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 quarterly period ended June 30, 1999

          |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                             Commission File Number:

                                 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)

        800 El Camino Real, Suite 400, Menlo Park, CA 94025 (Address of
                principal executive offices, including zip code)

                                 (650) 462-4100
              (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) has  been  subject  to such  filing
requirements for the past 90 days. Yes (1) No (2)

The  number of shares of Common  Stock  outstanding  as of August  31,  1999 was
34,395,406.





<PAGE>





                                 BE INCORPORATED
                                    FORM 10-Q
                                TABLE OF CONTENTS



                                                                            PAGE

PART I.   FINANCIAL INFORMATION

Item 1.   Condensed Consolidated Financial Statements:

          Consolidated Balance Sheets at June 30, 1999
          and December 31, 1998................................................3

          Consolidated  Statements of Income for the three
          and six month periods ended June 30, 1999 and June 30, 1998..........4

          Consolidated  Statements of Cash Flows for the six month
          periods ended June 30, 1999 and June 30, 1998........................5

          Notes to Condensed Consolidated Financial Statements.................6


Item 2.   Management's  Discussion and Analysis of Financial Condition
          and Results of Operations............................................8


Item 3.   Quantitative and Qualitative Disclosures About Market Risk..........17

PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings...................................................17

Item 2.   Changes in Securities and Use of Proceeds...........................17

Item 3.   Defaults upon Senior Securities.....................................18

Item 4.   Submission of Matters to a Vote of Security Holders.................18

Item 5.   Other Information...................................................18

Item 6.   Exhibits and Reports on Form 8-K....................................18

          Signatures..........................................................19

          Exhibit 27.1 - Financial Data Schedule



<PAGE>





                         PART I - FINANCIAL INFORMATION

ITEM 1.             CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                        BE INCORPORATED AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                 (in thousands)
<TABLE>
<CAPTION>

                                                           June 30, December 31,
                                                             1999        1998
                                                           --------    --------
                                                         (unaudited)
<S>                                                        <C>         <C>
ASSETS
Current assets:

   Cash and cash equivalents ...........................   $  1,318    $  3,394
   Short-term investments ..............................      2,335       8,254
   Accounts receivable .................................        242         477
   Prepaid and other current assets ....................        259         327
                                                           --------    --------
       Total current assets ............................      4,154      12,452

Property and equipment, net ............................        578         403
Purchased web site technology, net of amortization .....        121         303
Other assets, net of accumulated amortization ..........      1,548         476
                                                           --------    --------
        Total assets ...................................   $  6,401    $ 13,634
                                                           ========    ========


LIABILITIES, MANDATORILY REDEEMABLE
CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' DEFICIT Current liabilities:
   Accounts payable ....................................   $  1,098    $    576
   Accrued expenses ....................................      1,826       1,094
   Technology license obligations, current portion .....        723         688
   Deferred revenue ....................................        566         392
                                                           --------    --------
       Total current liabilities .......................      4,213       2,750

Technology license obligations, net of current portion .        446         779
                                                           --------    --------
       Total liabilities ...............................      4,659       3,529
                                                           --------    --------
Mandatorily redeemable convertible preferred stock .....     38,268      38,005
                                                           --------    --------
Stockholders' Deficit:
   Common stock ........................................          5           5
   Additional paid-in capital ..........................     32,767      25,302
   Deferred stock compensation .........................     (8,288)     (4,490)
   Accumulated deficit .................................    (61,010)    (48,717)
                                                           --------    --------
       Total stockholders' deficit .....................    (36,526)    (27,900)
                                                           --------    --------
        Total liabilities, mandatorily redeemable
          preferred stock and stockholders' deficit ....   $  6,401    $ 13,634
                                                           ========    ========
</TABLE>

              The accompanying notes are an integral part of these
                  condensed consolidated financial statements.




                                       3
<PAGE>

                        BE INCORPORATED AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF INCOME
                    (in thousands, except per share amounts)


                                <TABLE>
<CAPTION>
                                               Three Months Ended      Six Months Ended
                                                     June 30,              June 30,
                                               ------------------    -------------------
                                                 1999       1998        1999      1998
                                               -------    -------    --------    -------
                                                   (unaudited)           (unaudited)
<S>                                            <C>        <C>        <C>         <C>
Net revenues ...............................   $   537    $   602    $    846    $   666
Cost of revenues ...........................       239      1,620         324      1,763
                                               -------    -------    --------    -------
Gross profit (loss) ........................       298     (1,018)        522     (1,097)

Operating expenses:
   Research and development ................     1,783      1,951       3,670      3,026
   Sales and marketing .....................     2,587      1,027       4,341      1,883
   General and administrative ..............       694        678       1,559      1,129
   Amortization of deferred stock
     compensation ..........................     1,713      1,078       3,378      1,615
                                               -------    -------    --------    -------
       Total operating expenses ............     6,777      4,734      12,948      7,653
                                               -------    -------    --------    -------

Loss from operations .......................    (6,479)    (5,752)    (12,426)    (8,750)

Interest expense ...........................       (38)       (29)        (74)       (84)
Other income and expenses, net .............        70        224         207        353
                                               -------    -------    --------    -------
Net loss ...................................    (6,447)    (5,557)    (12,293)    (8,481)
                                               -------    -------    --------    -------
Accretion of mandatorily redeemable
   convertible preferred stock .............   $  (131)   $   (97)   $   (264)   $  (163)
                                               -------    -------    --------    -------
Net loss attributable to common
   stockholders ............................   $(6,578)   $(5,654)   $(12,557)   $(8,644)
                                               =======    =======    ========    =======

Net loss per common share--basic and diluted   $ (1.54)   $ (1.86)   $  (3.07)   $ (2.99)
                                               =======    =======    ========    =======
Shares used in per common share
   calculation--basic and diluted ..........     4,266      3,046       4,090      2,893
                                               =======    =======    ========    =======
</TABLE>

              The accompanying notes are an integral part of these
                  condensed consolidated financial statements.








                                       4
<PAGE>


                        BE INCORPORATED AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
<TABLE>
<CAPTION>
                                                       Six Months Ended June 30,
                                                          1999            1998
                                                         ------          ------
                                                              (unaudited)
<S>                                                    <C>             <C>
Cash flows from operating activities:
   Net loss ........................................   $(12,293)       $ (8,481)
   Adjustments to reconcile net loss to net
    cash used in operating activities:
     Depreciation and amortization .................        447             419
     Licensed technology used in
      research and development .....................       --             1,841
     Amortization of discount on
       technology license obligations ..............         61              53
     Loss on disposal of fixed assets ..............         64            --
     Compensation expense incurred on issuance
       of stock ....................................        497            --
     Amortization of deferred stock compensation ...      3,378           1,615
     Changes in assets and liabilities
      (in 1998, net of effects of acquisition):
        Accounts receivable ........................        235            (296)
        Prepaid and other current assets ...........        (54)            (96)
        Accounts payable ...........................        522              88
        Accrued expenses ...........................       (162)            160
        Deferred revenue ...........................        174               8
                                                         ------          ------
         Net cash used in operating activities .....     (7,131)         (4,689)
                                                         ------          -------
Cash flow used in investing activities:
   Acquisition of property and equipment ...........       (371)           (201)
   Acquisition of licensed technology ..............       (452)           (562)
   Purchases of short-term investments .............     (1,035)        (15,019)
   Sales of short-term investments .................      6,953           1,392
   Acquisition of StarCode (net of cash acquired) ..       --              (562)
                                                         ------          ------
      Net cash provided by
            (used in) investing activities .........      5,095         (14,952)
                                                         ------          ------
Cash flows provided by financing activities:
   Proceeds from issuance of preferred stock, net ..       --            19,404
   Proceeds from option to purchase Series 2,
    preferred stock and common stock warrants ......       --             1,322
   Proceeds from issuance of common stock ..........         59             203
   Initial public offering costs ...................        (96)           --
   Repurchase of common stock ......................         (3)             (4)
                                                         ------          ------
      Net cash used in (provided by)
          financing activities .....................        (40)         20,925
                                                         ------          ------
Net increase (decrease) in cash and cash equivalents     (2,076)          1,284

