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 June 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 July 30, 1997:   Common Stock:   15,044,867

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 June 30, 1997 (Unaudited) and 
              March 31, 1997                                                 3

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

              Statements of Cash Flows (Unaudited) for the three month
              period ended June 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 5.   Other Information                                             13

    ITEM 6.   Exhibits and Reports on Form 8-K                              13


                                       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>

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

     Current Assets:
       Cash and cash equivalents                                                $       1,296       $     2,722
       Accounts receivable, net of allowances of $51 and $65                              157               118
       Notes and other receivables                                                        144                83
       Prepaid expenses and deferred charges                                              205               312
       Inventories                                                                         21                34
                                                                                ---------------     ---------------

         Total current assets                                                           1,823             3,269

     Property and equipment, net                                                          547               524
     Note receivable from officer                                                          76                76
     Other non-current assets                                                              19                 7
                                                                                ---------------     ---------------

     Total assets                                                               $       2,465       $     3,876
                                                                                ===============     ===============


     LIABILITIES AND SHAREHOLDERS' EQUITY

     Current Liabilities:
       Accounts payable and accrued liabilities                                 $         753       $       885
       Current portion of capital lease obligation                                          8                 -
                                                                                ---------------     ---------------

         Total current liabilities                                                        761               885

     Long-term debt                                                                        45                 -
                                                                                ---------------     ---------------

         Total liabilities                                                                806               885


     Shareholders' equity:
       Preferred stock, $.01 par value; $0 (June 30, 1997) and 
         $75 (March 31, 1997) liquidation value; authorized
         10,000,000; issued and outstanding -0- shares (June 30, 1997)
         and 25,000 (March 31, 1997)                                                        -                 -
       Common stock, $.01 par value; authorized 50,000,000; issued and
         outstanding 15,044,867 (June 30, 1997) and 13,319,487 (March 31,                 150               133
         1997)
      Additional paid-in capital                                                       26,788            26,805
      Deficit accumulated during development stage                                    (25,279)          (23,947)
                                                                                ---------------     ---------------

       Total shareholders' equity                                                       1,659             2,991
                                                                                ---------------     ---------------

     Total liabilities and shareholders' equity                                 $       2,465       $     3,876
                                                                                ===============     ===============





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

                                       3
<PAGE>


                              STARBASE CORPORATION
                          (a development stage company)

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

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

Revenues:
  Consulting services                                              $      -      $      -     $   4,430
  Consulting services-related party                                       -             -           281
  Products                                                              268            80         2,226
  License and royalty                                                    70           129           748
  Other                                                                   -             -            64
                                                                   ------------  ------------  ------------

    Total revenues                                                      338           209         7,749

Cost of Sales:
  Consulting services                                                     -             -         4,716
  Consulting services-related party                                       -             -           289
  Products, licenses and other                                           32             1           459
                                                                   ------------  ------------  ------------

    Total cost of sales                                                  32             1         5,464
                                                                   ------------  ------------  ------------
Gross margin                                                            306           208         2,285

Operating Expenses:
  Research and development                                              498           332         9,554
  Selling, general and administrative                                 1,164         1,113        18,372
                                                                   ------------  ------------  ------------

    Total operating expenses                                          1,662         1,445        27,926
                                                                   ------------  ------------  ------------

  Operating loss                                                     (1,356)       (1,237)      (25,641)

  Interest income                                                        25            42           414
  Other income and expense                                               (1)          (14)          (20)
                                                                   ------------  ------------  ------------
  Total interest and other income and expense                            24            28           394

Loss before income taxes                                             (1,332)       (1,209)      (25,247)

  Provision for income taxes                                              -             1            11
                                                                   ------------  ------------  ------------

    Net loss                                                       $ (1,332)     $ (1,210)     $(25,258)
                                                                   ============  ============  ============

Per share data:
  Loss per common share                                            $  (0.11)     $  (0.14)
                                                                   ============  ============

  Weighted average number of
   common shares outstanding                                         12,002         8,796
                                                                   ============  ============

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


                                       4
<PAGE>


                              STARBASE CORPORATION
                          (a development stage company)

                            STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                 (in thousands)
<TABLE>
<CAPTION>


                                                                                                     
                                                                           Three months ended        Sept. 6. 1991
                                                                                June 30,                through
                                                                     ------------------------------- June 30, 1997
                                                                          1997            1996        (cumulative)
                                                                     --------------- --------------- ---------------
<S>                                                                  <C>             <C>             <C>

