UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number:
BE INCORPORATED
(Exact name of Registrant as specified in its charter)
Delaware 94-3123667
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
800 El Camino Real, Suite 400, Menlo Park, CA 94025 (Address of
principal executive offices, including zip code)
(650) 462-4100
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes (1) No (2)
The number of shares of Common Stock outstanding as of August 31, 1999 was
34,395,406.
<PAGE>
BE INCORPORATED
FORM 10-Q
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements:
Consolidated Balance Sheets at June 30, 1999
and December 31, 1998................................................3
Consolidated Statements of Income for the three
and six month periods ended June 30, 1999 and June 30, 1998..........4
Consolidated Statements of Cash Flows for the six month
periods ended June 30, 1999 and June 30, 1998........................5
Notes to Condensed Consolidated Financial Statements.................6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................8
Item 3. Quantitative and Qualitative Disclosures About Market Risk..........17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...................................................17
Item 2. Changes in Securities and Use of Proceeds...........................17
Item 3. Defaults upon Senior Securities.....................................18
Item 4. Submission of Matters to a Vote of Security Holders.................18
Item 5. Other Information...................................................18
Item 6. Exhibits and Reports on Form 8-K....................................18
Signatures..........................................................19
Exhibit 27.1 - Financial Data Schedule
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
BE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
-------- --------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ........................... $ 1,318 $ 3,394
Short-term investments .............................. 2,335 8,254
Accounts receivable ................................. 242 477
Prepaid and other current assets .................... 259 327
-------- --------
Total current assets ............................ 4,154 12,452
Property and equipment, net ............................ 578 403
Purchased web site technology, net of amortization ..... 121 303
Other assets, net of accumulated amortization .......... 1,548 476
-------- --------
Total assets ................................... $ 6,401 $ 13,634
======== ========
LIABILITIES, MANDATORILY REDEEMABLE
CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' DEFICIT Current liabilities:
Accounts payable .................................... $ 1,098 $ 576
Accrued expenses .................................... 1,826 1,094
Technology license obligations, current portion ..... 723 688
Deferred revenue .................................... 566 392
-------- --------
Total current liabilities ....................... 4,213 2,750
Technology license obligations, net of current portion . 446 779
-------- --------
Total liabilities ............................... 4,659 3,529
-------- --------
Mandatorily redeemable convertible preferred stock ..... 38,268 38,005
-------- --------
Stockholders' Deficit:
Common stock ........................................ 5 5
Additional paid-in capital .......................... 32,767 25,302
Deferred stock compensation ......................... (8,288) (4,490)
Accumulated deficit ................................. (61,010) (48,717)
-------- --------
Total stockholders' deficit ..................... (36,526) (27,900)
-------- --------
Total liabilities, mandatorily redeemable
preferred stock and stockholders' deficit .... $ 6,401 $ 13,634
======== ========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
3
<PAGE>
BE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -------------------
1999 1998 1999 1998
------- ------- -------- -------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net revenues ............................... $ 537 $ 602 $ 846 $ 666
Cost of revenues ........................... 239 1,620 324 1,763
------- ------- -------- -------
Gross profit (loss) ........................ 298 (1,018) 522 (1,097)
Operating expenses:
Research and development ................ 1,783 1,951 3,670 3,026
Sales and marketing ..................... 2,587 1,027 4,341 1,883
General and administrative .............. 694 678 1,559 1,129
Amortization of deferred stock
compensation .......................... 1,713 1,078 3,378 1,615
------- ------- -------- -------
Total operating expenses ............ 6,777 4,734 12,948 7,653
------- ------- -------- -------
Loss from operations ....................... (6,479) (5,752) (12,426) (8,750)
Interest expense ........................... (38) (29) (74) (84)
Other income and expenses, net ............. 70 224 207 353
------- ------- -------- -------
Net loss ................................... (6,447) (5,557) (12,293) (8,481)
------- ------- -------- -------
Accretion of mandatorily redeemable
convertible preferred stock ............. $ (131) $ (97) $ (264) $ (163)
------- ------- -------- -------
Net loss attributable to common
stockholders ............................ $(6,578) $(5,654) $(12,557) $(8,644)
======= ======= ======== =======
Net loss per common share--basic and diluted $ (1.54) $ (1.86) $ (3.07) $ (2.99)
======= ======= ======== =======
Shares used in per common share
calculation--basic and diluted .......... 4,266 3,046 4,090 2,893
======= ======= ======== =======
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
4
<PAGE>
BE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1999 1998
------ ------
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss ........................................ $(12,293) $ (8,481)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization ................. 447 419
Licensed technology used in
research and development ..................... -- 1,841
