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 September 30, 2001

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

                        Commission File Number: 000-26387

                                 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)

                    800 El Camino Real, 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. [X] Yes [ ] No.

The number of shares of Common  Stock  outstanding  as of October  31,  2001 was
36,792,563.




                                 BE INCORPORATED
                                    FORM 10-Q
                                TABLE OF CONTENTS




PART I.    FINANCIAL INFORMATION
                                                                           PAGE
     Item 1.    Condensed Financial Statements:

                Consolidated Balance Sheets at September 30, 2001
                 and December 31, 2000                                         2

                Consolidated Statements of Operations for the three and nine
                 month periods ended September 30, 2001 and September 30, 2000 3

                Consolidated Statements of Cash Flows for the six months
                     ended September 30, 2001 and September 30, 2000           4

                Notes to Condensed Consolidated Financial Statements           5


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

     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                     18

     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



                                       1
<PAGE>



                         PART I - FINANCIAL INFORMATION

ITEM 1.    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

                                                      September 30, December 31,
                                                           2001         2000
<S>                                                      <C>          <C>
ASSETS
Current assets:
   Cash and cash equivalents .........................   $   2,098    $   9,463
   Short-term investments ............................        --          4,594
   Accounts receivable ...............................          74           26
   Prepaid and other current assets ..................         577          549
                                                         ---------    ---------
       Total current assets ..........................       2,749       14,632
Property and equipment, net ..........................         248          391
Other assets, net of accumulated amortization ........          24        1,048
                                                         ---------    ---------
        Total assets .................................   $   3,021    $  16,071
                                                         =========    =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable ..................................   $     111    $     362
   Accrued expenses ..................................         621        1,502
   Technology license obligations, current portion ...         432          454
   Deferred revenue ..................................          64          109
                                                         ---------    ---------
       Total current liabilities .....................       1,228        2,427
Technology license obligations, net of current portion         244          320
                                                         ---------    ---------
       Total liabilities .............................       1,472        2,747

Stockholders' Equity:
   Common stock ......................................          37           36
   Additional paid-in capital ........................     108,344      108,880
   Accumulated other comprehensive income ............        --              1
   Deferred stock compensation .......................        (280)      (1,218)
   Accumulated deficit ...............................    (106,552)     (94,375)
                                                         ---------    ---------
       Total stockholders' equity ....................       1,549       13,324
                                                         ---------    ---------
        Total liabilities and stockholders' equity ...   $   3,021    $  16,071
                                                         =========    =========

</TABLE>
              The accompanying notes are an integral part of these
             unaudited condensed consolidated financial statements.



                                       2
<PAGE>


                        BE INCORPORATED AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
               (in thousands, except per share amounts; unaudited)
<TABLE>
<CAPTION>

                                                                      Three Months               Nine Months
                                                                    Ended September 30,       Ended September 30,
                                                                        2001        2000        2001        2000
                                                                      ------      ------      ------     -------
<S>                                                                 <C>         <C>         <C>        <C>

Net revenues ....................................................   $  1,135    $     68    $  1,950    $    464
Cost of revenues ................................................      1,765         216       2,336         770
                                                                      ------      ------      ------     -------
Gross loss ......................................................       (630)       (148)       (386)       (306)

Operating expenses:
   Research and development, including amortization of deferred .      1,305       2,247       6,112       6,747
     stock compensation of $(93), $159, $59 and $668
   Sales and marketing, including amortization of deferred ......       (386)      1,543       1,688       6,123
     stock compensation of $(496), $121, $(533) and $547
   General and administrative, including amortization of deferred      1,194       1,107       3,790       3,651
     stock compensation of $73, $227, $289 and $982
   Restructuring charge .........................................       --          --           450        --
                                                                      ------      ------      ------     -------
       Total operating expenses .................................      2,113       4,897      12,040      16,521
                                                                      ------      ------      ------     -------
Loss from operations ............................................     (2,743)     (5,045)    (12,426)    (16,827)

Interest expense ................................................        (14)        (58)        (42)       (121)
Other income and expenses, net ..................................         33         332         291       1,058
                                                                      ------      ------      ------     -------
Net loss ........................................................   $ (2,724)   $ (4,771)   $(12,177)   $(15,890)
                                                                    ========    ========    ========    ========
Net loss per common share--basic and diluted ....................   $   (.07)   $   (.13)   $   (.33)   $   (.45)
                                                                    ========    ========    ========    ========
Shares used in per common share
   calculation--basic and diluted ...............................     36,630      35,722      36,430      35,406
                                                                    ========    ========    ========    ========
</TABLE>


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


                                       3
<PAGE>

                        BE INCORPORATED AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (in thousands; unaudited)

<TABLE>
<CAPTION>
                                                                 Nine Months
                                                             Ended September 30,
                                                              2001       2000
                                                             -----       -----
<S>                                                       <C>         <C>
Cash flows from operating activities:
   Net loss ...........................................   $(12,177)   $(15,890)
   Adjustments to reconcile net loss to net
     cash used in operating activities:
       Depreciation and amortization ..................        729         905
       Write-off of impaired licensed technology assets        539
       Amortization of discount on
        technology license obligations ................         42          87
       Loss on disposal of fixed assets ...............          6
       Compensation expense incurred on issuance
        of stock ......................................       --            34
       Amortization of deferred stock compensation ....       (185)      2,197
       Changes in assets and liabilities
          Accounts receivable .........................        (48)        137
          Prepaid and other current assets ............        (28)        (45)
          Other assets ................................       --          --
          Accounts payable ............................       (251)       (733)
          Accrued expenses ............................       (881)       (519)
          Deferred revenue ............................        (45)        (19)
                                                            -------      ------
            Net cash used in operating activities .....    (12,299)    (13,846)
                                                            -------      ------
Cash flow provided by investing activities:
   Acquisition of property and equipment ..............        (72)       (121)
   Acquisition of licensed technology .................       (175)       (501)
   Purchases of short-term investments ................     (1,728)    (55,813)
   Sales of short-term investments ....................      6,322      70,408
                                                            -------      ------
            Net cash provided by investing activities .      4,347      13,973
                                                            -------      ------
Cash flows  provided by financing  activities:
   Proceeds from issuance of common stock:
     pursuant to common stock options .................         21       2,201
     pursuant to common stock warrants ................        180         455
     under Employee Stock Purchase Plan ...............        386         702
   Repurchase of common stock .........................       --            (3)
                                                            -------      ------
         Net cash provided by financing activities ....        587       3,355
                                                            -------      ------
Net increase (decrease) in cash and cash equivalents ..     (7,365)      3,482
                                                            -------      ------
Cash and cash equivalents, beginning of period ........      9,463       6,500
                                                            -------      ------
Cash and cash equivalents, end of period ..............   $  2,098    $  9,982
                                                           ========    ========
</TABLE>
              The accompanying notes are an integral part of these
             unaudited condensed consolidated financial statements.


