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United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Period Ended September 30, 2002.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Transition Period from __________ to __________.
Commission File Number: 0-26387
BE INCORPORATED
(Exact name of Registrant as specified in its charter)
Delaware 94-3123667
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
655 West Evelyn Avenue, Suite 6, Mountain View, California 94041
(Address of principal executive offices, including zip code)
(650) 965-4842
(Registrant's telephone number, including area code)
------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ ] No [X]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, No Par Value --- 38,450,527 shares as of November 13, 2002
- - ------------------------------------------------------------------------------
BE INCORPORATED
Index
PAGE
PART 1 FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Net Assets in Liquidation at September 30, 2002...........1
Condensed Consolidated Balance Sheet at December 31, 2001...........................2
Consolidated Statement of Changes in Net Assets in Liquidation for the
period from March 16, 2002 to September 30, 2002....................................3
Condensed Consolidated Statements of Operations for the period
from January 1, 2002 to March 15, 2002 and for the three months
ended March 31, 2001................................................................4
Condensed Consolidated Statements of Cash Flows of Operations for
the period from January 1, 2002 to March 15, 2002 and for the three months
ended March 31, 2001................................................................5
Notes to Condensed Consolidated Financial Statements................................6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Discontinued Operations.............................................................9
Item 3. Quantitative and Qualitative Disclosure about Market Risk..........................15
Item 4. Controls and Procedures............................................................15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..................................................................16
Item 2. Changes in Securities and Use of Proceeds..........................................16
Item 3. Defaults Upon Senior Securities....................................................16
Item 4. Submission of Matters to a Vote of Security Holders................................16
Item 5. Other Information..................................................................17
Item 6. Exhibits and Reports on Form 8-K...................................................17
SIGNATURES ...................................................................................18
CERTIFICATIONS ...................................................................................19
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
BE INCORPORATED
CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION
(In thousands)
(unaudited)
September 30, 2002
------------------
ASSETS
Cash and cash equivalents ....................................... $4,249
Other assets .................................................... 3
------
Total assets .................................................. $4,252
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LIABILITIES
Accounts payable ................................................ $ 63
Technology License obligations .................................. 540
Estimated costs during period of liquidation (Note 2) ........... 529
Contingent liabilities (Note 4)
------
Total liabilities ............................................. 1,132
------
Net assets in liquidation ..................................... $3,120
======
The accompanying notes are an integral part
of these financial statements.
-1-
BE INCORPORATED
Consolidated Balance Sheets - Unaudited
(in thousands, except share and per share amounts)
December 31,
2001
----
Assets
Current assets:
Cash and cash equivalents .................................... $ 5,381
Short-term investments ....................................... --
Accounts receivable .......................................... 66
Prepaid and other current assets ............................. 1,363
------
Total current assets ..................................... 6,810
Property and equipment, net ......................................... 2
Other assets, net of accumulated amortization ....................... 24
------
Total assets ............................................. $ 6,836
======
Liabilities and stockholders' equity:
Accounts payable ............................................. $ 96
Accrued expenses ............................................. 94
Technology license obligations ............................... 815
Deferred revenue ............................................. 56
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Total liabilities ........................................ 1,061
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Commitments and Contingencies (Note 4)
Stockholders' Equity:
Preferred stock, $.001 par value:
Shares authorized: 2,000,000
Shares issued and outstanding: none
Common stock, $.001 par value:
Shares authorized: 78,000,000 shares
Shares issued and outstanding: 38,486,007................... 38
Additional paid-in capital........................................... 106,493
Deferred stock compensation.......................................... (39)
Accumulated deficit.................................................. (100,717)
Accumulated other comprehensive income (loss)........................ -
------
Total stockholders' equity................................ 5,775
------
Total liabilities and stockholders' equity.............. $ 6,836
=======
The accompanying notes are an integral part
of these financial statements.
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BE INCORPORATED
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
(In thousands)
(Unaudited)
For the period from
March 16, 2002 to
September 30, 2002
-------------------
Net assets in liquidation at March 16, 2002 $ 3,185
Recoveries and refunds, net 76
Earnings on cash and cash equivalents 7
--------
Net assets in liquidation at March 31, 2002 $ 3,268
Recoveries and refunds, net 5
Earnings on cash and cash equivalents 17
--------
Net assets in liquidation at June 30, 2002 $ 3,290
Recoveries and refunds, net (186)
Earnings on cash and cash equivalents 16
--------
Net assets in liquidation at September 30, 2002 $ 3,120
========
The accompanying notes are an integral part
of these financial statements.