Amortization of discount on
technology license obligations .............. 61 53
Loss on disposal of fixed assets .............. 64 --
Compensation expense incurred on issuance
of stock .................................... 497 --
Amortization of deferred stock compensation ... 3,378 1,615
Changes in assets and liabilities
(in 1998, net of effects of acquisition):
Accounts receivable ........................ 235 (296)
Prepaid and other current assets ........... (54) (96)
Accounts payable ........................... 522 88
Accrued expenses ........................... (162) 160
Deferred revenue ........................... 174 8
------ ------
Net cash used in operating activities ..... (7,131) (4,689)
------ -------
Cash flow used in investing activities:
Acquisition of property and equipment ........... (371) (201)
Acquisition of licensed technology .............. (452) (562)
Purchases of short-term investments ............. (1,035) (15,019)
Sales of short-term investments ................. 6,953 1,392
Acquisition of StarCode (net of cash acquired) .. -- (562)
------ ------
Net cash provided by
(used in) investing activities ......... 5,095 (14,952)
------ ------
Cash flows provided by financing activities:
Proceeds from issuance of preferred stock, net .. -- 19,404
Proceeds from option to purchase Series 2,
preferred stock and common stock warrants ...... -- 1,322
Proceeds from issuance of common stock .......... 59 203
Initial public offering costs ................... (96) --
Repurchase of common stock ...................... (3) (4)
------ ------
Net cash used in (provided by)
financing activities ..................... (40) 20,925
------ ------
Net increase (decrease) in cash and cash equivalents (2,076) 1,284
Cash and cash equivalents, beginning of period ..... 3,394 699
------ ------
Cash and cash equivalents, end of period ........... $ 1,318 $ 1,983
======== ========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
5
<PAGE>
BE INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Organization and Business
Be Incorporated (the "Company") offers the Be Operating System ("BeOS"), an
operating system designed for digital media applications and Internet
appliances. The Company markets and sells BeOS directly to end users and
resellers and distributors. Prior to 1998, the Company was engaged
primarily in research and development, raising capital and development of
its markets and was in the development stage.
2. Basis of Presentation
The condensed consolidated financial statements include the accounts of Be
Incorporated (the "Company" or "Be") and its wholly owned subsidiaries. All
significant intercompany balances and transactions have been eliminated.
The condensed consolidated financial statements have been prepared in
accordance with the rules and regulations of the Securities and Exchange
Commission ("SEC") applicable to interim financial information. Certain
information and footnote disclosures included in financial statements
prepared in accordance with generally accepted accounting principles have
been omitted in these interim statements pursuant to such SEC rules and
regulations. Management recommends that these interim financial statements
be read in conjunction with the audited financial statements of the Company
for the year ended December 31, 1998 and the notes thereto contained in the
Company's Registration Statement on Form S-1, Registration No. 333-77855,
in the form declared effective by the Securities and Exchange Commission on
July 20, 1999. Interim results are not necessarily indicative of the
results to be expected for the full year. The December 31, 1998 balance
sheet was derived from audited financial statements, but does not include
all disclosures required by Generally Accepted Accounting Standards.
In management's opinion, the condensed consolidated financial statements
include all adjustments necessary to present fairly the financial position
and results of operations for each interim period shown. Interim results
are not necessarily indicative of results to be expected for a full fiscal
year.
2. Recent Accounting Pronouncements
In December 1998, AcSEC released Statement of Position 98-9 or SOP 98-9,
Modification of SOP 97-2, "Software Revenue Recognition." SOP 98-9 amends
SOP 97-2 to require that an entity recognize revenue for multiple element
arrangements by means of the "residual method" when (1) there is no
vendor-specific objective evidence ("VSOE") of the fair values of all the
undelivered elements that are not accounted for by means of long-term
contract accounting, (2) VSOE of fair value does not exist for one or more
of the delivered elements, and (3) all revenue recognition criteria of SOP
97-2 (other than the requirement for VSOE of the fair value of each
delivered element) are satisfied. The provisions of SOP 98-9 that extend
the deferral of certain paragraphs of SOP 97-2 became effective December
15,1998. These paragraphs of SOP 97-2 and SOP 98-9 will be effective for
transactions that are entered into in fiscal years beginning after March
15,1999. Retroactive application is prohibited. The Company is currently
evaluating the impact of the requirements of SOP 98-9 and the effects, if
any, on its current revenue recognition policies.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, or SFAS 133, Accounting for
Derivative Instruments and Hedging Activities. SFAS 133 establishes new
standards of accounting and reporting for derivative instruments and
hedging activities. SFAS 133 requires that all derivatives be recognized at
fair value in the statement of financial position, and that the
corresponding gains or losses be reported either in the statement of
operations or as a component of comprehensive income, depending on the type
of hedging relationship that exists. SFAS 133 will be effective for fiscal
years beginning after June 15, 2000. The Company does not currently hold
derivative instruments or engage in hedging activities.
