UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-K/A
                                (Amendment No. 1)

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

                   For the fiscal year ended December 31, 2001

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

                         Commission File Number: 0-26387

                                 BE INCORPORATED
             (Exact name of Registrant as specified in its charter)

                    Delaware                           94-3123667
        (State or other jurisdiction of     (IRS Employer Identification No.)
           incorporation or organization)

        655 West Evelyn Street, Suite 6, Mountain View, California 94041
          (Address of principal executive offices, including zip code)

                                 (650) 965-4842
              (Registrant's telephone number, including area code)

        Securities registered pursuant to Section 12(b) of the Act: NONE

           Securities registered pursuant to Section 12(g) of the Act:
                         COMMON STOCK, $0.001 PAR VALUE


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 |X| No __

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ___

The   approximate   aggregate   market   value  of  the  common  stock  held  by
non-affiliates  of the Registrant,  based upon the last sale price of the Common
Stock  reported  on the  Nasdaq  National  Market,  as of April  15,  2002,  was
approximately $4,027,000.

The  number  of  shares of Common  Stock  outstanding  as of April 15,  2002 was
38,450,527.



                                       1
<PAGE>




                                 BE INCORPORATED

                        FORM 10-K/A AMENDED ANNUAL REPORT

                            FOR THE FISCAL YEAR ENDED
                                DECEMBER 31, 2001

                                Table of Contents


PART II

Item 6.   Selected Financial Data............................................  3

Item 7.   Management's Discussion and Analysis of Financial
Condition and Results of Operations........................................    5

Item 8.   Consolidated Financial Statements and Supplementary Data.........   10

PART IV

Item 14.  Exhibits, Financial Statement Schedule and Reports on Form 8-K...   11

Signatures.................................................................   13




                                       2
<PAGE>



                                     PART II


ITEM 6.  SELECTED FINANCIAL DATA

     The tables  that follow  present  portions  of our  unaudited  consolidated
financial  statements  and are not  complete.  You  should  read  the  following
selected  financial  information in conjunction with our Unaudited  Consolidated
Financial  Statements  and related  Notes and with  "Management  Discussion  and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this Amended  Annual  Report.  The historical  results  presented  below are not
necessarily indicative of the results to be expected for any future fiscal year.
See "Management's  Discussion and Analysis of Financial Condition and Results of
Operations."


<TABLE>
<CAPTION>


                                                                  Year Ended December 31,
                                                                 -----------------------
                                                   1997       1998         1999        2000        2001
                                                  ----         ----        ----        ----       ----
                                                              (in thousands, except per share data)
Consolidated Statement of Operations Data:
<S>                                            <C>         <C>         <C>         <C>         <C>
Net revenues ...............................   $     86    $  1,199    $  2,656    $    480    $  2,713
Cost of revenues (1) .......................         84       2,161       1,436       1,097       2,831
                                               --------    --------    --------    --------    --------
Gross profit (loss) ........................          2        (962)      1,220        (617)       (118)
Operating expenses (2):
     Research and development ..............      5,170       8,133      10,429       9,139       6,269
     Sales and marketing ...................      4,452       5,617      10,966       7,812       1,681
     General and administrative ............      1,393       2,729       5,120       4,740       2,777
     Restructuring expense .................       --          --           --          --          450
                                               --------    --------    --------    --------    --------
          Total operating expenses .........     11,015      16,479      26,515      21,691      11,177
                                               --------    --------    --------    --------    --------
Loss from operations .......................    (11,013)    (17,441)    (25,295)    (22,308)    (11,295)
Other income, net (3) ......................        580         580         789       1,156       4,953
                                               --------    --------    --------    --------    --------
Net loss ...................................   $(10,433)   $(16,861)   $(24,506)   $(21,152)   $ (6,342)
                                               ========    ========    ========    ========    ========
Net loss attributable to common stockholders   $(10,448)   $(18,423)   $(24,798)   $(21,152)   $ (6,342)
                                               ========    ========    ========    ========    ========

Net loss per common share--basic and
   Diluted (4) .............................   $  (4.87)   $  (5.80)   $  (1.41)   $  (0.60)   $  (0.17)
                                               ========    ========    ========    ========    ========
Shares used in per common share
   Calculation--basic and diluted (4) ......      2,145       3,178      17,589      35,533      36,762
                                               --------    --------    --------    --------    --------

</TABLE>
<TABLE>
<CAPTION>

                                                                      As of December 31,
                                                                      ------------------
                                                      1997        1998         1999       2000       2001
                                                      ----        ----         ----       ----      ----
                                                                      (in thousands)
Consolidated Balance Sheet Data:
<S>                                                 <C>         <C>         <C>        <C>        <C>
Cash, cash equivalents and short-term investments   $    899    $ 11,648    $ 29,129   $ 14,057   $  5,381
Working capital .................................     (3,206)      9,702      26,740     12,205      5,749
Total assets ....................................      1,303      13,634      32,310     16,071      6,836
Mandatory redeemable convertible preferred stock      14,052      38,005        --         --         --
Total stockholders' equity (deficit) ............   $(16,978)   $(27,900)   $ 28,427   $ 13,324   $  5,775

</TABLE>

(1)  Our cost of revenues for the year ended  December 31, 1998  includes a $1.2
     million expense attributable to the write-off of capitalized costs relating
     to the  acquisition  of technology no longer useful to the  development  of
     BeOS.

                                       3
<PAGE>

(2)  Operating expenses include the amortization of deferred  compensation which
     was recorded by us and which  represents the difference  between the deemed
     fair value of our common stock,  as determined for accounting  purposes and
     the exercise price of options at the date of grant. For the purposes of the
     financial  statements,  this expense was  disclosed as being  applicable to
     each line item as follows:

<TABLE>
<CAPTION>

                                                     Year Ended December 31,
                                                     -----------------------
                                              1997     1998      1999      2000       2001
                                              ----     ----      ----      ----       ----
                                                       (in thousands)
Analysis of the amortization
    of deferred compensation:
<S>                                       <C>       <C>       <C>       <C>       <C>
Research and development ..............   $   480   $ 1,747   $ 1,927   $   794   $  (551)
Sales and marketing ...................       273       833     1,692       646      (533)
General and administrative ............       114     1,301     2,614     1,173      (912)
                                           -------   -------   -------   -------   -------
   Total amortization of deferred stock
     compensation......................   $   867   $ 3,881   $ 6,233   $ 2,613   $(1,996)
                                          =======   =======   =======   =======   =======

</TABLE>


(3)  On  November  13,  2001,  we  sold  substantially  all of our  intellectual
     property  and  other  technology  assets  to Palm  for a total  net gain of
     approximately $4.9 million.

(4)  See Note 2 of Notes to Unaudited  Consolidated  Financial Statements for an
     explanation of the  determination of the number of shares used in computing
     net loss per common share--basic and diluted.


                                       4
<PAGE>


ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

     THIS REPORT ON FORM 10-K/A  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 ABOVE UNDER  "FACTORS  AFFECTING OUR
BUSINESS,OPERATING RESULTS AND FINANCIAL CONDITION" AND ELSEWHERE IN THIS REPORT
AS WELL AS THOSE NOTED IN OUR PUBLIC  FILINGS WITH THE  SECURITIES  AND EXCHANGE
COMMISSION ("SEC").  THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE PUBLICLY ANY
FORWARD-  LOOKING  STATEMENTS,  WHETHER AS A RESULT OF NEW  INFORMATION,  FUTURE
EVENTS OR OTHERWISE. Factors that could cause or contribute to these differences
include, but are not limited to, those discussed in the sections titled "Factors
Affecting  our  business   operating   results  and  financial   condition"  and
"Business"under  item 1 in OUR ANNUAL  REPORT ON FORM 10-K FILED WITH THE SEC On
APRIL 1, 2002


Overview


     Be was  founded  in  1990  and  prior  to  the  cessation  of its  business
operations  offered  software  solutions  designed for Internet  appliances  and
digital  media  applications.  On August  16,  2001,  we  entered  into an asset
purchase agreement with Palm, Inc. to sell substantially all of our intellectual
property  and other  technology  assets.  This  transaction  was approved by our
stockholders  on November 12, 2001 and was  completed  on November 13, 2001.  On
March 15, 2002,  we filed a  Certificate  of  Dissolution  with the Secretary of
State of Delaware  pursuant to Section 275 of the Delaware  General  Corporation
Law,  closed our transfer books and  voluntarily  delisted our common stock from
the Nasdaq National Market System.

     Prior to 1998, we had no revenues and our operations consisted primarily of
research and  development.  In December  1998,  we shipped the first  version of
BeOS,  our desktop  operating  system  targeted  primarily  to end users.  Prior
releases of BeOS were targeted primarily to software developers. Throughout 1999
we focused on delivering BeOS as a desktop  operating  system to end users,  but
ultimately  determined the barriers to entry and the cost of intense competition
in that market was more than we could  overcome.  In recognition of this, and to
address  shareholder  value, in 2000 we shifted our resources to focus primarily
on the market for Internet appliances and the further development, marketing and
deployment of BeIA, our software solution intended for Internet  appliances.  At
the same  time we  announced  that we would be making  available  at no charge a
version of BeOS for personal  use, and a more fully  featured  version  would be
available for a charge through third party publishers. Our revenues in 2000 were
primarily  generated  from  the  sale  of  BeOS  to  our  licensed  third  party
publishers,  and other resellers and  distributors,  and direct sales of BeOS to
end users  through  our  BeDepot.com  Web site.  We also  generated  revenue  by
collecting commission from sales of third party software through our BeDepot.com
Web site.

     In 2001, revenues were generated through royalty payments,  maintenance and
support fees,  professional services and integration fees and by revenue-related
consulting  services  performed after August 16, 2001 under a funding  agreement
with Palm executed in connection  with the asset sale.  These  payments and fees
were received from developers and manufacturers of Internet appliances,  as well
as other  systems  and  hardware  manufacturers  incorporating  BeIA into  their
products.  However,  revenues from BeIA did not offset the loss of revenues from
sales  of BeOS.  Upon the  completion  of the sale of  substantially  all of our
assets to Palm,  we received an  aggregate  of  4,104,478  shares of Palm common
stock and sold these shares on November 13, 2001 for $10,100,772 in cash, net of
brokerage  and  transaction  fees. As a result of the sale of our assets and the
cessation  of our business  operations,  we do not expect to generate any future
revenues.

     Our research and development  expenses consisted  primarily of compensation
and related costs for research and  development  personnel.  We also included in
research  and   development   expenses  the  costs   relating  to  licensing  of
technologies and amortization of costs of software tools used in the development
of our operating  system.  Costs incurred in the research and development of new
releases and  enhancements  are expensed as incurred.  These costs  included the
cost  of  licensing  technology  that  is  incorporated  into  a  product  or an
enhancement   that  is  still  in   preliminary   development,   and  for  which
technological feasibility has not been established.  Once the product is further
developed and technological feasibility has been established,  development costs
are capitalized until the product is available for general release. Products and
enhancements have generally reached technological  feasibility and were released
for sale at substantially the same time. As we have ceased business  operations,
we do not expect to incur any research and development expenses in the future.

                                       5
<PAGE>

     Our sales and marketing  expenses  consisted  primarily of compensation and
related  costs for sales and marketing  personnel,  marketing  programs,  public
relations,  investor  relations,  promotional  materials,  travel,  and  related
expenses for attending  trade shows.  In July 2001, we eliminated  our sales and
marketing  group.  As we have ceased  operations,  we do not expect to incur any
sales and marketing expenses in the future.

     General and administrative expenses consisted primarily of compensation and
related expenses for management, finance, and accounting personnel, professional
services and related fees,  occupancy  costs and other  expenses.  We expect our
general and administrative expenses in the future to be minimal as we intend for
only one employee to remain with the Company in order to facilitate  the wind up
of the company's operations and to oversee legal proceedings.

     In the past,  we marketed  and sold our  products in the United  States and
internationally. International sales of products accounted for approximately 0%,
23% and 56% of total revenues in 2001,  2000 and 1999,  respectively.  We do not
expect to generate any revenues in the near or extended future.

     From time to time in the past,  we have granted stock options to employees,
consultants and non-employee directors. As of December 31, 2001, we had recorded
deferred  compensation  related to these  options  in the total  amount of $12.6
million,  net of cancellations,  representing the difference  between the deemed
fair value of our common stock, as determined for accounting  purposes,  and the
exercise  price of options at the date of grant.  Of this amount,  $11.9 million
had been  amortized  at December 31, 1999,  with $2.6 and $(2.0)  million  being
amortized in 2000 and 2001, respectively.  The negative amount shown for 2001 is
due to the cancellation of options.  Future  amortization of expense arising out
of options  granted  through  December  31, 2001 is  estimated to be $38,000 and
$1,000 for 2002 and 2003  respectively.  We amortize the  deferred  compensation
charge  monthly  over  the  vesting  period  of the  underlying  option.  Due to
cessation of our business operations, we do not expect to grant stock options to
employees, consultants or directors in the future.


