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, 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 November  10, 1999 was
34,399,204.



<PAGE>


                                 BE INCORPORATED
                                    FORM 10-Q
                                TABLE OF CONTENTS



                                                                            PAGE

PART I.   FINANCIAL INFORMATION

Item 1.   Condensed Consolidated Financial Statements:

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

          Consolidated  Statements of Operations for the three and nine
          month periods ended September 30, 1999 and September 30, 1998........4

          Consolidated  Statements of Cash Flows for the nine month
          periods ended September 30, 1999 and September 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..........21

PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings...................................................21

Item 2.   Changes in Securities and Use of Proceeds...........................21

Item 3.   Defaults upon Senior Securities.....................................21

Item 4.   Submission of Matters to a Vote of Security Holders.................22

Item 5.   Other Information...................................................22

Item 6.   Exhibits and Reports on Form 8-K....................................22

          Signatures..........................................................23

          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>

                                                      September 30, December 31,
                                                             1999         1998
                                                          ---------    --------
                                                        (unaudited)
<S>                                                         <C>          <C>
ASSETS
Current assets:
   Cash and cash equivalents ..........................   $  11,020    $  3,394
   Short-term investments .............................      22,591       8,254
   Accounts receivable ................................         818         477
   Prepaid and other current assets ...................         665         327
                                                          ---------    --------
       Total current assets ...........................      35,094      12,452


Property and equipment, net ...........................         625         403
Purchased web site technology, net of amortization ....          30         303
Other assets, net of accumulated amortization .........         977         476
                                                          ---------    --------
        Total assets ..................................   $  36,726    $ 13,634
                                                          =========    ========

LIABILITIES, MANDATORILY REDEEMABLE
CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
   Accounts payable ...................................   $   1,121    $    576
   Accrued expenses ...................................       1,260       1,094
   Technology license obligations, current portion ....         867         688
   Deferred revenue ...................................         588         392
                                                          ---------    --------
       Total current liabilities ......................       3,836       2,750

Technology license obligations, net of current portion          309         779
                                                          ---------    --------
       Total liabilities ..............................       4,145       3,529
                                                          ---------    --------
Mandatorily redeemable convertible preferred stock ....        --        38,005
                                                          ---------    --------
Stockholders' Equity (Deficit):
   Common stock .......................................          34           5
   Additional paid-in capital .........................     106,281      25,302
   Deferred stock compensation ........................      (6,670)     (4,490)
   Accumulated deficit ................................     (67,064)    (48,717)
                                                          ---------    --------
       Total stockholders' equity (deficit) ...........      32,581     (27,900)
                                                          ---------    --------
        Total liabilities, mandatorily redeemable
          preferred stock and stockholders' deficit ...   $  36,726    $ 13,634
                                                          =========    ========
</TABLE>

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

                                       3
<PAGE>

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

                                                Three Months Ended     Nine Months Ended
                                                    September 30,         September 30,
                                               -------------------    --------------------
                                                  1999       1998       1999        1998
                                               --------    -------    --------    --------
                                                     (unaudited)             (unaudited)
<S>                                            <C>         <C>        <C>         <C>
Net revenues ...............................   $    775    $   226    $  1,621    $    892
Cost of revenues ...........................        372         99         696       1,862
                                               --------    -------    --------    --------
Gross profit (loss) ........................        403        127         925        (970)

Operating expenses:
   Research and development ................      2,005      1,270       5,675       4,296
   Sales and marketing .....................      2,179        887       6,520       2,770
   General and administrative ..............        961        549       2,520       1,678
   Amortization of deferred stock
     compensation ..........................      1,596      1,097       4,974       2,712
                                               --------    -------    --------    --------
       Total operating expenses ............      6,741      3,803      19,689      11,456
                                               --------    -------    --------    --------
Loss from operations .......................     (6,338)    (3,676)    (18,764)    (12,426)

Interest expense ...........................        (32)       (29)       (106)       (113)
Other income and expenses, net .............        316        177         523         530
                                               --------    -------    --------    --------
Net loss ...................................     (6,054)    (3,528)    (18,347)    (12,009)
                                               --------    -------    --------    --------


