<PAGE>  1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549





                                   FORM 10-QSB





              |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                For the quarterly period ended September 30, 1996


                                       OR


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




                         Commission File Number: 0-25612



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



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


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


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


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


Number of shares outstanding as of November 14, 1996:
                             Common Stock:                 13,219,758
                             Series C Preferred Stock:         50,000

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

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

<PAGE>  2


                              STARBASE CORPORATION

                                TABLE OF CONTENTS


PART I.       FINANCIAL INFORMATION

    ITEM 1.   Financial Statements

              Balance Sheets at September 30, 1996 (Unaudited)
               and March 31, 1995                                        3

              Statements of Operations (Unaudited) for the three
               and six month periods ended September 30, 1996 
               and 1995                                                  4

              Statements of Cash Flows (Unaudited) for the six month
              periods ended September 30, 1996 and 1995                  5

              Notes to Unaudited  Financial Statements                   6


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

PART II.      OTHER INFORMATION

    ITEM 4.   Submission of Matters to a Vote of Security Holders       13
    
    ITEM 5.   Other Information                                         13

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





                                       2
<PAGE> 3 

                                



                                     PART I

                                     ITEM 1
                              FINANCIAL STATEMENTS

                              STARBASE CORPORATION
                          (a development stage company)

                                 BALANCE SHEETS
             (in thousands, except number of shares and par values)
<TABLE>
<CAPTION>

                                                                                September 30,         March 31,
                                                                                     1996                1996
                                                                                ---------------     ---------------
                                                                                 (unaudited)
     <S>                                                                        <C>                 <C>
     ASSETS

     Current Assets:
       Cash and cash equivalents                                               $        5,579      $      1,252
       Accounts receivable, net of allowances of $18 and $44                               57                 3
       Notes and other receivables                                                        142                10
       Prepaid expenses and deferred charges                                              161               137
       Inventories                                                                         23                14
                                                                                ---------------     ---------------

         Total current assets                                                           5,962             1,416

     Property and equipment, net                                                          579               660
     Note receivable from officer                                                          76                76
     Other non-current assets                                                               7                21
                                                                                ---------------     ---------------

     Total assets                                                              $        6,624      $      2,173
                                                                                ===============     ===============


     LIABILITIES AND SHAREHOLDERS' EQUITY

     Current Liabilities:
       Accounts payable and accrued liabilities                                $          680      $      1,375
       Due to director                                                                      -               280
       Other current liabilities                                                            1               111
       Current portion of debt                                                              -               186
                                                                                ---------------     ---------------

         Total current liabilities                                                        681             1,952

     Long-term debt                                                                         -               153
                                                                                ---------------     ---------------

         Total liabilities                                                                681             2,105


     Shareholders' equity:
       Preferred  stock,  $.01 par value;  $150  (September 30, 1996) and $4,456
         (March 31, 1996) liquidation value; authorized 10,000,000;
         issued and outstanding 50,000 (September 30, 1996) and 2,227,946                   1                22
         (March 31, 1996)
       Common stock, $.01 par value;  authorized  50,000,000;  issued 13,188,347
         (September 30, 1996) and 7,841,812 (March 31, 1996);
         outstanding, 13,182,086 (September 30, 1996) and 7,835,551 (March                132                78
         31, 1996)
      Common stock pending authorization                                                    -                27
      Additional paid-in capital                                                       26,631            18,185
      Treasury stock, 6,261 common shares                                                 (21)              (21)
      Deficit accumulated during development stage                                    (20,800)          (18,223)
                                                                                ---------------     ---------------

       Total shareholders' equity                                                       5,943                68
                                                                                ---------------     ---------------

     Total liabilities and shareholders' equity                                $        6,624      $      2,173
                                                                                ===============     ===============

                      The accompanying notes are an integral part of the financial statements

</TABLE>

                                       3
<PAGE> 4


                              STARBASE CORPORATION
                          (a development stage company)