                                       4
<PAGE>

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

1.   Organization and Business

     Be  Incorporated  (the  "Company"  or "Be") was founded in 1990.  Be offers
     software  solutions  designed for  Internet  appliances  and digital  media
     applications.   An  Internet  appliance  is  a  dedicated  device  designed
     specifically to access  information  from the Internet for a given purpose.
     An Internet  appliance's  hardware and software are  seamlessly  integrated
     together to provide users with a responsive and easy to use interface. Be's
     software solutions are BeIA: the Complete Internet  Appliance  Solution(TM)
     and BeOS, its operating system designed for digital media applications.  In
     early 2000, Be shifted the primary focus of its business from the marketing
     and distribution of BeOS, its desktop operating system, to the development,
     marketing  and  deployment  of BeIA,  its  software  solution  intended for
     Internet  appliances.  Be  shifted  its  focus as a result  of the  intense
     competition in the market for the BeOS operating  system,  the  anticipated
     market for the BeIA product and the limited  resources  available to Be for
     the  development  and marketing of its products.  BeIA gives  customers the
     ability  to create  customized  Internet  appliances  that  deliver  unique
     services,  information  and  entertainment  to their  targeted  end  users.
     Unfortunately,  the  Internet  appliance  market as a whole  has  failed to
     materialize as anticipated.  Consumer response to early Internet appliances
     has been  unenthusiastic,  major  manufacturers  have either  removed their
     products  from the market or have not  undertaken  significant  development
     efforts,  and the economic  realities of the last four  quarters  have made
     success even more difficult. Despite Be's efforts in the Internet appliance
     market, its financial  difficulties have continued,  and Be has been unable
     to generate revenues sufficient to meet operating expenses.

     On August 16, 2001, Be entered into an asset purchase  agreement with Palm,
     Inc., a Delaware corporation headquartered in Santa Clara, California,  and
     ECA Subsidiary Acquisition Corporation,  a wholly-owned subsidiary of Palm.
     Under the terms of the asset purchase agreement, Be will sell substantially
     all of its intellectual  property and other  technology  assets (the "Asset
     Sale"),  including those related to its BeOS and BeIA operating systems, to
     Palm and will  receive an  aggregate  number of shares of Palm common stock
     equal in value to  $11,000,000,  as  determined  on the closing date of the
     transaction  and subject to the  approval of Be's  stockholders.  A special
     meeting of Be's  stockholders  is scheduled to be held on November 12, 2001
     whereby  stockholders  of  record  shall  consider  and  vote  upon (i) the
     approval  of the  asset  sale  with  Palm  and  (ii)  the  approval  of the
     dissolution of Be through adoption of a plan of dissolution.

     Under  the  proposed  Asset  Sale,  Be will sell  substantially  all of its
     intellectual  property  and  other  technology  assets.  As a  result,  the
     remaining  technology  assets will not be used to generate  any future cash
     flows.  According to SFAS 121, "Accouting for the Impairement of Long-Lives
     Assets  and for Long  Lived  Assets to be  disposed  of",  an entity  shall
     recognize an  impairment  loss when  expected  future cash in flows is less
     than the carrying  amount of the asset.  Therefore,  Be decided to write-of
     the  outstanding  balance of its  technology  license assets of $539,000 at
     September 30, 2001.

                                       5
<PAGE>


2.   Basis of Presentation

     The condensed consolidated financial statements include the accounts of the
     Company 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, 2000 and the notes thereto contained in the
     Company's  Annual Report on Form 10-K.  The December 31, 2000 balance sheet
     was derived from  audited  financial  statements,  but does not include all
     disclosures required by generally accepted accounting principles.

     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.

     If the Asset Sale is not  completed,  it is likely that Be will file for or
     be  forced  to  resort  to  bankruptcy  protection.  If the  Asset  Sale is
     completed,  Be intends to wind up its  business and pay, or provide for the
     payment  of,  all  of  its  outstanding   liabilities  and  obligations  in
     accordance with applicable law and the plan of dissolution.  Until it winds
     up its business,  Be will continue to experience losses from operations and
     negative  cash flows and will continue to require  working  capital to fund
     its  remaining  operations.   Be  believes  that  existing  cash  and  cash
     equivalents   will  not  be  sufficient  to  meet   operating  and  capital
     requirements at its currently  anticipated  level of operations  beyond the
     end of fiscal 2001.

     The consolidated  financial  statements do not include any adjustments that
     might result from the outcome of these uncertainties.

3.   Recent Accounting Pronouncements

     In September  1998, the Financial  Accounting  Standards  Board,  ("FASB"),
     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  deferred  item  depending  on the  type  of  hedge
     relationship  that exists with respect of such  derivatives.  In July 1999,
     the  Financial  Accounting  Standards  Board issued  Statement of Financial
     Accounting  Standards  No. 137,  or SFAS 137,  "Accounting  for  Derivative
     Instruments and Hedging Activities - Deferral of the Effective Date of FASB
     Statement No. 133." SFAS 137 deferred the effective date until fiscal years
     beginning  after  September  30, 2000.  In September  2000,  the  Financial
     Accounting   Standards  Board  issued  Statement  of  Financial  Accounting
     Standards No. 138, or SFAS 138, "Accounting for Derivative  Instruments and
     Hedging  Activities - An Amendment of FASB Statement  133." SFAS 138 amends
     the accounting and reporting  standards for certain  derivative  activities
     such  as  net  settlement  contracts,  foreign  currency  transactions  and
     intercompany  derivatives.  The Company's  implementation of SFAS 133 since
     January 1, 2001, has not had a material impact on its financial position or
     results of operations.

                                       6
<PAGE>

     In  September  2001,  the FSAB  unanimously  approved  the  issuance of two
     statements,  Statement of Financial  Accounting  Standards No. 141, or SFAS
     141,  "Business   Combinations,"  and  Statement  of  Financial  Accounting
     Standards  No. 142, or SFAS 142,  "Goodwill and Other  Intangible  Assets."
     SFAS  141  addresses  financial   accounting  and  reporting  for  business
     combinations and amends APB No.16 "Business  Combinations." It requires the
     purchase  method of accounting for business  combinations  initiated  after
     September 30, 2001. SFAS 142 addresses  financial  accounting and reporting
     for acquired goodwill and other intangible assets and supersedes APB No.17,
     "Intangible  Assets."  It  changes  the  accounting  for  goodwill  from an
     amortization  method to an impairment  only  approach.  It is effective for
     fiscal year beginning  after December 15, 2001.  Early adoption of SFAS 142
     is permitted for  companies  with a fiscal year  beginning  after March 15,
     2001.  The  adoption  of  these  statements  is  not  expected  to  have  a
     significant  impact on the  Company's  financial  position  and  results of
     operations.