Cash and cash equivalents, beginning of period .....      3,394             699
                                                         ------          ------
Cash and cash equivalents, end of period ...........   $  1,318        $  1,983
                                                       ========        ========
</TABLE>

               The accompanying notes are an integral part of these
                  condensed consolidated financial statements.



                                       5
<PAGE>

                        BE INCORPORATED AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

1.   Organization and Business

     Be Incorporated (the "Company") offers the Be Operating System ("BeOS"), an
     operating  system  designed  for digital  media  applications  and Internet
     appliances.  The Company  markets and sells BeOS  directly to end users and
     resellers  and  distributors.  Prior  to  1998,  the  Company  was  engaged
     primarily in research and  development,  raising capital and development of
     its markets and was in the development stage.

2.   Basis of Presentation

     The condensed  consolidated financial statements include the accounts of Be
     Incorporated (the "Company" or "Be") and its wholly owned subsidiaries. All
     significant intercompany balances and transactions have been eliminated.

     The  condensed  consolidated  financial  statements  have been  prepared in
     accordance  with the rules and  regulations  of the Securities and Exchange
     Commission  ("SEC")  applicable to interim financial  information.  Certain
     information  and  footnote  disclosures  included in  financial  statements
     prepared in accordance with generally accepted  accounting  principles have
     been  omitted in these  interim  statements  pursuant to such SEC rules and
     regulations.  Management recommends that these interim financial statements
     be read in conjunction with the audited financial statements of the Company
     for the year ended December 31, 1998 and the notes thereto contained in the
     Company's  Registration  Statement on Form S-1, Registration No. 333-77855,
     in the form declared effective by the Securities and Exchange Commission on
     July 20,  1999.  Interim  results  are not  necessarily  indicative  of the
     results to be expected  for the full year.  The  December  31, 1998 balance
     sheet was derived from audited financial  statements,  but does not include
     all disclosures required by Generally Accepted Accounting Standards.

     In management's  opinion, the condensed  consolidated  financial statements
     include all adjustments  necessary to present fairly the financial position
     and results of operations  for each interim period shown.  Interim  results
     are not necessarily  indicative of results to be expected for a full fiscal
     year.

2.   Recent Accounting Pronouncements

     In December 1998,  AcSEC  released  Statement of Position 98-9 or SOP 98-9,
     Modification of SOP 97-2,  "Software Revenue  Recognition." SOP 98-9 amends
     SOP 97-2 to require that an entity  recognize  revenue for multiple element
     arrangements  by  means  of the  "residual  method"  when  (1)  there is no
     vendor-specific  objective  evidence ("VSOE") of the fair values of all the
     undelivered  elements  that are not  accounted  for by  means of  long-term
     contract accounting,  (2) VSOE of fair value does not exist for one or more
     of the delivered elements,  and (3) all revenue recognition criteria of SOP
     97-2  (other  than  the  requirement  for  VSOE of the  fair  value of each
     delivered  element) are  satisfied.  The provisions of SOP 98-9 that extend
     the deferral of certain  paragraphs of SOP 97-2 became  effective  December
     15,1998.  These  paragraphs  of SOP 97-2 and SOP 98-9 will be effective for
     transactions  that are entered into in fiscal years  beginning  after March
     15,1999.  Retroactive  application is prohibited.  The Company is currently
     evaluating the impact of the  requirements of SOP 98-9 and the effects,  if
     any, on its current revenue recognition policies.

     In June 1998, the Financial  Accounting Standards Board issued Statement of
     Financial  Accounting  Standards  No.  133,  or SFAS  133,  Accounting  for
     Derivative  Instruments  and Hedging  Activities.  SFAS 133 establishes new
     standards of  accounting  and  reporting  for  derivative  instruments  and
     hedging activities. SFAS 133 requires that all derivatives be recognized at
     fair  value  in  the  statement  of  financial   position,   and  that  the
     corresponding  gains or  losses be  reported  either  in the  statement  of
     operations or as a component of comprehensive income, depending on the type
     of hedging  relationship that exists. SFAS 133 will be effective for fiscal
     years  beginning  after June 15, 2000.  The Company does not currently hold
     derivative instruments or engage in hedging activities.

                                       6
<PAGE>


3.   Net Loss Per Share

     Basic net loss per common share is computed by dividing net loss  available
     to common  stockholders  by the weighted  average  number of vested  common
     shares  outstanding  for the period.  Diluted net loss per common  share is
     computed giving effect to all dilutive  potential common shares,  including
     options,  warrants and  preferred  stock.  Options,  warrants and preferred
     stock were not included in the  computation  of diluted net loss per common
     share because the effect would be  antidilutive.  A  reconciliation  of the
     numerator and denominator  used in the calculation of basic and diluted net
     loss per common share follows (in thousands, except per share data):
<TABLE>
<CAPTION>
                                                                Three Months Ended      Six Months Ended
                                                                      June 30,               June 30,
                                                                 1999        1998        1999        1998
                                                                ------      ------      ------      ------
                                                                    (unaudited)             (unaudited)
<S>                                                           <C>         <C>         <C>         <C>
Historical net loss per common share, basic and diluted:
   Net loss ...............................................   $ (6,447)   $ (5,557)   $(12,293)   $ (8,481)
   Accretion of mandatorily redeemable
     convertible preferred stock ..........................       (131)        (97)       (264)       (163)
                                                                ------      ------      ------      ------
   Numerator for net loss, basic and diluted ..............     (6,578)     (5,654)    (12,557)     (8,644)

   Denominator for basic and diluted loss per common share:
     Weighted average common shares
       outstanding ........................................      4,266       3,046       4,090       2,893
                                                                ======      ======      ======      ======
   Net loss per common share basic and diluted ............   $  (1.54)   $  (1.86)   $  (3.07)   $  (2.99)
                                                                ======      ======      ======      ======
   Antidilutive securities:
     Options to purchase common stock .....................      5,664       2,093       5,664       2,093
     Common stock not yet vested ..........................        883       1,954         883       1,954
     Preferred stock ......................................     22,499      21,853      22,499      21,853
     Warrants .............................................      2,870       2,862       2,870       2,862
                                                                ------      ------      ------      ------
                                                                31,916      28,762      31,916      28,762
                                                                ======      ======      ======      ======
</TABLE>

4.   Subsequent Events

     In July 1999, the Company  completed its initial  public  offering and sold
     6,000,000  shares of its Common  Stock at a price of $6.00 per  share.  The
     Company received  approximately  $32.4 million in cash, net of underwriting
     discounts, commissions and other offering expenses. Simultaneously with the
     closing  of  the  initial  public  offering,   the  Company's   mandatorily
     redeemable  convertible  preferred  stock  outstanding at December 31, 1998
     automatically  converted into  approximately  22.5 million shares of common
     stock.  The Company's  shares are now traded on the NASDAQ  national market
     system under the symbol "BEOS".

