Starbase Planning $12 Million Offering
By ANDREW SIMONS
Starbase Corp., a Santa Ana-based software maker, continued a string of financing deals with plans for a $12 million private placement of preferred stock.
The financing is the company’s fourth in seven months, including a $3 million private placement in November and a $4 million line of credit from Silicon Valley Bank in April. Earlier this year, the company cut its payables by $2.5 million by offering vendors company stock in place of cash.
Starbase plans to seek approval for the latest preferred stock deal at its July shareholders meeting.
“Our cash position hasn’t been the strongest,” said Doug Norman, Starbase’s chief financial officer. “But we’ve shored up our finances,the sooner we can bring confidence to our customers, the sooner they are going to feel confident about placing big orders.”
Norman said he was confident shareholders would OK the private placement.
“The credibility of these notable institutional investors is a real testament to investor confidence in our business plan moving forward,” Starbase Chief Executive Jim Harrer said.
Starbase has been coping with the general tech slowdown. In the March quarter, Starbase posted a pro forma loss of $419,000 on a 28% decline in revenue to $11.9 million vs. a year ago. The company reported a $507,000 profit a year earlier.
Starbase shares have been hit hard in the past 12 months; declining 91% from 2.86 to a recent close of 26 cents a share.
Starbase’s software products allow developers to manage both code and content at the same time. It also allows geographically dispersed software developers,as often happens in large companies,to collaborate in writing software code via the Internet.
At the peak of Internet-related capital spending, companies would spend money on software such as Starbase’s. But it has become a more difficult sell in the past year.
Starbase’s slowdown stands in stark contrast to its rapid growth of the past few years, when it stood as one of OC’s fastest-growing companies.
Like many software companies in the heady days of the technology boom, Starbase grew by acquisition.
In the past two years, Starbase acquired worldweb.net and Technology Builders Inc., as it sought to grow its product base and improve its sales and marketing team.
Starbase executives bought both companies with stock, aping the expansion method employed by fellow fastest-growing company Irvine-based Broadcom Corp.
But Starbase has been in triage since September.
The company’s acquisition strategy bloated its ranks, forcing it to cut nearly 12% of its staff.
Starbase’s executive ranks, which had long been led by company founder William Stow, were overhauled.
Starbase’s board hired Harrer, former head of San Luis Opisbo-based Web Associates Inc.
Stow took an advisory role on the board following the change.
Starbase also elected John Snedegar as chairman of the board. Snedegar is chief executive of Micro General Corp. in Santa Ana, which is being bought by Irvine-based Fidelity National Financial Inc.
Starbase’s shares recently were transferred to the Nasdaq SmallCap Market from the Nasdaq exchange.
Nasdaq requires that shares trade for at least a buck to stay listed. Starbase’s board approved a 1-for-10 reverse stock split in an effort to comply with the rule. The company plans to seek shareholder support for the reverse split at its July meeting.