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BE INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
For the
Period Three
January 1, Months
2002 to Ending
March 15, March 31,
2002 2001
--------- --------
Net revenues ........................................... - 100
Cost of revenues ....................................... - 251
-------- --------
Gross profit (loss) .................................... - (151)
Operating expenses:
Research and development ............................ - 2,481
Sales and marketing ................................. - 1,618
General and administrative .......................... 551 1,146
Restructuring charge ................................ - 307
Total operating expenses ........................ 551 5,552
-------- --------
Loss from operations ................................... (551) (5,703)
Interest expense ....................................... - (15)
Other income and expenses, net ......................... 6 161
-------- --------
Net loss ............................................... (545) (5,557)
======== ========
Net loss per common share--basic and diluted ........... $ (.01) $ (.15)
======== ========
Shares used in per common share
calculation--basic and diluted ...................... 38,450 36,194
======== ========
The accompanying notes are an integral part
of these financial statements.
-4-
BE INCORPORATED
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
For the
Period Three
January 1, Months
2002 to Ending
March 15, March 31,
2002 2001
--------- --------
Cash flows from operating activities:
Net loss ............................................ $ (545) $ (5,557)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization ................... 1 267
Amortization of discount on
technology license obligations ................. 5 15
Loss on disposal of fixed assets ................ 6
Amortization of deferred stock compensation ..... 2 302
Changes in assets and liabilities
Accounts receivable .......................... 52 (428)
Prepaid and other current assets ............. 78 (3)
Accounts payable ............................. (88) (190)
Accrued expenses ............................. (53) 202
Deferred revenue ............................. (56) 368
-------- --------
Net cash used in operating activities ...... (604) (5,018)
-------- --------
Cash flow provided by investing activities:
Acquisition of property and equipment ............... - (72)
Acquisition of licensed technology .................. - (175)
Purchases of short-term investments ................. - (1,728)
Sales of short-term investments ..................... - 3,588
-------- --------
Net cash provided by investing activities .. - 1,613
-------- --------
Cash flows provided by financing activities:
Proceeds from issuance of common stock:
pursuant to common stock options .................. - 12
pursuant to common stock warrants ................. - 180
under Employee Stock Purchase Plan ................ - 324
-------- --------
Net cash provided by financing activities .. - 516
-------- --------
Net increase (decrease) in cash and cash equivalents ... (604) (2,889)
-------- --------
Cash and cash equivalents, beginning of period ......... 5,381 9,463
-------- --------
Cash and cash equivalents, end of period ............... $ 4,777 $ 6,574
======== ========
The accompanying notes are an integral part
of these financial statements.
-5-
BE INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - The Company and its Significant Accounting Policies:
Be Incorporated ("Be" or the "Company") was founded in 1990 and prior to
the cessation of its business operations offered software platforms designed for
Internet appliances and digital media applications.
The unaudited condensed consolidated financial statements included herein
have been prepared by Be pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information or footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. In the opinion of Be the accompanying unaudited condensed
consolidated financial statements contain all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the financial
information included therein. While Be believes that the disclosures are
adequate to make the information not misleading, it is suggested that these
financial statements be read in conjunction with the unaudited financial
statements and accompanying notes included in Be's Annual Report on Form 10-K/A
for the fiscal year ended December 31, 2001 as filed with the Securities and
Exchange Commission.
On August 16, 2001, the Board of Directors of the Company unanimously
adopted resolutions approving the sale of substantially all of the Company's
intellectual property and other technology assets (the "Asset Sale") to ECA
Subsidiary Acquisition Corporation, a Delaware corporation and an indirect
wholly-owned subsidiary of Palm, Inc. ("Palm"), pursuant to an Asset Purchase
Agreement dated August 16, 2001. On October 9, 2001, the Company filed a
definitive proxy statement soliciting stockholder approval for the Asset Sale
and the dissolution of the Company pursuant to a plan of dissolution (the "Plan
of Dissolution"). The Plan of Dissolution provides for the orderly liquidation
of Be's remaining assets, the winding-up of Be's business and operations and the
dissolution of the Company. In accordance with the terms of the Plan of
Dissolution, Be will pay, or provide for the payment of, all of its liabilities
and obligations following the approval of the Board to proceed with the
liquidation and dissolution of the company. If there are any remaining assets
after the payment, or the provision for payment, of all of its liabilities and
obligations, Be will then distribute such assets to its stockholders in one or
more distributions.