     In August 1999, the underwriters  exercised their over-allotment option and
     the Company  sold an  additional  557,465  shares of its Common  Stock at a
     price of $6.00 per share,  thereby raising proceeds of  approximately  $3.1
     million, net of underwriting discounts.





                                       7
<PAGE>
ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Forward Looking Statements

THIS REPORT CONTAINS FORWARD-LOOKING  STATEMENTS THAT HAVE BEEN MADE PURSUANT TO
THE PROVISIONS OF THE PRIVATE  SECURITIES  LITIGATION  REFORM ACT OF 1995.  SUCH
FORWARD-LOOKING  STATEMENTS  ARE BASED ON CURRENT  EXPECTATIONS,  ESTIMATES  AND
PROJECTIONS ABOUT THE COMPANY'S BUSINESS,  MANAGEMENT'S  BELIEFS AND ASSUMPTIONS
MADE BY MANAGEMENT.  WORDS SUCH AS "ANTICIPATES," "EXPECTS," "INTENDS," "PLANS,"
"BELIEVES," "SEEKS," "ESTIMATES," "LIKELY, "VARIATIONS OF SUCH WORDS AND SIMILAR
EXPRESSIONS   ARE   INTENDED   TO   IDENTIFY   SUCH   FORWARD-LOOKINGSTATEMENTS.
THESESTATEMENTS  ARE NOT  GUARANTEES  OF FUTURE  PERFORMANCE  AND ARE SUBJECT TO
CERTAIN   RISKS,   UNCERTAINTIES   AND   ASSUMPTIONS   THAT  ARE   DIFFICULT  TO
PREDICT;THEREFORE,  ACTUAL RESULTS AND OUTCOMES MAY DIFFER  MATERIALLY FROM WHAT
IS EXPRESSED OR FORECASTEDIN ANY SUCH FORWARD-LOOKING STATEMENTS. SUCH RISKS AND
UNCERTAINTIES  INCLUDE THOSE SET FORTH HEREIN BELOW UNDER "FACTORS AFFECTING OUR
BUSINESS,OPERATING  RESULTS AND  FINANCIAL  CONDITION" AS WELL AS THOSE NOTED IN
OUR AMENDED REGISTRATION STATEMENT ON FORM S-1 (FILE NO. 333-77855). THE COMPANY
UNDERTAKES  NO OBLIGATION TO UPDATE  PUBLICLY ANY FORWARD-  LOOKING  STATEMENTS,
WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.

Overview

     Be was  founded in 1990.  We develop  and sell BeOS,  an  operating  system
designed for digital media applications and Internet appliances.  Prior to 1997,
we had no revenues  and our  operations  consisted  primarily  of  research  and
development.  In December  1998,  we shipped the first  version of BeOS that was
targeted  primarily to end users.  Prior  releases  were  targeted  primarily to
software developers.

     Our revenues are generated  primarily from the following sources:  sales of
BeOS to  resellers  and  distributors,  and  direct  sales of BeOS to end  users
through  our  BeDepot.com  Web site.  We also  generate  revenue  by  collecting
commission from sales of third party software  through our BeDepot.com Web site.
In the  future,  we also  expect our  revenues to be  generated  from  royalties
received from OEMs bundling  BeOS on their  products.  In an attempt to increase
the number of BeOS users and increase  market  acceptance of BeOS, we may choose
to forego immediate revenue potential by providing BeOS at little or no cost.

     Our agreements with third party software  vendors provide that we will sell
and, if desired by the  customer,  electronically  distribute  software that has
been written for BeOS. We do not carry  inventory in  connection  with the third
party software sold through our Web site.

     We defer revenues from sales to distributors  and resellers.  We also defer
an  allocated  portion of revenues  attributable  to free product  upgrades.  We
recognize  revenues  from  sales  to  distributors  and  resellers  when we have
evidence that our product has been sold to end users. For example,  we typically
recognize revenue when we receive  confirmation from the distributor or reseller
of sales to end  users.  Revenues  deferred  due to free  product  upgrades  are
recognized  as upgrades  are shipped.  As of June 30,  1999,  we had $566,000 in
deferred revenues.

     Our cost of revenues consist  primarily of the cost of packaging,  software
duplication, documentation,  translation and product fulfillment. We use a third
party fulfillment house to store,  package and ship BeOS in retail channels.  We
also include in the cost of revenues the amortized costs relating to the license
of third party technology used in the development of BeOS.

     Our research and development expenses consist primarily of compensation and
related  costs for  research  and  development  personnel.  We also  include  in
research  and   development   expenses  the  costs   relating  to  licensing  of
technologies and amortization of costs of software tools used in the development
of BeOS.  Costs  incurred in the  research and  development  of new releases and
enhancements  of BeOS are  expensed as  incurred.  These costs  include  cost of
licensing technology that is incorporated into a product or an enhancement which
is still in preliminary  development and 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. To date, products and enhancements have generally
reached   technological   feasibility   and  have  been  released  for  sale  at
substantially  the same time. We expect that research and  development  expenses
will increase substantially in the future as we further develop and enhance BeOS
and develop new products  including  those intended for the Internet  appliances
market.

     Our sales and marketing  expenses  consist  primarily of  compensation  and
related  costs for sales and marketing  personnel,  marketing  programs,  public
relations,  promotional  materials,  travel and related  expenses for  attending
trade  shows.  We  also  include  costs  relating  to  third  party  application
developers,  including  partial funding of their  development  costs and cost of
technical support provided to them in our sales and marketing expenses.

                                       8
<PAGE>


     We expect our sales and marketing expenses to increase  substantially as we
promote  awareness  of BeOS.  We plan to  initiate an  advertising  and a direct
marketing  campaign,   by  increasing  print  and  Internet-based   advertising,
distributing  demonstration copies of BeOS to targeted potential customers,  and
hiring  additional  sales and  marketing  personnel.  We expect  that  sales and
marketing   expenses   will  also   increase  as  we  expand  our  domestic  and
international distributor and reseller channel and hire new personnel, establish
new  facilities  and increase  distributor  and reseller  promotions.  Sales and
marketing  expenses  will also  increase  as we further  develop  and expand our
relationships  with  third  party  application  developers  including  providing
developers technical support and financial incentives by partially funding their
development costs.

