-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JZZdB5xFJwv0Z29GkH3rUHe2zE+9PM4a0VNff3sJxP2eqOe8g8PH89Zw+4Hy0S9V GiuI+/4GFqVrks/zIdsvrg== 0000895921-02-000014.txt : 20020515 0000895921-02-000014.hdr.sgml : 20020515 20020515154416 ACCESSION NUMBER: 0000895921-02-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BE INC CENTRAL INDEX KEY: 0000895921 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 943123667 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-26387 FILM NUMBER: 02651970 BUSINESS ADDRESS: STREET 1: 800 EL CAMINO RD STREET 2: SUITE 300 CITY: MENLO PARK STATE: CA ZIP: 95117 BUSINESS PHONE: 6504624100 MAIL ADDRESS: STREET 1: 800 EL CAMINO REAL STREET 2: SUITE 300 CITY: MENLO PARK STATE: CA ZIP: 95117 10-Q 1 q10_033102.txt - - United States Securities and Exchange Commission Washington, D.C. 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Period Ended October 31, 2001. [ ] 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: 0-26387 BE INCORPORATED (Exact name of Registrant as specified in its charter) Delaware 94-3123667 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 655 West Evelyn Street, Suite 6, Mountain View, California 94041 (Address of principal executive offices, including zip code) (650) 965-4842 (Registrant's telephone number, including area code) ------------------------ (Former name, former address and former fiscal year, if changed since last report) - - ------------------------------------------------------------------------------ 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 periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ ] No [X] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, No Par Value --- 38,450,527 shares as of May 15, 2002 - - ------------------------------------------------------------------------------ BE INCORPORATED Index
PAGE PART 1 FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Statement of Net Assets in Liquidation at March 31, 2002...............1 Condensed Consolidated Balance Sheet at December 31, 2001...........................2 Consolidated Statement of Changes in Net Assets in Liquidation for the period from March 16, 2002 to March 31, 2002........................................3 Condensed Consolidated Statements of Operations for the period from January 1, 2002 to March 15, 2002 and for the three months ended March 31, 2001................................................................4 Condensed Consolidated Statements of Cash Flows of Operations for the period from January 1, 2002 to March 15, 2002 and for the three months ended March 31, 2001................................................................5 Notes to Condensed Consolidated Financial Statements................................6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Discontinued Operations.............................................................9 Item 3. Quantitative and Qualitative Disclosure about Market Risk..........................15 PART II. OTHER INFORMATION Item 1. Legal Proceedings..................................................................16 Item 2. Changes in Securities and Use of Proceeds..........................................16 Item 3. Defaults Upon Senior Securities....................................................16 Item 4. Submission of Matters to a Vote of Security Holders................................16 Item 5. Other Information..................................................................17 Item 6. Exhibits and Reports on Form 8-K...................................................17 SIGNATURES ...................................................................................18
PART I FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS BE INCORPORATED CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION (In thousands) (unaudited) March 31, 2002 ---------------- ASSETS Cash and cash equivalents ....................................... $4,679 Prepaid fees .................................................... 22 Other assets .................................................... 9 ------ Total assets .................................................. $4,710 ====== LIABILITIES Accounts payable ................................................ $ 48 Technology License obligations .................................. 540 Estimated costs during period of liquidation (Note 2) ........... 604 Contingent liabilities (Note 4) ------ Total liabilities ............................................. 1,192 ------ Net assets in liquidation ..................................... $3,518 ====== The accompanying notes are an integral part of these financial statements. -1- BE INCORPORATED Consolidated Balance Sheets - Unaudited (in thousands, except share and per share amounts) December 31, 2001 ---- Assets Current assets: Cash and cash equivalents .................................... $ 5,381 Short-term investments ....................................... -- Accounts receivable .......................................... 66 Prepaid and other current assets ............................. 1,363 ------ Total current assets ..................................... 6,810 Property and equipment, net ......................................... 2 Other assets, net of accumulated amortization ....................... 