     In  October  2001,  the  FASB  issued  Statement  of  Financial  Accounting
     Standards 144 ("SFAS 144"),  "Accounting  for the Impairment or Disposal of
     Long-Lived  Assets",  which is required to be applied  starting with fiscal
     years  beginning  after  December 12, 2001.  SFAS 144 requires  among other
     thingsm the application of one acounting  model for long-lived  assets that
     are impaired or to be disposed of by sale.  The adoption of SFAS 144 is not
     expected  to  have  a  significant   impact  on  the  Company's   financial
     statements.

4.   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  unvested  common  shares.  Options,  warrants  and
     unvested  common shares 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       Nine Months Ended
                                                                    September 30,            September 30,
                                                                 2001          2000      2001           2000
                                                              --------    --------      ------     -------
                                                                     (unaudited)             (unaudited)
<S>                                                           <C>         <C>           <C>        <C>
Historical net loss per common share, basic and diluted:
   Numerator for net loss, basic and diluted ..............   $ (2,724)   $ (4,771)   $(12,177)   $(15,890)

   Denominator for basic and diluted loss per common share:
     Weighted average common shares
       outstanding ........................................     36,630      35,722      36,430      35,247
                                                              ========    ========      ======     =======
   Net loss per common share basic and diluted ............   $   (.07)   $   (.13)   $   (.33)   $   (.45)
                                                              ========    ========      ======     =======
   Antidilutive securities:
     Options to purchase common stock .....................      5,038       6,857       5,038       6,857
     Common stock not yet vested ..........................         90         332          90         332
     Warrants .............................................       --         2,130        --         2,130
                                                              --------    --------      ------     -------
                                                                 5,128       9,319       5,128       9,319
                                                              ========    ========      ======     =======
</TABLE>

                                       7
<PAGE>

5.   Comprehensive Income (loss)

     Statement of Financial Accounting Standard No. 130, or SFAS 130, "Reporting
     Comprehensive  Income"  establishes  rules for  reporting  and  display  of
     comprehensive  income  (loss) and its  components.  The  following  are the
     components of comprehensive income (loss) (in thousands):

<TABLE>
<CAPTION>

                                                   Three Months Ended       Nine Months Ended
                                                      September 30,           September 30,
                                                     2001       2000        2001        2000
                                                  --------    --------    --------    --------
<S>                                               <C>         <C>         <C>         <C>
Net loss ......................................   $ (2,724)   $ (4,771)   $(12,177)   $(15,890)
Unrealized gain (loss) on marketable securities         (2)          5          (1)         -
                                                  --------    --------    --------    --------
Comprehensive loss ............................   $ (2,726)   $ (4,766)   $(12,178)   $(15,890)
                                                  ========    ========    ========    ========
</TABLE>



   The components of accumulated other comprehensive income, net of related tax
are as follows (in thousands):

<TABLE>
<CAPTION>
                                                  September 30,   December 31,
                                                      2001        2000
                                                     -----        -----
<S>                                               <C>          <C>
Unrealized gain on marketable securities.......   $      -     $     1
                                                     -----        -----
                                                         -           1
                                                     =====        =====
</TABLE>

                                       8
<PAGE>

6.   Restructuring Charge

     On April 2, 2001,  the Company  announced its decision,  made at the end of
     the first quarter,  to restructure its operations to reflect current market
     and  financial  conditions  by  closing  its  European  office in Paris and
     eliminating  positions  principally in the Company's  sales,  marketing and
     general  administration  departments in the United States. As a result, the
     Company  recorded a  restructuring  charge of $307,000 in the first quarter
     for the closing of its European office,  which is comprised of $272,000 for
     involuntary  termination  benefits and $35,000 for termination of operating
     contracts  and  professional  fees.  The Company  recorded a  restructuring
     charge of approximately  $143,000 in the second quarter for the involuntary
     termination benefits related to the elimination of 22 positions in the U.S.
     At September 30, 2001, this restructuring plan was substantially  completed
     and all amounts had been paid.

     On July 31, 2001, the Company announced the elimination of 28 positions. In
     addition  to  the  elimination  of the  sales  and  marketing  departments,
     positions  in  administration  and  engineering  were  also  affected.  The
     eliminated positions represent  approximately 33% of the Company's existing
     workforce.  The Company's  remaining 57 positions are primarily  engaged in
     product development. The Company did not incur any associated restructuring
     charge.


7.   Legal Proceedings

     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,  a Be stockholder,  alleging  damages  resulting from the
     transfer agent's failure to timely issue its stock  certificates.  While Be
     was not a party named in such demand letter, Be was named as a party on the
     stockholder's  draft claim attached to the demand  letter.  On May 9, 2001,
     the claim was in fact filed, naming Be and Wells Fargo Bank Minnesota, N.A.
     as defendants, and is currently active in the Superior Court of California.
     The  stockholder  is seeking  damages in the amount of  approximately  $2.4
     million.  Prior to this  filing,  the  Company  had been  participating  in
     communications with the parties in an effort to resolve the matter prior to
     a lawsuit being filed.

     Be management  continues to believe that the  allegations as they relate to
     Be in the filed  claim are  without  merit and intends to defend Be against
     this legal action.  However,  there can be no assurance  this claim will be
     resolved without costly  litigation,  or require Be's  participation in the
     settlement of such claim,  in a manner that is not adverse to its financial
     position,  results of operations or cash flows.  No estimate can be made of
     the possible loss or possible range of loss  associated with the resolution
     of this  contingency.  If Be were  held  liable,  it is its  intent to seek
     reimbursement under its D&O insurance policy.



8.   Sale of Assets

     On August 16, 2001,  the Company  entered into a definitive  agreement with
     Palm, Inc. for the sale of substantially  all of its intellectual  property
     and other technology assets for a purchase price of $11 million, to be paid
     in common stock of Palm, Inc.  Closing of the transaction is subject to the
     satisfaction of certain  conditions,  including  obtaining  approval of the
     stockholders of the Company.

     A Special Meeting of stockholders  has been scheduled for November 12, 2001
     seeking approval of (1) the sale of substantially  all of Be's intellectual
     property  and  other  technology  assets  to  ECA  Subsidiary   Acquisition
     Corporation,  a  wholly  owned  subsidiary  of  Palm,  Inc.,  and  (2)  the
     subsequent dissolution of Be pursuant to a plan of dissolution.


                                       9
<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" AND  VARIATIONS  OF SUCH WORDS AND
SIMILAR  EXPRESSIONS ARE INTENDED TO IDENTIFY SUCH  FORWARD-LOOKING  STATEMENTS.
THESE  STATEMENTS  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 FORECASTED IN ANY SUCH FORWARD-LOOKING  STATEMENTS.  SUCH RISKS AND
UNCERTAINTIES  INCLUDE THOSE SET FORTH IN THIS SECTION UNDER "FACTORS  AFFECTING
OUR  BUSINESS,OPERATING  RESULTS AND FINANCIAL  CONDITION" AND ELSEWHERE IN THIS
REPORT  AS WELL AS THOSE  NOTED IN OUR  ANNUAL  REPORT ON FORM 10-K FOR THE YEAR
ENDED  DECEMBER 31, 2000 AND OUR OTHER PUBLIC  FILINGS WITH THE  SECURITIES  AND
EXCHANGE COMMISSION. 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.  Be offers  software  solutions  designed  for  Internet
appliances and digital media applications.