Comparison

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

     Operating  expenses as shown in Item 6 - Selected  Financial Data,  include
non-cash charges for stock compensation amortization as follows:

<TABLE>
<CAPTION>

                                                                       Year Ended December 31,
                                                                   1999          2000         2001
                                                                   ----          ----         ----
                                                                            (in thousands)
Amortization of deferred compensation included in:
<S>                                                                 <C>             <C>        <C>
     Research and development....................                   $ 1,927         $ 794      $ (551)
     Sales and marketing.........................                     1,692           646        (533)
     General and administrative..................                     2,614         1,173        (912)
                                                                      ------        ----------   -----
        Total amortization of deferred stock compensation           $ 6,233       $ 2,613    $ (1,996)
                                                                    ========      ========   =========
</TABLE>

     Excluding the amortization of deferred compensation, operating expenses are
as follows:
<TABLE>
<CAPTION>

                                                                        Year Ended December 31,
                                                                    1999          2000          2001
                                                                    ----          ----          ----
                                                                            (in thousands)
Operating expenses:
<S>                                                                  <C>            <C>         <C>
     Research and development....................                    $ 8,502        $ 8,345     $ 6,820
     Sales and marketing.........................                      9,274          7,166       2,214
     General and administrative..................                      2,506          3,567       3,689
     Amortization of deferred stock compensation                       6,233          2,613      (1,996)
                                                                     -------        -------     -------
        Total operating expenses......................              $ 26,515       $ 21,691    $ 10,727
                                                                    =========      =========   ========
</TABLE>


                                       6
<PAGE>

Comparison  of the Year Ended  December 31, 2001 to the Year Ended  December 31,
2000

     Net Revenues.  Net revenues  increased $2.2 million to $2.7 million for the
year ended December 31, 2001 from $480,000 for the year ended December 31, 2000.
Revenues  are not  directly  comparable  as they  were  mainly  attributable  to
shipments of BeOS in 2000 and to BeIA integration  services and  revenue-related
consulting  services  in  2001,  the  latter  being  performed  under a  funding
agreement entered into with Palm on August 16, 2001, in connection with the sale
of substantially all of our assets to Palm.

     Cost of Revenues.  Cost of revenues  increased $1.7 million to $2.8 million
for the year  ended  December  31,  2001 from $1.1  million  for the year  ended
December  31,  2000.  A  majority  of such  costs  resulted  from the  continued
amortization of technology license agreements. In addition, in the quarter ended
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 decreased $1.5
million,  or 18%, to $6.8 million for the year ended December 31, 2001 from $8.3
million for the year ended December 31, 2000. This decrease is mainly due to the
reductions in workforce in April and July 2001 as well as to the  termination of
our remaining engineering team after the completion of the sale of our assets to
Palm on November 13, 2001.

     Sales and Marketing.  Sales and marketing  expenses decreased $5.0 million,
or 69%, to $2.2  million for the year ended  December 31, 2001 from $7.2 million
for the year ended December 31, 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  were
relatively  constant  at $3.7  million for the year ended  December  30, 2001 as
compared with $3.6 million for the year ended  December 31, 2000.  Lower payroll
expenses  following the  reductions  in workforce  carried out in April and July
2001 were partially offset by higher insurance costs.

     Amortization of Deferred Stock Compensation. Amortization of deferred stock
compensation  decreased  $4.6  million  to  $(2.0)  million  for the year  ended
December 31, 2001,  from $2.6 million for the year ended  December 31, 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.

     Interest and Other Income  (Expense),  Net. Net other income increased $3.9
million to $5.0 million for the year ended December 31, 2001,  from $1.2 million
for the year ended December 31, 2000. The increase is primarily  attributable to
the sale of  substantially  all of our  assets  to Palm on  November  13,  2001,
partially  offset by the decrease in interest income due to the reduced balances
in our investment portfolio used to fund operations.

Comparison  of the Year Ended  December 31, 2000 to the Year Ended  December 31,
1999

     Net Revenues.  Net revenues decreased $2.2 million to $480,000 for the year
ended  December 31, 2000 from $2.7 million for the year ended December 31, 1999.
This decrease was primarily  attributable to lower  shipments of BeOS,  which we
believe resulted from making a version of BeOS available for free download.

     Cost of  Revenues.  Cost of revenues  decreased  $339,000,  or 24%, to $1.1
million  for the year ended  December  31,  2000 from $1.4  million for the year
ended December 31, 1999. Gross margin was negative as a result of the continuing
amortization of technology license agreements.

     Research and Development. Research and development expenses were relatively
constant at $8.3 million for the year ended  December 30, 2000 as compared  with
$8.5  million for the year ended  December 31, 1999.  Lower  outside  consulting
expenses  were  partially  offset  by  increases  in  payroll  expenses  due  to
additional headcount.

     Sales and Marketing.  Sales and marketing  expenses decreased $2.1 million,
or 23%, to $7.2  million for the year ended  December 31, 2000 from $9.3 million
for the year ended December 31, 1999.  This decrease was primarily  attributable
to our  shift in  resources  to focus on the  Internet  appliances  market,  and
resulting  shift in our  potential  customer  base from end users to device  and
service providers.  Additionally,  the Web site technology purchased in 1998 was
now fully amortized.

                                       7
<PAGE>

     General and Administrative.  General and administrative  expenses increased
$1.1 million,  or 42%, to $3.6 million for the year ended December 31, 2000 from
$2.5 million for the year ended  December 31, 1999.  This increase was primarily
attributable  to the full year  expenses  associated  with the  activities  of a
public company.

     Amortization of Deferred Stock Compensation. Amortization of deferred stock
compensation  decreased $3.6 million to $2.6 million for the year ended December
31, 2000, from $6.2 million for the year ended December 31, 1999.  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.

     Interest  and Other  Income  (Expense),  Net.  Net other  income  increased
$367,000,  or 47%, to $1.2 million for the year ended  December  31, 2000,  from
$789,000  for the year ended  December 31,  1999.  The  increase  was  primarily
attributable to the increase in interest income due to the increased balances in
our investment portfolio following our initial public offering.

Liquidity and Capital Resources

     Since our inception,  we  traditionally  financed our operations  primarily
through the sale of our equity securities and through borrowing arrangements. On
November  13,  2001,  we  sold  substantially  all of our  assets  to  Palm  for
approximately  $11.0  million in Palm stock.  That same day,  we sold  4,104,478
shares of Palm stock for  $10,100,772 in cash, net of brokerage and  transaction
fees.   Cash  and  cash   equivalents  and  short-term   investments   decreased
approximately  $8.7 million to $5.4  million at December  31,  2001,  from $14.1
million at December 31, 2000.  This  decrease is primarily  attributable  to the
amounts used to fund operations, net of the proceeds from the sale of our assets
to Palm.

     Cash used in operating  activities  decreased $3.7 million to $13.9 million
for the year ended  December 31, 2001 as compared to $17.5  million for the year
ended December 31, 2000. This decrease is primarily attributable to the decrease
in the net  operating  loss,  net of  non-cash  items,  and to the  decrease  in
payables balances during the year ended December 31, 2001.

     Cash provided by investing  activities was  approximately  $9.2 million for
the year ended  December  31, 2001 as compared  with  $17.1million  for the year
ended December 31, 2000. This change is primarily attributable to the asset sale
to Palm and to net sales of short-term  investments  in the year ended  December
31, 2001. For a more detailed explanation of the Company's net gain on the asset
sale to  Palm,  see  Note 3 to the  Notes to  Unaudited  Consolidated  Financial
Statements on page F-12 of this Amended Annual Report.


     Cash provided by financing  activities for the year ended December 31, 2001
was  approximately  $5.7 million as compared with $3.4 million in the year ended
December 31, 2000.  This change is primarily  attributable  to net proceeds from
the sale of substantially all of our assets to Palm in November 2001, net of the
reduced proceeds from the exercise of stock options.

     Since  November  2001,  we have been winding down our  operations  and have
substantially  reduced our working  capital  requirements.  Our working  capital
requirements  are now  minimal  and we  believe  that  existing  cash  and  cash
equivalents  will be  sufficient  to meet our  remaining  operating  and capital
requirements  for the next twelve months or the period of liquidation if sooner.
As part of the  winding  down  process,  we  intend  to  distribute  part of our
remaining cash to our shareholders as soon as practicable under Delaware law and
dissolution  procedures.  After  that time,  we intend to retain  only a nominal
amount of cash to complete the winding down process.

Critical Accounting Policies

         Use of estimates

          The preparation of unaudited  financial  statements in conformity with
     generally  accepted  accounting  principles  requires  management  to  make
     estimates  and  assumptions  that affect the reported  amount of assets and
     disclosure  of  contingent  assets  and  liabilities  at  the  date  of the
     financial  statements  and the  reported  amounts of revenues  and expenses
     during  the  reported  period.  Actual  results  could  differ  from  those
     estimates.

         Accounting for Long-Lived Assets

          The Company reviews its property and equipment for impairment whenever
     events or changes in  circumstances  indicate  that the carrying  amount of
     these  assets  may  not  be  recoverable.  Recoverability  is  measured  by
     comparison  of its carrying  amount to future net cash flows the assets are
     expected to generate.  If such assets are  considered  to be impaired,  the
     impairment to be recognized is measured by the amount by which the carrying
     amount of the assets  exceeds the  projected  discounted  future cash flows
     arising from the asset.

                                       8
<PAGE>

          At each balance sheet date, the unamortized cost of purchased software
     is compared to the net realizable  value of the related  software  product.
     The amount by which the unamortized  cost exceeds the net realizable  value
     of the software is charged to operations.  The net realizable  value of the
     software  product is  determined by  estimating  future gross  revenues and
     reduced by the estimated future costs of selling the product.

         Research and development costs

          Costs  incurred  in the  research  and  development  of  new  software
     products are expensed as incurred,  including minimum payments made and due
     to third parties for technology  incorporated  into the Company's  product,
     until  technological  feasibility  is  established.  Development  costs are
     capitalized beginning when a product's  technological  feasibility has been
     established and ending when the product is available for general release to
     customers.   Products  and  enhancements  generally  reached  technological
     feasibility and were released for sale at substantially the same time.


         Revenue recognition

          In 2001,  the  Company's  revenue  was  primarily  derived  from  BeIA
     integration services and revenue-related  consulting  services,  the latter
     being performed  under a funding  agreement that was entered into on August
     16, 2001 in connection with the sale of substantially  all of the Company's
     assets to Palm.  In the second  half of 2000,  the  Company's  revenue  was
     primarily   derived  from   royalties  on  sales  of  BeOS  by  third-party
     publishers.  In prior periods, revenue was generated from licensing fees on
     sales to end-users  either by  direct-order  on the  Company's  web site or
     sales by distributors.

          The Company  recognized  product revenues from orders on the Company's
     web site upon shipment,  provided a credit card authorization was received,
     the fee was fixed and determinable, collection of resulting receivables was
     probable and product returns were reasonably estimable.  The Company used a
     standard shrink wrap license for all of its sales.  Under the license,  the
     Company was obligated to provide limited telephone support to end users who
     purchase the Company's  product and provided a 5-day money back  guarantee.
     The Company accrued the costs of providing  telephone support upon shipment
     of the product based on the  historical  cost of providing  such support to
     its  customers.  In addition,  upon  shipment of its  product,  the Company
     recorded an allowance for estimated sales returns.

          Product  revenues for sales to its  distributors  were recognized upon
     sell through to an end user provided a signed contract existed, the fee was
     fixed and determinable and collection was probable.  The Company recognized
     revenue from these  distributors  upon sale by the  distributors  to an end
     user  because  the  Company  did not have  sufficient  experience  with the
     distributors to reasonably estimate returns.

         Stock-based compensation

          The   Company   accounts   for  stock  based   employee   compensation
     arrangements  in accordance  with the  provisions of Accounting  Principles
     Board Opinion No. 25, or APB 25, "Accounting for Stock Issued to Employees"
     as interpreted by FIN 44,  "Accounting for Certain  Transactions  involving
     Stock  Compensation,   No.  25"and  Financial  Accounting  Standards  Board
     Interpretation ("FIN") No.28, "Accounting for Stock Appreciation Rights and
     Other  Variable  Stock  Option  or  Award  Plans,"  and  complies  with the
     disclosure  provisions of Statement of Financial  Accounting  Standards No.
     123, or SFAS 123, "Accounting for Stock-Based  Compensation." Under APB 25,
     compensation  expense is based on the  difference,  if any,  on the date of
     grant,  between the estimated fair value of the Company's  common stock and
     the  exercise  price.  SFAS 123  defines  a "fair  value"  based  method of
     accounting for an employee stock option or similar equity  investment.  The
     pro forma  disclosures of the difference  between the compensation  expense
     included in net loss and the related cost measured by the fair value method
     are presented in Note 7. The Company accounts for equity instruments issued
     to  nonemployees in accordance with the provisions of SFAS 123 and Emerging
     Issues Task Force 96-18, "Accounting for Equity Instruments That Are Issued
     to Other Than Employees for Acquiring, or in Conjunction with Selling Goods
     or Services."


                                       9
<PAGE>


ITEM 8.  CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

          The  Company's  unaudited  financial  statements  appear  on pages F-1
     through F-26 of this report (See Item 14).