Cash Flows from Operating Activities:
  Net loss                                                           $    (1,332)    $    (1,210)    $   (25,258)
  Adjustments to reconcile net loss to
    net cash used in operating activities:
    Depreciation and amortization                                             53              57             857
    Provision for doubtful accounts and sales                                 39              27             266
        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)
    Other adjustments                                                          -               -              87
    Common stock to be issued for professional services                        -              60               -
  Changes in assets and liabilities, excluding
        the effect of Non-cash transactions:
      Accounts receivable                                                    (78)           (151)           (422)
      Notes and other receivables                                            (61)            (33)           (215)
      Inventories                                                             13               2             (21)
      Prepaid expenses and deferred charges                                   94             (34)           (169)
      Other assets                                                             1              11             (30)
      Accounts payable and accrued liabilities                              (132)           (755)          1,342
                                                                     --------------- --------------- ---------------

Net cash used by operations                                               (1,403)         (2,086)        (23,922)

Cash Flows from Investing Activities:
  Proceeds from disposition of property and      
    equipment                                                                  -               -               7
  Capital expenditures                                                        (8)            (12)         (1,377)
                                                                     --------------- --------------- ---------------

Net cash used by investing activities                                         (8)            (12)         (1,370)

Cash Flows from Financing Activities:
  Proceeds from reverse acquisition                                            -               -           1,402
  Proceeds from sale of preferred stock                                        -           1,021           7,294
  Proceeds from preferred stock subscriptions                                  -               -               -
  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                                                   -             224             548
    From exercise of warrants                                                  -           1,155           2,654
  Proceeds from convertible subordinated notes                                 -               -             381
  Proceeds from promissory notes                                               -               -           1,083
  Payments on promissory notes                                                 -            (107)           (274)
  Borrowings on line of credit                                                 -               -             664
  Payments on line of credit                                                   -               -            (664)
  Payment of financing related costs                                         (14)           (938)         (1,444)
  Payments on capitalized lease obligations                                   (1)              -             (41)
  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                             (15)          7,655          26,588
                                                                     --------------- --------------- ---------------

Net increase (decrease) in cash                                           (1,426)          5,557           1,296

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

Cash and cash equivalents, end of period                             $     1,296     $     6,809     $     1,296
                                                                     =============== =============== ===============
  
<FN>
            
     The accompanying notes are an integral part of the financial statements
</FN>
</TABLE>

                                       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
three months ended June 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)   
                                                    June 30,         March 31,
                                                      1997             1997
                                                 ---------------   -------------
       ACCOUNTS RECEIVABLE
       Trade accounts receivable                 $       208        $     183
       Less allowance for doubtful accounts              (51)             (65)
                                                 ---------------   -------------
                                                
                                                 $       157        $     118
                                                 ===============   =============


       PROPERTY AND EQUIPMENT
       Computer hardware                         $       891        $      888
       Furniture and fixtures                            237               164
       Computer software                                 132               132
       Leasehold improvements                             29                29
                                                  --------------    ------------
                                                       1,289             1,213
       Less accumulated depreciation and 
         amortization                                   (742)             (689)
                                                  --------------    ------------

                                                  $      547        $      524
                                                  ==============    ============


       ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
       Trade accounts payable                     $      257         $     431
       Accrued professional fees                         214               179
       Accrued wages and bonuses                         135               139
       Other accrued expenses                            147               136
                                                   -------------    ------------

                                                  $      753         $     885
                                                   =============    ============




4.   EQUITY TRANSACTIONS

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


                                       7
<PAGE>


                              STARBASE CORPORATION
                          (a development stage company)

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)

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 June 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.

WARRANTS
Warrant activity for the three month period ended June 30, 1997 is as follows:

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

Outstanding at March 31, 1997              4,833,534

Exercised (converted)                     (4,743,534)          CDN$2.51-
                                                                US$2.00
Expired                                            -
                                   -------------------
Outstanding at June 30, 1997                  90,000
                                   ===================


                                       8
<PAGE>


                              STARBASE CORPORATION
                          (a development stage company)

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)

5.   SUPPLEMENTAL CASH FLOW INFORMATION

                                                           Three months
                                                           Ended June 30,
                                                    ----------------------------
  (In thousands)                                        1997             1996
                                                    -------------   ------------

Interest paid                                       $         2     $        17
Income taxes paid                                             -               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 4)                                    1               -
  Conversion of promissory notes to Series C
     Preferred  Stock                                         -              75
  Common Stock issued in 3-for-1 warrant 
     conversion  (Note 4)                                    16               -


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.