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

<TABLE>
<CAPTION>
                                                                                            
                                                                                              
                                          Three months ended           Six months ended        Sept. 6, 1991
                                             September 30,               September 30,            through
                                       --------------------------  -------------------------   September 30,
                                           1996          1995          1996          1995          1996
                                                                                               (CUMULATIVE)
                                       ------------  ------------  ------------  -----------   ------------
<S>                                    <C>           <C>           <C>           <C>           <C>    

Revenues:
  Consulting services                 $       -     $     136     $       -     $     497      $   4,430
  Consulting services-related party           -             -             -             -            281
  Products, licenses and other              172            66           381           215          2,042
                                       ------------  ------------  ------------  ------------  ------------
    Total revenues                          172           202           381           712          6,753

Cost of Sales:
  Consulting services                         -           141             -           625          4,716
  Consulting services-related party           -             -             -             -            289
  Products, licenses and other               27            44            28            72            359
                                       ------------  ------------  ------------  ------------  ------------
    Total cost of sales                      27           185            28           697          5,364
                                       ------------  ------------  ------------  ------------  ------------
Gross margin                                145            17           353            15          1,389

Operating Expenses:
  Research and development                  355           688           687         1,496          8,122
  Selling, general and                    1,242           703         2,355         2,010         14,343
    administrative                     ------------  ------------  ------------  ------------  ------------
    Total operating expenses              1,597         1,391         3,042         3,506         22,465
                                       ------------  ------------  ------------  ------------  ------------
  Operating loss                         (1,452)       (1,374)       (2,689)       (3,491)       (21,076)

  Interest, other income and 
    (expense), net                           85           (65)          113           (72)           285
                                       ------------  ------------  ------------  ------------  ------------
 Loss before income taxes                (1,367)       (1,439)       (2,576)       (3,563)       (20,791)

  Provision for income taxes                  -             -             1             1              9
                                       ------------  ------------  ------------  ------------  ------------
    Net loss                          $  (1,367)    $  (1,439)    $  (2,577)    $  (3,564)     $ (20,800)
                                       ============  ============  ============  ============  ============

Per share data:
  Loss per common share               $   (0.11)    $   (0.19)    $   (0.22)    $   (0.53)
                                       ============  ============  ============  ============

  Weighted average number of
   common shares outstanding             12,714         7,727        11,471         6,666
                                       ============  ============  ============  ============


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

                                       4
<PAGE> 5


                              STARBASE CORPORATION
                          (a development stage company)

                            STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                 (in thousands)
 
<TABLE>
                                                                                                    
<CAPTION>
                                                                                                      Sept. 6, 1991
                                                                           Six months ended              through
                                                                             September 30,            September 30,
                                                                     -------------------------------      1996
                                                                          1996            1995        (cumulative)
                                                                     --------------- --------------- ---------------
<S>                                                                  <C>             <C>             <C>    

Cash Flows from Operating Activities:
  Net loss                                                          $     (2,577)   $     (3,564)   $    (20,800)
  Adjustments to reconcile net loss to
    net cash used in operating activities:
    Depreciation and amortization                                            117             136             685
    Provision for doubtful accounts and sales returns                         34               -             164
    Loss on disposition of property, equipment and capital lease               6              35              80
    Write-down of assets                                                       -              22              50
    Gain on debt restructuring                                                 -               -            (138)
    Recognition of deferred income                                           (66)              -            (301)
    Other adjustments                                                          -               -              75
    Common stock to be issued for professional services                        -               -               -
    Changes in assets and liabilities, excluding
        the effect of non-cash transactions:
      Accounts receivable                                                    (88)            708            (220)
      Notes and other receivables                                           (132)              2            (213)
      Inventories                                                             (9)             36             (23)
      Prepaid expenses and deferred charges                                  (24)             62            (175)
      Other assets                                                            11             (17)            (30)
      Accounts payable and accrued liabilities                              (979)            258           1,126
                                                                     --------------- --------------- ---------------
 Net cash used by operations                                              (3,707)         (2,322)        (19,720)