Selected Quarterly Results of Operations

          The  following  table  sets  forth  certain  unaudited  statements  of
     operations  data for the eight quarters ended December 31, 2001.  This data
     has been derived from unaudited  financial  statements that, in the opinion
     of our  management,  include  all  adjustments  consisting  only of  normal
     recurring adjustments that we consider necessary for a fair presentation of
     the  information  when read in  conjunction  with our  unaudited  financial
     statements and the attached  notes.  The operating  results for any quarter
     are not necessarily indicative of the results for any future period.


<TABLE>
<CAPTION>

                                                                       Quarter Ended
                                March 31,   June 30,    September  December   March 31,  June 30,  September  December
                                                            30,        31,                             30,        31,
                                   2000        2000        2000       2000       2001       2001      2001       2001
                                  -------    -------    -------    --------   --------   -------    -------    -------

<S>                               <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
Net revenues ..................   $   254    $   142    $    68    $    16    $   100    $   715    $ 1,135    $   763
Cost of revenues ..............       293        261        216        327        251        320      1,765        495
                                  -------    -------    -------    --------   --------   -------    -------    -------
Gross profit (loss) ...........       (39)      (119)      (148)      (311)      (151)       395       (630)       268

Operating expenses:
     Research and
        Development ...........     2,148      1,843      2,088      2,266      2,379      2,276      1,398        767
     Sales and marketing ......     2,171      1,983      1,422      1,590      1,554        557        110         (7)
     General and
        Administrative ........       950        839        880        898      1,010      1,370      1,121        188
     Restructuring expense ....      --         --         --         --          307        143       --         --
     Amortization of deferred
        stock compensation ....     1,033        657        507        416        302         29       (516)    (1,811)
                                  -------    -------    -------    --------   --------   -------    -------    -------
          Total operating
             expenses .........     6,302      5,322      4,897      5,170      5,552      4,375      2,113       (863)
                                  -------    -------    -------    --------   --------   -------    -------    -------
Loss from operations ..........    (6,341)    (5,441)    (5,045)    (5,481)    (5,703)    (3,980)    (2,743)     1,131
Other income (net) ............       341        322        274        219        146         84         19      4,704
                                  -------    -------    -------    --------   --------   -------    -------    -------
Net loss ......................   $(6,000)   $(5,119)   $(4,771)  $ (5,262)   $ (5,557)  $(3,896)   $(2,724)   $ 5,835
                                  =======    =======    =======    ========   ========   =======    =======    =======
Net loss attributable to common
   stockholders ...............   $(6,000)   $(5,119)   $(4,771)   $ (5,262)  $ (5,557)  $(3,896)   $(2,724)   $ 5,835
                                  =======    =======    =======    ========   ========   =======    =======    =======
</TABLE>


     In January of 2000,  we  announced  we would be shifting  our  resources to
focus  primarily  on the market for  Internet  appliances.  We also  announced a
version of BeOS would be made available for personal use at no charge. After the
first  quarter of 2000,  net  revenues  were  primarily  generated  by royalties
received from third-party publishers. The decrease in net revenues was primarily
attributable to lower shipments of BeOS, which we believe resulted from making a
version of BeOS  available for free download.  In 2001,  revenues were primarily
generated  under  BeIA  integration  services  and  revenue-related   consulting
services,  the latter being performed under a funding agreement that was entered
into August 16, 2001, in connection  with the sale of  substantially  all of our
assets to Palm.

     Amortization  of  licensed or  acquired  technology  was charged to cost of
revenues and as a result of the continuing  amortization  of technology  license
agreements,  gross  margins  were  negative in year 2000.  In the quarter  ended
September 30, 2001, the remaining book value of these  technology  agreements of
$539,000 was determined to be impaired and was therefore expensed.

     Quarterly   fluctuations  in  research  and  development  expenses  related
primarily to costs associated with increased personnel and related costs and the
costs of licensing  technology used for development of BeOS.  Concurrently  with
the sale of  substantially  all of our assets to Palm in November 13, 2001,  our
remaining research and development team was transferred to Palm.

     From the first  quarter  of 2000,  sales and  marketing  expenses  began to
decrease  following our decision to reallocate  capital to focus on the Internet
appliances  market and shifting our  potential  customer  base from end users to
OEMs and ODMs. In 2001, sales and marketing expenses decreased further due to 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.

     In  the  quarter  ended  December  31,  2001,  we  completed  the  sale  of
substantially  all of our intellectual  property and other technology  assets to
Palm, recognizing a net gain of approximately $4.9 million.



                                       10
<PAGE>


                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K

(a)      (1) Financial Statements

     Our unaudited  consolidated  financial statements as set forth under Item 8
are filed as part of this Amended Annual Report on Form 10-K/A.

         (2) Financial Statement Schedules

     Schedule  II--Valuation  and  Qualifying  Accounts is filed on page F-26 of
this Amended Annual Report on Form 10-K/A.

     All  other  schedules  for  which  provision  is  made  in  the  applicable
accounting  regulations of the  Securities  and Exchange  Commission are omitted
because  they  are  not  required   under  the  related   instructions   or  are
inapplicable.

         (3) Exhibits

EXHIBIT
NUMBER    DESCRIPTION OF DOCUMENT


2.1***    Asset  Purchase  Agreement  by and among  Palm  Inc.,  ECA  Subsidiary
          Acquisition  Corporation  and the Company,  dated August 16, 2001,  as
          amended and restated on September 10, 2001
2.2***    Plan of Dissolution of the Company as approved by the  stockholders of
          the Company on November 12, 2001
3.1*      Amended and Restated Certificate of Incorporation
3.2*      Bylaws
4.1*      Form of Common Stock Certificate
4.2*      Form of Warrant to purchase an aggregate of up to 1,046,102  shares of
          common  stock  issued  in  connection  with the  Series 1  convertible
          preferred stock financing
4.3*      Warrant to  purchase up to  1,538,462  shares of common  stock,  dated
          December 23, 1998, issued by Be Incorporated to Intel Corporation
4.4*      Amended and Restated  Investors' Rights  Agreement,  dated February 4,
          1998
9.1***    Form of  Stockholder  Support  Agreement  by and among Palm Inc.,  ECA
          Subsidiary  Acquisition  Corporation and the Company, dated August 16,
          2001, as amended and restated on September 10, 2001
10.1*     Form of Indemnity  Agreement  entered into between the Company and its
          directors and officers
10.2.1*   1992 Stock Option Plan
10.2.2*   Form of 1992 Stock Option Agreement
10.3.1*   1999 Equity Incentive Plan
10.3.2*   Form of 1999 Equity Incentive Plan Stock Option Agreement
10.3.3*   Form of 1999 Stock Option Grant Notice
10.4.1*   Employee Stock Purchase Plan
10.4.2*   Form of Employee Stock Purchase Plan Offering
10.5.1*   Non-Employee Directors' Stock Option Plan
10.5.2*   Form of Nonstatutory Stock Option
10.6.1*   Office  Lease  dated  June 24,  1994,  by and  between  Menlo  Station
          Development and the Company
10.6.2*   Amendment to Office Lease,  dated April 10, 1997, by and between Menlo
          Station Development and the Company
10.7*     Employment Agreement,  dated June 22, 1998, by and between the Company
          and Wesley S. Saia
10.8*     Employment Agreement, dated March 12, 1999, by and between the Company
          and Roy Graham
10.9*     Employment  Agreement,  dated  October 9,  1998,  by and  between  the
          Company and Jean R. Calmon
10.10*    Stock Purchase Agreement,  dated as May 1, 1998, by and among StarCode
          Software,  Inc., the Stockholders of StarCode  Software,  Inc., and Be
          Incorporated
10.11*+   Software  Distribution  Agreement,  dated  November  5,  1998,  by and
          between the Company and Plat'Home Co. Ltd.

                                       11
<PAGE>

10.12**   Form of Change in Control Agreement
10.13***  Funding Agreement, dated August 16, 2001, by and between Palm Inc. and
          the Company
10.14***  Form of Non-Competition Agreement, effective November 13, 2001, by and
          between Palm, Inc. and certain  stockholders or  optionholders  of the
          Company 21.1* List of Subsidiaries

*         Incorporated by reference from the Registrant's Registration Statement
          on Form S-1, as amended (File No. 333-77855)
**        Incorporated by reference from the Registrant's  Annual Report on Form
          10-K, filed with the SEC on March 30, 2000
***       Incorporated  by  reference  from the  Registrant's  Definitive  Proxy
          Statement, filed with the SEC on October 9, 2001
+         Confidential  Treatment  has been  granted  with  respect  to  certain
          portions of this agreement

(b)       Reports on Form 8-K

          Current Report on Form 8-K, filed November 28, 2001,  announcing  that
          Be  completed  Palm's   acquisition  of   substantially   all  of  the
          intellectual  property and other  technology  assets of Be pursuant to
          the terms of an Amended and Restated Asset Purchase  Agreement,  dated
          September 10, 2001,  entered into between Be, Palm and ECA  Subsidiary
          Acquisition  Corporation,  a  Delaware  corporation  and  wholly-owned
          subsidiary of Palm.

          Current Report on Form 8-K, filed March 6, 2002,  announcing  that (i)
          on February 19, 2002 Be had filed suit against  Microsoft  Corporation
          for   the   destruction   of  Be's   business   resulting   from   the
          anticompetitive  business  practices of Microsoft and (ii) on March 4,
          2002, the Company  planned to file a certificate  of dissolution  with
          the Delaware  Secretary of State on March 15, 2002 in accordance  with
          the Plan of Dissolution approved by stockholders on November 12, 2001.

          Current Report on Form 8-K, filed March 28, 2002,  announcing  that on
          March 15, 2002, Be had filed a  certificate  of  dissolution  with the
          Delaware  Secretary of State and voluntarily  delisted from the Nasdaq
          National Market.

(c)       See Item 14 (a)(3) above.

(d)       See Item 14 (a)(2) above.



                                       12
<PAGE>


                                   Signatures

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934,  the Registrant has duly caused this Amended Annual Report
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Mountain View, State of California, on May 7, 2002.


                                       BE INCORPORATED


                                       By:         /S/ DANIEL S. JOHNSTON
                                       -----------------------------------------
                                       Name:       Daniel S. Johnston
                                       Title:      President and General Counsel


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
Amended Annual Report has been signed by the following  persons on behalf of the
Registrant in the capacities and on the dates indicated.

  Signature                         Title(s)                        Date

 /s/      DANIEL S. JOHNSTON        President and General Counsel   May 7 , 2002
 -----------------------------
          Daniel S. Johnston

                   *                Director                        May  7, 2002
 -----------------------------
          P.C. Berndt

                   *                Director                        May  7, 2002
 -----------------------------
          Andrei M. Manoliu

                   *                Director                        May  7, 2002
 -----------------------------
          Barry M. Weinman


   * By   /S/ DANIEL S. JOHNSTON
          Daniel S. Johnston
          --------------------------------
          Attorney-in-fact

                                       13
<PAGE>



1. Index to Unaudited Consolidated Financial Statements

     The  following  unaudited  financial  statements  are filed as part of this
     Amended Annual Report:


          Unaudited Consolidated Balance Sheets............................. F-2

          Unaudited Consolidated Statements of Operations................... F-3

          Unaudited Consolidated Statements of
              Stockholders' Equity (Deficit)................................ F-4

          Unaudited Consolidated Statements of Cash Flows................... F-5

          Notes to Unaudited Consolidated Financial Statements.............. F-6

2.   Index to Financial Statement Schedules

          The following  financial  statement  schedule is filed as part of this
          report  and  should  be  read  in   conjunction   with  the  Unaudited
          Consolidated Financial Statements:

          Schedule
             II         Valuation and Qualifying Accounts.................  F-26

                                      F-1
<PAGE>


                                 BE INCORPORATED

                     Consolidated Balance Sheets - Unaudited
               (in thousands, except share and per share amounts)

<TABLE>
<CAPTION>

                                                                                         December 31,
                                                                                      2001           2000
                                                                                    -----          ----

Assets
Current assets:
<S>                                                                                     <C>       <C>
       Cash and cash equivalents ....................................................   $ 5,381   $ 9,463
       Short-term investments .......................................................      --       4,594
       Accounts receivable ..........................................................        66        26
       Prepaid and other current assets .............................................     1,363       549

           Total current assets .....................................................     6,810    14,632
Property and equipment, net .........................................................         2       391
Other assets, net of accumulated amortization .......................................        24     1,048

           Total assets .............................................................   $ 6,836   $16,071
                                                                                         =======   =====

Liabilities and stockholders' equity Current liabilities:
       Accounts payable .............................................................   $    96   $   362
       Accrued expenses .............................................................        94     1,502
       Technology license obligations, current portion ..............................       815       454
       Deferred revenue .............................................................        56       109

           Total current liabilities ................................................     1,061     2,427
Technology license obligations, net of current portion ..............................      --         320

           Total liabilities ........................................................     1,061     2,747


Commitments and Contingencies (Note 6)