Be's  software  solution  products  consist of (i) BeIA:  the Complete  Internet
Appliance  Solution/TM/,  comprised of three  components;  BeIA Client Platform,
BeIA Management and Administration  Platform, and BeIA Integration Services, and
(ii) BeOS,  its operating  system  designed for digital media  applications  and
which  serves as the  development  platform for BeIA.  Prior to 1998,  Be had no
revenues and its operations consisted primarily of research and development.  In
December  1998,  Be shipped the first  version of BeOS,  its  desktop  operating
system  targeted  primarily to end users.  Prior  releases of BeOS were targeted
primarily to software  developers.  Having  experienced losses and negative cash
flow from  operations  since  inception,  in the latter  half of 1999 Be began a
review of its BeOS desktop  operating system business model and its potential to
create  stockholder  value.  The impetus  for the review was market  information
obtained from institutional  investors and market analysts,  and the realization
that the desktop  product  could only succeed by competing  effectively  against
Microsoft  Corporation,  which  is a  very  large,  established  and  entrenched
competitor in a rapidly maturing market. During this same period, many potential
large customers and industry  analysts were expressing  significant  interest in
the Internet  appliance  version of Be's  operating  system.  At the time,  most
market analysts were predicting rapid growth in the nascent  Internet  appliance
market and indicating it would ultimately have significant upside potential. The
strengths of Be's technology appeared  transferable to the needs of this market,
and the  market was not yet  dominated  by any one  player.  As a result of Be's
business  model review,  in January 2000 Be announced its intention to shift its
primary focus from the marketing and distribution of BeOS, its desktop operating
system,  to the  development,  marketing and  deployment  of BeIA,  its software
solution intended for Internet appliances.

                                       10
<PAGE>

At the same time Be shifted its  resource  focus,  it  attempted to provide BeOS
with a final  opportunity  for success in the desktop  market.  First, Be made a
fully  functioning  Personal  Edition of BeOS available on the Internet for free
download.  The intent of the Personal Edition of BeOS was to seed the market and
to create interest in and exposure to Be's technology.  Second,  Be entered into
publishing  relationships with several  well-established  software publishers to
distribute a royalty-bearing  Professional Edition of BeOS.  Ultimately,  Be did
not have the  resources,  nor  could  it  reasonably  obtain  the  resources  to
adequately   pursue   both  the   desktop   and   Internet   appliance   markets
simultaneously.  Thus,  Be  decided  to  allow  companies  in  the  business  of
publishing and distributing software to market the Professional Edition of BeOS.
Be reasoned that if the  publishers  were able to generate  enough  interest and
revenue with the  Professional  Edition of BeOS,  the royalty  revenues could be
used to fund further development of the desktop product. However, the publishers
were  never  able  to  generate  any  material  revenues  from  the  sale of the
Professional Edition of BeOS.

In  contrast,  Be was  successful  in 2000 in rapidly  entering  the  developing
Internet  appliance  market.  Be's  efforts  culminated  in the  execution  of a
contract with Sony for its eVilla  Network  Entertainment  Center in early 2001.
Unfortunately,   the  Internet  appliance  market  as  a  whole  has  failed  to
materialize as anticipated.  Consumer response to early Internet  appliances has
been unenthusiastic, major manufacturers have either removed their products from
the market or have not undertaken significant  development efforts. The economic
realities of the last four quarters have made success even more  difficult,  and
on August 30, 2001 Sony  discontinued the eVilla Network  Entertainment  Center,
its  Internet  appliance  based on BeIA.  Despite  Be's  efforts in the Internet
appliance  market,  Be's financial  difficulties  have continued and it has been
unable to generate revenues sufficient to meet operating expenses.  In April and
July  of  2001,  Be  substantially  reduced  its  workforce  and  announced  the
elimination  of its  sales  and  marketing  departments  in  order  to  conserve
resources.

Be has undertaken  extensive  activities since early 2000 to evaluate and pursue
financing  alternatives  for the company to allow for its  continuation  and the
creation of value for Be  stockholders.  Be has endeavored to obtain  additional
equity capital from numerous  sources.  Private  placements  with  institutions,
funds and private investors,  equity lines of credit and private placements with
strategic investors have all been thoroughly  investigated.  By the end of March
2001,  it was  clear no  adequate  source  of  capital  was  available  on terms
beneficial to Be stockholders.  Faced with this reality, Be's board of directors
approved the exploration of strategic and financial  alternatives for maximizing
stockholder value.  Alternatives considered included, but were not limited to, a
merger or similar  business  combination,  an equity  investment  by a strategic
investor,  or the sale of all or substantially all of the business or assets for
stock or cash in a transaction of the type ultimately entered into with Palm.

Since April 2001, Be has worked with  professional  financial  advisors with the
intent  of   maximizing   the  return  of  value  to   stockholders   under  the
circumstances.  Be  conducted  an  extensive  search  for  potential  interested
parties,  directly contacted a number of these parties and discussed with them a
variety of  possible  transactions.  As part of this  effort,  Be held  numerous
discussions and negotiations with third parties, including Palm, in an effort to
obtain  financing  necessary to the  continuation  or the potential sale of Be's
business.  Except for the proposed transaction with Palm, these discussions have
not resulted in any  acceptable  offers and during this period,  Be's  financial
resources have continued to deteriorate.

Be's  revenues  in  fiscal  year 2000  were  generated  from the sale of BeOS to
licensed  third party  publishers,  and other  resellers and  distributors,  and
direct  sales of BeOS to end users  through the  BeDepot.com  Web site.  Be also
generated  revenue by collecting  commissions from sales of third party software
through the BeDepot.com Web site.

To date,  revenues  in fiscal  year 2001 have  been  generated  through  royalty
payments,   maintenance  and  support  fees,  and   professional   services  and
integration fees and by revenue-related  consulting services performed under the
funding  agreement  since August 16. 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. The revenues
from BeIA have not offset the loss of revenues  from sales of BeOS.  As a result
of Be's  announcements  of the proposed Palm  transaction and the elimination of
its sales and marketing departments, Be does not expect to generate any material
revenues in the near or extended future.

Be's research and development expenses consist of compensation and related costs
for research and  development  personnel.  These  expenses are  currently  being
funded by Palm  under the terms of the  funding  agreement  entered  into by and
between  Be and Palm on August  16,  2001.  Be also  includes  in  research  and
development  expenses  the costs  relating  to  licensing  of  technologies  and
amortization of costs of software tools used in the development of its products.
Costs incurred in the research and development of new releases and  enhancements
are expensed as incurred.  These costs include the 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. Be expects research and development expenses will remain stagnant and
will be limited to  compensation  and related costs of research and  development
personnel, which are currently being funded by Palm, and the costs of technology
license  arrangements  entered into prior to Be's  announcement  of the proposed
Palm transaction.