Accretion of mandatorily redeemable
   convertible preferred stock .............   $    (28)   $   (97)   $   (292)   $   (260)
                                               --------    -------    --------    --------
Net loss attributable to common
   stockholders ............................   $ (6,082)   $(3,625)   $(18,639)   $(12,269)
                                               ========    =======    ========    ========

Net loss per common share--basic and diluted   $   (.22)   $ (1.09)   $  (1.56)   $  (4.03)
                                               ========    =======    ========    ========
Shares used in per common share
   calculation--basic and diluted ..........     27,853      3,340      11,921       3,042
                                               ========    =======    ========    ========
</TABLE>

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


                                       4
<PAGE>


                        BE INCORPORATED AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
<TABLE>
<CAPTION>
                                                             Nine Months Ended
                                                                September 30,
                                                             1999         1998
                                                           --------   ---------
                                                                (unaudited)
<S>                                                        <C>         <C>
Cash flows from operating activities:
   Net loss ............................................   $(18,347)   $(12,009)
   Adjustments to reconcile net loss to net
     cash used in operating activities:
       Depreciation and amortization ...................        721         642
       Licensed technology used in
        research and development .......................       --         1,841
       Amortization of discount on
        technology license obligations .................         93          98
       Loss on disposal of fixed assets ................         64        --
       Compensation expense incurred on issuance
        of stock .......................................        505        --
       Amortization of deferred stock compensation .....      4,975       2,711
       Changes  in  assets  and liabilities
         (in 1998, net of effects of acquisition):
          Accounts receivable ..........................       (341)       (217)
          Prepaid and other current assets .............       (460)       (107)
          Accounts payable .............................        545         110
          Accrued expenses .............................       (240)        115
          Deferred revenue .............................        196           8
                                                           --------   ---------
            Net cash used in operating activities ......    (12,289)     (6,808)
                                                           --------   ---------
Cash flow used in investing activities:
   Acquisition of property and equipment ...............       (504)       (257)
   Acquisition of licensed technology ..................       (975)     (1,373)
   Purchases of short-term investments .................    (77,554)    (21,257)
   Sales of short-term investments .....................     63,199      11,515
   Acquisition of StarCode (net of cash acquired) ......       --          (562)
                                                           --------   ---------
            Net cash used in investing activities ......    (15,834)    (11,934)
                                                           --------   ---------
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, net .........     35,753         203
   Repurchase of common stock ..........................         (4)         (4)
                                                           --------   ---------
            Net cash provided by financing activities ..     35,749      20,925
                                                           --------   ---------
Net increase in cash and cash equivalents ..............      7,626       2,183

Cash and cash equivalents, beginning of period .........      3,394         699
                                                           --------   ---------
Cash and cash equivalents, end of period ...............   $ 11,020    $  2,882
                                                           ========   =========
</TABLE>

              The accompanying notes are an integral part of these
                       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.

                                       6
<PAGE>

     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.


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      Nine Months Ended
                                                                  September 30,           September 30,
                                                                1999        1998        1999        1998
                                                              --------    --------    --------    --------
                                                                  (unaudited)              (unaudited)
<S>                                                           <C>         <C>         <C>         <C>
Historical net loss per common share, basic and diluted:
   Net loss ...............................................   $ (6,054)   $ (3,528)   $(18,347)   $(12,009)
   Accretion of mandatorily redeemable
     convertible preferred stock ..........................        (28)        (97)       (292)       (260)
                                                              --------    --------    --------    --------
   Numerator for net loss, basic and diluted ..............     (6,082)     (3,625)    (18,639)    (12,269)

   Denominator for basic and diluted loss per common share:
     Weighted average common shares
       outstanding ........................................     27,853       3,340      11,921       3,042
                                                              ========    ========    ========    ========
   Net loss per common share basic and diluted ............   $   (.22)   $  (1.09)   $  (1.56)   $  (4.03)
                                                              ========    ========    ========    ========
   Antidilutive securities:
     Options to purchase common stock .....................      6,320       2,298       6,320       2,298
     Common stock not yet vested ..........................        692       1,740         692       1,740
     Preferred stock ......................................       --        21,853        --        21,853
     Warrants .............................................      2,870       2,862       2,870       2,862
                                                              --------    --------    --------    --------
                                                                 9,882      28,753       9,882      28,753
                                                              ========    ========    ========    ========

</TABLE>

                                       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-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   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)  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.  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 September 30, 1999, we had $588,000 in
deferred revenues.