-6-
At a special meeting of stockholders held on November 12, 2001, the
stockholders of Be approved the Asset Sale and the Plan of Dissolution. The
Asset Sale was completed on November 13, 2001. Under the terms of the Purchase
Agreement, Be received an aggregate of 4,104,478 shares of Palm common stock
valued at approximately $11,000,000 on the closing date of the transaction. On
March 15, 2002, the Company filed a certificate of dissolution with the Delaware
Secretary of State in accordance with the plan of dissolution approved by
stockholders on November 12, 2001 and as set forth in the Definitive Proxy
Statement filed on October 9, 2001.
Accordingly, all activities of Be as of March 15, 2002 are presented under
the liquidation basis of accounting. Under the liquidation basis of accounting,
assets are stated at their estimated net realizable values and liabilities are
stated at their anticipated settlement amount, if reasonably estimable. Because
the Company no longer has business operations or operating, investing or
financing activities while in liquidation, the Company's condensed consolidated
statements of operations and statements of cash flows in this Quarterly Report
on Form 10-Q compare the period from January 1, 2002 to March 15, 2002 with the
three month period ending March 31, 2001 in accordance with the requirements of
the liquidation basis of accounting. See "Activities While in Liquidation"
below. Additionally, Be's common stock was delisted from the NASDAQ National
Market effective March 15, 2002.
Activities While in Liquidation
Changes in net assets in liquidation for the period from March 16, 2002 to
March 31, 2002 of $83,000, were primarily a result of the early termination of a
technology license agreement. Changes in net assets in liquidation for the
period from April 1, 2002 to June 30, 2002, were primarily a result of earnings
on cash and cash equivalents. Changes in net assets in liquidation for the
period from July 1, 2002 to September 30, 2002 were primarily a result of salary
payments, professional fees and other costs related to the Company's liquidation
and dissolution.
Be expects to continue to incur certain administrative, legal and other
costs associated with winding up its affairs. These costs have been accrued (See
Note 2).
The amount of unknown or contingent liabilities cannot be quantified and
could decrease or eliminate any remaining assets available for distribution to
Be's shareholders. Further, if Be is subject to any contingent liabilities, this
could require that it establish reserves that could delay any distribution to Be
shareholders. Because of the uncertainties as to the precise net realizable
value of Be's assets and the settlement amount of Be's debts and liabilities, Be
cannot at this time determine the timing or amount of distributions that may be
made to its shareholders, if any. Only if there are assets remaining at the time
of the liquidation of Be's assets will Be shareholders receive a distribution of
those assets.
-7-
Note 2 - Balance Sheet Components (in Thousands):
Estimated Costs During Period of Liquidation:
September 30, 2002
Accrued salaries, wages and benefits $ 201
Accrued professional fees 280
Accrued leases payable 20
Miscellaneous accrued expenses 28
------
Estimated costs during period of liquidation $ 529
======
Note 3 - Net Loss Per Share:
Basic net loss per share is computed using the weighted average number of
common shares outstanding during the periods. Diluted net loss per share is
computed using the weighted average number of common and potentially dilutive
common shares during the periods presented.
Diluted loss per share was the same as basic loss per share for the three
months ended March 31, 2002 and 2001. During the period from January 1, 2002 to
March 15, 2002 and the three month period ended March 2001, options to purchase
approximately 899,000 and 7.1 million shares of common stock, respectively, were
outstanding but not included in the calculation because they were anti-dilutive.
During the period from January 1, 2002 to March 15, 2002 and the three month
period ended March 31 2001, warrants to purchase approximately 1.5 million
shares were outstanding but not included in the calculation because they were
anti-dilutive.