Cash Flows from Investing Activities:
  Proceeds from disposition of property and equipment                          -               -               4
  Capital expenditures                                                       (39)            (22)         (1,284)
                                                                     --------------- --------------- ---------------
Net cash used by investing activities                                        (39)            (22)         (1,280)

Cash Flows from Financing Activities:
  Proceeds from reverse acquisition                                            -               -           1,402
  Proceeds from sale of preferred stock                                    1,021               -           7,294
  Proceeds from issuance of common stock:
    From stock purchase plan                                                   -               -              10
    From public offering                                                       -               -           4,063
    From private placements                                                6,300             304          10,698
    From exercise of options                                                 282             102             548
    From exercise of warrants                                              1,555               -           2,579
  Proceeds from convertible subordinated notes                                 -               -             381
  Proceeds from promissory notes                                               -             462           1,083
  Payments on promissory notes                                              (111)              -            (274)
  Borrowings on line of credit                                                 -               -             664
  Payments on line of credit                                                   -            (664)           (664)
  Payment of financing related costs                                        (974)              -          (1,379)
  Payments on capitalized lease obligations                                    -              (8)            (40)
  Loans from officers/directors                                                -             137             365
  Repayment of loans from officers/directors                                   -               -             (75)
  Repayment of (disbursement of) loan to officer                               -              55             (76)
                                                                     --------------- --------------- ---------------
Net cash provided by financing activities                                  8,073             388          26,579
                                                                     --------------- --------------- ---------------
Net increase (decrease) in cash                                            4,327          (1,956)          5,579

Cash and cash equivalents, beginning of period                             1,252           1,972               -
                                                                     --------------- --------------- ---------------
Cash and cash equivalents, end of period                            $      5,579    $         16    $      5,579
                                                                     ==============  =============== ===============

                      The accompanying notes are an integral part of the financial statements

</TABLE>
                                       5
<PAGE> 6





                              STARBASE CORPORATION
                          (a development stage company)

                          NOTES TO FINANCIAL STATEMENTS



1.    DESCRIPTION OF BUSINESS

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

2.   BASIS OF PRESENTATION

The unaudited  interim  financial  statements have been prepared pursuant to the
rules and  regulations of the Securities and Exchange  Commission.  Accordingly,
certain  information  and footnote  disclosures  normally  included in financial
statements prepared in accordance with generally accepted accounting  principles
have not been presented.  The accompanying unaudited financial statements should
be read in  conjunction  with the  financial  statements  and the notes  thereto
included in the  StarBase  Corporation  report to the  Securities  and  Exchange
Commission on Form 10-K, as amended, for the year ended March 31, 1996.

The interim financial statements reflect all normal recurring  adjustments which
are, in the opinion of  management,  necessary  for a fair  presentation  of the
Company's  financial  position,  results  of  operations  and cash flows for the
period  presented.  Certain  prior period  balances  have been  reclassified  to
conform to current period classifications. The results of operations for the six
months ended September 30, 1996 are not necessarily  indicative of the operating
results for a full year.

EARNINGS PER COMMON SHARE
Earnings  per  common  share  are  calculated  by  dividing  the net loss by the
weighted average shares of common stock  outstanding.  Common stock  equivalents
are considered anti-dilutive and are excluded from this calculation.


                                       6
<PAGE>  7


                              STARBASE CORPORATION
                          (a development stage company)

                          NOTES TO FINANCIAL STATEMENTS


3.   COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS
       (In thousands) 

<TABLE>
<CAPTION>
                                                                          September 30,      March 31,
                                                                              1996             1996
                                                                        -----------------   -----------
       <S>                                                              <C>                 <C>  
       ACCOUNTS RECEIVABLE
       Trade accounts receivable                                       $       75          $       47
       Less allowance for doubtful accounts                                   (18)                (44)
                                                                        -----------------   -----------
                                                                       $       57          $        3
                                                                        =================   ===========