                                       11
<PAGE>

Prior to the  elimination  of its sales and marketing  departments in July 2001,
Be's sales and marketing  expenses  consisted 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.  After  the  elimination  of the  sales  and  marketing
departments,  Be has not  incurred,  and does not expect to incur in the future,
any material expenses related to sales and marketing functions.

General and administrative expenses consist of compensation and related expenses
for management,  finance, and accounting  personnel,  professional  services and
related fees,  occupancy costs and other expenses.  As a result of the workforce
reductions  in April and July 2001 and the continued  decline of Be's  business,
general and  administrative  expenses related to day to day operations have been
greatly  reduced.  However,  in the third  quarter,  general and  administrative
expenses  increased  as a whole  due to the  costs  related  to the  search  for
potential investors and for the payment of professional fees and expenes related
to the the asset sale. Be does not expect general and administrative expenses to
be increased in the future.

Be has  historically  marketed  and sold its  products in the United  States and
internationally.  International  sales of products  accounted for  approximately
23%, 56% and 53% of Be's total  revenues in 2000,  1999 and 1998,  respectively.
International sales of products accounted for less than 1% of total revenues for
the three and nine month periods ended September 30, 2001 and  approximately 30%
and 21% for the three and nine month periods ended  September 30, 2000.  Because
of Be's  shift in focus away from BeOS,  in the event that it  generates  future
revenue,  Be expects that a higher percentage of such future total revenues,  if
any,  will be  derived  from  North  America.  Be does not  currently  engage in
currency hedging activities.

From time to time in the past,  Be has granted  stock  options to employees  and
non-employee  directors.  As of  September  30, 2001,  Be had recorded  deferred
compensation  related to these options in the total amount of $14.7 million, net
of cancellations,  representing the difference  between the deemed fair value of
Be's common stock, as determined for accounting purposes, and the exercise price
of options at the date of grant. Of this amount, $5.7 million had been amortized
at December 31, 1998,  with $6.2  million,  $2.6 million and  $(185,000),  being
amortized  in 1999,  2000 and the nine month period  ended  September  30, 2001,
respectively.  Future  amortization  of expense  arising out of options  granted
through  September 30, 2001 was estimated to be $106,000 for the remaining three
months of 2001,  $170,000 in 2002 and $4,000 in 2003.  Be amortizes the deferred
compensation charge monthly over the vesting period of the underlying option.


Comparison

Certain prior year costs have been reclassified to conform with the current year
presentation.

Operating  expenses  as  shown in the  Consolidated  Statements  of  Operations,
include non-cash charges for stock compensation amortization as follows:

<TABLE>
<CAPTION>

                                                                 Three Months            Nine Months
                                                             Ended September 30,     Ended September 30,
                                                             -------------------     -------------------
                                                             2001          2000      2001           2000
                                                             ----          ----      ----           ----
                                                                (in thousands)         (in thousands)
<S>                                                        <C>            <C>         <C>          <C>
Amortization of deferred compensation included in:
     Research and development....................          $ (93)         $ 159       $ 59         $ 668
     Sales and marketing.........................           (496)           121       (533)          547
     General and administrative..................             73            227        289           982
                                                            ----            ----       -----       -----
        Total amortization of deferred stock compensation $ (516)          $ 507     $ 185       $ 2,197
                                                         =========        ======     =======     =======

</TABLE>
     Excluding the amortization of deferred compensation, operating expenses are
as follows:
<TABLE>
<CAPTION>
                                                        Three Months        Nine Months
                                                     Ended September 30,  Ended September 30,
                                                    -------------------  -------------------
                                                   2001         2000    2001          2000
                                                   ----         ----    ----          ----
                                                    (in thousands)       (in thousands)
<S>                                                <C>       <C>       <C>           <C>
Operating expenses:
     Research and development....................  $1,398    $2,088     $6,053       $6,079
     Sales and marketing.........................     110     1,422      2,221        5,576
     General and administrative..................   1,121       880      3,501        2,669
     Amortization of deferred stock compensation     (516)      507       (185)       2,197
                                                      ---    -------   -------       ------
        Total operating expenses..................$ 2,113    $4,897   $ 11,590       16,521
                                                  ========   =======   =======     ========

</TABLE>

                                       12
<PAGE>

Comparison of the Three Month Period ended September 30, 2001 to the Three Month
Period ended September 30, 2000

Net  Revenues.  Net revenues  increased  $1.1 million for the three month period
ended September 30, 2001 from $68,000 for the three month period ended September
30, 2000.  Revenues are not directly comparable as they were mainly attributable
to shipments of BeOS in 2000 and to revenue-related consulting services in 2001,
performed  under a funding  agreement  that was entered  into  August 16,  2001,
contemporaneously  with  the  execution  and  delivery  of  the  asset  purchase
agreement among Be, Palm and ECA Subsidiary Acquisition Corporation.

Cost of Revenues.  Cost of revenues  increased  $1.5 million to $1.8 million for
the three month  period  ended  September  30, 2001 from  $216,000 for the three
month period  ended  September  30, 2000. A majority of such costs  continues to
result from the continuing  amortization of technology  license  agreements.  In
addition,  at September 30, 2001, the remaining  book value of these  technology
agreements of $539,000 was determined to be impaired and was therefore expensed.

Research and Development.  Research and development expenses, exclusive of stock
compensation,  decreased  $690,000,  or 33%, to $1.4 million for the three month
period  ended  September  30, 2001 from $2.1  million for the three month period
ended  September 30, 2000.  The decrease  results  primarily  from  decreases in
personnel  expenses,  primarily  attributable to the restructuring of operations
implemented on April 2, 2001 and July 31, 2001.

Sales  and  Marketing.   Sales  and  marketing  expenses,   exclusive  of  stock
compensation,  decreased  $1.3 million,  or 92%, to $110,000 for the three month
period  ended  September  30, 2001 from $1.4  million for the three month period
ended  September  30,  2000.  This  decrease is  primarily  attributable  to the
elimination of our sales and marketing departments on July 31, 2001.

General and Administrative.  General and administrative  expenses,  exclusive of
stock compensation,  increased  $241,000,  or 27%, to $1.1 million for the three
month period ended  September  30, 2001 from $880,000 for the three month period
ended September 30, 2000. This increase is primarily attributable to the payment
of fees and expenses related to the search for potential investors and the asset
sale  agreement  entered  into on August  16,  2001,  net of  reduced  personnel
expenses as compared with last year.

Amortization  of Deferred  Stock  Compensation.  Amortization  of deferred stock
compensation  decreased  $1.0 million to  $(516,000)  for the three month period
ended  September  30,  2001,  from  $507,000  for the three month  period  ended
September 30, 2000. The decrease is attributable to the  cancellation of options
and to the use of an  amortization  methodology,  which  tends to record  higher
compensation in the initial years of the vesting period. 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
and non-employee directors.