                                       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 three month period ended June 30, 1997 $129,000
or 62%,  to  $338,000,  from  $209,000  in the same  three  month  period of the
previous year.  Product revenue increased  $188,000 or 235%, which was offset by
the  decrease in license and royalty  revenue of $59,000 or 46%. 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.  License
and royalty  revenue  from the Company's Roundtable  product  decreased from the
same period in the prior year due the timing of royalty revenue earned. Although
the overall royalty revenue earned for the  contract years  which ended June 30,
1997 and June 30, 1996 remained steady at $325,000, the minimum contract amount,
a greater portion of the  royalties  were earned  during the earlier part of the
contract  year which ended June 30,  1997,  thus a lesser  amount was recognized
during the current quarter to reflect the annual minimum royalty.

Product  revenue to date has been limited by a number of factors,  including the
introductory cycle for new software development tools such as StarTeam. StarTeam
1.0 was  introduced in January 1996,  followed by StarTeam 2.0 in late August of
1996.  Sufficient  working capital was not available to support a major StarTeam
1.0  marketing  and sales  program.  The  StarTeam  1.0  marketing  strategy was
therefore to sell the product to  strategic  customers,  who,  with a successful
initial  experience,  had  the  potential  to  generate  significant  additional
business.  In June 1996, sufficient working capital was raised through a private
placement  to support a major  marketing  and sales  program for  StarTeam  2.0.
Commercial  shipments of  StarTeam  2.0 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).   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 first  quarter of fiscal 1998 $98,000 or 47%, to
$306,000,  from $208,000 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,  increased  from the same  period in the prior  year due to the higher
percentage  of  product  revenue  generated  by  product  sales,  as  opposed to
maintenance contracts, during the quarter ended June 30, 1997.

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
three months ended June 30, 1997 or for the same period in the previous year due
to the discontinuation of the Company's Consulting Division.


                                       10
<PAGE>


Operating  expenses  increased  by  approximately  $217,000 or 15% 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 was focused on strengthening  its sales and  marketing  efforts,  which
included  filling  key  marketing  and sales  positions as  well  as  increased
promotional  activities.  At June 30, 1996, the Company had 32 employees, which
consisted of eight in sales & marketing,  16 in research & development and eight
in general &  administrative.  At June 30, 1997, the Company had  44  employees,
which consisted of 13 in sales & marketing, 23  in research  &  development  and
eight in general & administrative.

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  over the same period in the prior year $166,000 or 50% as a result of
the increase in development  staff.  Research & development staff increased from
16 at June 30, 1996 to 23 at June 30, 1997.  As a result,  compensation  related
expenses and  recruiting  costs  increased  approximately  $127,000 and $35,000,
respectively, from the three month period ended June 30, 1996.

SELLING,  GENERAL AND ADMINISTRATIVE  EXPENSES. For the three month period ended
June  30,  1997,   selling,   general  &   administrative   expenses   increased
approximately  $51,000 or 5% over the same period in the prior year, mainly the
result of the increase in sales and marketing personnel coupled with commissions
paid  on  increased  product sales.  Sales and  marketing   expenses  remained
relatively stable from the same period in the  previous year.  Sales & marketing
expenses  include advertising,  trade  shows  and other  promotional  expenses,
compensation and  sales  commissions,  public  relations,  travel,  and  certain
facilities expenses.

INTEREST INCOME
Interest  income  for the quarter that ended June 30, 1997  decreased by $17,000
or 40% from the quarter that ended June 30, 1996 due to a decrease in the amount
of cash available for investment.

OTHER INCOME AND EXPENSE
Other income and expense consisted primarily of interest paid on a capital lease
obligation during the current quarter and interest on outstanding payables
during the quarter that ended June 30, 1996.

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 Symantec, Aonix, Softquad, Metrowerks, Visix and Penumbra as well
as VAR and sales referral agreements.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash  equivalents  on hand as of June 30, 1997 totaled $1.3 million and
$2.7  million as of June 30,  1996.  At June 30, 1997 the  Company had  positive
working capital of $1.1 million, compared to $2.4 million at June 30, 1996.

During the quarter, the Company used $1.4 million for operations,  a decrease of
approximately  $0.7  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 quarter ended June 30, 1996,  which had accumulated in the prior year due to
a cash shortage. Capital expenditures during the quarter ended June 30, 1997 and
June 30, 1996 were not significant.

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  $51,000 at June 30, 1997 for future returns and other  collection
issues.