       PROPERTY AND EQUIPMENT
       Computer hardware                                               $      896          $      869
       Furniture and fixtures                                                 130                 125
       Computer software                                                      123                 115
       Leasehold improvements                                                  29                  41
                                                                        -----------------   -----------
                                                                            1,178               1,150
       Less accumulated depreciation and amortization                        (599)               (490)
                                                                        -----------------   -----------
                                                                       $      579          $      660
                                                                        =================   ===========


       ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
       Trade accounts payable                                          $      310          $      910
       Accrued professional fees                                              135                 135
       Accrued wages and bonuses                                               94                  70
       Other accrued expenses                                                 141                 260
                                                                        -----------------   -----------
                                                                       $      680          $    1,375
                                                                        =================   ===========
</TABLE>




4.   EQUITY TRANSACTIONS

PRIVATE PLACEMENTS
The Company has  authorized  50,000,000  shares of common  stock and  10,000,000
shares of preferred  stock with a par value of $0.01 per share. Of the preferred
stock,  2,500,000  shares have been  designated as Series B Preferred  Stock, of
which no shares are issued and  outstanding  at September 30, 1996,  and 366,666
shares have been designated as Series C Preferred  Stock, of which 50,000 shares
are outstanding at September 30, 1996.

On May 13, 1996, a private  placement  of common  stock was  completed.  In this
private  placement,  2,099,832  Units were issued,  each Unit  consisting of one
share of common stock and one non-transferable  warrant to purchase one share of
common stock.  The warrants are  exercisable at $2.00 per share through  January
31, 1997 and thereafter exercisable at $2.50 per share through January 31, 1998,
after which date the warrants expire. In addition,  warrants to purchase 120,000
shares of the Company's common stock were issued as a placement agent fee.

As a result of the May 13, 1996 private placement of common stock, the 2,227,946
shares of the  Company's  Series B  Preferred  Stock,  issued  in a fiscal  1996
private  placement,   automatically  converted  into  2,227,946  shares  of  the
Company's common stock.

                                       7
<PAGE> 8


                              STARBASE CORPORATION
                          (a development stage company)

                          NOTES TO FINANCIAL STATEMENTS


During  June  1996,  the  private  placement  of  Series C  Preferred  Stock was
completed.  In this private  placement,  365,496  Units were  issued,  each Unit
consisting  of one share of Series C  Preferred  Stock and one  non-transferable
warrant to purchase one share of common stock.  The warrants are  exercisable at
$2.00 per share through January 31, 1997 and thereafter exercisable at $2.50 per
share through January 31, 1998, after which date the warrants expire. The Series
C Preferred  Stock is not redeemable  and has a liquidation  preference of $3.00
per share.  The holders of Series C Preferred  Stock are not entitled to receive
any dividends nor,  except as provided by law, vote upon any matter  relating to
the business or affairs of the Company or for any other  purpose.  Each share of
Series C Preferred  Stock is  convertible,  at the option of the holder,  at any
time into the  Company's  common  stock,  of which the  conversion  rate will be
determined by dividing $3.00 by the Conversion Price. The Conversion Price shall
be the lesser of (a) $3.00 per share or (b) 80% of the average closing bid price
of the common  stock as reported by  Bloomberg,  L.P.  for shares  traded in the
United States for the five  consecutive  trading days  preceding the  conversion
date. At September 30, 1996, 315,496 shares of Series C Preferred Stock had been
converted into 382,609 shares of common stock.


CONVERSION OF NOTE PAYABLE
A promissory  note payable with a face value of $75,000 was converted  into 
Series C Preferred  Stock at a price of $3.00 per Unit.