Stockholders' Equity:
       Preferred stock, $.001 par value:
         Shares authorized: 2,000,000 in 2000 and 1999
         Shares issued and outstanding: none
       Common stock, $.001 par value:
         Shares authorized: 78,000,000 shares in 2001 and 2000
         Shares issued and outstanding: 38,486,007 in 2001 and 36,202,899 in 2000           38            36
Additional paid-in capital......................................................       106,493       108,880
Deferred stock compensation....................................................           (39)       (1,218)
Accumulated deficit............................................................      (100,717)      (94,375)
Accumulated other comprehensive income (loss)..................................              -             1

           Total stockholders' equity...........................................         5,775        13,324

             Total liabilities and stockholders' equity.........................       $ 6,836      $ 16,071
                                                                                       =======      ========
</TABLE>

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


                                      F-2
<PAGE>


                                 BE INCORPORATED
                Consolidated Statements of Operations - Unaudited
                    (in thousands, except per share amounts)

<TABLE>
<CAPTION>

                                                                            Year Ended December 31,
                                                                         2001         2000       1999
                                                                      --------    --------    --------
<S>                                                                   <C>         <C>         <C>
Net revenues ......................................................   $  2,713    $    480    $  2,656
Cost of revenues ..................................................      2,831       1,097       1,436

Gross profit (loss) ...............................................       (118)       (617)      1,220
Operating expenses:
     Research and development, including amortization of deferred
        stock compensation of $(551) in 2001, $794 in 2000 and ....      6,269       9,139      10,429
        $1,927 in 1999
     Sales and marketing, including amortization of deferred stock
        compensation of $(533) in 2001, $646 in 2000 and $1,692 in
        1999                                                             1,681       7,812      10,966
     General and administrative, including amortization of deferred
        stock compensation of $(912) in 2001, $1,173 in 2000 and
        $2,614 in 1999 ............................................      2,777       4,740       5,120
     Restructuring expense ........................................        450        --          --
                                                                      --------    --------    --------
          Total operating expenses ................................     11,177      21,691      26,515
                                                                      --------    --------    --------
Loss from operations ..............................................    (11,295)    (22,308)    (25,295)
Interest expense ..................................................        (56)       (155)       (138)
Net gain on Asset Sale ............................................      4,883        --          --
Other income and expenses, net ....................................         26       1,311         927
                                                                      --------    --------    --------
Net loss ..........................................................     (6,342)    (21,152)    (24,506)
                                                                      --------    --------    --------
Other comprehensive gain(loss)
      Unrealized gains(losses) on investments .....................         (1)         18         (17)
Comprehensive loss ................................................   $ (6,343)   $(21,134)   $(24,523)
                                                                      ========    ========    ========
Net loss ..........................................................   $ (6,342)   $(21,152)   $(24,506)
Accretion of mandatorily
   redeemable convertible preferred stock .........................       --          --          (292)
                                                                      --------    --------    --------
Net loss attributable to common stockholders ......................   $ (6,342)   $(21,152)   $(24,798)
                                                                      ========    ========    ========

Net loss per common share--basic and diluted ......................   $  (0.17)   $  (0.60)   $  (1.41)
                                                                      ========    ========    ========

Shares used in per common share
   calculation--basic and diluted .................................     36,762      35,533      17,589
                                                                      ========    ========    ========

</TABLE>


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



                                      F-3
<PAGE>


                                 BE INCORPORATED
      Consolidated Statements of Stockholders' Equity (Deficit) - Unaudited
                      (in thousands, except share amounts)

<TABLE>
<CAPTION>
                                                                  Additional   Def.              Other
                                                    Common Stock   Paid-in    Stock  Accumulated Comp.
                                                  Shares   Amount  Capital     Comp.   Deficit   Loss   Total
                                              -----------  ------ ---------  -------  ---------  ----  --------

<S>              <C>                            <C>        <C>    <C>        <C>      <C>              <C>
Balance, January 1, 1999 ....................   5,094,757  $    5 $  25,302  $(4,490) $ (48,717)  --   $(27,900)
Repurchase of common stock ..................     (39,640)   --          (3)    --         --     --         (3)
Exercise of stock options ...................     294,548    --          65     --         --     --         65
Exercise of common stock warrants ...........     286,411       1       578     --         --     --        579
Deferred stock compensation related to
grants of ...................................        --      --       7,457   (7,457)      --     --       --
  stock options
Cancellation of options .....................      (1,024)  1,024
Amortization of deferred stock compensation .        --      --        --      6,233       --     --      6,233
Compensation expense on grant of fully vested
  options ...................................        --      --         662     --         --     --        662
Issuance of common stock for cash, net of
  issuance costs of $4,034 ..................   6,557,465       6    35,303     --         --     --     35,309
Conversion of Mandatorily Redeemable
  Convertible Preferred Stock ...............  22,498,874      23    38,274     --         --     --     38,297
Net loss ....................................        --      --        --       --      (24,506)  --    (24,506)
Accretion of mandatorily redeemable
  convertible preferred stock ...............        --      --        (292)    --         --     --       (292)
Unrealized loss on investments ..............        --      --        --       --         --    $(17)      (17)
                                              -----------  ------ ---------  -------  ---------  ----  --------
Balance, December 31, 1999 ..................  34,692,415      35   106,322   (4,690)   (73,223)  (17)   28,427
Repurchase of common stock ..................     (22,165)   --          (2)    --         --     --         (2)
Exercise of stock options ...................     911,110       1     2,225     --         --     --      2,226
Exercise of common stock warrants ...........     454,625    --         454     --         --     --        454
Compensation expense on grant of fully vested
  options ...................................        --      --          38     --         --     --         38
Cancellation of options .....................        --      --        (859)     859       --     --       --
Sale of shares under the ESPP ...............     166,914    --         702     --         --     --        702
Amortization of deferred stock compensation .        --      --        --      2,613       --     --      2,613
Net loss ....................................        --      --        --       --      (21,152)  --    (21,152)
Unrealized gain on investments ..............        --      --        --       --         --      18        18
                                              -----------  ------ ---------  -------  ---------  ----  --------
Balance, December 31, 2000 ..................  36,202,899      36   108,880   (1,218)   (94,375)    1    13,324
Repurchase of common stock ..................      (4,498)   --          (1)    --         --     --         (1)
Exercise of stock options ...................      71,569    --          22     --         --     --         22
Exercise of common stock warrants ...........     179,291    --         179     --         --     --        179
Stock bonus awards ..........................   1,693,484       1       202     --         --     --        203
Cancellation of options .....................        --      --      (3,175)   3,175       --     --       --
Sale of shares under the ESPP ...............     343,262       1       386     --         --     --        387
Amortization of deferred stock compensation .        --      --        --     (1,996)      --     --     (1,996)
Net loss ....................................        --      --        --       --       (6,342)  --     (6,342)
Unrealized loss on investments ..............        --      --        --       --         --      (1)       (1)
                                              -----------  ------ ---------  -------  ---------  ----  --------
Balance, December 31, 2001 ..................  38,486,007  $   38 $ 106,493  $   (39) $(100,717) $--   $  5,775
                                              ===========  ====== =========  =======  =========  ====  ========

</TABLE>

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


                                      F-4
<PAGE>



                                 BE INCORPORATED
                Consolidated Statements of Cash Flows - Unaudited
                                 (in thousands)
<TABLE>
<CAPTION>


                                                                                              Year Ended December 31,
                                                                                        2001            2000             1999
                                                                                      -------         -------          -------
<S>                                                                                 <C>             <C>             <C>
Cash flows from operating activities:
Net loss.......................................................................      $ (6,342)      $ (21,152)       $ (24,506)
Adjustments to reconcile net loss to net cash used in operating activities:
    Depreciation and amortization..............................................           791           1,187              966
    Gain on Asset Sale to Palm.................................................        (4,884)             --               --
    Loss on disposal of fixed assets...........................................           188               5               69
    Write-off of impaired licensed technology assets...........................           914              --               --
    Licensed technology used in research and development.......................            --              --              320
    Amortization of discount on technology license obligations.................            56             109              134
    Compensation expense incurred on issuance of stock.........................            --              38              662
    Amortization of deferred stock compensation................................        (1,996)          2,613            6,233
    Changes in assets and liabilities:
        Accounts receivable....................................................           (40)            141              310
        Prepaid and other current assets.......................................          (814)            241             (525)
        Other accrued..........................................................            --              --              (91)
        Accounts payable.......................................................          (266)           (548)             284
        Accrued expenses.......................................................        (1,408)           (169)             456
        Deferred revenue.......................................................           (53)             10             (293)
                                                                                      -------         -------          -------
            Net cash used in operating activities..............................       (13,854)        (17,525)         (15,981)
                                                                                      -------         -------          -------

Cash flow provided by (used in) investing activities:
Acquisition of property and equipment..........................................           (72)           (182)            (515)
Acquisition of licensed technology.............................................          (425)           (746)          (1,893)
Purchases of short-term investments............................................        (1,727)        (64,377)         (81,749)
Proceeds from Asset Sale, net..................................................          5,087              --               --
Sales and maturities of short-term investments.................................         6,322          82,412           67,357
Deposits and other.............................................................            --              --              (63)
                                                                                      -------         -------          -------
            Net cash provided by (used in) investing activities................         9,185          17,107          (16,863)
                                                                                      -------         -------          -------
Cash flows provided by financing activities:
Proceeds from issuance of common stock pursuant to common stock options........            22           2,226               65
Proceeds from issuance of common stock pursuant to common stock warrants.......           179             455              579
Proceeds from issuance of common stock under the Employee Stock Purchase Plan..           387             702               --
Proceeds from issuance of common stock in initial public offering, net.........            --              --           35,309
Repurchase of common stock.....................................................           (1)            (2)                (3)
                                                                                      -------         -------          -------
            Net cash provided by financing activities..........................           587           3,381           35,950
                                                                                      -------         -------          -------
Net increase (decrease) in cash and cash equivalents...........................        (4,082)          2,963            3,106
Cash and cash equivalents, beginning of year...................................         9,463           6,500            3,394

Cash and cash equivalents, end of year.........................................       $ 5,381         $ 9,463          $ 6,500
                                                                                      =======         =======          =======
Supplemental schedule of noncash financing activities:
Conversion of mandatorily redeemable convertible preferred stock to
  common stock.................................................................       $    --         $    --      $   38,297
                                                                                      =======         =======      ==========
Stock bonus awards.............................................................      $    203         $    --          $    --
                                                                                     ========         =======          =======
Accretion of mandatorily redeemable preferred stock............................       $    --         $    --         $    292
                                                                                      =======         =======         ========
Future obligations under noncancelable technology licenses.....................       $    --         $    --         $    809
                                                                                      =======         =======         ========
Unearned stock based compensation related to stock option grants, net of
  cancellations................................................................   $   (3,175)       $   (859)        $   6,433
                                                                                  ===========       =========        =========

</TABLE>


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



                                      F-5
<PAGE>



                                 BE INCORPORATED

              Notes to Unaudited Consolidated Financial Statements


NOTE 1--NATURE OF BUSINESS:

     Be  Incorporated  ("Be" or the  "Company")  was founded in 1990 and offered
software   platforms   designed  for  Internet   appliances  and  digital  media
applications.

     On August 16,  2001,  the Board of  Directors  of the  Company  unanimously
adopted  resolutions  approving the sale of  substantially  all of the Company's
intellectual  property  and other  technology  assets (the "Asset  Sale") to ECA
Subsidiary  Acquisition  Corporation,  a Delaware  corporation  and an  indirect
wholly-owned  subsidiary of Palm, Inc.  ("Palm"),  pursuant to an Asset Purchase
Agreement  dated  August 16,  2001.  On October 9,  2001,  the  Company  filed a
definitive proxy statement  soliciting  stockholder  approval for the Asset Sale
and the dissolution of the Company  pursuant to a plan of dissolution (the "Plan
of Dissolution").  The Plan of Dissolution  provides for the orderly liquidation
of Be's remaining assets, the winding-up of Be's business and operations and the
dissolution  of the  Company.  In  accordance  with  the  terms  of the  Plan of
Dissolution,  Be will pay, or provide for the payment of, all of its liabilities
and  obligations  following  the  approval  of the  Board  to  proceed  with the
liquidation  and dissolution of the company.  If there are any remaining  assets
after the payment,  or the provision for payment,  of all of its liabilities and
obligations,  Be will then distribute such assets to its  stockholders in one or
more distributions.

     At a special  meeting  of  stockholders  held on  November  12,  2001,  the
stockholders  of Be  approved  the Asset Sale and the Plan of  Dissolution.  The
Asset Sale was  completed on November 13, 2001.  Under the terms of the Purchase
Agreement,  Be received an aggregate  of  4,104,478  shares of Palm common stock
valued at approximately  $11,000,000 on the closing date of the transaction.  On
March 15, 2002, the Company filed a certificate of dissolution with the Delaware
Secretary  of State in  accordance  with the  plan of  dissolution  approved  by
stockholders  on  November  12,  2001 and as set forth in the  Definitive  Proxy
Statement filed on October 9, 2001.