                                       8
<PAGE>

     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.

     We expect  our sales and  marketing  expenses  to  increase  as we  further
promote awareness of BeOS, 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.

                                       9
<PAGE>

     We market and sell our products in the United  States and  internationally.
International sales of products accounted for approximately 53% and 57% of total
revenues for the three month period  ended  September  30, 1999 and for the nine
month period ended September 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 September 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 September
30, 1999 is estimated to be $1.5 million for the remaining three 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.

                                       10
<PAGE>

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

     Net  Revenues.  Net revenues  increased  $549,000 to $775,000 for the three
month period ended  September  30, 1999 from $226,000 for the three month period
ended  September  30, 1998.  This increase is primarily  attributable  to higher
shipments of BeOS as a result of the release of version R4.5 in June of 1999 and
of the development of a reseller distribution channel in 1999.

     Cost of Revenues.  Cost of revenues  increased $273,000 to $372,000 for the
three month  period  ended  September  30, 1999 from $99,000 for the three month
period ended September  30,1998.  Gross margin decreased from 56% in 1998 to 52%
in 1999 due mainly to the development of the distribution  channel where margins
are lower than direct sales which accounted for all the revenue in 1998.

     Research and Development.  Research and Development  increased $735,000, or
58%, to $2.0 million for the three month period  ended  September  30, 1999 from
$1.3 million for the three month period ended  September  30,1998.  The increase
results primarily from increases of approximately $250,000 in personnel expenses
and of approximately $400,000 in costs of licensing third party technology.

     Sales and  Marketing.  Sales and Marketing  increased  $1.3 million to $2.2
million for the three month period ended  September  30, 1999 from  $887,000 for
the three month  period  ended  September  30,1998.  This  increase is primarily
attributable  to the hiring of additional  sales and marketing  personnel and 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
$412,000,  or 75%, to $961,000 for the three month period  ended  September  30,
1999 from  $549,000 for the three month period ended  September  30, 1998.  This
increase was primarily  attributable to the hiring of additional  personnel,  to
premiums related to insurance  coverage  obtained  concurrently with the initial
public offering and to the expansion of leased facilities.

     Amortization of Deferred Stock Compensation. Amortization of deferred stock
compensation  increased  $499,000,  or 45%, to $1.6  million for the three month
period ended  September  30, 1999,  from $1.1 million for the three month period
ended September 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 increased $136,000,  or 92%,
to $284,000 for the three month period ended  September  30, 1999 from  $148,000
for the three month period ended  September 30, 1998.  The increase is primarily
attributable to the increase in interest income due to the increased balances in
our investment portfolio following our initial public offering.

                                       11
<PAGE>

Comparison  of the Nine Month Period ended  September 30, 1999 to the Nine Month
Period Ended September 30, 1998

     Net Revenues.  Net revenues increased $729,000, or 82%, to $1.6 million for
the nine month period ended  September 30, 1999 from $892,000 for the nine month
period ended  September  30, 1998.  This increase is primarily  attributable  to
higher  shipments  of BeOS as a result of the release of version R4.5 in June of
1999 and of the development of a reseller distribution channel in 1999.

     Cost of  Revenues.  Cost of  revenues  decreased  $1.2  million or 63%,  to
$696,000 for the nine month period  ended  September  30, 1999 from $1.9 million
for the nine month period ended September 30, 1998. The cost of revenues for the
nine month period  ended  September  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 $1.4 million,
or 32%, to $5.7 million for the nine month period ended  September 30, 1999 from
$4.3 million for the nine month period ended September 30,1998. The net increase
is primarily  attributable  to an increase in  personnel  costs and in licensing
costs.  Personnel  expenses  increased by approximately  $940,000 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  $3.8 million to $6.5
million for the nine month period ended September 30, 1999 from $2.8 million for
the nine month  period ended  September  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  September of
1999.