24 ------ Total assets ............................................. $ 6,836 ====== Liabilities and stockholders' equity: Accounts payable ............................................. $ 96 Accrued expenses ............................................. 94 Technology license obligations ............................... 815 Deferred revenue ............................................. 56 ------ Total liabilities ........................................ 1,061 ------ Commitments and Contingencies (Note 4) Stockholders' Equity: Preferred stock, $.001 par value: Shares authorized: 2,000,000 Shares issued and outstanding: none Common stock, $.001 par value: Shares authorized: 78,000,000 shares Shares issued and outstanding: 38,486,007................... 38 Additional paid-in capital........................................... 106,493 Deferred stock compensation.......................................... (39) Accumulated deficit.................................................. (100,717) Accumulated other comprehensive income (loss)........................ - ------ Total stockholders' equity................................ 5,775 ------ Total liabilities and stockholders' equity.............. $ 6,836 ======= The accompanying notes are an integral part of these financial statements. -2- BE INCORPORATED CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION (In thousands) (Unaudited) For the period from March 15, 2002 to March 31, 2002 ------------------- Net assets in liquidation at March 16, 2002 $ 3,435 Recoveries and refunds, net 76 Earnings on cash and cash equivalents 7 -------- Net liabilities in liquidation at March 31, 2002 $ 3,518 ======== The accompanying notes are an integral part of these financial statements. -3- BE INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) For the Period Three January 1, Months 2002 to Ending March 15, March 31, 2002 2001 -------- -------- Cost of revenues ....................................... - 251 -------- -------- Gross profit (loss) .................................... - (151) Operating expenses: Research and development ............................ - 2,481 Sales and marketing ................................. - 1,618 General and administrative .......................... 551 1,146 Restructuring charge ................................ - 307 Total operating expenses ........................ 551 5,552 -------- -------- Loss from operations ................................... (551) (5,703) Interest expense ....................................... - (15) Other income and expenses, net ......................... 6 161 -------- -------- Net loss ............................................... (545) (5,557) ======== ======== Net loss per common share--basic and diluted ........... $ (.01) $ (.15) ======== ======== Shares used in per common share calculation--basic and diluted ...................... 38,450 36,194 ======== ======== The accompanying notes are an integral part of these financial statements. -4- BE INCORPORATED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (In thousands) (Unaudited)
For the Period Three January 1, Months 2002 to Ending March 15, March 31, 2002 2001 -------- -------- Cash flows from operating activities: Net loss ............................................ $ (545) $ (5,557) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization ................... 1 267 Amortization of discount on technology license obligations ................. 5 15 Loss on disposal of fixed assets ................ 6 Amortization of deferred stock compensation ..... 2 302 Changes in assets and liabilities Accounts receivable .......................... 52 (428) Prepaid and other current assets ............. 78 (3) Accounts payable ............................. (88) (190) Accrued expenses ............................. (53) 202 Deferred revenue ............................. (56) 368 -------- -------- Net cash used in operating activities ...... (604) (5,018) -------- -------- Cash flow provided by investing activities: Acquisition of property and equipment ............... - (72) Acquisition of licensed technology .................. - (175) Purchases of short-term investments ................. - (1,728) Sales of short-term investments ..................... - 3,588 -------- -------- Net cash provided by investing activities .. - 1,613 -------- -------- Cash flows provided by financing activities: Proceeds from issuance of common stock: pursuant to common stock options .................. - 12 pursuant to common stock warrants ................. - 180 under Employee Stock Purchase Plan ................ - 324 -------- -------- Net cash provided by financing activities .. - 516 -------- -------- Net increase (decrease) in cash and cash equivalents ... (604) (2,889) -------- -------- Cash and cash equivalents, beginning of period ......... 5,381 9,463 -------- -------- Cash and cash equivalents, end of period ............... $ 4,777 $ 6,574 ======== ========