WARRANTS
Warrant  activity  for the six  month  period  ended  September  30,  1996 is as
follows:

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

Outstanding at March 31, 1996                    2,949,595

Issued in connection with stock offerings        2,585,328             $2.00
Exercised                                         (403,711)      $2.00-$5.67
Expired                                             (5,006)            $5.67
                                            -----------------
 Outstanding at September 30, 1996               5,126,206
                                            =================


                                       8
<PAGE>  9


                              STARBASE CORPORATION
                          (a development stage company)

                          NOTES TO FINANCIAL STATEMENTS


5.   SUPPLEMENTAL CASH FLOW INFORMATION

                                                                  Six months
                                                             ended September 30,
                                                            --------------------
(In thousands)                                                1996        1995
                                                            ---------   --------

Interest paid                                               $  20      $    25
Income taxes paid                                               1            1

Non-cash investing and financing transactions:
  Conversion of Series A Preferred Stock to
     common stock                                              -         2,710
  Conversion of Series B Preferred Stock to
     common stock (Note 4)                                     22            -
  Conversion of Series C Preferred Stock to
     common stock (Note 4)                                      3            -
  Conversion of promissory notes to Series C Preferred
     Stock (Note 4)                                            75            -
  Common Stock issued for non-cash consideration               28            -


6.   COMMITMENTS AND CONTINGENCIES

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

                                       9
<PAGE>  10


                                     PART I

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



FORWARD-LOOKING STATEMENTS

The following discussion contains forward-looking  statements within the meaning
of Sections 21E and 27A of the  Securities  Exchange Act of 1934.  These forward
looking  statements  are subject to risks and  uncertainties.  There are several
important  factors that could cause  actual  results to differ  materially  from
those anticipated by the forward-looking  statements  contained in the following
discussion.  Such factors  include,  but are not limited to, the growth rates of
certain market  segments,  the  positioning  of the Company's  products in those
segments,  price pressures and the rapidly changing  competitive  environment in
the  software  industry,  the  Company's  ability to manage its  business in its
evolution  from a  development  stage  company,  and the  Company's  ability  to
establish strategic  alliances.  Additional  information on these and other risk
factors  which could affect the Company's  financial  results is included in the
Company's  Annual  Report for the fiscal year ended March 31, 1996 on Form 10-K,
as amended, on file with the Securities and Exchange Commission.


REVENUES

In the spring of 1995 the  management of StarBase made the decision to focus the
Company's  business on the  development  and  marketing of software  designed to
increase team productivity,  rather than individual programmer productivity. The
Company was  reorganized  in fiscal  1996 to reflect  this change in product and
market  focus and,  in line with the  reorganization,  the 26 person  Consulting
Division was discontinued. Thus, consulting services revenue for the quarter and
six month period ended  September 30, 1996 decreased to nil compared to $136,000
for the quarter and $497,000 for the six months of the  previous  year.  Revenue
from  products  and  licenses  for the quarter and six months was  $172,000  and
$381,000  compared to $66,000 and  $215,000 for the same periods of the previous
year.  Revenue  from  products and licenses for the quarter and six months ended
September  30, 1996  consisted  primarily of license fee income and sales of the
StarTeam products.

Product  revenue to date has been limited by a number of factors,  including the
introductory cycle for new software development tools such as StarTeam. StarTeam
1.0 was  introduced in January 1996,  followed by StarTeam 2.0 in late August of
1996.  Sufficient  working capital was not available to support a major StarTeam
1.0  marketing  and sales  program.  The  StarTeam  1.0  marketing  strategy was
therefore to sell the product to a limited number of strategic  customers,  who,
with a successful initial experience,  had the potential to generate significant
additional business. In June 1996, sufficient working capital was raised through
a private  placement to support a major marketing and sales program for StarTeam
2.0.  Commercial  shipments  of StarTeam  2.0 began in the final week of August,
1996, providing five weeks of contribution to the revenue for the quarter ending
September 30, 1996.

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


                                       10
<PAGE>  11


Since mid-May of 1996, when additional  working  capital became  available,  the
Company has been focused on strengthening its sales and marketing effort. Due to
the  technical  nature of the  product  line,  the Company  determined  that its
primary  sales effort  would be through  direct  tele-sales  as well as targeted
programs toward original equipment manufacturers (OEM) and large accounts. Prior
to the  availability  of  additional  working  capital in May 1996,  several key
positions  in sales and  marketing  were  either not filled or were  occupied by
personnel  with  inappropriate  skill sets. As of September 30, 1996 the Company
has  filled  open  sales  and  marketing  positions  and  replaced  certain  key
management positions.