     General and  administrative  expenses consist primarily of compensation and
related expenses for finance and accounting personnel, professional services and
related fees,  occupancy  costs and other expenses.  General and  administrative
expenses  may  increase in the future as we expand our  existing  facilities  or
relocate  to  new  facilities  that  better  address  any  growth  that  we  may
experience. We also expect general and administrative expenses to increase as we
hire additional  personnel and incur costs related to the anticipated  growth in
our business and cost of operating as a public company.

     We market and sell our products in the United  States and  internationally.
International sales of products accounted for approximately 45% and 60% of total
revenues  for the three month  period  ended June 30, 1999 and for the six month
period ended June 30, 1999 respectively.  We have a subsidiary located in France
to market and sell our  products in Europe.  In  addition,  we may in the future
open new offices in other  countries to market and sell in those  countries  and
surrounding regions. The expansion of our existing international  operations and
entry into additional  international markets will require significant management
attention and financial  resources and we cannot be certain that our investments
in  establishing  offices in other  countries  will  produce  desired  levels of
revenues.  While  the  majority  of our  international  revenues  are  presently
denominated in US dollars,  we expect an increasing portion of our international
revenues to be denominated in local  currencies.  We do not currently  engage in
currency hedging activities.  Although exposure to currency fluctuations to date
has been  insignificant,  future  fluctuations  in currency  exchange  rates may
adversely affect revenues from international sales.

     From time to time in the past,  we have granted stock options to employees,
consultants  and  non-employee  directors and expect to continue to do so in the
future.  As of June 30, 1999, we had recorded deferred  compensation  related to
these options in the total amount of $17.4 million  representing  the difference
between the deemed fair value of our common stock,  as determined for accounting
purposes,  and the  exercise  price  of  option  at the  date of  grant.  Future
amortization  of expense arising out of options granted through June 30, 1999 is
estimated to be $3.1 million for the remaining six months of 1999,  $3.4 million
for the year ended 2000, $1.4 million for the year ended 2001,  $387,000 for the
year ended 2002 and $10,000 for the year ended 2003.  We amortize  the  deferred
compensation charge monthly over the vesting period of the underlying option.


                                       9
<PAGE>

Comparison  of the Three  Month  Period  ended June 30,  1999 to the Three Month
Period ended June 30, 1998

     Net Revenues.  Net revenues decreased $65,000,  or 11%, to $537,000 for the
three month period ended June 30, 1999 from  $602,000 for the three month period
ended June 30,1998.  This decrease is primarily  attributable to lower shipments
of  BeOS  which  we  believe  were  due  to  customer  deferrals  of  orders  in
anticipation of the release of version 4.5, which occurred in late June 1999.

     Cost of  Revenues.  Cost of revenues  decreased  $1.4  million,  or 85%, to
$239,000  for the three month  period  ended June 30, 1999 from $1.6 million for
the three month  period ended June  30,1998.  The cost of revenues for the three
month period ended June  30,1998  includes a charge of $1.2 million  relating to
technology which was used with BeOS, the cost of which was no longer recoverable
from forecasted revenues.

     Research and Development.  Research and Development  decreased $168,000, or
9%, to $1.8  million  for the three  month  period  ended June 30,  1999 from $2
million for the three month period ended June 30,1998.  The net decrease results
primarily from an increase of approximately $302,000 in personnel expenses and a
decrease of approximately $457,000 in costs of licensing third party technology.

     Sales and  Marketing.  Sales and Marketing  increased  $1.6 million to $2.6
million for the three month  period  ended June 30, 1999 from $1 million for the
three month period ended June 30,1998.  This increase is primarily  attributable
to the  hiring of  additional  sales and  marketing  personnel  and to the costs
relating to our third party developer programs including financial incentives in
the form of partial funding of developers'  costs and technical support provided
to developers.  Sales and marketing expenses also increased due to the launch of
new marketing  programs including those related to the release of version 4.5 of
BeOS in June of 1999.

     General and Administrative.  General and administrative  expenses increased
$16,000,  or 2%, to $694,000 for the three month period ended June 30, 1999 from
$678,000  for the three month  period  ended June 30,  1998.  This  increase was
primarily attributable to the expansion of leased facilities.

     Amortization of Deferred Stock Compensation. Amortization of deferred stock
compensation increased $635,000 to $1.7 million for the three month period ended
June 30, 1999, from $1.1 million for the three month period ended June 30, 1998.
These  amounts  represent the allocated  portion of the  difference  between the
deemed fair value of our common  stock and the exercise  price of stock  options
granted by us to employees, consultants and non-employee directors.

     Other Income (Expense),  Net. Net other income decreased $154,000,  or 69%,
to $70,000 for the three month period ended June 30, 1999 from  $224,000 for the
three month period ended June 30, 1998.  The decrease is primarily  attributable
to the decrease in interest income due to the reduced balances in our investment
portfolio.


Comparison  of the Six Month  Period ended June 30, 1999 to the Six Month Period
Ended June 30, 1998

     Net Revenues.  Net revenues increased $180,000, or 27%, to $846,000 for the
six month  period  ended June 30, 1999 from  $666,000 for the three month period
ended June 30, 1998.  This increase is  attributable  to the fact that the first
version of BeOS  targeted  primarily at end users was released in March 1998 and
that as a result we only  generated  revenues  for three months in the six month
period ended June 30, 1998.

     Cost of  Revenues.  Cost of  revenues  decreased  $1.4  million or 82%,  to
$324,000  for the six month period ended June 30, 1999 from $1.7 million for the
six month  period  ended June 30,  1998.  The cost of revenues for the six month
period  ended  June  30,1998  includes  a charge  of $1.2  million  relating  to
technology which was used with BeOS, the cost of which was no longer recoverable
from forecasted revenues.

     Research and Development.  Research and Development  increased $644,000, or
21%,  to $3.7  million  for the six month  period  ended  June 30,  1999 from $3
million  for the six month  period  ended  June  30,1998.  The net  increase  is
primarily  attributable  to an  increase  in  personnel  costs and a decrease in
licensing costs.  Personnel  expenses  increased by  approximately  $690,000 and
included a one-time  charge of  approximately  $145,000  related to the grant of
immediately  vested  stock  options  and the  acceleration  of  vesting of stock
options previously issued to an employee.

     Sales and  Marketing.  Sales and Marketing  increased  $2.5 million to $4.3
million for the six month  period  ended June 30, 1999 from $1.9 million for the
six month period ended June 30,1998. This increase is primarily  attributable to
the hiring of additional sales and marketing personnel and to the costs relating
to our third party developer programs including financial incentives in the form
of partial  funding of  developers'  costs and  technical  support  provided  to
developers.  Sales and marketing expenses also increased due to the amortization
of purchased technology related to the acquisition in the second quarter 1998 of
StarCode,  a software development company. In 1999, sales and marketing expenses
increased due to the launch of new marketing programs including those related to
the release of version 4.5 of BeOS in June of 1999.

                                       10
<PAGE>

     General and Administrative.  General and administrative  expenses increased
$430,000,  or 38%, to $1.6  million for the six month period ended June 30, 1999
from $1.1 million for the six month period  ended June 30, 1998.  This  increase
was primarily  attributable  to increases in  professional  services and related
fees, increased personnel and related costs, and expansion of leased facilities.