Other Income  (Expense),  Net. Net other income decreased  $255,000,  or 93%, to
$19,000 for the three month period ended  September  30, 2001 from  $274,000 for
the three month  period  ended  September  30,  2000.  The decrease is primarily
attributable to the decrease in interest  income due to the reduced  balances in
our investment portfolio used to fund operations.


Comparison  of the Nine Month Period ended  September 30, 2001 to the Nine Month
Period Ended September 30, 2000

Net Revenues.  Net revenues  increased $1.5 million to $2.0 million for the nine
month period ended  September  30, 2001 from  $464,000 for the nine month period
ended  September  30, 2000.  Revenues are not directly  comparable  as they were
mainly  attributable  to  shipments  of  BeOS  in  2000  and to  revenue-related
consulting  services  in 2001,  performed  under a  funding  agreement  that was
entered into August 16, 2001 with Palm, Inc.

Cost of Revenues.  Cost of revenues  increased  $1.6 million to $2.3 million for
the nine month period ended  September 30, 2001 from $770,000 for the nine month
period ended  September  30,  2000. A majority of such costs  continue to result
from the continuing amortization of technology license agreements.  In addition,
at September 30, 2001, the remaining book value of these  technology  agreements
of $539,000 was determined to be impaired and was therefore expensed.

Research and Development.  Research and development expenses, exclusive of stock
compensation, remained unchanged at $6.1 million for the nine month period ended
September 30, 2001 and for the nine month period ended September 30, 2000.

Sales  and  Marketing.   Sales  and  marketing  expenses,   exclusive  of  stock
compensation, decreased $3.4 million, or 60%, to $2.2 million for the nine month
period  ended  September  30, 2001 from $5.6  million for the nine month  period
ended  September  30,  2000.  This  decrease is  primarily  attributable  to the
restructuring of our operations, implemented early in the second quarter of 2001
and to the elimination of our sales and marketing departments on July 31, 2001.

General and Administrative.  General and administrative  expenses,  exclusive of
stock  compensation,  increased  $832,000,  or 31%, to $3.5 million for the nine
month  period  ended  September  30,  2001 from $2.7  million for the nine month
period ended September 30, 2000. This increase is primarily  attributable to the
payment of fees,  on a retainer  basis,  to an investment  banking  firm,  hired
during the second quarter of 2001, to assist us in exploring  various  strategic
and  financial  alternatives  for  maximizing  shareholder  value on a near-term
basis,  and to the  payment  of fees and  expenses  related  to the  asset  sale
agreement entered into on August 16, 2001.

Amortization  of Deferred  Stock  Compensation.  Amortization  of deferred stock
compensation  decreased  $2.4  million to  $(185,000)  for the nine month period
ended  September  30,  2001,  from $2.2  million for the nine month period ended
September 30, 2000. The decrease is attributable to the  cancellation of options
and to the use of an  amortization  methodology,  which  tends to record  higher
compensation in the initial years of the vesting period. 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
and non-employee directors.

Other Income  (Expense),  Net. Net other income decreased  $688,000,  or 73%, to
$249,000 for the nine month period ended  September  30, 2001 from  $937,000 for
the nine month  period  ended  September  30,  2000.  The  decrease is primarily
attributable to the decrease in interest  income due to the reduced  balances in
our investment portfolio used to fund operations.

                                       13
<PAGE>



Taxes

Since inception, the Company has generated net operating losses which aggregated
approximately $84.6 million as of September 30, 2001. The Company has provided a
full  valuation  allowance  against the losses since it believes that it is more
likely than not that such benefits will not be realized. The amount of available
net  operating  losses will be reduced in the case of a change in  ownership  as
defined in the Internal Revenue Code.

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 $12 million to
$2.1 million at September 30, 2001 from $14.1 million at December 31, 2000. This
decrease is primarily attributable to the amounts used to fund operations.

Cash used in operating activities decreased  approximately $1.2 million to $12.6
million for the nine month period ended  September 30, 2001 as compared to $13.8
million for the nine month period ended  September  30, 2000.  This  decrease is
primarily  attributable  to lower  operating  expenses in the nine month  period
ended September 30, 2001

Cash provided by investing  activities  decreased  approximately $9.3 million to
$4.7 million for the nine month period ended  September  30, 2001 as compared to
$14.0 million for the nine month period ended  September 30, 2000. This decrease
is primarily  attributable  to lower net sales of short-term  investments in the
nine month period ended September 30, 2001.

Cash provided by financing  activities for the nine month period ended September
30, 2001 was  approximately  $588,000,  which represents a $2.8 million decrease
from the nine month  period  ended  September  30,  2000 of $3.4  million.  This
decrease is primarily attributable to the proceeds of $2.1 million received from
the exercise of stock options in the first quarter of 2000.

We require  substantial  working  capital to fund our  operations.  We expect to
continue to experience losses from operations and negative  operating cash flows
for the foreseeable  future.  We expect to receive gross proceeds of $11 million
upon completion of the asset sale, if and when it occurs.

If the asset  sale is not  completed,  it is likely  that Be will file for or be
forced to resort to bankruptcy  protection.  If the asset sale is completed,  Be
intends to wind up its  business  and pay, or provide for the payment of, all of
its  outstanding  liabilities  and obligations in accordance with applicable law
and the plan of dissolution. Until it winds up its business, Be will continue to
experience  losses from  operations and negative cash flows and will continue to
require  working  capital to fund its  remaining  operations.  Be believes  that
existing cash and cash  equivalents will not be sufficient to meet operating and
capital requirements at its currently anticipated level of operations beyond the
end of fiscal 2001.


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  "Factors  Affecting  our  Business,
Operating  Results and Financial  Condition"  discussed in the Company's  Annual
Report on Form 10-K for the year ended  December  31, 2000 and our other  public
filings with the Securities and Exchange Commission.

Risks Relating to the Asset Sale

Whether  or not the  asset  sale  is  completed,  Be may not be able to pay,  or
provide for the payment of, all of its liabilities and obligations.  If the sale
is not  completed,  it is  likely  that  Be  will  file  for or be  forced  into
bankruptcy by its creditors and no assets may be available for  distribution  to
Be stockholders.

   If the asset sale is not  completed,  Be  believes  that it is likely that it
will file for or be forced to resort to bankruptcy protection. In this event, it
is extremely  unlikely  that Be would be able to pay, or provide for the payment
of, all of its liabilities and obligations,  and,  therefore,  there would be no
assets  available for  distribution  to Be's  stockholders.  Even if the parties
complete  the asset sale,  the  proceeds  provided by the sale of the Palm stock
received at the closing,  together with Be's other assets, may not be sufficient
to pay, or provide for the payment of, all of Be's known and unknown liabilities
and  obligations.  If the proceeds  from the asset sale together with Be's other
assets were  insufficient to pay or provide for the payment of Be's  liabilities
and other obligations,  it is likely that Be could be required to file for or be
forced to resort to bankruptcy  protection.  Further,  if there are insufficient
proceeds from the asset sale to pay or otherwise provide for the liabilities and
obligations of Be, there will be no assets  available for  distribution  to Be's
stockholders.