     Traditionally,  the Company's  revenues were  primarily  generated from the
following sources: sale of BeOS to resellers and distributors,  and direct sales
of BeOS to end users  through our  BeDepot.com  Web site.  In 2000,  the Company
shifted its resources to focus  primarily on the market for Internet  appliances
and the  further  development  and  marketing  of BeIA,  its  software  platform
intended for Internet appliances. At the same time it announced that it would be
making  available  at no charge a version of BeOS for  personal  use, and a more
fully  featured  version  would be available  for a charge  through  third party
publishers.  During 2001,  revenues were mainly attributable to BeIA integration
services  and  revenue-related  consulting  services in 2001,  the latter  being
performed  under a funding  agreement  that was entered  into August 16, 2001 in
connection with the Asset Sale.

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Basis of presentation

     These unaudited  consolidated financial statements were prepared on a going
concern  basis and  therefore  contemplate  the  realization  of assets  and the
satisfaction  of  liabilities  in the normal  course of business.  Following its
March  15,  2002  filing  of a  certificate  of  dissolution  with the  Delaware
Secretary of State, the Company adopted liquidation accounting (see Note 5).

     Since  November  2001, the Company has been winding down its operations and
has  substantially  reduced  its working  capital  requirements.  The  Company's
working capital  requirements are now minimal and it believes that existing cash
and  cash   equivalents  will  be  sufficient  to  meet  operating  and  capital
requirements  for the next twelve  months.  As part of the winding down process,
the Company intends to distribute part of its remaining cash to its shareholders
as soon as practicable under Delaware law and dissolution procedures. After that
time,  the Company  intends to retain only a nominal  amount of cash to complete
the winding down process.



                                      F-6
<PAGE>


                                 BE INCORPORATED

   Notes to Unaudited Unaudited Consolidated Financial Statements (continued)


Principles of consolidation

     These uanudited  consolidated  financial statements include the accounts of
the Company and its wholly  owned  subsidiaries.  All  significant  intercompany
balances and transactions have been eliminated.


Foreign currency translation

     The  functional  currency of the Company's  foreign  subsidiary is the U.S.
Dollar.  Nonmonetary  assets and liabilities are remeasured into U.S. Dollars at
historical  rates,  monetary  assets and  liabilities are remeasured at exchange
rates in  effect  at the end of the  year  and  income  statement  accounts  are
remeasured  at average rates for the period.  Remeasurement  gains and losses of
the Company's  foreign  subsidiary are included in the results of operations and
are not significant.


Use of estimates

     The  preparation  of unaudited  financial  statements  in  conformity  with
generally accepted  accounting  principles requires management to make estimates
and  assumptions  that affect the reported  amount of assets and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the reported amounts of revenues and expenses during the reported period. Actual
results could differ from those estimates.


Financial instruments

     The Company  considers  all highly liquid  investments  with an original or
remaining  maturities of three months or less at the date of purchase to be cash
equivalents. Cash and cash equivalents are deposited with two major banks in the
United  States.  Deposits  in these  banks may exceed  the  amount of  insurance
provided on such  deposits.  The Company has not  experienced  any losses on its
deposits of its cash and cash equivalents.

     Management has  classified  all of its short-term  investments as available
for  sale.   Realized  gains  and  losses  are  calculated  using  the  specific
identification method. Realized gains and losses in 2001, 2000 and 1999 were not
significant.  The Company had no short-term investments at December 31, 2001 and
unrealized  gains and  losses  at  December  31,  2000 and 1999 are shown in the
Consolidated  Statements  of Operations  and  Stockholders'  Equity  (Deficit) -
Unaudited.

     The carrying  amounts of certain of the  Company's  financial  instruments,
including cash and cash  equivalents,  accounts  receivable and accounts payable
approximate  fair value due to their short  maturities.  The fair value of short
term  investments is set forth in note 4 of Notes to the Unaudited  Consolidated
Financial Statements.

Certain risks and concentrations

     Although the Company filed a certificate  of  dissolution on March 15, 2002
with the State of Delaware,  it will continue to exist for three years following
this date or for such longer  period as the  Delaware  Court of  Chancery  shall
direct for the purpose of prosecuting and defending  lawsuits and enabling Be to
close its business, to dispose of its property, to discharge its liabilities and
to distribute to its stockholders any remaining  assets.  Under Delaware law, in
the event Be fails to create an adequate  contingency reserve for payment of its
expenses and liabilities  during this period,  each Be stockholder could be held
liable for payment to Be's  creditors  of such  stockholder's  pro rata share of
amounts owed to creditors in excess of the contingency reserve. The liability of
any  stockholder  would be limited to the  amounts  previously  received by such
stockholder from Be (and from any liquidating  trust or trusts).  As a result, a
stockholder  could be required to return all  distributions  previously  made to
such  stockholder  and  would  receive  no  amounts  from Be  under  the Plan of
Dissolution.  Moreover,  in the event a  stockholder  has paid  taxes on amounts
previously received, a repayment of all or a portion of such amount could result
in a stockholder  incurring a net tax cost if the stockholder's  repayment of an
amount previously  distributed does not cause a commensurate  reduction in taxes
payable.  Although Be intends to exercise  caution in setting up its contingency
reserve and making distributions to stockholders, there can be no assurance that
the contingency reserve established by Be will be adequate to cover its expenses
and liabilities.


                                      F-7
<PAGE>

                                 BE INCORPORATED

        Notes to Unaudited Consolidated Financial Statements (continued)



Property and equipment

     Property and  equipment are stated at cost less  accumulated  depreciation.
Depreciation  is provided  using the  straight-line  method  over the  estimated
useful lives of the assets,  generally three years.  Upon disposal,  the cost of
the asset and related accumulated depreciation are removed from the accounts and
any resulting gain or loss is included in the results of operations.

     Depreciation  expense for 2001,  2000, and 1999 was $266,000,  $347,000 and
$287,000, respectively.

Accounting for Long-Lived Assets

     The Company  reviews its property and  equipment  for  impairment  whenever
events or changes in  circumstances  indicate  that the  carrying  amount  these
assets may not be recoverable.  Recoverability  is measured by comparison of its
carrying amount to future net cash flows the assets are expected to generate. If
such assets are  considered to be impaired,  the  impairment to be recognized is
measured by the amount by which the  carrying  amount of the assets  exceeds the
projected discounted future cash flows arising from the asset.

     At each balance sheet date, the unamortized  cost of purchased  software is
compared to the net realizable value of the related software product. The amount
by which the unamortized  cost exceeds the net realizable  value of the software
is charged to operations.  The net realizable  value of the software  product is
determined  by  estimating  future gross  revenues and reduced by the  estimated
future costs of selling the product.

Income taxes

     The Company  accounts for its income taxes in accordance with the liability
method.  Under this method,  deferred tax assets and  liabilities are determined
based on the difference between the financial  statement and tax bases of assets
and  liabilities  using  enacted  tax rates in effect  for the year in which the
differences  are expected to affect  taxable  income.  Valuation  allowances are
established when necessary to reduce deferred tax assets to the amounts expected
to be realized.

Advertising costs

     Advertising costs,  included in sales and marketing expenses,  are expensed
as  incurred  and  were  nil,  $73,000  and  $154,000  in 2001,  2000 and  1999,
respectively.

Research and development costs

     Costs incurred in the research and development of new software products are
expensed as incurred,  including  minimum payments made and due to third parties
for technology  incorporated  into the Company's  product,  until  technological
feasibility is established.  Development costs are capitalized  beginning when a
product's  technological  feasibility  has been  established and ending when the
product is available for general release to customers. Products and enhancements
generally  reached  technological  feasibility  and  were  released  for sale at
substantially the same time.


                                      F-8
<PAGE>

                                 BE INCORPORATED

        Notes to Unaudited Consolidated Financial Statements (continued)

Revenue recognition

     In 2001, the Company's  revenue was primarily derived from BeIA integration
services and  revenue-related  consulting  services,  the latter being performed
under a funding agreement that was entered into on August 16, 2001 in connection
with the sale of  substantially  all of the  Company's  assets  to Palm.  In the
second half of 2000, the Company's  revenue was primarily derived from royalties
on sales  of BeOS by  third-party  publishers.  In prior  periods,  revenue  was
generated from licensing fees on sales to end-users  either by  direct-order  on
the Company's web site or sales by distributors.

     The Company  recognized  product  revenues from orders on the Company's web
site upon shipment,  provided a credit card authorization was received,  the fee
was fixed and determinable, collection of resulting receivables was probable and
product  returns were reasonably  estimable.  The Company used a standard shrink
wrap license for all of its sales. Under the license,  the Company was obligated
to provide  limited  telephone  support to end users who purchase the  Company's
product and provided a 5-day money back guarantee. The Company accrued the costs
of  providing  telephone  support  upon  shipment  of the  product  based on the
historical  cost of providing such support to its customers.  In addition,  upon
shipment of its product,  the Company  recorded an allowance for estimated sales
returns.

     Product  revenues for sales to its  distributors  were recognized upon sell
through to an end user provided a signed contract existed, the fee was fixed and
determinable and collection was probable.  The Company  recognized  revenue from
these  distributors  upon sale by the  distributors  to an end user  because the
Company did not have sufficient  experience with the  distributors to reasonably
estimate returns.

     During 1999, under certain circumstances, the Company offered an upgrade to
its  product  in  conjunction  with  product  sales  at  no  additional  charge.
Generally,  such rights were offered  prior to new versions  being  released and
gave the customers who purchase products between  established dates the right to
such an upgrade.  Revenue was  allocated to an upgrade  right based on the price
for upgrades when sold separately.  The Company  recognized upgrade revenue when
the criteria for product revenue  recognition from end users set forth above are
met.

     At  December  31,  2001,  deferred  revenue  consisted  primarily  of sales
transaction for which collection was uncertain.  At December 31, 2000,  deferred
revenue consisted primarily of prepaid royalties for BeIA. At December 31, 1999,
deferred  revenue  consisted of revenue  related to  distributor  sales not sold
through to end users.

     In December 1999, the  Securities  and Exchange  Commission  ("SEC") issued
Staff Accounting Bulletin No. 10, or SAB 101, "Revenue  Recognition in Financial
Statements,"  which  provides  guidance  on the  recognition,  presentation  and
disclosure  of  revenue in  financial  statements  filed  with the SEC.  SAB 101
outlines the basic  criteria that must be met to recognize  revenue and provides
guidance for disclosures  related to revenue recognition  policies.  The Company
adopted SAB 101 in the fourth  quarter of 2000.  The adoption of SAB 101 did not
have a  material  impact on the  Company's  financial  position  or  results  of
operations.

Stock-based compensation

     The Company accounts for stock based employee compensation  arrangements in
accordance with the provisions of Accounting Principles Board Opinion No. 25, or
APB 25,  "Accounting  for Stock Issued to Employees" as  interpreted  by FIN 44,
"Accounting for Certain  Transactions  involving Stock Compensation,  No. 25"and
Financial Accounting Standards Board Interpretation  ("FIN") No.28,  "Accounting
for Stock  Appreciation  Rights and Other Variable Stock Option or Award Plans,"
and complies with the disclosure provisions of Statement of Financial Accounting
Standards No. 123, or SFAS 123, "Accounting for Stock-Based Compensation." Under
APB 25, compensation expense is based on the difference,  if any, on the date of
grant,  between the estimated  fair value of the Company's  common stock and the
exercise  price.  SFAS 123 defines a "fair value" based method of accounting for
an employee stock option or similar equity investment. The pro forma disclosures
of the difference between the compensation  expense included in net loss and the
related  cost  measured by the fair value  method are  presented  in Note 7. The
Company  accounts for equity  instruments  issued to  nonemployees in accordance
with  the  provisions  of  SFAS  123  and  Emerging  Issues  Task  Force  96-18,
"Accounting for Equity  Instruments  That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling Goods or Services."


                                      F-9
<PAGE>


                                 BE INCORPORATED

        Notes to Unaudited Consolidated Financial Statements (continued)


Comprehensive income (loss)

     Comprehensive  income  (loss)  is  defined  as the  change  in  equity of a
business  enterprise  during a period  from  transactions  and other  events and
circumstances  from  non-owner  sources.  The  differences  between net loss and
comprehensive  loss  are  shown  in the  Unaudited  Consolidated  Statements  of
Operations.