     Amortization of Deferred Stock Compensation. Amortization of deferred stock
compensation  increased  $1.8  million to $3.4  million for the six month period
ended June 30,  1999,  from $1.6 million for the six month period ended June 30,
1998. These amounts  represent the allocated  portion of the difference  between
the  deemed  fair  value of our  common  stock and the  exercise  price of stock
options granted by us to employees, consultants and non-employee directors.

     Other Income (Expense),  Net. Net other income decreased $146,000,  or 41%,
to $207,000 for the six month  period ended June 30, 1999 from  $353,000 for the
six month period ended June 30, 1998. The decrease is primarily  attributable to
the decrease in interest  income due to the reduced  balances in our  investment
portfolio.


Liquidity and Capital Resources

     Since our inception,  we have financed our operations primarily through the
sale of our equity securities and through borrowing arrangements.  Cash and cash
equivalents and short-term  investments decreased  approximately $7.9 million to
$3.7 million at June 30,  1999,  from $11.6  million at December 31, 1998.  This
decrease is primarily attributable to the funding of operations.

     Cash used in operating  activities  increased  $2.4 million to $7.1 million
for the six month period ended June 30, 1999 as compared to $4.7 million for the
six month period ended June 30,1998. This increase is primarily  attributable to
the increase in net loss during the six month period ended June 30, 1999.

     Cash provided by investing activities increased approximately $20.1 million
to $5.1 million for the six month period ended June 30, 1999 as compared to cash
used by  investing  activities  of $15.0  million for the six month period ended
June 30, 1998.  This increase is primarily  attributable  to sales of short-term
investments  in the six month period ended June 30,1999 to fund  operations.  In
the six month period ended 1998, we purchased short term  investments  following
the sale of Series 2 convertible preferred stock.

     Cash used in financing  activities  for the six month period ended June 30,
1999 was  approximately  $40,000,  which  represents a $20.9 million decrease in
cash provided by financing  activities  from the six month period ended June 30,
1998. This decrease is primarily  attributable to the net proceeds received from
the sale of Series 2 convertible  preferred  stock in the six month period ended
June 30,1998.

     We require substantial working capital to fund our operations. We expect to
continue to  experience  losses from  operations  and negative cash flows for at
least the next twelve  month  period.  In July 1999,  we  completed  the initial
public  offering of our common stock and raised  approximately  $32.4 million in
net cash  proceeds.  We raised an  additional  $3.1  million in net  proceeds in
August 1999 upon the underwriters'  exercise of their over-allotment option. The
proceeds of the initial  public  offering  will be used for working  capital and
general corporate  purposes,  including any expansion of our sales and marketing
efforts,  increases in research and  development  activities,  and licensing and
acquisition of new technologies. Since inception, we have experienced losses and
negative  cash  flow  from  operations  and  expect to  continue  to  experience
significant  negative cash flow in the foreseeable  future. In addition,  in the
future, we may need to raise additional capital and we cannot be certain that we
will be able to obtain additional financing on favorable terms, if at all. If we
cannot raise additional  capital on acceptable terms, if and when needed, we may
not be able to  further  develop  or  enhance  BeOS,  take  advantage  of future
opportunities or respond to competitive pressures or unanticipated requirements,
any of which could have a material adverse effect on our business and results of
operations.


Year 2000 Issue

     The "Year 2000 Issue" is  typically  the result of  limitations  of certain
software  written  using  two  digits  rather  than four  digits  to define  the
applicable  year.  If  software  with  date-sensitive  functions  are  not  Year
2000compliant, they may recognize a date using "00" as the year 1900 rather than
the year 2000.

Risks

     We believe that our principle product, BeOS, has been designed to avoid the
Year 2000 Issue. However, if for any reason, BeOS is not Year 2000 compliant, we
could face unexpected  expenses  redesigning BeOS, which could harm our business
and reputation and delay any market acceptance for BeOS.

                                       11
<PAGE>

     In addition,  our operating system operates in complex network environments
and  directly  and  indirectly  interacts  with a number of other  hardware  and
software   systems  and   applications.   These  hardware  system  and  software
applications may contain errors or defects  associated with the Year 2000 Issue.
We are  presently  unable to predict to what extent our business may be affected
if  hardware  systems  or  software  applications  and  tools  that  operate  in
conjunction with our operating system  experience the Year 2000 Issue.  Known or
unknown  errors or defects  that  affect  the  operation  of BeOS,  when used in
conjunction  with other  hardware or software,  could result in delay or loss of
revenues,  damage to our reputation and possible litigation,  any of which could
materially adversely affect our business and results of operations.

     We also depend on the Internet  and more  specifically  on our  BeDepot.com
Website for  release and  distribution  of BeOS and  related  support  tools and
applications.  The  Internet is a medium which is  susceptible  to the Year 2000
Issues.  The Year 2000 Issue could result in a system failure or miscalculations
causing  significant  disruption of our Web site  operations,  including,  among
other things,  interruptions  in the  distribution  of BeOS and related  support
tools and applications over the Internet.  This could also include disruption in
the  distribution  of third  party  software  applications  over our  electronic
commerce Web site.  It is possible  that this  disruption  will  continue for an
extended  period  of time.  Any  disruption  in our Web site  operations  or our
electronic  commerce  site could  result in loss of revenues  and could harm our
reputation  and  business.  Also,  Year  2000  compliance  efforts  may  involve
significant  time and expense,  and  uncorrected  problems could  materially and
adversely affect our business.

Readiness

     We have initiated an internal review of our information  systems  including
software  programs used in our  accounting  and financial  reporting  functions.
Based on our  review to date and  preliminary  information  gathered  from third
party vendors, we do not believe that there are any significant Year 2000 Issues
relating  to our  information  systems.  However,  our  review  to date has been
preliminary and is not expected to be completed until the third quarter of 1999.
We will  continue  to request  vendors of the  material  hardware  and  software
components of our information  systems to provide  assurances of their Year 2000
compliance. We plan to complete this process during the third quarter of 1999.We
are currently assessing our material non-information technology systems and will
seek  assurances of Year 2000  compliance  from providers of these systems.  Our
costs  incurred  to date  with  respect  to Year 2000  compliance  have not been
significant.  While we believe our future Year 2000 compliance costs will not be
significant,  we have no way of ascertaining  this until our testing is complete
and key vendors and  suppliers are  contacted.  We may not be able to completely
evaluate  whether our systems  will need to be revised or replaced  and the cost
associated with such efforts.  If our efforts to address Year 2000 risks are not
successful, or if suppliers or other third parties with whom we conduct business
do not successfully  address such risks, it could have a material adverse effect
on our business.

Contingency Plans

     We have not yet fully developed a comprehensive contingency plan to address
situations  that may result if we are unable to achieve  Year 2000  readiness of
our critical operations.  Development of contingency plans is in progress and is
expected  to be  developed  in detail and  expanded  during  the second  half of
1999.We  may not be able to  develop a  contingency  plan  that will  adequately
address  all Year  2000  issues.  Our  failure  to  develop  and  implement,  if
necessary, an appropriate contingency plan could materially adversely affect our
business and results of operations.