6
<PAGE>
3. Net Loss Per Share
Basic net loss per common share is computed by dividing net loss available
to common stockholders by the weighted average number of vested common
shares outstanding for the period. Diluted net loss per common share is
computed giving effect to all dilutive potential common shares, including
options, warrants and preferred stock. Options, warrants and preferred
stock were not included in the computation of diluted net loss per common
share because the effect would be antidilutive. A reconciliation of the
numerator and denominator used in the calculation of basic and diluted net
loss per common share follows (in thousands, except per share data):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
------ ------ ------ ------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Historical net loss per common share, basic and diluted:
Net loss ............................................... $ (6,447) $ (5,557) $(12,293) $ (8,481)
Accretion of mandatorily redeemable
convertible preferred stock .......................... (131) (97) (264) (163)
------ ------ ------ ------
Numerator for net loss, basic and diluted .............. (6,578) (5,654) (12,557) (8,644)
Denominator for basic and diluted loss per common share:
Weighted average common shares
outstanding ........................................ 4,266 3,046 4,090 2,893
====== ====== ====== ======
Net loss per common share basic and diluted ............ $ (1.54) $ (1.86) $ (3.07) $ (2.99)
====== ====== ====== ======
Antidilutive securities:
Options to purchase common stock ..................... 5,664 2,093 5,664 2,093
Common stock not yet vested .......................... 883 1,954 883 1,954
Preferred stock ...................................... 22,499 21,853 22,499 21,853
Warrants ............................................. 2,870 2,862 2,870 2,862
------ ------ ------ ------
31,916 28,762 31,916 28,762
====== ====== ====== ======
</TABLE>
4. Subsequent Events
In July 1999, the Company completed its initial public offering and sold
6,000,000 shares of its Common Stock at a price of $6.00 per share. The
Company received approximately $32.4 million in cash, net of underwriting
discounts, commissions and other offering expenses. Simultaneously with the
closing of the initial public offering, the Company's mandatorily
redeemable convertible preferred stock outstanding at December 31, 1998
automatically converted into approximately 22.5 million shares of common
stock. The Company's shares are now traded on the NASDAQ national market
system under the symbol "BEOS".
In August 1999, the underwriters exercised their over-allotment option and
the Company sold an additional 557,465 shares of its Common Stock at a
price of $6.00 per share, thereby raising proceeds of approximately $3.1
million, net of underwriting discounts.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Forward Looking Statements
THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS THAT HAVE BEEN MADE PURSUANT TO
THE PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH
FORWARD-LOOKING STATEMENTS ARE BASED ON CURRENT EXPECTATIONS, ESTIMATES AND
PROJECTIONS ABOUT THE COMPANY'S BUSINESS, MANAGEMENT'S BELIEFS AND ASSUMPTIONS
MADE BY MANAGEMENT. WORDS SUCH AS "ANTICIPATES," "EXPECTS," "INTENDS," "PLANS,"
"BELIEVES," "SEEKS," "ESTIMATES," "LIKELY, "VARIATIONS OF SUCH WORDS AND SIMILAR
EXPRESSIONS ARE INTENDED TO IDENTIFY SUCH FORWARD-LOOKINGSTATEMENTS.
THESESTATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND ARE SUBJECT TO
CERTAIN RISKS, UNCERTAINTIES AND ASSUMPTIONS THAT ARE DIFFICULT TO
PREDICT;THEREFORE, ACTUAL RESULTS AND OUTCOMES MAY DIFFER MATERIALLY FROM WHAT
IS EXPRESSED OR FORECASTEDIN ANY SUCH FORWARD-LOOKING STATEMENTS. SUCH RISKS AND
UNCERTAINTIES INCLUDE THOSE SET FORTH HEREIN BELOW UNDER "FACTORS AFFECTING OUR
BUSINESS,OPERATING RESULTS AND FINANCIAL CONDITION" AS WELL AS THOSE NOTED IN
OUR AMENDED REGISTRATION STATEMENT ON FORM S-1 (FILE NO. 333-77855). THE COMPANY
UNDERTAKES NO OBLIGATION TO UPDATE PUBLICLY ANY FORWARD- LOOKING STATEMENTS,
WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.