NOTE 4 - Legal Contingencies:
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. On August 21, 2002, the Judicial Panel on Multidistrict
Litigation ordered the lawsuit against Microsoft transferred to the federal
district court for the District of Maryland in Baltimore, to be coordinated by
Judge Frederick Motz.
Be is seeking recovery of an unspecified amount of damages for the benefit
of the Company and its stockholders.
-8-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF DISCONTINUED OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Discontinued Operations contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. Any statements contained in this
document, including without limitation statements to the effect that Be or its
management "believes," "expects," "anticipates," "plans," "may," "will,"
"projects," "continues," or "estimates," or statements concerning "potential,"
or "opportunity" or other variations thereof or comparable terminology or the
negative thereof, that are not statements of historical fact should be
considered forward-looking statements. These forward-looking statements are
based on current expectations and entail various risks and uncertainties that
could cause actual results to differ materially from those projected in the
forward-looking statements. Some of such risks and uncertainties are set forth
below under "Risk Factors".
Overview
Be was founded in 1990 and prior to the cessation of its business
operations offered software solutions designed for Internet appliances and
digital media applications. On August 16, 2001, we entered into an asset
purchase agreement with Palm, Inc. to sell substantially all of our intellectual
property and other technology assets. This transaction was approved by our
stockholders on November 12, 2001 and was completed on November 13, 2001. On
March 15, 2002, we filed a Certificate of Dissolution with the Secretary of
State of Delaware pursuant to Section 275 of the Delaware General Corporation
Law, closed our transfer books and voluntarily delisted our common stock from
the Nasdaq National Market System.
Prior to 1998, we had no revenues and our operations consisted primarily of
research and development. In December 1998, we shipped the first version of
BeOS, our desktop operating system targeted primarily to end users. Prior
releases of BeOS were targeted primarily to software developers. Throughout 1999
we focused on delivering BeOS as a desktop operating system to end users, but
ultimately determined the barriers to entry and the cost of intense competition
in that market was more than we could overcome. In recognition of this, and to
address shareholder value, in 2000 we shifted our resources to focus primarily
on the market for Internet appliances and the further development, marketing and
deployment of BeIA, our software solution intended for Internet appliances. At
the same time we announced that we would be making available at no charge a
version of BeOS for personal use, and a more fully featured version would be
available for a charge through third party publishers. Our revenues in 2000 were
primarily generated from the sale of BeOS to our licensed third party
publishers, and other resellers and distributors, and direct sales of BeOS to
end users through our BeDepot.com Web site. We also generated revenue by
collecting commission from sales of third party software through our BeDepot.com
Web site.
-9-
In 2001, revenues were generated through royalty payments, maintenance and
support fees, professional services and integration fees and by revenue-related
consulting services performed after August 16, 2001 under a funding agreement
with Palm executed in connection with the asset sale. These payments and fees
were received from developers and manufacturers of Internet appliances, as well
as other systems and hardware manufacturers incorporating BeIA into their
products. However, revenues from BeIA did not offset the loss of revenues from
sales of BeOS. Upon the completion of the sale of substantially all of our
assets to Palm, we received an aggregate of 4,104,478 shares of Palm common
stock and sold these shares on November 13, 2001 for $10,100,772 in cash, net of
brokerage and transaction fees. As a result of the sale of our assets and the
cessation of our business operations, we do not expect to generate any future
revenues.
Our research and development expenses consisted primarily of compensation
and related costs for research and development personnel. We also included in
research and development expenses the costs relating to licensing of
technologies and amortization of costs of software tools used in the development
of our operating system. Costs incurred in the research and development of new
releases and enhancements were expensed as incurred. These costs included the
cost of licensing technology that was incorporated into a product or an
enhancement that was still in preliminary development, and for which
technological feasibility had not been established. Once the product was further
developed and technological feasibility had been established, development costs
were capitalized until the product was available for general release. Products
and enhancements have generally reached technological feasibility and were
released for sale at substantially the same time. As we have ceased business
operations, we do not expect to incur any research and development expenses in
the future.
Our sales and marketing expenses consisted primarily of compensation and
related costs for sales and marketing personnel, marketing programs, public
relations, investor relations, promotional materials, travel, and related
expenses for attending trade shows. In July 2001, we eliminated our sales and
marketing group. As we have ceased operations, we do not expect to incur any
sales and marketing expenses in the future.