COST OF SERVICES AND PRODUCTS

There was no consulting  service  revenue or cost of service  revenue during the
quarter  and  for  the  six  months  ended   September   30,  1996  due  to  the
discontinuation of the Company's Consulting Division.  The negative gross margin
resulting  from  services  for the quarter  ended  September  30, 1995  reflects
decreased  staff  utilization as the Company reduced the scope of its consulting
operations.

Cost of products  consists  primarily of manufacturing and related costs such as
media,  documentation,  product assembly and third party royalties.  The Company
currently  outsources  manufacturing for all software products.  The decrease in
cost of products as a percentage of product  revenues is primarily the result of
increased  license  and  maintenance  revenue  for which no  related  costs were
incurred.

OPERATING EXPENSES

Compared to the same  quarter in the prior year,  operating  expenses  increased
approximately  $206,000,  15%,  due  to  an  increase  in  sales  and  marketing
expenditures  offset by a decrease in research  and  development  expenses.  The
increase in sales and  marketing  expenses  for the quarter is due to  increased
promotional activities as well as increased headcount.  Research and development
expenses  decreased  due to headcount  reductions.  At September  30, 1996,  the
Company had 36 full-time employees,  11 in sales and marketing, 8 in general and
administrative,  and 17 in research and  development.  As of September 30, 1995,
the  Company  had 39  full-time  employees,  3 in  consulting,  6 in  sales  and
marketing, 7 in general and administrative, and 23 in research and development.

RESEARCH AND DEVELOPMENT EXPENSES.  While StarBase continues to make significant
investments in research and development intended to bring its products to market
and to support existing products, overall research and development expenses have
been reduced.  The Company has not  capitalized any software  development  costs
since inception.  For the current quarter research and development expenses were
reduced  by  $333,000,  approximately  48% of  total  research  and  development
expenses  for the same  quarter  in the prior  year.  For the six month  period,
research and development expenses decreased $809,000 over the same period in the
prior year.  The primary  cause for the  decrease is the  reduction in headcount
which is a reflection  of the  completion  of the StarTeam  product line and the
migration into a product  improvement and maintenance mode. At the same time the
company's  research and  development  resources have been  re-allocated  between
on-going projects as well as conceptual, future-business projects.

SELLING,   GENERAL   AND   ADMINISTRATIVE   EXPENSES.   Selling,   general   and
administrative  expenses for the quarter and six months ended September 30, 1996
compared to the same periods of 1995 increased due to greater product  marketing
and sales expenses incurred since May 1996.

INTEREST, OTHER INCOME AND EXPENSE, NET

Interest  and other  income and  expense,  net  consisted  primarily of interest
income generated by placing available funds in short-term US Treasury Bills. For
the  comparative  periods in the prior year,  the amounts  consisted of interest
expense payable on the credit line and promissory notes.



                                       11
<PAGE>  12

INCOME TAXES

The Company has incurred minimal income taxes due to its cumulative  losses. The
provision for income taxes for the quarter  represented  minimum state franchise
taxes.

INFLATION

Management  believes  that  inflation  has  not  had a  material  impact  on the
Company's results of operations.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents on hand totaled $5.6 million at September 30, 1996 and
$1.3 million at March 31, 1996.  During the six months ended  September 30, 1996
the Company  generated  $8.1 million  (net) in cash from  financing  activities,
including  $8.2 million  (net) from the sale of additional  equity.  The Company
completed  a  private   placement  of  preferred   stock  for  net  proceeds  of
approximately   $1.0   million,   a  private   placement  of  common  stock  for
approximately $5.4 million,  exercise of options for $0.3 million,  and exercise
of warrants for $1.5  million.  Offsetting  the proceeds  from  financings,  the
Company made payments on promissory notes of approximately $0.1 million.

During the past six months,  the Company  used $3.7 million for  operations,  an
increase of approximately $1.4 million over the amount used by operations in the
same  six  month  period  of the  prior  year.  The  increase  in cash  used for
operations  was primarily due to the  substantial  pay down of accounts  payable
compared to the same period in the prior year when accounts payable were allowed
to cumulate due a cash shortage. Capital expenditures were approximately $39,000
for the six months ended September 30, 1996.