The accompanying notes are an integral part of these financial statements. -5- BE INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 1 - The Company and its Significant Accounting Policies: Be Incorporated ("Be" or the "Company") was founded in 1990 and prior to the cessation of its business operations offered software platforms designed for Internet appliances and digital media applications. The unaudited condensed consolidated financial statements included herein have been prepared by Be pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information or footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of Be the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial information included therein. While Be believes that the disclosures are adequate to make the information not misleading, it is suggested that these financial statements be read in conjunction with the unaudited financial statements and accompanying notes included in Be's Annual Report on Form 10-K/A for the fiscal year ended December 31, 2001 as filed with the Securities and Exchange Commission. On August 16, 2001, the Board of Directors of the Company unanimously adopted resolutions approving the sale of substantially all of the Company's intellectual property and other technology assets (the "Asset Sale") to ECA Subsidiary Acquisition Corporation, a Delaware corporation and an indirect wholly-owned subsidiary of Palm, Inc. ("Palm"), pursuant to an Asset Purchase Agreement dated August 16, 2001. On October 9, 2001, the Company filed a definitive proxy statement soliciting stockholder approval for the Asset Sale and the dissolution of the Company pursuant to a plan of dissolution (the "Plan of Dissolution"). The Plan of Dissolution provides for the orderly liquidation of Be's remaining assets, the winding-up of Be's business and operations and the dissolution of the Company. In accordance with the terms of the Plan of Dissolution, Be will pay, or provide for the payment of, all of its liabilities and obligations following the approval of the Board to proceed with the liquidation and dissolution of the company. If there are any remaining assets after the payment, or the provision for payment, of all of its liabilities and obligations, Be will then distribute such assets to its stockholders in one or more distributions. -6- At a special meeting of stockholders held on November 12, 2001, the stockholders of Be approved the Asset Sale and the Plan of Dissolution. The Asset Sale was completed on November 13, 2001. Under the terms of the Purchase Agreement, Be received an aggregate of 4,104,478 shares of Palm common stock valued at approximately $11,000,000 on the closing date of the transaction. On March 15, 2002, the Company filed a certificate of dissolution with the Delaware Secretary of State in accordance with the plan of dissolution approved by stockholders on November 12, 2001 and as set forth in the Definitive Proxy Statement filed on October 9, 2001. Accordingly, all activities of Be as of March 15, 2002 are presented under the liquidation basis of accounting. Under the liquidation basis of accounting, assets are stated at their estimated net realizable values and liabilities are stated at their anticipated settlement amount, if reasonably estimable. See "Activities While in Liquidation" below. Additionally, Be's common stock was delisted from the NASDAQ National Market effective March 15, 2002. Activities While in Liquidation Changes in net assets in liquidation for the period from March 16, 2002 to March 31, 2002 of $83,000, were primarily a result of the early termination of a technology license agreement. Be expects to continue to incur certain administrative and other costs associated with winding up its affairs. The amount of unknown or contingent liabilities cannot be quantified and could decrease or eliminate any remaining assets available for distribution to Be's shareholders. Further, if Be is subject to any contingent liabilities, this could require that it establish reserves that could delay any distribution to Be shareholders. Because of the uncertainties as to the precise net realizable value of Be's assets and the settlement amount of Be's debts and liabilities, Be cannot at this time determine the timing or amount of distributions that may be made to its shareholders, if any. Only if there are assets remaining at the time of the liquidation of Be's assets will Be shareholders receive a distribution of those assets. -7- Note 2 - Balance Sheet Components (in Thousands): Estimated Costs During Period of Liquidation: March 31, 2002 Accrued salaries, wages and benefits $ 122 Accrued professional fees 425 Accrued leases payable 5 Miscellaneous accrued expenses 52 ------ Estimated costs during period of liquidation $ 604 ====== Note 3 - Net Loss Per Share: Basic net loss per share is computed using the weighted average number of common shares outstanding during the periods. Diluted net loss per share is computed using the weighted average number of common and potentially dilutive common shares during the periods presented. Diluted loss per share was the same as basic loss per share for the three months ended March 31, 2002 and 2001. During the period from January 1, 2002 to March 15, 2002 and the three month period ended March 2001, options to purchase approximately 899,000 and 7.1 million shares of common stock, respectively, were outstanding but not included in the calculation because they were anti-dilutive. During the period from January 1, 2002 to March 15, 2002 and the three month period ended March 31 2001, warrants to purchase approximately 1.5 million shares were outstanding but not included in the calculation because they were anti-dilutive. NOTE 4 - Legal Contingencies: Stockholder lawsuit As previously disclosed in the Company's filings with the Securities and Exchange Commission, in November 2000, the Company's stock transfer agent, Wells Fargo Bank Minnesota, N.A., received a demand