General and administrative expenses consisted primarily of compensation and
related expenses for management, finance, and accounting personnel, professional
services and related fees, occupancy costs and other expenses. We expect our
general and administrative expenses in the future to be minimal. However, we
continue to incur legal, accounting and other professional fees related to the
Company's liquidation and dissolution, continue to lease rental space and
continue to employ Dan Johnston, our President and General Counsel, in order to
facilitate the wind up of the Company's operations and to oversee legal
proceedings.
In the past, we marketed and sold our products in the United States and
internationally. International sales of products accounted for approximately 0%,
23% and 56% of total revenues in 2001, 2000 and 1999, respectively. We do not
expect to generate any revenues in the near or extended future.
-10-
From time to time in the past, we have granted stock options to employees,
consultants and non-employee directors. As of December 31, 2001, we had recorded
deferred compensation related to these options in the total amount of $12.6
million, net of cancellations, representing the difference between the deemed
fair value of our common stock, as determined for accounting purposes, and the
exercise price of options at the date of grant. Of this amount, $11.9 million
had been amortized at December 31, 1999, with $2.6 and $(2.0) million being
amortized in 2000 and 2001, respectively. The negative amount shown for 2001 is
due to the cancellation of options. Following the filing of our certificate of
dissolution on March 15, 2002, it was deemed that the remaining options no
longer had any value and accordingly the remaining deferred compensation balance
was cancelled. We amortized the deferred compensation charge monthly over the
vesting period of the underlying option. Due to cessation of our business
operations, we will not grant stock options to employees, consultants or
directors in the future.
Comparison of the period from January 1, 2002 to March 15, 2002 to the Three
Month Period ended March 31, 2001
Since the completion of the Asset Sale to Palm on November 13, 2001, we
have generated no material revenues from operations and the vast majority of our
expenses have been of a general and administrative nature.
General and administrative expenses decreased approximately $615,000, or
54%, to $531,000 for the period from January 1, 2002 to March 15, 2002 from $1.1
million for the three month period ended March 31, 2001. In 2002, such expenses
are primarily attributable to the rent costs of approximately $242,000 for the
lease of our former headquarters in Menlo Park. This lease expired on February
28, 2002. Other expenses included salary costs of approximately $140,000 for the
5 person transition team in charge of winding down operations. Remaining
expenses were related to professional fees and also to moving costs for the
relocation of the Company's offices. After May 15, 2002, only one employee
remains with the Company.
Statement of Changes in Net Assets in Liquidation from March 16, 2002 to
September 30, 2002
Changes in net assets in liquidation for the period from March 16, 2002 to
March 31, 2002 of $83,000 were primarily a result of the early termination of a
technology license agreement. Changes in net assets in liquidation for the
period from April 1, 2002 to June 30, 2002, were primarily a result of earnings
on cash and cash equivalents. Changes in net assets in liquidation for the
period from July 1, 2002 to September 30, 2002 were primarily a result of salary
payments, professional fees and other costs related to the Company's liquidation
and dissolution.
Liquidity and Capital Resources
Since our inception, we traditionally financed our operations primarily
through the sale of our equity securities and through borrowing arrangements. On
November 13, 2001, we sold substantially all of our assets to Palm for
approximately $11.0 million in Palm stock. That same day, we sold 4,104,478
shares of Palm stock for $10,100,772 in cash, net of brokerage and transaction
fees. Cash and cash equivalents and short-term investments decreased
approximately $600,000 to $4.8 million at March 15, 2002 from $5.4 million at
December 31, 2001. This decrease was primarily attributable to the amounts used
to fund the winding down of the Company's operations.
Since November 2001, we have been winding down our business operations and
have substantially reduced our working capital requirements. Our working capital
requirements are now minimal and we believe that existing cash and cash
equivalents will be sufficient to meet our remaining operating and capital
requirements for at least the next twelve months or until a final liquidation
occurs. As part of the winding down process, we intend to distribute part of our
remaining cash to our shareholders as soon as practicable under Delaware law and
dissolution procedures. After that time, we intend to retain only a nominal
amount of cash to complete the winding down process.
Critical Accounting Policies
Use of estimates and liquidation accounting
The preparation of unaudited financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reported period. Actual
results could differ from those estimates.