The Company  believes  that proceeds  from the sale of equity  securities  since
March 31, 1996 will at least be  sufficient  to allow the Company to conduct its
operations through August 1997.  Continuing operations thereafter will depend on
increased cash flow from operations or the Company's ability to raise additional
funds  through  equity,  debt,  or other  financing.  There can be no assurance,
however, that such funds will be available.


                                       12
<PAGE>  13


                                     PART II

                                     ITEM 4
               SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS


(a)   The Company held its annual meeting of stockholders on September 25, 1996.

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

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

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

                               Number of Votes       # of Votes     # of Votes
         Name of Nominee             For               Against       Withheld
----------------------------- ------------------- ---------------- -------------
Alan M. Davis                       9,877,348                           48,672
Roger C. Ferguson                   9,877,348                           48,672
Gary E. Gratny                      9,877,348                           48,672
Michael G. Lyons                    9,877,348                           48,672
Phillip E. Pearce                   9,877,348                           48,672
Kenneth A. Sexton                   9,877,348                           48,672
John R. Snedegar                    9,877,348                           48,672
William R. Stow III                 9,877,348                           48,672

         (ii) Approval of amendment and  restatement of incentive  stock option,
non-qualified stock option and restricted stock purchase plan - 1992. A total of
7,469,585 votes were voted for the amendment;  295,048 votes were voted against;
and 22,111 votes were withheld.

         (iii)  Proposal  to reserve an  additional  1,500,000  shares of common
stock to the Company's  1992 stock option plan. A total of 7,521,507  votes were
voted for the proposal;  243,059 votes were voted against; and 21,095 votes were
withheld.

         (iv) Approval of the selection of Price Waterhouse LLP as the company's
independent  auditors  for the year ended March 31,  1997.  A total of 9,904,711
votes were voted for the selection;  13,691 votes were voted against;  and 9,277
votes were withheld.


                                     ITEM 5
                                OTHER INFORMATION

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


                                       13
<PAGE>  14


                                     ITEM 6
                        EXHIBITS AND REPORTS ON FORM 8-K


(a)      Exhibits

<TABLE>
<CAPTION>


  Exhibit                                                                                                   Ref./
  Number                                       Description Of Document                                      Page
------------   ----------------------------------------------------------------------------------------   ----------
<S>            <C>                                                                                        <C>
   