letter from Financial Square Partners ("FSP"), a Be stockholder, alleging damages resulting from the transfer agent's failure to timely issue its stock certificates. Failing to reach a settlement, on May 9, 2001, FSP filed a claim in the Superior Court of California, naming Be and Wells Fargo Bank Minnesota, N.A. as defendants. A settlement conference occurred in April 2002 and a settlement was reached in May 2002 whereby the Company agreed to pay FSP an amount less than the Company's insurance deductible of $250,000. Financial Square Partners was seeking damages in the amount of approximately $2.4 million. Antitrust lawsuit On February 15, 2002, Be engaged Susman Godfrey LLP on a contingency basis to bring forth claims against Microsoft Corporation for the destruction of Be's business resulting from anticompetitive business practices. On February 19, 2002, the Company filed a lawsuit in the United States District Court in San Francisco alleging, among other things, Microsoft harmed Be through a series of illegal, exclusionary and anticompetitive acts designed to maintain its monopoly in the Intel-compatible PC operating system market and created exclusive dealing arrangements with PC OEMs prohibiting the sale of PCs with multiple preinstalled operating systems. Be is seeking recovery of an unspecified amount of damages for the benefit of the Company and its stockholders. -8- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF DISCONTINUED OPERATIONS The following Management's Discussion and Analysis of Financial Condition and Results of Discontinued Operations contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Any statements contained in this document, including without limitation statements to the effect that Be or its management "believes," "expects," "anticipates," "plans," "may," "will," "projects," "continues," or "estimates," or statements concerning "potential," or "opportunity" or other variations thereof or comparable terminology or the negative thereof, that are not statements of historical fact should be considered forward-looking statements. These forward-looking statements are based on current expectations and entail various risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. Some of such risks and uncertainties are set forth below under "Risk Factors". Overview Be was founded in 1990 and prior to the cessation of its business operations offered software solutions designed for Internet appliances and digital media applications. On August 16, 2001, we entered into an asset purchase agreement with Palm, Inc. to sell substantially all of our intellectual property and other technology assets. This transaction was approved by our stockholders on November 12, 2001 and was completed on November 13, 2001. On March 15, 2002, we filed a Certificate of Dissolution with the Secretary of State of Delaware pursuant to Section 275 of the Delaware General Corporation Law, closed our transfer books and voluntarily delisted our common stock from the Nasdaq National Market System. Prior to 1998, we had no revenues and our operations consisted primarily of research and development. In December 1998, we shipped the first version of BeOS, our desktop operating system targeted primarily to end users. Prior releases of BeOS were targeted primarily to software developers. Throughout 1999 we focused on delivering BeOS as a desktop operating system to end users, but ultimately determined the barriers to entry and the cost of intense competition in that market was more than we could overcome. In recognition of this, and to address shareholder value, in 2000 we shifted our resources to focus primarily on the market for Internet appliances and the further development, marketing and deployment of BeIA, our software solution intended for Internet appliances. At the same time we announced that we would be making available at no charge a version of BeOS for personal use, and a more fully featured version would be available for a charge through third party publishers. Our revenues in 2000 were primarily generated from the sale of BeOS to our licensed third party publishers, and other resellers and distributors, and direct sales of BeOS to end users through our BeDepot.com Web site. We also generated revenue by collecting commission from sales of third party software through our BeDepot.com Web site. -9- In 2001, revenues were generated through royalty payments, maintenance and support fees, professional services and integration fees and by revenue-related consulting services performed after August 16, 2001 under a funding agreement with Palm executed in connection with the asset sale. These payments and fees were received from developers and manufacturers of Internet appliances, as well as other systems and hardware manufacturers incorporating BeIA into their products. However, revenues from BeIA did not offset the loss of revenues from sales of BeOS. Upon the completion of the sale of substantially all of our assets to Palm, we received an aggregate of 4,104,478 shares of Palm common stock and sold these shares on November 13, 2001 for $10,100,772 in cash, net of brokerage and transaction fees. As a result of the sale of our assets and the cessation of our business operations, we do not expect to generate any future revenues. Our research and development expenses consisted primarily of compensation and related costs for research