All activities of Be as of March 15, 2002 are presented under the
liquidation basis of accounting. Under the liquidation basis of accounting,
assets are stated at their estimated net realizable values and liabilities are
stated at their anticipated settlement amount, if reasonably estimable.
-11-
FACTORS AFFECTING OUR BUSINESS, OPERATING RESULTS AND FINANCIAL CONDITION
The following is a discussion of certain risks, uncertainties and other
factors that currently impact or may impact our business, operating results
and/or financial condition. Anyone evaluating us and making an investment
decision with respect to our common stock or other securities is cautioned
to carefully consider these factors, along with similar factors and cautionary
statements contained in our filings with the Securities and Exchange Commission.
Our stockholders may be liable to our creditors for an amount up to the amount
received from the Company if our reserves for payments to creditors are
inadequate.
Although we filed a certificate of dissolution on March 15, 2002 with the
State of Delaware, Be will continue to exist for three years following this date
or for such longer period as the Delaware Court of Chancery shall direct for the
purpose of prosecuting and defending lawsuits and enabling Be to close its
business, to dispose of its property, to discharge its liabilities and to
distribute to its stockholders any remaining assets. Under Delaware law, in the
event Be fails to create an adequate contingency reserve for payment of its
expenses and liabilities during this period, each Be stockholder could be held
liable for payment to Be's creditors of such stockholder's pro rata share of
amounts owed to creditors in excess of the contingency reserve. The liability of
any stockholder would be limited to the amounts previously received by such
stockholder from Be (and from any liquidating trust or trusts). As a result, a
stockholder could be required to return all distributions previously made to
such stockholder and would receive no amounts from Be under the Plan of
Dissolution. Moreover, in the event a stockholder has paid taxes on amounts
previously received, a repayment of all or a portion of such amount could result
in a stockholder incurring a net tax cost if the stockholder's repayment of an
amount previously distributed does not cause a commensurate reduction in taxes
payable. Although Be intends to exercise caution in setting up its contingency
reserve and making distributions to stockholders, there can be no assurance that
the contingency reserve established by Be will be adequate to cover our expenses
and liabilities.
Our stock transfer books were closed on March 15, 2002, the final record date,
after which any trades will not be recorded by the Company.
We closed our stock transfer books and discontinued recording transfers of
Common Stock at the close of business on March 15, 2002 (the "Record Date"), the
date of effectiveness of the Certificate of Dissolution we filed with the
Delaware Secretary of State. Thereafter, certificates representing our Common
Stock will not be assignable or transferable on our books except by will,
intestate succession or operation of law. Although our Common Stock currently
trades on the "over-the-counter" securities market, the proportionate interests
of our stockholders have been fixed on the basis of their respective stock
holdings at the close of business on the Record Date, and, after the Record
Date, any distributions made by the Company will be made solely to the
stockholders of record at the close of business on the Record Date, except as
may be necessary to reflect subsequent transfers recorded on our books as a
result of any assignments by will, intestate succession or operation of law. For
any other trades after the Record Date, the seller and purchaser of the stock
will need to negotiate and rely on contractual obligations between themselves
with respect to the allocation of stockholder proceeds arising from ownership of
the shares.
We did not perform an audit of our fiscal 2001 financials that were filed with
our annual report on Form 10-K.
In order to further curtail expenses in connection with our wind-up and
dissolution, we filed unaudited financial statements with our Form 10-K, as
amended, for the 2001 fiscal year. Because these financial statements were not
audited by an outside auditor, such statements could be subject to change or the
financial information included therein may be materially different from audited
financial information. There can be no assurance that such changes or
differences would not be significant.
-12-
Our stock was delisted from the Nasdaq National Market on March 15, 2002 and is
significantly less liquid than before.
We voluntarily requested that our stock be delisted from trading on the
Nasdaq Stock Market on March 15, 2002 due to the fact that we had ceased our
business operations. Following delisting, the ability of stockholders to buy and
sell our shares has been materially impaired, and is limited primarily to
over-the-counter quotation services, such as Pink Sheets, that handle high-risk
ventures and are not regulated by the Securities and Exchange Commission.
There is no guarantee that our stock will continue to be quoted on
over-the-counter markets.