Net loss per common 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 in 2001,  2000 and 1999 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>

                                                           2001       2000       1999
                                                          ------     ------     ------
<S>                                                     <C>        <C>        <C>
Net loss per common share, basic and diluted:
     Net loss ........................................  $ (6,342)  $(21,152)  $(24,506)
     Accretion of mandatorily redeemable convertible
        preferred stock ..............................      --         --         (292)
                                                          ------     ------     ------
               Numerator for net loss per common
                  share, basic and diluted ...........    (6,342)   (21,152)   (24,798)
     Denominator for basic and diluted loss per common
        share:
          Weighted average common shares
             outstanding .............................    36,762     35,533     17,589
                                                        ========   ========   ========
     Net loss per common share basic and diluted .....  $  (0.17)  $  (0.60)  $  (1.41)
                                                        ========   ========   ========
     Antidilutive securities:
          Options to purchase common stock ...........     3,207      5,911      6,010
          Common stock subject to repurchase .........        35        222        499
          Preferred stock ............................      --         --         --
          Warrants ...................................     1,538      2,130      2,585
                                                          ------     ------     ------
                                                           4,780      8,263      9,094
                                                        ========   ========   ========
</TABLE>



                                      F-10
<PAGE>



                                 BE INCORPORATED

        Notes to Unaudited Consolidated Financial Statements (continued)


Recent accounting pronouncements

     In June 2001, the Financial  Accounting  Standards Board issued FAS No. 141
Business  Combinations ( FAS 141 ) and FAS No. 142 Goodwill and Other Intangible
Assets ( FAS 142 ). FAS 141 requires  that the purchase  method of accounting be
used for all business  combinations  initiated after June 30, 2001. FAS 141 also
specifies the criteria  applicable to intangible  assets  acquired in a purchase
method  business  combination to be recognized and reported apart from goodwill.
FAS 142 requires  that goodwill and  intangible  assets with  indefinite  useful
lives no longer be amortized, but instead be tested for impairment, upon initial
adoption  of the  standard  and  then  annually.  FAS  142  also  requires  that
intangible  assets with definite useful lives be amortized over their respective
estimated useful lives to their estimated  residual values,  and be reviewed for
impairment.

     In  August  2001,  the  FASB  issued  SFAS No.  143  Accounting  for  Asset
Retirement Obligations.  SFAS No. 143 requires,  among other things,  retirement
obligations   to  be  recognized   when  they  are  incurred  and  displayed  as
liabilities,  with a  corresponding  amount  capitalized  as part of the related
long-lived asset. The capitalized  element must be expensed over its useful life
using a  systematic  and  rational  method.  The adoption of SFAS No. 143 is not
expected  to have a  significant  impact on the  Company's  financial  position,
results of operations or cash flows.

     In October 2001, the FASB issued SFAS No. 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 No. 144 requires,  among
other things, the application of one accounting model for long-lived assets that
are  impaired or to be disposed of by sale.  The adoption of SFAS No. 144 is not
expected to have a  significant  impact on our  financial  position,  results of
operations or cash flows.


Reclassifications

     Certain  prior year amounts have been  reclassified  for  consistency  with
current year financial statement presentation.



                                      F-11
<PAGE>


                                 BE INCORPORATED

        Notes to Unaudited Consolidated Financial Statements (continued)





NOTE 3--DISPOSALS:

Asset Sale to Palm

     On August 16,  2001,  the Board of  Directors  of the  Company  unanimously
adopted  resolutions  approving the sale of  substantially  all of the Company's
intellectual property and other technology assets to ECA Subsidiary  Acquisition
Corporation,  a Delaware corporation and an indirect wholly-owned  subsidiary of
Palm,  Inc.,  pursuant to an Asset Purchase  Agreement dated August 16, 2001. On
October 9, 2001,  the Company  filed a  definitive  proxy  statement  soliciting
stockholder  approval  for the Asset  Sale and the  dissolution  of the  Company
pursuant  to a plan of  dissolution  (the  "Plan of  Dissolution").  The Plan of
Dissolution  provides for the orderly  liquidation of Be's remaining assets, the
winding-up of Be's business and operations  and the  dissolution of the Company.
In accordance with the terms of the Plan of Dissolution, Be will pay, or provide
for the  payment  of,  all of its  liabilities  and  obligations  following  the
approval of the Board to proceed with the  liquidation  and  dissolution  of the
Company.  If there are any remaining assets after the payment,  or the provision
for payment, of all of its liabilities and obligations,  Be will then distribute
such assets to its stockholders in one or more distributions.

     At a special  meeting  of  stockholders  held on  November  12,  2001,  the
stockholders  of Be  approved  the Asset Sale and the Plan of  Dissolution.  The
Asset Sale was  completed on November 13, 2001.  Under the terms of the Purchase
Agreement,  Be received an aggregate  of  4,104,478  shares of Palm common stock
valued at approximately $11,000,000 on the closing date of the transaction.

     The gain on the asset sale to Palm is as follows (in thousands):

      Total gross proceeds.............................................. $11,000
                                                                         =======
      Severance agreements and bonuses..................................   3,100
      Bankers' fees.....................................................   1,250
      Broker's fees.....................................................     900
      Legal and accounting fees.........................................     534
      Non-cash  expense related to stock bonuses........................     202
      Other expenses....................................................     131
                                                                             ---
      Net gain on asset sale............................................  $4,883
                                                                          ======


     As part of its employee  recruiting and retention  plan, Be had a policy of
entering into change of control agreements with certain employees  considered to
be  critical to  effectuating  a  transaction  such as the Asset Sale with Palm.
Several senior executive  officers and key employees of the Company were parties
to these  change of control  agreements  at the time of the closing of the Asset
Sale. Pursuant to the terms of the agreements,  these executive officers and key
employees  were paid a lump sum  severance  payment  equal to twelve months base
salary as well as the  continuation  of certain health  insurance  benefits.  In
addition,  in order to further assure the  dedication  and continued  efforts of
Be's executives through the critical  transition period up to the closing of the
Asset Sale, the Board of Directors of the Company  approved  grants of shares of
common stock of Be in the form of stock bonuses to certain employees,  including
some executive officers, still employed with Be at the closing of the Asset Sale
or who may be  terminated  by the Company  without cause after July 30, 2001. In
addition to these stock bonuses,  the Board approved an aggregate of $867,000 in
incentive  cash  bonuses  to certain  designated  employees,  including  certain
executive  officers,  for  continuing  to provide  services  to Be  through  the
transition  period,  and to assist the Company in  fulfilling a condition to the
closing of the Asset Sale that  specified  that  certain  employees of Be, and a
specified  percentage of Be's remaining employee workforce,  remain employees of
the Company and accept  employment  with Palm as of the closing.  The  aggregate
charge  against the net gain on the Asset Sale related to  severance  agreements
and bonuses for certain of the  Company's  executive  officers and key employees
(including  non-cash  expenses) was  approximately  $3.3  million.  Service fees
related to banker, broker, legal and accounting fees accounted for approximately
$2.7 million in additional charges.  Other miscellaneous expenses related to the
transaction accounted for approximately $131,000.



                                      F-12
<PAGE>


                                BE INCORPORATED

        Notes to Unaudited Consolidated Financial Statements (continued)



NOTE 4--BALANCE SHEET ACCOUNTS:

<TABLE>
<CAPTION>

                                                                                      December 31,
                                                                        2001                               2000
                                                                        ----                               ----
                                                                  Cost          Fair Value           Cost           Fair Value
                                                                --------         --------          --------           --------
<S>                                                              <C>              <C>              <C>                <C>
Cash and cash equivalents
Cash.....................................................        $     4          $     4          $    426           $    426
Money Market.............................................          5,377            5,377                 8                  8
Repurchase Agreements....................................             --               --             6,785              6,785
Corporate Obligations....................................             --               --             1,250              1,250
Commercial paper.........................................                                               994                994

                                                                $  5,381         $  5,381          $  9,463           $  9,463
                                                                ========         ========          ========           ========

</TABLE>
<TABLE>
<CAPTION>


                                                                                      December 31,
                                                                        2001                               2000
                                                                        ----                               ----
                                                                  Cost          Fair Value           Cost           Fair Value
                                                                --------         --------          --------           --------
<S>                                                              <C>              <C>              <C>                <C>
Short-term investments
Federal government obligations.........................               --               --                --                 --
Corporate debt obligations.............................               --               --                --                 --
Commercial paper.........................................                                         $  4,593              4,594
                                                         ---------------  ---------------         ---------              -----
                                                                      --              --          $  4,593            $  4,594
                                                         ===============  ===============         =========           ========
</TABLE>


         All short-term investments mature within one year.



                                      F-13
<PAGE>


                                 BE INCORPORATED

        Notes to Unaudited Consolidated Financial Statements (continued)




                                                                   December 31,
                                                                 2001      2000
                                                                -----      ----
Property and equipment, net
Computer equipment .........................................  $    21   $ 1,124
Furniture and fixtures .....................................     --         390
                                                              -------   -------
                                                                   21     1,514
Less: accumulated depreciation .............................      (19)   (1,123)
                                                              -------   -------
                                                              $     2   $   391
                                                              =======   =======
Accrued expenses
License and royalty liabilities ............................  $    37   $    70
Payroll and related ........................................     --         932
Other ......................................................       57       500
                                                              -------   -------
                                                              $    94   $ 1,502
                                                              =======   =======
Other assets, net
Technology licenses ........................................  $  --     $ 3,520
Deposits ...................................................       24        24
                                                              -------   -------
                                                                   24     3,544
Less: accumulated amortization .............................     --      (2,496)
                                                              -------   -------
                                                              $    24   $ 1,048
                                                              =======   =======

     Beginning  in 1998,  the  Company  entered  into other  technology  license
agreements  including  non  cancelable  minimum  payments.  The present value of
payments  due under these  agreements  (see Note 6) was recorded as an asset and
amortized  over the  lesser  of the term of the  agreement  or three  years,  if
technological  feasibility  was established at the date the agreement was signed
or as research and development  costs if technological  feasibility had not been
established and there was no alternative future use for the licensed technology.
During 2001, 2000 and 1999, costs  capitalized  under these agreements were nil,
$100,000 and $809,000, respectively.


                                      F-14
<PAGE>


                                 BE INCORPORATED

        Notes to Unaudited Consolidated Financial Statements (continued)



NOTE 5--DISSOLUTION OF THE COMPANY:

     On March 15, 2002, the Company filed a certificate of dissolution  with the
Delaware Secretary of State in accordance with the plan of dissolution  approved
by  stockholders  on November 12, 2001 and as set forth in the Definitive  Proxy
Statement filed on October 9, 2001.  Following such filing,  the Company adopted
liquidation accounting. Set forth below is the Company's pro forma balance sheet
as of December  31,  2001,  as if the  certificate  had been filed on that date.
Under  liquidation  accounting,   all  assets  and  liabilities  are  stated  at
realizable  value  unlike  under  going  concern  accounting  where  assets  and
liabilities are stated at historical value.


         PRO FORMA STATEMENT OF NET ASSETS IN LIQUIDATION (IN THOUSANDS)
<TABLE>
<CAPTION>

                                                                           Historical                        Pro Forma
                                                                          December 31,    Adjustments       December 31,
                                                                              2001                              2001
                                                                          ------------    -----------       ------------
<S>                                                                             <C>           <C>              <C>
Assets
Current assets:
       Cash and cash equivalents.......................................         $ 5,381       $    -           $ 5,381
       Accounts receivable.............................................              66         (66)                 -
       Prepaid and other current assets................................           1,363      (1,363)  (a)            -
                                                                                -------      ------              -----
           Total current assets........................................           6,810      (1,429)             5,381
Property and equipment, net............................................               2            -                 2
Other assets, net of accumulated amortization..........................              24                             24
                                                                                -------      ------              -----
           Total assets................................................         $ 6,836      (1,429)             5,407
                                                                                =======      =======             =====
Liabilities
Current liabilities:
       Accounts payable................................................            $ 96            -              $ 96
       Accrued expenses................................................              94          300  (b)          394
       Technology license obligations, current portion.................             815            -               815
       Deferred revenue................................................              56         (56)                 -
                                                                                -------      ------              -----
           Total current liabilities...................................           1,061          244             1,305
                                                                                -------      ------              -----
Stockholders' Equity:
Common stock, $.001 par value:.........................................              38          (38)                -
Additional paid-in capital.............................................         106,493                              -
                                                                                            (106,493)
Deferred stock compensation..........................................               (39)          39                 -
Accumulated deficit..................................................          (100,717)      100,717                -
                                                                                -------      ------              -----
           Total stockholders' equity..................................          5,775       (5,775)                 -
                                                                                -------      ------              -----
             Total liabilities.........................................         $ 6,836     $(5,775)             1,305
                                                                                -------      ------              -----
             Net assets in liquidation.................................             --          --             $ 4,102
                                                                                =======      =======             =====
</TABLE>

(a)  This amount is primarily related to liability  insurance  contracted for in
     accordance  with the  dissolution  process and discussed in the  Definitive
     Proxy Statement filed on October 9, 2001

(b)  This amount  represents  estimated costs to liquidate the company according
     to  the  plan  of  dissolution  and  consists   primarily  of  $150,000  in
     professional services and $130,000 in salary costs.

                                      F-15
<PAGE>

                                 BE INCORPORATED
        Notes to Unaudited Consolidated Financial Statements (continued)


NOTE 6--COMMITMENTS AND CONTINGENCIES:

Lease commitments

     The Company leased its facilities under non cancelable operating leases
that expired in February 2002. In February 2002, the company entered into a
renewable 6 month lease for a small office with a monthly lease payment of
approximately $1,300 per month. Future annual minimum lease payments as of
December 31, 2001 are as follows (in thousands):

     2002..........................................................        $ 200
     Thereafter..................................................            -
                                                                          ------
                                                                          $ 200
                                                                          ------

     Total rent expense was $1,262,000, $1,308,000 and $1,168,000 for 2001, 2000
and 1999, respectively.