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 Be's business,  operating  results
and/or financial condition. Anyone making an investment decision with respect to
Be's Common Stock or other  securities  of the Company is cautioned to carefully
consider these factors, along with the "Risk Factors" discussed in the Company's
Amended Registration Statement on Form S-1 (File No. 333-77855).

We have incurred significant net losses and we may never achieve profitability.

     We incurred  significant net losses of approximately  $7.8 million in 1996,
$10.4  million in 1997 and $16.9 million in 1998. As of June 30, 1999, we had an
accumulated   deficit  of  approximately  $61.0  million.  We  expect  to  incur
significant  additional losses and continued  negative cash flow from operations
in 1999 and beyond and we may never become profitable.

     We expect to continue to incur  significant  sales and marketing,  research
and  development  and  general  and  administrative  expenses.  We will  need to
generate  significant  revenues to achieve  profitability and positive operating
cash flows.  Even if we do achieve  profitability  and positive  operating  cash
flow,  we may not be able to  sustain  or  increase  profitability  or  positive
operating cash flow on a quarterly or annual basis.

                                       12
<PAGE>

The  market  for  Internet  appliances  may not evolve and we may not be able to
compete effectively in this market.

     Our business and prospects depend on the development and market  acceptance
of Internet  appliances and our ability to successfully  market BeOS as a viable
operating system for Internet appliances.  The market for Internet appliances is
new, unproven and subject to rapid  technological  change. This market may never
develop or may develop at a slower rate than we  anticipate.  In  addition,  our
success in marketing  BeOS as a platform for  Internet  appliances  is dependent
upon developing and maintaining relationships with industry-leading computer and
consumer  electronics  manufacturers,  Internet  service  providers  and content
creators.  There is already  intense  competition  to offer non-PC  devices that
provide access to the Internet and enable digital media content on the Internet.
Companies such as Microsoft  Corporation,  Oracle  Corporation,  Apple Computer,
Inc. and  Spyglass,  Inc. have  operating  systems that are being used or may be
used  for  Internet  appliances.  These  companies  have an  established  market
presence,  relationships with computer and consumer electronic manufacturers who
will develop and market  Internet  appliances,  and have  significantly  greater
financial,  marketing  and  technical  resources  than we do.  These  companies,
together with a large number of smaller  companies who offer  operating  systems
that may be used for Internet  appliances,  may capture a larger  portion of the
market than we do. Our failure to establish  relationships  with other companies
that offer  Internet  appliances  and establish BeOS in this market would have a
material adverse effect on our business and prospects.

We have only one product that may never gain broad market acceptance.

     BeOS is our only  product  and we will  derive all of our  revenue  for the
foreseeable  future from sales of BeOS. To date, BeOS has been used primarily by
a limited number of enthusiasts  and  application  developers.  Our business and
prospects  are highly  dependent on the broader  market  acceptance of BeOS as a
viable platform for a wide variety of applications  and devices enabling digital
media and Internet-based applications. The ability of BeOS to gain broad support
from  developers,  enthusiasts  and OEMs is unproven.  BeOS may never gain broad
market  acceptance  among  consumers  and  OEMs.  At  present,  a large  base of
commercially  available  software  developed  for use on BeOS  does  not  exist.
Consumers and OEMs may not perceive any significant  advantages over traditional
operating  systems such as Microsoft  Windows,  Apple's Mac OS or the UNIX-based
operating systems.  In addition,  we may be unable to demonstrate the commercial
viability  and  cost-effective  nature of BeOS. We may also be  unsuccessful  at
marketing  BeOS as the  operating  system of choice  among  professional  users,
consumers or applications  developers.  As a result, potential customers may not
purchase BeOS and OEMs may not elect to incorporate  BeOS in their products.  If
BeOS is not accepted or adopted by an increasing  number of developers and OEMs,
our business and prospects will be materially adversely affected.

     Traditional  or new  operating  systems  could  evolve to more  effectively
address  the  digital  media  requirements  of  users  and  OEMs.  For  example,
enhancements and features could be added to Microsoft's Windows operating system
and Apple's Mac OS which could  significantly  decrease the differences  between
BeOS and these  operating  systems.  As a result,  any  technical  or  marketing
advantage we may have had in the market for operating  systems could be lost and
the demand and acceptance of BeOS would diminish.

We face intense competition from companies with significantly greater financial,
marketing, and technical resources

     The market for computer  operating systems is intensely  competitive.  This
market  is  dominated  by  one  company,   Microsoft   Corporation,   which  has
significantly   greater  brand  recognition,   market  presence  and  financial,
marketing and  distribution  resources  than we do. Other  companies  that offer
competing   operating   systems  include  Apple  Computer,   Inc.,  IBM,  Oracle
Corporation,  Sony  Corporation and a number of companies that offer versions of
the UNIX operating system,  including SGI, the  Hewlett-Packard  Company and Sun
Microsystems.  In  addition,  we  face  competition  from a  number  of  smaller
companies  developing and marketing  UNIX-based operating systems such as Linux.
Many of our current and potential competitors have longer operating histories, a
larger  customer  base,  a  greater  number  of   applications,   greater  brand
recognition,  and  greater  financial,  technical,  marketing  and  distribution
resources than we do. As a result, we may have difficulty  increasing the number
of BeOS users and attracting  OEMs and third party  developers to create devices
and software that will use BeOS.

                                       13
<PAGE>

Our  success  depends  on  our  ability  to  establish  and  maintain  strategic
relationships, and the loss of any of our strategic relationships could harm our
business and have an adverse impact on our revenue.

     Our success in  increasing  the number of BeOS users,  particularly  in the
Internet appliance market, depends in large part on our ability to establish and
maintain  strategic  relationships with  industry-leading  computer and consumer
electronic  manufacturers  and Internet service and content  providers.  We have
entered  into   agreements  with  four  OEMs  and  a  number  of  resellers  and
distribution  partners.  We  cannot  be  certain  that we will be able to  reach
agreements with  additional  partners on a timely basis or at all, or that these
partners  will devote  adequate  resources to promote  BeOS. We may be unable to
enter into new agreements with  additional  partners on terms favorable to us or
at all. If we are unable to develop or maintain relationships with OEMs, we will
have difficulty  selling and gaining market acceptance for BeOS and our business
and results of operations will be materially adversely affected.

Our success depends upon  availability of third party  applications that operate
on BeOS.

     Demand and market  acceptance for BeOS will  significantly  depend upon the
availability of an increasing number of third party applications that operate on
the BeOS platform.  These applications include video and audio editing programs,
3D games,  creative audio and video content  development and  manipulation,  and
personal productivity applications.

     We  intend  to  encourage  the  development  of  an  increasing  number  of
applications  that operate on BeOS by attracting  third party  developers to the
BeOS platform and by maintaining our existing  developer  relationships  through
marketing,   technical   support  and  financial   incentives  for  third  party
developers. However, third party developers are generally under no obligation to
develop applications based on the BeOS platform. A developer's decision to write
applications  for BeOS is based in part on the  perception  and  analysis of the
relative technical,  financial and other benefits of developing applications for
the BeOS platform versus writing applications for more popular operating systems
such as  Microsoft's  Windows  or  Apple's  Mac OS.  If we  fail  to  attract  a
sufficient  number of application  developers who develop and market  successful
applications  on  BeOS,  the  demand  for  BeOS and our  business  will  suffer.
Moreover,  any delay or unsuccessful  release of third party  applications could
have a material adverse effect on our business and results of operations.