If we are unable to comply with the requirements for continued listing for
over-the-counter markets such as the Pink Sheets, our stock may no longer be
eligible for quotation on such services. For example, following our failure to
timely file audited financial statements with our Annual Report on Form 10-K for
the 2001 fiscal year, our stock was removed from quotation on the OTC Bulletin
Board. The removal of our stock from quotation from regulated quotation services
may further limit the liquidity of our common stock and impair stockholders'
ability to buy and sell our shares.
We cannot guarantee how much cash, if any, will be available to distribute to
our stockholders and if there is cash to distribute, the timing of any such
distribution.
There is currently no firm timetable for the distribution of proceeds to
our stockholders because of contingencies inherent in winding up the Company's
business. The proportionate interests of all of our stockholders will be fixed
on the basis of their respective stock holdings at the close of business on the
Record Date, and after such date, any distributions made by the Company will be
made solely to stockholders of record on the close of business on the Record
Date, except to reflect permitted transfers. We are, however, currently unable
to predict the precise nature, amount or timing of any distribution to
stockholders. The actual nature, amount and timing of all distributions will be
determined by our Board of Directors, in its sole discretion.
Uncertainties as to the precise net value of our non-cash assets, the
resolution of our outstanding claim against Microsoft Corporation and the
ultimate amount of our debts and liabilities make it impracticable to predict
the aggregate net value ultimately distributable to stockholders. Claims,
liabilities and expenses from operations (including costs associated with the
sale of our remaining assets and the settlement of our remaining liabilities,
taxes, legal and accounting fees and miscellaneous office expenses) will
continue to be incurred. These expenses will reduce the amount of cash available
for ultimate distribution to stockholders. However, no assurances can be given
that available cash and amounts received on the sale of assets will be adequate
to provide for our obligations, liabilities, expenses and claims and to make
cash distributions to stockholders. If such available cash and amounts received
from the sale of assets are not adequate to provide for our obligations,
liabilities, expenses and claims, we may not be able to distribute meaningful
cash, or any cash, to our stockholders.
-13-
The filing of the antitrust lawsuit against Microsoft or the engagement of legal
counsel for that purpose does not guarantee that the outcome of the suit will be
favorable for Be.
On February 15, 2002, Be engaged Susman Godfrey LLP on a contingency basis
to bring forth claims against Microsoft Corporation for the destruction of Be's
business resulting from anticompetitive business practices. On February 19,
2002, the Company filed a lawsuit in the United States District Court in San
Francisco alleging, among other things, Microsoft harmed Be through a series of
illegal, exclusionary and anticompetitive acts designed to maintain its monopoly
in the Intel-compatible PC operating system market and created exclusive dealing
arrangements with PC OEMs prohibiting the sale of PCs with multiple preinstalled
operating systems. While Susman Godfrey was hired by Be to represent the company
and to seek a recovery for the benefit of stockholders, Susman Godfrey does not
directly represent the stockholders themselves, either individually or as a
class. The filing of the antitrust lawsuit or the engagement of legal counsel
for that purpose does not guarantee that the outcome of the suit will be in Be's
favor or that stockholders can assume that any distribution of proceeds will
occur as a result of a settlement of the lawsuit or a judgment against
Microsoft. In addition, we have engaged Susman Godfrey on a contingency basis
such that any amounts collected as a result of a settlement of the lawsuit or a
judgment against Microsoft would be divided between the Company for the benefit
of its stockholders and Susman Godfrey under the terms of the engagement letter
entered into between the parties.
The proceeds from the sale of our remaining assets may be less than anticipated.
Sales of any remaining assets will be made on such terms as are approved by
the Board of Directors and may be conducted by competitive bidding, public sales
or privately negotiated sales. The prices at which we will be able to sell these
assets will depend largely on factors beyond our control such as general market
conditions. Because some of our remaining assets may decline in value over time,
we may not be able to consummate the sale of these assets in time to generate
meaningful value. In addition, we may not obtain as high a price for a
particular asset as we might secure if we were not in liquidation.
We may be unable to negotiate settlements with respect to our remaining
liabilities.
We are currently in the process of negotiating settlements with respect to
our remaining obligations and liabilities which include, without limitation, tax
obligations, claims by licensees, and contractual and trade payables with third
parties including vendors and service providers. If we are unable to
successfully negotiate termination of these obligations, we will have fewer cash
proceeds to distribute to our stockholders.