and development personnel. We also included in research and development expenses the costs relating to licensing of technologies and amortization of costs of software tools used in the development of our operating system. Costs incurred in the research and development of new releases and enhancements are expensed as incurred. These costs included the cost of licensing technology that is incorporated into a product or an enhancement that is still in preliminary development, and for which technological feasibility has not been established. Once the product is further developed and technological feasibility has been established, development costs are capitalized until the product is available for general release. Products and enhancements have generally reached technological feasibility and were released for sale at substantially the same time. As we have ceased business operations, we do not expect to incur any research and development expenses in the future. Our sales and marketing expenses consisted primarily of compensation and related costs for sales and marketing personnel, marketing programs, public relations, investor relations, promotional materials, travel, and related expenses for attending trade shows. In July 2001, we eliminated our sales and marketing group. As we have ceased operations, we do not expect to incur any sales and marketing expenses in the future. General and administrative expenses consisted primarily of compensation and related expenses for management, finance, and accounting personnel, professional services and related fees, occupancy costs and other expenses. We expect our general and administrative expenses in the future to be minimal as we intend for only one employee to remain with the Company in order to facilitate the wind up of the company's operations and to oversee legal proceedings. In the past, we marketed and sold our products in the United States and internationally. International sales of products accounted for approximately 0%, 23% and 56% of total revenues in 2001, 2000 and 1999, respectively. We do not expect to generate any revenues in the near or extended future. -10- From time to time in the past, we have granted stock options to employees, consultants and non-employee directors. As of December 31, 2001, we had recorded deferred compensation related to these options in the total amount of $12.6 million, net of cancellations, representing the difference between the deemed fair value of our common stock, as determined for accounting purposes, and the exercise price of options at the date of grant. Of this amount, $11.9 million had been amortized at December 31, 1999, with $2.6 and $(2.0) million being amortized in 2000 and 2001, respectively. The negative amount shown for 2001 is due to the cancellation of options. Following the filing of the certifcate of dissolution on March 15, 2002, it was deemed that the remaining options no longer had any value and accordingly the remaining deferred compensation balance was cancelled. We amortized the deferred compensation charge monthly over the vesting period of the underlying option. Due to cessation of our business operations, we do not expect to grant stock options to employees, consultants or directors in the future. Comparison of the period from January 1, 2002 to March 15, 2002 to the Three Month Period ended March 31, 2001 Since the completion of the Asset Sale to Palm on November 13, 2001, we have generated no material revenues from operations and the vast majority of our expenses have been of a general and administrative nature. General and administrative expenses decreased approximately $615,000, or 54%, to $531,000 for the period from January 1, 2002 to March 15, 2002 from $1.1 million for the three month period ended March 31, 2001. In 2002, such expenses are primarily attributable to the rent costs of approximately $242,000 for the lease of our former headquarters in Menlo Park. This lease expired on February 28, 2002. Other expenses included salary costs of approximately $140,000 for the 5 person transition team in charge of winding down operations. After May 15, 2002, we intend for only one employee to remain with the Compnay. Remaining expenses were related to professional fees and also to moving costs for the relocation of the Company's offices. Statement of Changes in Net Assets in Liquidation from March 16, 2002 to March 31, 2002 Changes in net assets in liquidation for the period from March 16, 2002 to March 31, 2002 of $83,000 were primarily a result of the early termination of a technology license agreement. Liquidity and Capital Resources Since our inception, we traditionally financed our operations primarily through the sale of our equity securities and through borrowing arrangements. On November 13, 2001, we sold substantially all of our assets to Palm for approximately $11.0 million in Palm stock. That same day, we sold 4,104,478 shares of Palm stock for $10,100,772 in cash, net of brokerage and transaction fees. Cash and cash equivalents and short-term investments decreased approximately $600,000 to $4.8 million at March 15, 2002 from $5.4 million at December 31, 2001. This decrease is primarily attributable to the amounts used to fund the winding down of the Company's operations. Since November 2001, we have been winding down our business operations and have substantially reduced our working capital requirements. Our