We may not be able to respond to the rapid  technological  change in the markets
in which we compete.

     The markets in which we participate or seek to participate are subject to:

 .    rapid technological change
 .    frequent product upgrades and enhancements;
 .    changing customer requirements for new products and features; and
 .    multiple, competing and evolving industry standards.

     The introduction of operating systems that contain new technologies and the
emergence  of new  industry  standards  could  render  BeOS  less  desirable  or
obsolete. In particular, we expect that changes in the Internet-based technology
and digital  media  enabling  technology  will require us to rapidly  evolve and
adapt  our  products  to be  competitive.  As a result,  the life  cycle of each
release of BeOS is  difficult to estimate.  To be  competitive,  we will need to
develop and release new products and operating  system  upgrades that respond to
technological   changes  or  evolving   industry   standards  on  a  timely  and
cost-effective basis. We cannot be certain that we will successfully develop and
market  these  types of  products  and  operating  system  upgrades  or that our
products will achieve market acceptance.  If we fail to produce  technologically
competitive  products  in a  cost-effective  manner and on a timely  basis,  our
business and results of operations could suffer materially.

                                       14
<PAGE>

Our revenues and operating  results are subject to significant  fluctuations and
our  stock  price  may fall if we fail to meet the  expectations  of the  public
market.

     Our revenues and  operating  results  will likely vary  significantly  from
period  to period  due to a number of  factors,  many of which are  outside  our
control, including :

 .    demand for and acceptance of our operating system;

 .    deferral  of  customer  orders in  anticipation  of new  products,  product
     enhancements or upgrades by us or by our competitors;

 .    the timing and availability of key applications  developed by third parties
     to be used in BeOS;

 .    delays and defects in BeOS;

 .    ability to attract and retain key strategic  partners,  including  OEMs and
     third party application developers;

 .    new product releases and product enhancements by us and our competitors;

 .    changes in our pricing policies or the pricing policies of our competitors;

 .    the mix of sales channels through which our products and services are sold;

 .    the mix of domestic and international sales;

 .    risks inherent in  international  operations,  including  foreign  currency
     fluctuations;

 .    potential  acquisitions  and  integration  of technology or  businesses;

 .    changes in accounting  standards,  including  standards relating to revenue
     recognition,  business  combinations  and stock-based  compensation;  and .
     impact of any Year 2000 issues.

Based on these  factors,  we may fail to meet  the  expectations  of the  public
market in any  given  period  and our stock  price  would  likely be  materially
adversely affected.

We are highly dependent on third party development tools.

     We are highly  dependent on development  tools provided by a limited number
of third party vendors.  Development tools are software applications that assist
programmers in the  development of  applications.  Together with our application
developers, we primarily rely upon software development tools provided by Cygnus
Solutions  and  Perforce  Software.  If Cygnus or  Perforce  fail to  support or
maintain these  development  tools,  we will either have to devote  resources to
maintain and support the tools  ourselves or transition to another  vendor.  Any
maintenance  or  support of the tools by us or the  transition  could be costly,
time consuming,  could delay our product release and upgrade schedule, and could
delay the development and availability of third party applications used on BeOS.
Failure to procure  the needed  software  development  tools or any delay in the
availability of third party applications could negatively impact our ability and
the ability of third party  application  developers  to release and support BeOS
and  the  applications  that  run on it.  These  factors  could  negatively  and
materially  affect  the  acceptance  and  demand  for  BeOS,  our  business  and
prospects.

In our effort to increase  market  acceptance for BeOS, we may forego  near-term
revenue by providing BeOS at little or no cost to potential users.

     In an attempt to  increase  the  number of users and market  acceptance  of
BeOS, we may choose to forego immediate  revenue  potential by providing BeOS at
little or no cost. Users, therefore, may be unwilling to pay for any upgrades or
new releases of BeOS. Our decision to forego near-term revenue in expectation of
increasing  the number of BeOS users may not yield market  acceptance and future
revenues.  In addition,  we may reduce prices in response to competitive factors
or to pursue new market opportunities.

                                       15
<PAGE>
We expect continued erosion in the average selling prices of our products.

     We have  experienced  erosion in the average selling prices of our products
due to a number of factors, including:

 .    competitive pricing pressures;
 .    rapid technological changes; and
 .    sales discounts.

     We  anticipate  that  the  average  selling  prices  of our  products  will
fluctuate  and  decrease  in the future in response  to these  factors.  We also
anticipate  that the average  selling  price of our products will decrease as we
market BeOS to Internet  appliances  and other  low-cost  device  manufacturers.
Therefore,  to maintain  or  increase  our gross  margins,  we must  develop and
introduce new products and product  enhancements on a timely basis. We must also
continually  reduce our product costs.  In addition,  our average selling prices
fluctuate  based on changes  in the  percentage  of  revenues  derived  from the
different  sales  channels  used to sell our products.  For example,  the retail
price for sales of BeOS is generally  higher than the  wholesale  price used for
sales to  resellers,  distributors  and  OEMs.  As our  average  selling  prices
decline,  we must  increase  our unit sales  volume to maintain or increase  our
revenue.  If our average selling prices decline more rapidly than our costs, our
gross margins will decline,  which could seriously harm our business and results
of operations.

We face risks relating to our product returns and price reduction policies.

     We provide most of our  distributors  and  resellers  with  product  return
rights for stock balancing or limited product evaluation. Stock balancing rights
permit  distributors  to  return  products  to us for  credit,  subject  to some
limitations.  We may  experience  significant  returns  in the  future  and  our
reserves may be inadequate  to cover such  returns.  We also provide most of our
distributors and resellers with price protection rights. Price protection rights
require that we grant  retroactive  price  adjustments  for  inventories  of our
products  held by  distributors  or  resellers  if we lower our prices for these
products.  Product  returns  or price  protection  rights  could have a material
adverse effect on business and results of operations.

We are dependent on the licensing of enabling technologies from third parties.

     The demand and acceptance of our product is also dependent upon our ability
to license key enabling technologies.  We license from third parties compression
and decompression algorithms known as "codecs" and communications protocols that
facilitate  the  movement  of rich media data and large  files and  enables  the
connection  of consumer  products  such as digital  camcorders  or set-top boxes
directly  to a personal  computer.  We may be unable to license  these  enabling
technologies  at favorable  terms or at all which may result in lower demand for
BeOS.

We may be unable to manage any growth that we may experience.

     To succeed in the implementation of our business strategy,  we must rapidly
execute  our sales and  marketing  strategy,  further  develop  and  enhance our
products and product support capabilities,  and implement effective planning and
operating processes. To manage any anticipated growth we must:

 .    establish and manage multiple relationships with OEMs, Internet service and
     content providers and other third parties;
 .    continue to implement and improve our operational, financial and management
     information systems; and
 .    hire, train and retain additional qualified personnel.

     Our  systems,  procedures  and  controls may not be adequate to support our
operations,  and our management may not be able to perform the tasks required to
capitalize on market opportunities for our products and services.  If we fail to
manage our growth effectively, our business could suffer materially.

