Company's  Form 10-KSB
               (file number 0-25612) filed with the Commission on June 30, 1997.

    (I)        Incorporated  herein by reference to the Company's Form 8-K (file
               number 0-25612) filed with the Commission on September 16, 1997.

           *   Denotes a management contract or compensatory plan or arrangement.

</FN>
</TABLE>



(b)      Reports on Form 8-K

In a report filed on Form 8-K dated August 19,  1997,  the Company  reported the
closing of private placements offering of its 6% Convertible  Debentures with an
several  investors.  In  addition,  the Company  reported  the  completion  of a
previously  announced  warrant  exchange offer whereby each holder  received one
share of common stock for every three warrants tendered.

                                       15
<PAGE>


SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                              STARBASE CORPORATION
                                              (Registrant)

NOVEMBER 12, 1997                             /S/ DONALD R. FARROW
------------------                            -----------------------
Date                                          Donald R. Farrow
                                              President and
                                              Chief Operating Officer