Even if Be's  stockholders  approve  the asset  sale,  the asset sale may not be
completed and it is likely that Be could be required to file for or be forced to
resort to bankruptcy protection.

   The completion of the asset sale is subject to numerous  conditions.  Even if
stockholders  of Be holding a majority  of the  outstanding  shares of Be common
stock vote to approve the asset sale and the  dissolution,  Be cannot  guarantee
that the asset sale will be completed.  If it is not completed,  Be would likely
not be able to sell its assets to another  buyer on terms as  favorable as those
provided in the asset purchase agreement, or at all, which would mean that it is
likely  that Be  could  be  required  to file  for or be  forced  to  resort  to
bankruptcy protection.

                                       14
<PAGE>

Failure to hire and retain key  employees  could  diminish  the  benefits of the
asset sale to Palm and could prevent consummation of the asset sale.

   It is a condition to closing the asset sale that seven out of eight employees
of Be designated as "key employees" and 33 out of 42 other designated  employees
of Be enter into "at will" employment  arrangements  with Palm as of the closing
date of the asset sale. Therefore,  failure by Palm to effectively recruit these
employees  could  prevent  consummation  of the  asset  sale.  Furthermore,  the
successful  integration of the Be assets into Palm's current business operations
will depend in part on the hiring and  retention  of  personnel  critical to the
business and operations of Palm and the Be operating  systems  business.  The Be
employees to be hired by Palm in connection  with the asset sale have  technical
and engineering  expertise that is in high demand and short supply.  Palm may be
unable to retain  technical and  engineering  personnel that are critical to the
successful  integration  of the Be  assets,  which  may  result  in  loss of key
information,  expertise or know-how and unanticipated  additional recruiting and
training costs and otherwise diminishing  anticipated benefits of the asset sale
for Palm and its stockholders.

The proceeds  from the sale of the Palm common stock  received in the asset sale
are uncertain.

   If  the  transactions  contemplated  by  the  asset  purchase  agreement  are
completed,  Be intends to sell the Palm shares  received in the  transaction for
cash promptly following the closing.  Although the Palm shares issued to Be will
have a value of $11,000,000 (subject to adjustment under certain circumstances),
based on the opening price of Palm common stock as quoted on the Nasdaq National
Market on the closing date of the transaction,  the actual proceeds  realized by
Be from the sale of the  shares  is likely  to be less  than  $11,000,000  after
payment of commissions and expenses. Furthermore, Be may not be able to promptly
resell the shares as a result of market conditions, securities laws restrictions
or other  factors.  Accordingly,  Be will bear  market  risk with  respect  to a
decline in the trading price of Palm's stock between  closing and the time Be is
able to sell the shares.

Failure to complete the asset sale could cause Be's stock price to decline.

   If the asset sale is not  completed,  Be's stock price may decline due to any
or all of the following potential consequences:

-    Be may not be  able  to  dispose  of its  assets  for  values  equaling  or
     exceeding those currently  estimated by Be; in particular,  the assets that
     are the subject of the asset sale will likely be  substantially  diminished
     in value;

-    Be may file for or be forced into bankruptcy;

-    Be's  costs  related  to the  asset  sale,  such as legal,  accounting  and
     financial  advisor  fees,  must  be  paid  even  if the  asset  sale is not
     completed; and

-    Be may have difficulty retaining its key remaining personnel.


   In addition, if the asset sale is not completed, Be's stock price may decline
to the extent that the current market price of Be common stock reflects a market
assumption that the asset sale will be completed.

Following  the  completion  of the asset  sale,  Be may no longer have access to
certain  intellectual  property  assets or the human  resources,  including  the
services of certain key employees,  necessary to fulfill its  obligations  under
existing agreements with third parties.

   Upon the  completion of the asset sale,  Be will have sold its rights,  title
and  interest  in  substantially  all of its  intellectual  property  and  other
technology  assets,  including  those  related  to the BeOS  and BeIA  operating
systems,  to Palm.  Because of this, Be may no longer be able to comply with its
existing   contractual   obligations  or  commitments   under  certain   license
agreements,  distribution  agreements  and service  contracts with third parties
that are not to be transferred to Palm in the asset sale. In addition, under the
terms of the asset  purchase  agreement,  at least 33  designated  employees and
seven key employees  shall have entered into "at-will"  employment  arrangements
with Palm at the  closing  of the  transaction.  As a result of this,  after the
closing of the asset sale, Be will have no more than seven  employees.  The loss
of the services of any of Be's executive  officers or other key  employees,  and
the loss of a  significant  portion  of Be's  current  workforce  to Palm  could
prevent  Be from  effectively  continuing  its  operations  and  fulfilling  its
contractual  obligations with third parties under existing agreements before the
dissolution of Be.

Risks Relating to the Dissolution of Be

Be cannot determine at this time whether any  distributions  will be made to its
stockholders  or the  amount  of any  such  distributions  to its  stockholders,
because  there are a variety  of  factors,  some of which  are  outside  of Be's
control,  that could  affect  the  ability  of Be to make  distributions  to its
stockholders.

                                       15
<PAGE>

   Be cannot  determine at this time the amount of or whether  there will be any
distributions  to its  stockholders  because  that  determination  depends  on a
variety of factors, including, but not limited to, the likelihood of closing the
asset sale,  the net proceeds  from the sale of the Palm shares  received in the
asset sale, the value of Be's other assets, the amount of Be's unknown debts and
liabilities to be paid in the future,  the resolution of pending  litigation and
other contingent liabilities, general business and economic conditions and other
matters.  The  amount  of  proceeds  from the  asset  sale and the  amount to be
distributed  to Be  stockholders,  if any,  are  subject to various  significant
uncertainties,  many of which are beyond Be's control. Examples of uncertainties
that could reduce the value of or  eliminate  distributions  to Be  stockholders
include the following:

-    Changes in the  anticipated  net proceeds  from the sale of the Palm shares
     received in the asset sale, the amount of Be's  liabilities and obligations
     and the  estimate  of the costs  and  expenses  of the asset  sale and Be's
     dissolution, including any resulting tax liabilities.

-    If liabilities  of Be that are unknown or contingent  later arise or become
     fixed  in  amount  and must be  satisfied  or  reserved  for as part of the
     dissolution.

-    Delays in  completing  the asset sale or the  dissolution  of Be that could
     result in additional  expenses and result in reductions in distributions to
     Be stockholders.