The  Company is  currently  in the  process of  negotiating  approximately  $2.5
million of financing and  anticipates  raising an additional $2.5 million in the
third 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 5
                                OTHER INFORMATION

On November 4, 1996, a  registration  statement on Form S-3 filed by the Company
was  declared  effective  by  the  Securities  and  Exchange   Commission.   The
registration  statement  covered 9,853,295 shares of common stock of the Company
(including  3,800,945  shares  issuable under  outstanding  warrants held by the
investors)  which were issued to investors in eligible private  placements.  The
Company  did not  receive  any of the  proceeds  from the sale of the  shares of
common stock by the investors.


                                     ITEM 6
                        EXHIBITS AND REPORTS ON FORM 8-K

<TABLE>
<CAPTION>

(a)      Exhibits

  Exhibit                                                                                                   Ref./
  Number                                       Description Of Document                                      Page
------------   ----------------------------------------------------------------------------------------   ----------
<S>            <C>                                                                                         <C>
    1.1        Underwriting Agreement between the Company and Dabney/ Resnick, Inc.                          (F)
    3.1        Amended and Restated Certificate of Incorporation of the Company.                             (B)
    3.2        Amended and Restated Bylaws of the Company.                                                   (A)
    3.3        Certificate of Designation, Series C Preferred Stock.                                         (F)
    3.4        Certificate of Amendment of Certificate of Designation,  Series C Preferred Stock.            (F)
    4.1        Investor's  Rights  Agreement  date  September  16,  1994 among the Company and
               certain investors.                                                                            (B)
    4.2        Registration Rights Agreement dated December 15, 1994.                                        (B)
    4.3        Registration Rights Agreement dated December 1995.                                            (E)
    4.4        Registration Rights Agreement dated May 1996.                                                 (D)
    4.5        Registration Rights Agreement dated June 1996.                                                (F)
   10.1        Form of Indemnity Agreement for Directors.                                                    (A)
   10.2        Form of Indemnity Agreement for Officers.                                                     (A)
   10.3        Performance  Share Escrow  Agreement,  as amended,  among the Company,  Montreal  Trust
               Company of Canada as Escrow Agent, and certain of the Company's stockholders.                 (A)
   10.4        Sublease dated December 2, 1993 between  McDonnell  Douglas Travel Company and StarBase
               Corporation, for the Company's Irvine, California facilities.                                 (B)
   10.5        1996 Stock Option Plan, as amended. (*)                                                       (G)
   10.6        Form of Restricted Stock Issuance Agreement.                                                  (A)
   10.7        Form of Restricted Stock Purchase Agreement.                                                  (A)
   10.8        Forms of Common Stock Subscription Agreements and Warrants used from time to time
               between the Company and certain of its stockholders in connection with certain equity
               financings, together with a list of equity investors.                                         (A)
   10.9        Forms of Common Stock Subscription Agreement and Warrants used in November 1994
               Private Placement.                                                                            (B)
   10.10       Forms of Common Stock  Subscription  Agreement  and Warrants used in March 1995 Private
               Placement.                                                                                    (C)
   10.11       Regional Prototype Defined Contribution Plan and Trust of the Company. (*)                    (A)
   10.12       Fiscal Agency Agreement between the Company and Canaccord Capital Corporation.                (B)
   10.13       Form of Agents' Warrant.                                                                      (B)
   10.14       Silicon Valley Bank Warrant dated December 15, 1994.                                          (B)
   10.15       Secured Promissory Note dated July 1, 1995 from William R. Stow III.                          (E)
   10.16       Forms of Preferred  Stock  Subscription  Agreements  and Warrants  used in January 1996
               Private Placement, together with a list of equity investors.                                  (E)
   
                                       13
<PAGE>


   10.17       Forms of Common Stock  Subscription  Agreement  and Warrants  used in July 1995 Private
               Placement, together with a list of equity investors.                                          (E)
   10.18       Form of Warrant used in the May 13, 1996 Private Placement.                                   (D)
   10.19       Form of Subscription Agreement used in the May 13, 1996 Private Placement.                    (D)
   10.20       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)
   10.21       Lease dated November 22, 1996 between The Provider Fund and StarBase Corporation,
               for the Company's Irvine, California facilities.                                              (H)
    27         Financial data schedule

-------------------------
<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.

          *   Denotes a management contract or compensatory plan or arrangement.
</FN>
</TABLE>




(b)      Reports on Form 8-K

There were no reports on Form 8-K filed during the quarter.

                                       14
<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)


  AUGUST 14, 1997                                  /S/ DONALD R. FARROW
__________________                                 _______________________
Date                                               Donald R. Farrow
                                                   President and
                                                   Chief Operating Officer


                                       15
<PAGE>