-14-
If Be fails to retain the services of its remaining executive officer and Board
members, the plan of dissolution may not succeed.
The success of the Plan of Dissolution depends in large part upon Be's
ability to retain the services of its current President and Board of Directors.
For this reason, Be approved incentive arrangements with its President and the
three remaining members of its Board of Directors. Despite these arrangements,
the retention of qualified personnel is particularly difficult under Be's
current circumstances.
We may continue to incur the expense of complying with public company reporting
requirements and the risk of not fully complying with such requirements.
We have an obligation to continue to comply with the applicable reporting
requirements of the Securities Exchange Act of 1934, as amended, even though
compliance with such reporting requirements is economically burdensome.
The decline in the value of our stock and our resulting cessation of business
operations and dissolution could give rise to securities class action claims
against us, which could deplete any proceeds that may be distributed to
stockholders.
Securities class action claims have been brought against companies in the
past where the market price of the company's securities has fallen due to an
inability of the company to achieve operational profitability. Any such
litigation could be very costly and divert our remaining resources from being
available for distribution to our stockholders. Any adverse determination in
this kind of litigation could also deplete our cash position, and reduce
proceeds that would otherwise be distributed to our stockholders.
In addition, in order to preserve proceeds for distribution to stockholders,
the Company filed unaudited financial statements with its Annual Report on Form
10-K, as amended, for the 2001 fiscal year. As a result, the Company is not
currently in compliance with the reporting requirements of the Securities
Exchange Act of 1934, as amended, and the Company's President cannot make
certain certifications in connection with the filing of this periodic report as
required by the Sarbanes-Oxley Act of 2002.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Be's cash equivalents are exposed to financial market risks due to
fluctuations and interest rates, which may affect interest income. Due to the
short term nature of Be's investment portfolio, Be would not expect
operating results or cash flows to be affected to any significant degree by the
effect of a sudden change in market interest rates. Be does not use its
investment portfolio for trading or other speculative purposes.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures.
Our President and General Counsel, who acts as the Company's chief
executive officer and chief financial officer, as evaluated the Company's
disclosure controls and procedures (as defined in Securities Exchange Act Rule
13a-14(c) as of a date within 90 days before the filing date of this quarterly
report (the "Evaluation Date") and has concluded that these controls and
procedures are effective.
Changes in internal controls.
There have been no significant changes in the Company's internal controls
or to our knowledge, in other factors that could significantly affect these
controls subsequent to the Evaluation Date.
Limitations on the Effectiveness of Controls.
The company's management does not expect that our disclosure controls and
procedures or our internal controls will prevent all error and all fraud. A
control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system
are met.
-15-
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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. On August 21, 2002, the Judicial Panel on Multidistrict
Litigation ordered the lawsuit against Microsoft transferred to the federal
district court for the District of Maryland in Baltimore, to be coordinated by
Judge Frederick Motz.
Be is seeking recovery of an unspecified amount of damages for the benefit
of the Company and its stockholders.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
-16-
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
Current Report on Form 8-K, filed August 29, 2002, announcing that (i) on
August 21, 2002 the Judicial Panel on Multidistrict Litigation ordered Be's
antitrust lawsuit against Microsoft transferred to the federal district court
for the District of Maryland in Baltimore, to be coordinated by Judge Frederick
Motz, and (ii) the court's scheduling of a pretrial proceedings status
conference for the attorneys of all parties whose cases against Microsoft will
be coordinated by the judge, and that at an appropriate time, Be will be
entitled to have its case transferred back to the federal court in Oakland,
unless Be consents to a trial of its case in Baltimore.
-17-
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: November 13, 2002
BE INCORPORATED
(Registrant)
By: /s/ DANIEL S. JOHNSTON
-----------------------------
Daniel S. Johnston
President and General Counsel
-18-
Certifications
I, Daniel S. Johnston, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Be Incorporated
("registrant");
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
the registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
The registrant's other certifying officers and I have indicated in the
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Dated: November 13, 2002
By: /s/ DANIEL S. JOHNSTON
-----------------------------
Daniel S. Johnston
President and General Counsel*
*Mr. Johnston is acting as chief executive officer and chief financial officer
of the Company.
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