working capital requirements are now minimal and we believe that existing cash and cash equivalents will be sufficient to meet our remaining operating and capital requirements for at least the next twelve months or until a final liquidation occurs. As part of the winding down process, we intend to distribute part of our remaining cash to our shareholders as soon as practicable under Delaware law and dissolution procedures. After that time, we intend to retain only a nominal amount of cash to complete the winding down process. Critical Accounting Policies Use of estimates and liquidation accounting The preparation of unaudited financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. All activities of Be as of March 15, 2002 are presented under the liquidation basis of accounting. Under the liquidation basis of accounting, assets are stated at their estimated net realizable values and liabilities are stated at their anticipated settlement amount, if reasonably estimable. -11- FACTORS AFFECTING OUR BUSINESS, OPERATING RESULTS AND FINANCIAL CONDITION The following is a discussion of certain risks, uncertainties and other factors that currently impact or may impact our business, operating results and/or financial condition. Anyone evaluating us and making an investment decision with respect to our common stock or other securities is cautioned to carefully consider these factors, along with similar factors and cautionary statements contained in our filings with the Securities and Exchange Commission. Our stockholders may be liable to our creditors for an amount up to the amount received from the Company if our reserves for payments to creditors are inadequate. Although we filed a certificate of dissolution on March 15, 2002 with the State of Delaware, Be will continue to exist for three years following this date or for such longer period as the Delaware Court of Chancery shall direct for the purpose of prosecuting and defending lawsuits and enabling Be to close its business, to dispose of its property, to discharge its liabilities and to distribute to its stockholders any remaining assets. Under Delaware law, in the event Be fails to create an adequate contingency reserve for payment of its expenses and liabilities during this period, each Be stockholder could be held liable for payment to Be's creditors of such stockholder's pro rata share of amounts owed to creditors in excess of the contingency reserve. The liability of any stockholder would be limited to the amounts previously received by such stockholder from Be (and from any liquidating trust or trusts). As a result, a stockholder could be required to return all distributions previously made to such stockholder and would receive no amounts from Be under the Plan of Dissolution. Moreover, in the event a stockholder has paid taxes on amounts previously received, a repayment of all or a portion of such amount could result in a stockholder incurring a net tax cost if the stockholder's repayment of an amount previously distributed does not cause a commensurate reduction in taxes payable. Although Be intends to exercise caution in setting up its contingency reserve and making distributions to stockholders, there can be no assurance that the contingency reserve established by Be will be adequate to cover our expenses and liabilities. Our stock transfer books were closed on March 15, 2002, the final record date, after which any trades will not be recorded by the Company. We closed our stock transfer books and discontinued recording transfers of Common Stock at the close of business on March 15, 2002 (the "Record Date"), the date of effectiveness of the Certificate of Dissolution we filed with the Delaware Secretary of State. Thereafter, certificates representing our Common Stock will not be assignable or transferable on our books except by will, intestate succession or operation of law. Although our Common Stock currently trades on the "over-the-counter" securities market, the proportionate interests of our stockholders have been fixed on the basis of their respective stock holdings at the close of business on the Record Date, and, after the Record Date, any distributions made by the Company will be made solely to the stockholders of record at the close of business on the Record Date, except as may be necessary to reflect subsequent transfers recorded on our books as a result of any assignments by will, intestate succession or operation of law. For any other trades after the Record Date, the seller and purchaser of the stock will need to negotiate and rely on contractual obligations between themselves with respect to the allocation of stockholder proceeds arising from ownership of the shares. We have not completed an audit of our fiscal 2001 financials that were to be filed with our annual report on From 10-K. In order to further curtail expenses in connection with our wind-up and dissolution, we filed unaudited financial statements with our Form 10-K, as amended, for the 2001 fiscal year. Because these financial statements were not audited by an outside auditor, such statements could be subject to change or the financial information included therein may be materially different from audited financial information. There can be no assurance that such changes or differences would not be significant. -12- Our stock was delisted from the Nasdaq National Market on March 15, 2002 