     In  addition,  the Company has entered into  several  technology  licensing
agreements  which  include non  cancelable  payments.  These  payments have been
recorded at the net present  value using a discount  rate of 10% per annum.  The
future minimum payments under these agreement are as follows:

     2002                                                                 $ 840
                                                                           ----
                                                                            840
     Less discount......................................................    (25)
                                                                            ---
                                                                            815
     Less current portion...............................................     -
                                                                          -----
                                                                          $ 815
                                                                          =====
Contingencies

      Stockholder lawsuit

     As previously  disclosed in the Company's  filings with the  Securities and
Exchange Commission, in November 2000, the Company's stock transfer agent, Wells
Fargo Bank  Minnesota,  N.A.,  received a demand  letter from  Financial  Square
Partners, a Be stockholder, alleging damages resulting from the transfer agent's
failure  to timely  issue its  stock  certificates.  While Be was not named as a
party 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.  A settlement  conference
occurred in April 2002 and  negotiations are ongoing.  A trial, if required,  is
scheduled for June.  Financial  Square Partners 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  involved  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.

      Antitrust lawsuit

     On February 15, 2002, Be engaged Susman Godfrey LLP on a contingency  basis
to bring forth claims against Microsoft  Corporation for the destruction of Be's
business  resulting from  anticompetitive  business  practices.  On February 19,
2002,  the Company  filed a lawsuit in the United States  District  Court in San
Francisco alleging,  among other things, Microsoft harmed Be through a series of
illegal, exclusionary and anticompetitive acts designed to maintain its monopoly
in the Intel-compatible PC operating system market and created exclusive dealing
arrangements with PC OEMs prohibiting the sale of PCs with multiple preinstalled
operating systems.

     Be is seeking recovery of an unspecified  amount of damages for the benefit
of the Company and its stockholders.


                                      F-16
<PAGE>

                                 BE INCORPORATED
        Notes to Unaudited Consolidated Financial Statements (continued)



NOTE 7--STOCKHOLDERS' EQUITY:

Initial Public Offering

     In July 1999, the Company  completed its initial  public  offering and sold
6,000,000  shares of its common stock at a price of $6.00 per share. The Company
received  approximately  $32.2 million in cash, net of  underwriting  discounts,
commissions and other offering expenses.  Simultaneously with the closing of the
initial  public  offering,  the  Company's  mandatorily  redeemable  convertible
preferred stock  outstanding at December 31, 1998  automatically  converted into
22,498,874  shares of common stock. In August 1999, the  underwriters  exercised
their over-allotment option and the Company sold an additional 557,465 shares of
its common  stock at a price of $6.00 per share,  thereby  raising  proceeds  of
approximately $3.1 million, net of underwriting discounts.

     Prior to the Company's voluntary delisting on March 15, 2002, the Company's
shares were traded on the Nasdaq national market system under the symbol "BEOS".
The Company's shares now trade on the  over-the-counter  market under the symbol
"BEOSZ".


Mandatorily Redeemable Convertible Preferred Stock

     On closing of the  Company's  initial  public  offering  in July 1999,  the
Company's  mandatorily  redeemable preferred stock automatically  converted into
22,498,874 shares of common stock (see above).

     Changes in the mandatorily  redeemable  convertible  preferred stock during
1999 were as follows (in thousands):

                                                                         Amount
     Balance, January 1, 1999..................................       $  38,005
          Accretion to redemption value........................             292
          Conversion to common stock...........................         (38,297)
                                                                        -------
     Balance, December 31, 1999.................................         $   --
                                                                        =======


                                      F-17
<PAGE>


                                 BE INCORPORATED

        Notes to Unaudited Consolidated Financial Statements (continued)



Warrants

     The Company has issued fully exercisable warrants to purchase shares of its
common stock.  None of these  warrants  were  exercised  prior to 1999.  Warrant
activity can be analyzed as follows:
<TABLE>
<CAPTION>

                                                                                      Number                             Number
                                                    Number          Number          of Warrants         Number        of Warrants
                                                   of Shares      of Warrants     Outstanding at      of Warrants    Outstanding at
  Issuance Date     Expiration    Exercise Price   Under the   Exercised in 1999 December 31,1999  Exercised in 2000    December
                       Date           Per share     warrants                                                             31,2000
  -------------     -----------      --------      ---------   ----------------- ----------------  -----------------   --------
<S>                 <C>              <C>         <C>               <C>              <C>                <C>            <C>
   April 1996       March 2001        $1.00      1,219,648          173,546          1,046,102          454,625         591,477
  December 1998   December 2003       $3.25      1,538,462               --          1,538,462               --       1,538,462
May and December
      1998        June 17, 2000       $3.58        112,865          112,865               --                 --             --
                                                ----------          -------     ---------------        ---------     ----------
                                                 2,870,975          286,411          2,584,564          454,625       2,129,939
                                                 =========          =======          =========          =======       =========
</TABLE>
<TABLE>
<CAPTION>

                                                     Number                                               Number
                                                  of Warrants        Number           Number           of Warrants
                                                 Outstanding at   of Warrants       of Warrants       Outstanding at
  Issuance Date     Expiration    Exercise Price   December      Exercised in     Expired in 2001   December 31, 2001
                       Date          Per share      31, 2001         2001
  -------------     -----------      ---------     ---------     -------------    ---------------   -----------------
<S>                <C>                <C>         <C>              <C>                <C>                <C>
   April 1996       March 2001        $1.00         591,477         179,291            412,186                  --
  December 1998   December 2003       $3.25       1,538,462              --                 --           1,538,462
May and December
      1998        June 17, 2000       $3.58              --              --                 --                  --
                                                --------------  --------------  --------------         --------------
                                                  2,129,939         179,291            412,186           1,538,462
                                                  =========      ===========     =============          =============

</TABLE>

     The December 1998  warrants were issued in connection  with the issuance of
Series 2 preferred stock in December 1998.

     The May and December 1998 warrants were issued for  investment  banker fees
related to the issuance of the Series 2 preferred stock.


                                      F-18
<PAGE>


                                 BE INCORPORATED

        Notes to Unaudited Consolidated Financial Statements (continued)




1992 Stock Option Plan

     In 1992 the Company  adopted a stock  option plan (the "1992  Plan")  under
which 5,000 shares of the Company's  common stock had been reserved for issuance
of stock  options  to  employees,  directors,  or  consultants  under  terms and
provisions established by the board of directors.  In 1997 and 1998, the Company
reserved an additional 5,995,000 shares and 2,000,000 shares, respectively,  for
issuance  under  the  1992  Plan.  Options  granted  under  the  1992  Plan  are
immediately  exercisable;  however,  shares  exercised  under  the 1992 Plan are
subject  to  the  Company's  right  of  repurchase  at the  end of the  holder's
association with the Company. The Company's right of repurchase generally lapses
as to 20% of the shares one year from the date of grant and (1)/60th  each month
thereafter  or as to 25% of the  shares  one year  from  the  date of grant  and
(1)/48th each month  thereafter.  The options  expire ten years from the date of
grant.

     On March 30, 1999, the board of directors terminated the 1992 Plan.

1999 Equity Incentive Plan

     On March 30, 1999 the Company adopted the Equity  Incentive Plan (the "1999
Plan")  under  which a total of up to  8,000,000  shares  of common  stock  were
initially  reserved for issuance.  This number of shares initially  reserved was
reduced by the  1,943,347  shares  reserved  for  issuance  under  options  then
outstanding  under  the  1992  Plan.  If  any of  these  1,943,347  options  are
cancelled,  the number of shares  reserved under the 1999 Plan will be increased
by the number of such  cancellations.  In  addition,  at the end of each year an
additional number of shares will  automatically be added to the number of shares
already  reserved for issuance under the 1999 Plan.  This  additional  number of
shares  will be not more than the  lesser  of 5% of the  number of shares of the
Company's issued and outstanding common stock as of year end or the number equal
to 8% of the number of shares of common stock issued and outstanding at year end
less the number of shares of common stock  reserved for issuance  under the 1999
Plan but not subject to outstanding awards. The 1999 Plan provides for the grant
of incentive  stock  options,  non-qualified  stock  options,  restricted  stock
purchase  rights and stock  bonuses to  employees,  consultants  and  directors.
Incentive stock options may be granted only to employees.  The exercise price of
incentive  stock  options  granted under the 1999 Plan must be at least equal to
the fair market value of the  Company's  common stock on the date of grant.  The
exercise price of non-qualified stock options is set by the administrator of the
1999 Plan,  but can be no less than 85% of the fair  market  value.  The maximum
term of options granted under the 1999 Plan is ten years.  Options granted under
the terms of the 1999 Plan become  exercisable  as to 25% of the shares  awarded
after one year and (1)/48th of the award monthly thereafter.

     Due to the cessation of the Company's business  operations,  the Company no
longer expects to grant stock options under the 1999 Plan.



                                      F-19
<PAGE>


                                 BE INCORPORATED

        Notes to Unaudited Consolidated Financial Statements (continued)



     Activity under the Company's Plans is set forth below (in thousands, except
per share and share numbers):
<TABLE>
<CAPTION>

                                                                                      Options Outstanding
                                                                      -----------------------------------------------------
                                                                                                                   Average
                                                                                                                   Weighted
                                                      Available                      Price per                     Exercise
                                                      for Grant        Shares          Share          Amount        Price
                                                      ---------        ------        ---------        ------       --------
     <S>                                               <C>           <C>              <C>              <C>         <C>
     Balance, January 1, 1999......................     351,488       2,204,927        0.10-0.35        $ 645       $ 0.29
          Options authorized March.................   5,524,813              --         --                 --           --
             Options authorized December...........     298,435              --         --                 --           --
          Options granted..........................  (4,328,000)      4,328,000      0.35-14.38        22,726         5.25
          Options exercised........................         --         (294,548)     0.10-5.00            (64)        0.22
          Options terminated.......................     928,657        (928,657)     0.10-6.25         (2,875)        3.10
                                                        -------        --------                        ------
     Balance, December 31, 1999 ...................   2,775,393       5,309,722      0.10-14.38        20,432        $3.85
          Options authorized.......................   1,810,145              --         --                 --           --
          Options granted..........................  (3,961,500)      3,961,500      1.00-17.88        32,112         8.11
          Options exercised........................         --         (911,110)     0.10-12.88        (2,226)        2.44
          Options terminated.......................   1,870,409      (1,870,409)     0.10-14.44       (13,662)        7.30
                                                    ----------      -------------                      ------
       Balance, December 31, 2000 .................   2,494,447       6,489,703      0.10-17.88        36,656       $ 5.65
          Options authorized.......................   2,108,580              --         --                 --           --
          Stock bonus awards........................ (1,693,484)              --         --                 --           --
          Options granted..........................    (231,000)        231,000      0.49-1.97            360         1.56
          Options exercised........................         --          (71,569)     0.10-1.00            (21)        0.29
          Options terminated.......................   3,935,575       (3,935,575)   0.10-17.875       (21,939)        5.57
                                                    ----------      -------------                      ------
     Balance, December 31, 2001 ...................   6,614,118       2,713,559     $0.10-$14.75      $15,056       $ 5.55
                                                      =========       =========                       =======
</TABLE>

     On November 13, 2001,  following the closing of the Asset Sale to Palm, the
Company granted  1,693,484  shares to employees under a conditional  stock award
program entered into on April 19, 2001.

     At December 31, 2001,  2000 and 1999,  2,769,941,  2,339,767  and 2,435,895
outstanding  options were  exercisable at weighted  average  exercise  prices of
$5.40, $4.52 and $2.01. Of these shares, nil shares,  295,869 shares and 848,685
shares  at  weighted   average   exercise   prices  of  nil,  $0.33  and  $0.33,
respectively, are subject to the Company's right of repurchase upon exercise. In
addition, 35,480, 221,743 and 499,069 shares of the Company's outstanding common
stock is subject to the Company's right of repurchase at weighted average prices
of $0.25, $0.29 and $0.24, respectively.

1999 Non-Employee Directors' Stock Option Plan

     On March 30, 1999 the board of  directors  also  adopted  the  Non-Employee
Directors' Stock Option Plan (the "Directors'  Plan"), and have reserved a total
of 1,500,000 shares of common stock for issuance thereunder.  The exercise price
of options under the  Directors'  Plan will be equal to the fair market value of
the common stock on the date of grant.  The maximum term of the options  granted
under the Directors' Plan is ten years.  Each initial grant under the Directors'
Plan will vest at 1/4th of the  shares  subject to the option one year after the
date of grant and  (1)/48th  of the shares  each month  thereafter.  The rate of
vesting of each  subsequent  grant will be  (1)/48th  of the shares on a monthly
schedule  after the date of grant.  The board may amend  (subject to stockholder
approval as necessary) or terminate the Directors' Plan at any time.

     Due to the cessation of the Company's business  operations,  the Company no
longer expects to grant stock options under this plan.