     General and Administrative.  General and administrative  expenses increased
$842,000,  or 50%, to $2.5 million for the nine month period ended September 30,
1999 from $1.7 million for the nine month period ended  September 30, 1998. This
increase was primarily  attributable to increases in  professional  services and
related fees,  increased  personnel and related  costs,  to premiums  related to
insurance  coverage  obtained  concurrently with the initial public offering and
expansion of leased facilities.

     Amortization of Deferred Stock Compensation. Amortization of deferred stock
compensation  increased $2.3 million, or 83%, to $5.0 million for the nine month
period ended  September  30,  1999,  from $2.7 million for the nine month period
ended September 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 remained stable at $417,000
for the nine month period  ended  September  30, 1999 as compared  with the nine
month period ended September 30, 1998.

                                       12
<PAGE>

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 increased  approximately $22.0 million to
$33.6  million at September  30, 1999,  from $11.6 million at December 31, 1998.
This increase is primarily  attributable  to the proceeds of our initial  public
offering, net of amounts used to fund operations.

     Cash used in operating  activities  increased $5.5 million to $12.3 million
for the nine month period ended  September  30, 1999 as compared to $6.8 million
for the nine month period ended  September 30, 1998.  This increase is primarily
attributable  to the  increase  in net loss during the nine month  period  ended
September 30, 1999.

     Cash used in investing activities  increased  approximately $3.9 million to
$15.8 million for the nine month period ended  September 30, 1999 as compared to
$11.9 million for the nine month period ended  September 30, 1998. This increase
is primarily attributable to net purchases of short-term investments in the nine
month period ended September 30,1999  following our initial public offering.  In
the nine month  period  ended  1998,  we had  purchased  short term  investments
following the sale of Series 2 convertible preferred stock.

     Cash  provided by  financing  activities  for the nine month  period  ended
September 30, 1999 was  approximately  $35.7 million,  which  represents a $14.8
million  increase in cash provided by financing  activities  from the nine month
period ended  September  30, 1998 of $20.9  million.  This increase is primarily
attributable  to the net  proceeds of $35.3  million  received  from our initial
public  offering.  The net  proceeds  from the sale of our Series 2  convertible
preferred  stock in the nine month period ended  September  30,1998  amounted to
approximately $20.7 million.

     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  $32.2 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 are and 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.


                                       13
<PAGE>

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 2000
compliant, 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.

     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.

Readiness

     We have completed our internal review of our information  systems including
software programs used in our accounting and financial  reporting  functions and
of our  material  non-information  technology  systems.  Based on our review and
information  gathered from third party vendors, we do not believe that there are
any significant Year 2000 Issues relating to our information  systems. Our costs
incurred to date with respect to Year 2000 have not been significant.  Although,
we believe  reasonable  steps  have been  taken,  we cannot be certain  that all
internal  Year 2000 risks have been  addressed  or that our  suppliers  or other
third parties with whom we conduct  business have  successfully  addressed  such
risks. If not addressed,  such risks could have a material adverse effect on our
business.

Contingency Plans

     We have  substantially  completed the development of a contingency  plan to
address situations that may result if we are faced with situations not addressed
by our Year 2000 review of our critical operations.  Although,  we will continue
to enhance our contingency plan during the last quarter of 1999, there can be no
assurance  that our  contingency  plan  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.

                                       14
<PAGE>

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) and our other
public filings with the Securities and Exchange Commission.

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,  $16.9  million in 1998 and $18.3  million  for the nine
period ended September 30, 1999. As of September 30, 1999, we had an accumulated
deficit  of  approximately   $67.1  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.

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.

                                       15
<PAGE>

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.


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.

                                       16
<PAGE>

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.

                                       17
<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.

                                       18
<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.

                                       19
<PAGE>

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.


                                       20
<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 September 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

           None.

Sales of Unregistered Securities

           None.


ITEM 3.    DEFAULT UPON SENIOR SECURITIES

           None.


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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
                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


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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, 1999
      Jean-Louis F. Gassee
      President, Chief Executive Officer and Director

By:   /s/ WESLEY S. SAIA                                Date : November 12, 1999
      Wesley S. Saia
      Vice President and Chief Financial Officer


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