    1.1        Underwriting Agreement between the Company and Dabney/ Resnick, Inc.                          (F)
    3.1        Amended and Restated Certificate of Incorporation of the Company.                             (B)
    3.2        Amended and Restated Bylaws of the Company.                                                   (A)
    3.3        Certificate of Designation, Series C Preferred Stock.                                         (F)
    3.4        Certificate of Amendment of Certificate of Designation,  Series C Preferred Stock.            (F)
    4.1        Investor's  Rights  Agreement  date  September  16,  1994 among the Company and certain
               investors.                                                                                    (B)
    4.2        Registration Rights Agreement dated December 15, 1994.                                        (B)
    4.3        Registration Rights Agreement dated December 1995.                                            (E)
    4.4        Registration Rights Agreement dated May 1996.                                                 (D)
    4.5        Registration Rights Agreement dated June 1996.                                                (F)
   10.1        Form of Indemnity Agreement for Directors.                                                    (A)
   10.2        Form of Indemnity Agreement for Officers.                                                     (A)
   10.3        Performance  Share Escrow  Agreement,  as amended,  among the Company,  Montreal  Trust
               Company of Canada as Escrow Agent, and certain of the Company's stockholders.                 (A)
   10.4        Sublease dated December 2, 1993 between  McDonnell  Douglas Travel Company and StarBase
               Corporation, for the Company's Irvine, California facilities.                                 (B)
   10.5        1996 Stock Option Plan, as amended. (*)                                                        (G)
   10.6        Form of Restricted Stock Issuance Agreement.                                                  (A)
   10.7        Form of Restricted Stock Purchase Agreement.                                                  (A)
   10.8        Forms of Common Stock Subscription Agreements and Warrants used from time to time
               between the Company and certain of its stockholders in connection with certain equity
               financings, together with a list of equity investors.                                         (A)
   10.9        Forms of Common Stock Subscription Agreement and Warrants used in November 1994
               Private Placement.                                                                            (B)
   10.10       Forms of Common Stock  Subscription  Agreement  and Warrants used in March 1995 Private
               Placement.                                                                                    (C)
   10.11       Regional Prototype Defined Contribution Plan and Trust of the Company. (*)                    (A)
   10.12       Fiscal Agency Agreement between the Company and Canaccord Capital Corporation.                (B)
   10.13       Form of Agents' Warrant.                                                                      (B)
   10.14       Silicon Valley Bank Warrant dated December 15, 1994.                                          (B)
   10.15       Promissory Note dated November 8, 1995 payable to William R. Stow III.                        (E)
   10.16       Promissory Note dated December 11, 1995 payable to Michael G. Lyons.                          (E)
   10.17       Promissory Note dated December 11, 1995 payable to John Snedegar.                             (E)
   10.18       Secured Promissory Note dated July 1, 1995 from William R. Stow III.                          (E)
   10.19       Forms of Preferred  Stock  Subscription  Agreements  and Warrants  used in January 1996
               Private Placement, together with a list of equity investors.                                  (E)
   10.20       Amendment  No. 1 to the  Sublease  dated  December 1, 1994  between  McDonnell  Douglas
               Travel  Company  and  StarBase  Corporation,   for  the  Company's  Irvine,  California
               facilities.                                                                                   (E)
   10.21       Amendment  No. 2 to the Sublease  dated  September 1, 1995  between  McDonnell  Douglas
               Travel  Company  and  StarBase  Corporation,   for  the  Company's  Irvine,  California
               facilities.                                                                                   (E)

</TABLE>

                                      14
<PAGE>  15


<TABLE>
<CAPTION>

------------   ----------------------------------------------------------------------------------------   ----------
  Exhibit                                                                                                   Ref./
  Number                                       Description Of Document                                      Page
------------   ----------------------------------------------------------------------------------------   ----------
<S>            <C>                                                                                        <C>
  
   10.22       Forms of Common Stock  Subscription  Agreement  and Warrants  used in July 1995 Private
               Placement, together with a list of equity investors.                                          (E)
   10.23       Form of Warrant used in the May 13, 1996 Private Placement.                                   (D)
   10.24       Form of Subscription Agreement used in the May 13, 1996 Private Placement.                    (D)
   10.25       Form of  Preferred  Stock  Subscription  Agreement  and  Warrant  used in the June 1996
               Private Placement, together with a list of equity investors and placement agent.              (F)
    27         Financial Data Schedule.                                                                      17

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

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

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

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

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

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

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

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




(b)      Reports on Form 8-K

         In a report  filed on Form 8-K  dated  August  13,  1996,  the  Company
reported a press release  announcing  the election of Alan M. Davis as President
and CEO and  William  R. Stow III as  Chairman.  In  addition,  Michael G. Lyons
relinquished  the position of Co-Chairman but will continue as a Director of the
Company.

         In a report  filed on Form 8-K  dated  August  16,  1996,  the  Company
reported a press  release  announcing  a  voluntary  request to delist  from the
Vancouver Stock Exchange.

         In a report  filed on Form 8-K dated  September  9, 1996,  the  Company
reported a press  release  announcing  that the trading of its common  stock had
commenced on the NASDAQ SmallCap Market.



                                       15
<PAGE>  16


                                   SIGNATURES


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

                                                     STARBASE CORPORATION
                                                     (Registrant)

NOVEMBER 14, 1996                                        /S/ ROBERT W. LEIMENA
-------------------                                   --------------------------
Date                                                     Robert W. Leimena
                                                         Chief Financial Officer


                                       16