and is significantly less liquid than before. We voluntarily requested that our stock be delisted from trading on the Nasdaq Stock Market on March 15, 2002 due to the fact that we had ceased our business operations. Following delisting, the ability of stockholders to buy and sell our shares has been materially impaired, and is limited primarily to over-the-counter quotation services, such as Pink Sheets, that handle high-risk ventures and are not regulated by the Securities and Exchange Commission. There is no guarantee that our stock will continue to be quoted on over-the-counter markets. If we are unable to comply with the requirements for continued listing for over-the-counter markets such as the OTC Bulletin Board or the Pink Sheets, our stock may no longer be eligible for quotation on such services. If our stock is removed from quotation from these regulated quotation services, it may further limit the liquidity of our common stock and impair stockholders' ability to buy and sell our shares. We cannot guarantee how much cash, if any, will be available to distribute to our stockholders and if there is cash to distribute, the timing of any such distribution. There is currently no firm timetable for the distribution of proceeds to our stockholders because of contingencies inherent in winding up the Company's business. The proportionate interests of all of our stockholders will be fixed on the basis of their respective stock holdings at the close of business on the Record Date, and after such date, any distributions made by the Company will be made solely to stockholders of record on the close of business on the Record Date, except to reflect permitted transfers. We are, however, currently unable to predict the precise nature, amount or timing of any distribution to stockholders. The actual nature, amount and timing of all distributions will be determined by our Board of Directors, in its sole discretion. Uncertainties as to the precise net value of our non-cash assets, the resolution of our outstanding claim against Microsoft Corporation and the ultimate amount of our debts and liabilities make it impracticable to predict the aggregate net value ultimately distributable to stockholders. Claims, liabilities and expenses from operations (including costs associated with the sale of our remaining assets and the settlement of our remaining liabilities, taxes, legal and accounting fees and miscellaneous office expenses) will continue to be incurred. These expenses will reduce the amount of cash available for ultimate distribution to stockholders. However, no assurances can be given that available cash and amounts received on the sale of assets will be adequate to provide for our obligations, liabilities, expenses and claims and to make cash distributions to stockholders. If such available cash and amounts received from the sale of assets are not adequate to provide for our obligations, liabilities, expenses and claims, we may not be able to distribute meaningful cash, or any cash, to our stockholders. -13- The filing of the antitrust lawsuit against Microsoft or the engagement of legal counsel for that purpose does not guarantee that the outcome of the suit will be favorable for Be. On February 15, 2002, Be engaged Susman Godfrey LLP on a contingency basis to bring forth claims against Microsoft Corporation for the destruction of Be's business resulting from anticompetitive business practices. On February 19, 2002, the Company filed a lawsuit in the United States District Court in San Francisco alleging, among other things, Microsoft harmed Be through a series of illegal, exclusionary and anticompetitive acts designed to maintain its monopoly in the Intel-compatible PC operating system market and created exclusive dealing arrangements with PC OEMs prohibiting the sale of PCs with multiple preinstalled operating systems. While Susman Godfrey was hired by Be to represent the company and to seek a recovery for the benefit of stockholders, Susman Godfrey does not directly represent the stockholders themselves, either individually or as a class. The filing of the antitrust lawsuit or the engagement of legal counsel for that purpose does not guarantee that the outcome of the suit will be in Be's favor or that stockholders can assume that any distribution of proceeds will occur as a result of a settlement of the lawsuit or a judgment against Microsoft. In addition, we have engaged Susman Godfrey on a contingency basis such that any amounts collected as a result of a settlement of the lawsuit or a judgment against Microsoft would be divided between the Company for the benefit of its stockholders and Susman Godfrey under the terms of the engagement letter entered into between the parties. The proceeds from the sale of our remaining assets may be less than anticipated. Sales of any remaining assets will be made on such terms as are approved by the Board of Directors and may be conducted by competitive bidding, public sales or privately negotiated sales. The prices at which we will be able to sell these assets will depend largely on factors beyond our control such as general market conditions. Because some of our remaining assets may decline in value over time, we may not be able to consummate the sale of these assets in time to generate meaningful value. In addition, we may not obtain as high a price for a particular asset as we might secure