                                      F-20
<PAGE>


                                 BE INCORPORATED

        Notes to Unaudited Consolidated Financial Statements (continued)

     Activity under the 1999 Non-Employee Directors' Stock Option Plan is set
forth below (in thousands, except per share and share numbers):
<TABLE>
<CAPTION>

                                                                                     Options Outstanding
                                                                    ------------------------------------------------------
                                                                                                                    Average
                                                                                                                   Weighted
                                                   Available                       Price per                       Exercise
                                                   for Grant        Shares           Share           Amount          Price
                                                   ----------       --------      ----------         --------      ---------

<S>                                                <C>              <C>            <C>             <C>             <C>
 Options authorized.............................   1,500,000              --       $    --         $    --         $    --
 Options granted................................    (700,000)        700,000       5.00-5.75            3,575         5.11
                                                    ---------        -------                            -----

 Balance, December 31, 1999.....................     800,000         700,000       5.00-5.75            3,575         5.11
 Options granted................................    (100,000)        100,000           16.13            1,612           16.13
 Options terminated.............................      90,625         (90,625)         5.00              (453)         5.00
                                                      ------         --------                           -----

 Balance, December 31, 2000.....................     790,625         709,375      $5.00-16.13          $4,734       $ 6.67
 Options terminated.............................     215,625        (215,625)      5.00-5.75          (1,116)         5.17
                                                     -------        ---------                         -------

 Balance, December 31, 2001.....................   1,006,250         493,750      $5.00-16.13          $3,618       $ 7.33
                                                   =========         =======                           ======

</TABLE>


     At  December  31,  2001,  2000 and 1999,  392,708,  285,416 and nil options
outstanding were exercisable at weighted average exercise prices of $6.39, $5.08
and nil, respectively.


                                      F-21
<PAGE>


                                 BE INCORPORATED

        Notes to Unaudited Consolidated Financial Statements (continued)

Options Outstanding

     The options  outstanding  and currently  exercisable  by exercise  price at
December 31, 2001 are as follows:
<TABLE>
<CAPTION>

                                                               Options Outstanding             Options Exercisable
                                                      -----------------------------------     ----------------------
                                                                    Weighted
                                                                     Average      Weighted                   Weighted
                                                                    Remaining      Average                    Average
                                                       Number      Contractual    Exercise       Number      Exercise
     Exercise Prices                                 Outstanding  Life (years)      Price     Exercisable      Price
     ---------------                                 -----------  ------------      -----     ------------     -----
     <S>                                               <C>           <C>           <C>           <C>          <C>
     $0.10-0.35....................................     641,905       6.83          $0.49         596,342      $0.45
     $1.00-4.56....................................     188,667       8.66          4.17          181,583      $4.22
     $5.00-5.75....................................   1,464,676       7.27          5..06       1,329,116      $5.06
     $6.00-9.00....................................     346,079       8.05          7.26          266,129      $7.22
     $12.88-17.88..................................     565,982       8.09          13.51         396,771     $13.32
                                                        -------                                   -------
                                                      3,207,309       7.49          $5.75       2,769,941      $5.40
                                                      =========                                 =========
</TABLE>

Deferred stock compensation

     In  accordance  with the  requirements  of APB 25, the Company has recorded
deferred compensation for the difference between the exercise price of the stock
options  granted before its initial public offering and the fair market value of
the  Company's  stock  at the  date of  grant.  This  deferred  compensation  is
amortized  to  expense  over the  period  during  which the  Company's  right to
repurchase the stock lapses or the options become exercisable, generally four or
five years, using the multiple options method.

     At  December  31,  2001,  the Company had  recorded  deferred  compensation
related to these options in an amount of $12,591,000 (net of cancellations),  of
which  $(1,996,000),  $2,613,000  and  $6,233,000  had been amortized to expense
during 2001, 2000 and 1999.

     During 1999,  options to purchase  4,173,000 shares of the Company's common
stock were granted with exercise prices below the estimated  market value at the
date of grant; the weighted average exercise prices were $4.98 per share and the
deemed  weighted  average market values of the common stock was $6.81 per share,
respectively.  During 2000 and 2001,  all options  were granted with an exercise
price equal to the fair market value of the underlying  common stock on the date
of grant.

Value of Options Granted

     The fair value of each option grant is estimated on the date of grant using
a type of Black-Scholes option pricing model with the following assumptions used
for grants:
                                              2001          2000          1999
                                              -----        -----         ----
     Expected volatility...........           163%          142%      0% and 60%
     Weighted average risk-free
        interest rate..............          4.50%         6.21%          4.80%
     Expected life.................        2 years       2 years        2 years
     Expected dividends............             0%            0%             0%


     For the period prior to the Company's  Initial Public Offering,  volatility
for the purposes of the SFAS No. 123 calculation was 0%.

     Based on the above  assumptions,  the  aggregate  fair  value and  weighted
average  fair  value per share of options  granted  in 2001,  2000 and 1999 were
$328,000, $29,359,000 and $13,919,000, and $1.42, $7.24 and $2.77, respectively.


                                      F-22
<PAGE>


                                 BE INCORPORATED

        Notes to Unaudited Consolidated Financial Statements (continued)


Employee Stock Purchase Plan

     On May 4, 1999 the Company  adopted an Employee  Stock  Purchase  Plan (the
"Purchase Plan"). The Company has reserved a total of 1,500,000 shares of common
stock for  issuance  under the  Purchase  Plan.  Under the terms of the Purchase
Plan,  employees who work at least 20 hours a week and have been employed for at
least five months in a calendar year may contribute,  during an offering period,
a specified  percentage,  not to exceed 15%, of their  compensation  to purchase
shares of common stock of the Company. Each offering period runs for a period of
24 months and will be divided into consecutive purchase periods of approximately
six months.  New offering  periods  commence  every six months on August 1st and
February 1st each year.

     The price of the common stock purchased under the Purchase Plan is equal to
85% of the  fair  market  value of the  common  stock  on the  first  day of the
applicable  offering  period or the last day of the applicable  purchase  period
whichever is lower. No person may purchase shares under the Purchase Plan to the
extent  that such  person  would own 5% or more of the total  combined  value or
voting power of all classes of the capital stock of the Company or to the extent
that such person's  rights to purchase  stock under stock  purchase  plans would
accrue at a rate in excess of $25,000 per year.

     The first purchases under the Purchase Plan occurred in 2000,  during which
166,914  shares  were  issued  under the  Purchase  Plan at a  weighted  average
purchase price of $4.21. In 2001,  343,262 shares were issued under the Purchase
Plan at a weighted  average  purchase  price of $1.13.  At  December  31,  2001,
989,824 shares were reserved for future issuance under the Purchase Plan.

     Due to the cessation of the Company's business  operations,  the Company no
longer expects any shares of stock to be purchased under the Purchase Plan.

     Under SFAS No. 123, compensation cost is also recognized for the fair value
of employee's  purchase rights under the Employee Stock Purchase Plan, which was
estimated using the following assumptions

                                             2001             2000          1999
                                            -----            -----          ----
     Expected volatility..................    163%          142%            60%
     Weighted average risk-free
         interest rate....................   4.31%         6.18%          4.80%
     Expected life........................ 6 months      6 months       6 months
     Expected dividends...................     0%            0%             0%

     Based on the above  assumptions,  the  aggregate  fair  value and  weighted
average fair value per share of those purchase  rights granted in 2001, 2000 and
1999  was  $43,000,   $417,000  and  $140,000,   and  $1.19,  $3.45  and  $1.94,
respectively. .

Pro forma stock compensation

     Had compensation  cost been determined based on the fair value at the grant
date for the awards made in 1995 and thereafter under the Company's stock option
plans and employee  stock purchase plan  consistent  with the provisions of SFAS
No. 123, the Company's net loss would have been as follows (in thousands, except
per share amounts):
<TABLE>
<CAPTION>

                                                                                           2001        2000       1999
                                                                                           -----       -----      ----
<S>                                                                                       <C>        <C>        <C>
     Net loss attributable to common stockholders--as reported.........................   $(6,342)   $(21,152)  $(24,798)
     Net loss attributable to common stockholders--pro forma...........................   $(6,399)   $(31,855)  $(27,039)
     Net loss per common share--basic and diluted as reported..........................   $ (0.17)    $ (0.60)   $ (1.41)
     Net loss per common share--basic and diluted pro forma............................   $ (0.17)    $ (0.90)   $ (1.54)
</TABLE>

     Such pro forma disclosures may not be representative of future compensation
cost because options vest over several years and additional grants are made each
year.


                                      F-23
<PAGE>

                                 BE INCORPORATED

        Notes to Unaudited Consolidated Financial Statements (continued)


NOTE 8--INCOME TAXES:

     The components of the net deferred tax asset are as follows (in thousands):

                                                               December 31,
                                                          2001             2000
                                                         -----            -----
     Net operating loss carryforwards...........       $ 30,905        $ 27,492
     Tax credit carryforwards...................          1,770           1,770
     Property and equipment and intangibles.....                             49
     Other.......................................          -                 53
                                                        ------          -------
                                                         32,675          29,364
     Less: valuation allowance......................    (32,675)        (29,364)
                                                       -------          -------
     Net deferred tax asset..........................   $   --          $   --
                                                        =======         =======

     Due  to  uncertainty  surrounding  the  realization  of the  favorable  tax
attributes in future tax returns,  the Company has placed a valuation  allowance
against its net deferred tax assets.  The  valuation  allowance  increased  $3.3
million in 2001, $9.4 million in 2000 and $7.9 million in 1999.


     The principal  items  accounting  for the  difference  between income taxes
benefit at the U.S.  statutory rate and the benefit from income taxes  reflected
in the statement of operations are as follows (in thousands):

                                             2001           2000          1999
                                             ----          -----          ----
     Federal benefit at statutory rate..   $ 2,156        $ 7,192       $ 8,332
     Nondeductible expenses.............       679           (890)       (2,242)
     Net operating losses and benefits..    (2,835)        (6,302)       (6,090)
                                            ------         ------         ------
                                           $   --         $   --         $   --
                                           =======        =======        ======


     At December  31, 2001,  the Company had  approximately  $81,745,000  of net
operating loss carryforwards and $1,272,000 of research and development  credits
to offset  future  federal  income  taxes.  The Company  also had  approximately
$47,718,000  of net operating  loss  carryforwards  and $498,000 of research and
development  credits to offset  future state income  taxes.  Included in the net
operating  loss  carryforwards   referred  to  above,  there  are  approximately
$7,181,000 and $3,591,000 of net operating  loss  carryforwards  for federal and
state  purposes,  respectively,  as of December 31, 2001,  which relate to stock
option  deductions.  The tax benefit of these additional losses will be credited
to additional paid in capital if the Company's deferred tax asset is recognized.
These carryforwards  expire in the years 2005 through 2021 if not utilized.  Due
to  changes  in  ownership,   the  Company's  net  operating   loss  and  credit
carryforwards may become subject to certain annual limitations.


                                      F-24
<PAGE>


                                 BE INCORPORATED

        Notes to Unaudited Consolidated Financial Statements (continued)


NOTE 9--401(k) PROFIT SHARING PLAN:

     The Company has a 401(k)  Profit  Sharing Plan which covers all  employees.
Under  the  Plan,  employees  are  permitted  to  contribute  up to 15% of gross
compensation  not to exceed the annual  limitation for any plan year ($10,500 in
2001). Discretionary  contributions may be made by the Company. No contributions
were made by the Company during 2001, 2000 and 1999.

NOTE 10--GEOGRAPHIC INFORMATION:

     Management  uses one  measurement of  profitability  for its business.  The
Company  markets its  products  and related  services to customers in the United
States, Europe and Asia.

     All  long  lived  assets  are  maintained  in the  United  States.  Revenue
information by geographic area is as follows (in thousands):

                                                                    Net Revenues
     2001
          Americas...............................................       $ 2,693
          Europe.................................................            10
          Asia...................................................            10
                                                                         ------
             Total...............................................       $ 2,713
                                                                        =======

     2000
          Americas...............................................         $ 370
          Europe.................................................            36
          Asia...................................................            74
                                                                         ------
             Total...............................................         $ 480
                                                                         ======

     1999
          Americas...............................................       $ 1,156
          Europe.................................................           755
          Asia...................................................           745
                                                                         ------
             Total...............................................       $ 2,656
                                                                        =======


                                      F-25
<PAGE>

                                                                     SCHEDULE II

                                 BE INCORPORATED
                        VALUATION AND QUALIFYING ACCOUNTS
                                 (in thousands)

<TABLE>
<CAPTION>

                                                                                     Additions
                                                                     Balance at     Charged to                    Balance at
                                                                     Beginning       Costs and                      Ending
                                                                     of Period       Expenses      Deductions     of Period
<S>                                                                  <C>             <C>              <C>         <C>
 Year Ended December 31, 1999
      Allowance for sales returns.................................      $ 10            $--            $--           $ 10
        Deferred tax asset valuation allowance....................    $12,080         $7,889           $--         $19,969

 Year Ended December 31, 2000
      Allowance for sales returns.................................      $ 10            $--            $--           $ 10
        Deferred tax asset valuation allowance....................     $19969         $9,395           $--         $29,364

 Year Ended December 31, 2001
      Allowance for sales returns.................................      $ 10            $--            $10           $--
        Deferred tax asset valuation allowance....................    $29,364         $ 3,311          $--         $32,675

</TABLE>


                                      F-26
<PAGE>