-    A decline in the value of Palm  common  stock  between the time Be receives
     the shares of Palm stock as  consideration  for the asset sale and the time
     Be is reasonably able to dispose of such shares.

   For the foregoing  reasons,  there can be no assurance that there will be any
distributions  to Be  stockholders,  or as to the amount of such  distributions,
even if the asset sale is completed.

Be's  board of  directors  may  abandon or delay  implementation  of the plan of
dissolution even if it is approved by Be's stockholders.

   Be's board of directors has adopted a plan of dissolution for the dissolution
and  winding-up  of Be following the  completion of the asset sale.  Even if the
plan of dissolution is approved and adopted by Be's stockholders,  Be's board of
directors  has  reserved  the  right,  in its  discretion,  to  abandon or delay
implementation  of the plan of  dissolution  for various  reasons,  including in
order to permit Be to pursue (or more  easily  pursue)  any  retained  claims or
causes of action.

Be's  stockholders  may be  liable  to  creditors  of Be for an amount up to the
amount  received  from  Be if  Be's  reserves  for  payments  to  creditors  are
inadequate.

   If the plan of dissolution is approved by Be's stockholders, and the board of
directors of Be determines to proceed with the  dissolution of Be, a certificate
of dissolution will be filed with the State of Delaware  dissolving Be. Pursuant
to the Delaware  General  Corporation  Law, or Delaware law, Be will continue to
exist for three years after the dissolution becomes effective or for such longer
period as the  Delaware  Court of  Chancery  shall  direct  for the  purpose  of
prosecuting  and  defending  suits  against  it 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 applicable  Delaware
law, in the event Be fails to create an adequate contingency reserve for payment
of its  expenses  and  liabilities  during  this  three  year  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).  Accordingly, in such event a stockholder could be
required to return all  distributions  previously made to such  stockholder.  In
such  event,  a  stockholder  could  receive  nothing  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.  There can be no assurance that the contingency  reserve established by
Be will be adequate to cover any expenses and liabilities.  However,  Be intends
to exercise caution in making distributions to stockholders in order to minimize
this type of risk.

If Be fails to  retain  the  services  of  current  key  personnel,  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 certain of its current  personnel who will not
become employed by Palm at the closing, or to attract qualified replacements for
them. The retention of qualified personnel is particularly  difficult under Be's
current  circumstances.  For this  reason and  others  discussed  below,  Be has
entered  into  incentive   arrangements  with  certain  executive  officers  and
employees.

Be expects its stock to be delisted from the Nasdaq  National Market in the near
future.

Be expects it will be unable to satisfy the requirements  for continued  listing
of its common stock on the Nasdaq National  Market.  In the event the asset sale
is completed,  rules of the Nasdaq National Market require that companies listed
on the Nasdaq  National  Market  continue to have an operating  business.  If Be
completes its plans to conclude business activities  following the completion of
the asset dale, it will no longer have an operating business. In addition, as Be
distributes cash to its stockholders,  certain other listing criteria may not be
met.  Regardless of whether the asset sale is completed,  Be is currently not in
compliance  with  certain  of  the  Nasdaq's  listing  criteria,  including  the
maintenance of a minimum amount of net tangible  assets.  If Nasdaq delists Be's
common stock from the Nasdaq National Market, the ability of stockholders to buy
and sell shares will be materially impaired,  and the trading price of Be common
stock may be materially impaired.

                                       16
<PAGE>

Be's board  members  may have a potential  conflict of interest in  recommending
approval of the asset sale and the plan of dissolution.

   Members  of the Be board  of  directors  may be  deemed  to have a  potential
conflict of interest in recommending  approval of the asset sale and the plan of
dissolution.

If Be's board of  directors  abandons  or delays  implementation  of the plan of
dissolution  after the  completion  of the asset sale,  Be may be the  potential
target of a reverse acquisition.

   If Be's board of  directors  decides to delay  implementation  of the plan of
dissolution following completion of the asset sale, Be will continue to exist as
a public shell  company.  Public  companies  that exist as  non-operating  shell
entities  have from time to time been the  target  of  reverse  acquisitions  by
private companies seeking to bypass the costly and  time-intensive  registration
process to become  publicly  traded  companies.  If Be  becomes  the target of a
successful  reverse  acquisition,  the  new  board  of  directors  of  Be  could
potentially decide to either delay or completely abandon the dissolution, and Be
stockholders  may not  receive  any  proceeds  that  would have  otherwise  been
distributed in connection with the dissolution.


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 September 30, 2001.
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.  Since the
closing of our French subsidiary was substantially completed at the end of June,
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

As  previously  disclosed  in the  Company's  filings  with the  Securities  and
Exchange  Commission,  in November 2000, our stock transfer  agent,  Wells Fargo
Bank Minnesota, N.A., received a demand letter from Financial Square Partners, a
Be stockholder,  alleging damages resulting from the transfer agent's failure to
timely  issue its  stock  certificates.  While Be was not a party  named in such
demand letter, Be was named as a party on the stockholder's draft claim attached
to the demand letter. On May 9, 2001, the claim was in fact filed, naming Be and
Wells Fargo Bank Minnesota,  N.A. as defendants,  and is currently active in the
Superior Court of California.  The  stockholder is seeking damages in the amount
of  approximately  $2.4  million.  Prior to this  filing,  the  Company had been
participating  in  communications  with the  parties in an effort to resolve the
matter prior to a lawsuit being filed.

Be management  continues to believe that the allegations as they relate to Be in
the filed  claim are without  merit and intends to defend Be against  this legal
action.  However,  there can be no assurance this claim will be resolved without
costly  litigation,  or require Be's  participation  in the  settlement  of such
claim,  in a manner that is not adverse to our  financial  position,  results of
operations  or cash  flows.  No  estimate  can be made of the  possible  loss or
possible range of loss associated with the resolution of this contingency. If Be
were held liable, it is our intent to seek reimbursement under our D&O insurance
policy.


                                       17
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ITEM 2.    CHANGES IN SECURITIES AND USE OF PROCEEDS

Sales of Registered Securities and Use of Proceeds

         None.

Sales of Unregistered Securities

         None.


ITEM 3.    DEFAULT UPON SENIOR SECURITIES

         None.


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

         None.


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



          *    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, 2000,  incorporated herein by
               reference.



(b)      Reports on Form 8-K

               Current  Report on Form 8-K,  filed August 24,  2001,  announcing
               that Be  entered.  into an Asset  Purchase  Agreement  with Palm,
               Inc.,  a Delaware  corporation,  and ECA  Subsidiary  Acquisition
               Corporation,   a  Delaware   corporation,   and  a   wholly-owned
               subsidiary of Palm.



                                       18
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                                   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

By:   /s/ JEAN-LOUIS F. GASSEE                          Date : November 12, 2001
      Jean-Louis F. Gassee
      President, Chief Executive Officer and Director

By:   /s/ P.C. BERNDT                                   Date : November 12, 2001
      P.C. Berndt
      Chief Financial Officer


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