if we were not in liquidation. We may be unable to negotiate settlements with respect to our remaining liabilities. We are currently in the process of negotiating settlements with respect to our remaining obligations and liabilities which include, without limitation, tax obligations, claims by licensees, and contractual and trade payables with third parties including vendors and service providers. If we are unable to successfully negotiate termination of these obligations, we will have fewer cash proceeds to distribute to our stockholders. -14- If Be fails to retain the services of its remaining executive officer and Board members, the plan of dissolution may not succeed. The success of the Plan of Dissolution depends in large part upon Be's ability to retain the services of its current President and Board of Directors. For this reason, Be approved incentive arrangements with its President and the three remaining members of its Board of Directors. Despite these arrangements, the retention of qualified personnel is particularly difficult under Be's current circumstances. We may continue to incur the expense of complying with public company reporting requirements. We have an obligation to continue to comply with the applicable reporting requirements of the Securities Exchange Act of 1934, as amended, even though compliance with such reporting requirements is economically burdensome. The decline in the value of our stock and our resulting cessation of business operations and dissolution could give rise to securities class action claims against us, which could deplete any proceeds that may be distributed to stockholders. Securities class action claims have been brought against companies in the past where the market price of the company's securities has fallen due to an inability of the company to achieve operational profitability. Any such litigation could be very costly and divert our remaining resources from being available for distribution to our stockholders. Any adverse determination in this kind of litigation could also deplete our cash position, and reduce proceeds that would otherwise be distributed to our stockholders. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Be's cash equivalents are exposed to financial market risks due to fluctuations and interest rates, which may affect interest income. Due to the short term nature of Be's investment portfolio, Be would not expect operating results or cash flows to be affected to any significant degree by the effect of a sudden change in market interest rates. Be does not use its investment portfolio for trading or other speculative purposes. -15- PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Stockholder lawsuit As previously disclosed in the Company's filings with the Securities and Exchange Commission, in November 2000, the Company's stock transfer agent, Wells Fargo Bank Minnesota, N.A., received a demand letter from Financial Square Partners ("FSP"), a Be stockholder, alleging damages resulting from the transfer agent's failure to timely issue its stock certificates. Failing to reach a settlement, on May 9, 2001, FSP filed a claim in the Superior Court of California, naming Be and Wells Fargo Bank Minnesota, N.A. as defendants. A settlement conference occurred in April 2002 and a settlement was reached in May 2002 whereby the Company agreed to pay FSP an amount less than the Company's insurance deductible of $250,000. Financial Square Partners was seeking damages in the amount of approximately $2.4 million. Antitrust lawsuit On February 15, 2002, Be engaged Susman Godfrey LLP on a contingency basis to bring forth claims against Microsoft Corporation for the destruction of Be's business resulting from anticompetitive business practices. On February 19, 2002, the Company filed a lawsuit in the United States District Court in San Francisco alleging, among other things, Microsoft harmed Be through a series of illegal, exclusionary and anticompetitive acts designed to maintain its monopoly in the Intel-compatible PC operating system market and created exclusive dealing arrangements with PC OEMs prohibiting the sale of PCs with multiple preinstalled operating systems. Be is seeking recovery of an unspecified amount of damages for the benefit of the Company and its stockholders. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None -16- ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits None (b) Reports on Form 8-K (i) Current Report on Form 8-K, filed March 6, 2002, announcing that (i) on February 19, 2002 Be had filed suit against Microsoft Corporation for the destruction of Be's business resulting from the anticompetitive business practices of Microsoft and (ii) on March 4, 2002, the Company planned to file a certificate of dissolution with the Delaware Secretary of State on March 15, 2002 in accordance with the Plan of Dissolution approved by stockholders on November 12, 2001. (ii) Current Report on Form 8-K, filed March 28, 2002, announcing that on March 15, 2002, Be had filed a certificate of dissolution with the Delaware Secretary of State and voluntarily delisted from the Nasdaq National Market. -17- 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. Dated: May 15, 2002 BE INCORPORATED (Registrant) By: /s/ DANIEL S. JOHNSTON ----------------------------- Daniel S. Johnston President and General Counsel -18- -----END PRIVACY-ENHANCED MESSAGE-----