Product defects may harm our business and reputation.

     Computer operating  systems,  including BeOS, and related software products
frequently  contain  errors or bugs. We have detected and may continue to detect
errors and product  defects in connection  with new releases and upgrades of our
operating system and related products.  Despite our internal testing and testing
by current  and  potential  customers,  errors may be  discovered  after BeOS or
related  software and tools are installed  and used by  customers.  These errors
could result in reduced or lost revenue,  delay in market acceptance,  diversion
of development  resources,  damage to our reputation,  or increased  service and
warranty costs, any of which could materially  adversely affect our business and
results of operations.

     Our products must successfully  integrate with products from other vendors,
such as third party software  applications and computer  hardware.  As a result,
when problems occur in a personal  computer or any other device or network using
our  products,  it may be difficult  to identify the source of the problem.  The
occurrence of hardware and software  errors,  whether  caused by our products or
another vendor's products, may result in reduced or loss of market acceptance of
our  products,  and any  necessary  product  revisions  may  force  us to  incur
significant  expenses.   The  occurrence  of  these  problems  could  materially
adversely affect our business and results of operations.

                                       16
<PAGE>


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

     We  considered  the  provision  of  Financial   Reporting  Release  No.  48
"Disclosure of Accounting  Policies for  Derivative  Financial  Instruments  and
Derivative Commodity Instruments, and Disclosure of Quantitative and Qualitative
Information  about Market Risk  Inherent in  Derivative  Financial  Instruments,
Other Financial  Instruments and Derivative  Commodity  Instruments."  We had no
holdings of  derivative  financial  or commodity  instruments  at June 30, 1999.
However, we are exposed to financial market risks,  including changes in foreign
currency  exchange  rates and  interest  rates.  Much of our revenue and capital
spending is  transacted  in U.S.  dollars.  However,  the  expenses  and capital
spending of our French  subsidiary are  transacted in French francs.  Results of
operations  from our French  subsidiary  are not  material to the results of our
operations,  therefore,  we believe that foreign currency  exchange rates should
not  materially  adversely  affect our overall  financial  position,  results of
operations  or cash  flows.  We believe  that the fair  value of our  investment
portfolio or related income would not be significantly  impacted by increases or
decreases  in  interest  rates  due  mainly  to  the  short-term  nature  of our
investment  portfolio.  However, a sharp increase in interest rates could have a
material  adverse  effect  on  the  fair  value  of  our  investment  portfolio.
Conversely,  sharp  declines in interest  rates could  seriously  harm  interest
earnings of our investment portfolio.


PART II - OTHER INFORMATION


ITEM 1.    LEGAL PROCEEDINGS

         None.


ITEM 2.    CHANGES IN SECURITIES AND USE OF PROCEEDS

Sales of Registered Securities and Use of Proceeds

     The  effective  date for of the  Registration  Statement  for Be's  initial
public  offering,  filed on Form S-1 under the  Securities Act of 1933 (File No.
333-77855)  was July 20, 1999.  The class of  securities  registered  was Common
Stock. The offering commenced on July 20,1999. The managing underwriters for the
offering were Volpe Brown Whelan & Company and Needham & Company, Inc.

     Pursuant to the  Registration  Statement,  Be sold 6,557,465  shares of its
Common  Stock  (which   includes   557,465   shares  sold  to  pursuant  to  the
underwriters'  exercise of their over-allotment  option) at $6.00 per share, for
an  aggregate  offering  price  of  $39.3  million.   Be  incurred  expenses  of
approximately  $3.8  million,  of which $2.7  million  represented  underwriting
discounts and  commissions  and  approximately  $1.1 million  represented  other
expenses  related to the  offering.  The  proceeds of the  offering,  net of all
expenses, was approximately $35.5 million.

     From the  effective  date of the  Registration  Statement  through June 30,
1999, the Company invested $25.0 million of the proceeds in commercial paper and
applied the balance to working  capital.  The use of proceeds  from the offering
does not  represent a material  change in the use of proceeds  described  in the
prospectus used in the offering.

Sales of Unregistered Securities

     From April 1, 1999 to June 30, 1999,  the Company  sold  198,604  shares of
Common  Stock to 5 employees / optionees  pursuant to  exercises of fully vested
options granted under the Company's 1992 Stock Option Plan at a weighted average
exercise price of $0.17 per share.  The Company received an aggregate of $33,011
in cash. All sales of stock  pursuant to option  exercises were made in reliance
on Rule 701 under the Securities Act of 1933.


                                       17
<PAGE>


ITEM 3.    DEFAULT UPON SENIOR SECURITIES

         None.


ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     In the quarterly  period ended June 30, 1999,  the  following  matters were
submitted to the security holders of the Company:

     In May 1999, the Company's stockholders approved the following proposals:

 .    The stockholders  approved a proposal to  reincorporate  the Company in the
     State of Delaware with votes cast as follows: 17,315,144 shares for; 32,720
     shares against; and 10,363,564 shares abstained;

 .    The stockholders  approved a proposal to amend the Company's Certificate of
     Incorporation to amend the authorized  capital of the Company to consist of
     78,000,000  shares of Common Stock and 2,000,000  shares of Preferred Stock
     effective at the closing of the initial public  offering with votes cast as
     follows:  17,292,936  shares for;  54,928 shares  against;  and  10,363,564
     shares abstained;

 .    The  stockholders  approved the adoption of the 1999 Equity  Incentive Plan
     and the Employee Stock Purchase Plan with votes cast as follows: 17,316,886
     shares for; 30,978 shares against; and 10,363,564 shares abstained;

 .    The stockholders approved the adoption of the 1999 Non-Employee  Directors'
     Stock Option Plan with votes cast as follows: 17,284,936 shares for; 62,928
     shares against; and 10,363,564 shares abstained; and

 .    The  stockholders  approved  a form of  Indemnity  Agreement  for use as an
     agreement  between the Company and its  officers and  directors  with votes
     cast  as  follows:  17,315,144  shares  for;  32,720  shares  against;  and
     10,363,564 shares abstained.



ITEM 5.    OTHER INFORMATION

         None.


ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits:

         3.1*     Amended and Restated Certificate of Incorporation
         3.2*     Bylaws
         4.1*     Form of common stock certificate
         27.1     Financial Data Schedule (EDGAR version only)

*    Filed with the Company's  Registration  Statement on Form S-1, Registration
     No. 333-77855, declared effective by the Securities and Exchange Commission
     on July 20, 1999, incorporated herein by reference.

(b)      Reports on Form 8-K

                  None




                                       18
<PAGE>



                                   SIGNATURES

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


BE INCORPORATED

<TABLE>
<CAPTION>
<S>                                                                               <C>

By:   /s/ JEAN-LOUIS F. GASSEE                                                    Date: September 2, 1999
      ------------------------
      Jean-Louis F. Gassee
      President, Chief Executive Officer and Director

By:   /s/ WESLEY S. SAIA                                                          Date: September 2, 1999
      ------------------------
      Wesley S. Saia
      Vice President and Chief Financial Officer

</TABLE>
                                       19

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