Overview
Be was founded in 1990. We develop and sell BeOS, an operating system
designed for digital media applications and Internet appliances. Prior to 1997,
we had no revenues and our operations consisted primarily of research and
development. In December 1998, we shipped the first version of BeOS that was
targeted primarily to end users. Prior releases were targeted primarily to
software developers.
Our revenues are generated primarily from the following sources: sales of
BeOS to resellers and distributors, and direct sales of BeOS to end users
through our BeDepot.com Web site. We also generate revenue by collecting
commission from sales of third party software through our BeDepot.com Web site.
In the future, we also expect our revenues to be generated from royalties
received from OEMs bundling BeOS on their products. In an attempt to increase
the number of BeOS users and increase market acceptance of BeOS, we may choose
to forego immediate revenue potential by providing BeOS at little or no cost.
Our agreements with third party software vendors provide that we will sell
and, if desired by the customer, electronically distribute software that has
been written for BeOS. We do not carry inventory in connection with the third
party software sold through our Web site.
We defer revenues from sales to distributors and resellers. We also defer
an allocated portion of revenues attributable to free product upgrades. We
recognize revenues from sales to distributors and resellers when we have
evidence that our product has been sold to end users. For example, we typically
recognize revenue when we receive confirmation from the distributor or reseller
of sales to end users. Revenues deferred due to free product upgrades are
recognized as upgrades are shipped. As of June 30, 1999, we had $566,000 in
deferred revenues.
Our cost of revenues consist primarily of the cost of packaging, software
duplication, documentation, translation and product fulfillment. We use a third
party fulfillment house to store, package and ship BeOS in retail channels. We
also include in the cost of revenues the amortized costs relating to the license
of third party technology used in the development of BeOS.
Our research and development expenses consist primarily of compensation and
related costs for research and development personnel. We also include in
research and development expenses the costs relating to licensing of
technologies and amortization of costs of software tools used in the development
of BeOS. Costs incurred in the research and development of new releases and
enhancements of BeOS are expensed as incurred. These costs include cost of
licensing technology that is incorporated into a product or an enhancement which
is still in preliminary development and technological feasibility has not been
established. Once the product is further developed and technological feasibility
has been established, development costs are capitalized until the product is
available for general release. To date, products and enhancements have generally
reached technological feasibility and have been released for sale at
substantially the same time. We expect that research and development expenses
will increase substantially in the future as we further develop and enhance BeOS
and develop new products including those intended for the Internet appliances
market.
Our sales and marketing expenses consist primarily of compensation and
related costs for sales and marketing personnel, marketing programs, public
relations, promotional materials, travel and related expenses for attending
trade shows. We also include costs relating to third party application
developers, including partial funding of their development costs and cost of
technical support provided to them in our sales and marketing expenses.
8
<PAGE>
We expect our sales and marketing expenses to increase substantially as we
promote awareness of BeOS. We plan to initiate an advertising and a direct
marketing campaign, by increasing print and Internet-based advertising,
distributing demonstration copies of BeOS to targeted potential customers, and
hiring additional sales and marketing personnel. We expect that sales and
marketing expenses will also increase as we expand our domestic and
international distributor and reseller channel and hire new personnel, establish
new facilities and increase distributor and reseller promotions. Sales and
marketing expenses will also increase as we further develop and expand our
relationships with third party application developers including providing
developers technical support and financial incentives by partially funding their
development costs.
General and administrative expenses consist primarily of compensation and
related expenses for finance and accounting personnel, professional services and
related fees, occupancy costs and other expenses. General and administrative
expenses may increase in the future as we expand our existing facilities or
relocate to new facilities that better address any growth that we may
experience. We also expect general and administrative expenses to increase as we
hire additional personnel and incur costs related to the anticipated growth in
our business and cost of operating as a public company.
We market and sell our products in the United States and internationally.
International sales of products accounted for approximately 45% and 60% of total
revenues for the three month period ended June 30, 1999 and for the six month
period ended June 30, 1999 respectively. We have a subsidiary located in France
to market and sell our products in Europe. In addition, we may in the future
open new offices in other countries to market and sell in those countries and
surrounding regions. The expansion of our existing international operations and
entry into additional international markets will require significant management
attention and financial resources and we cannot be certain that our investments
in establishing offices in other countries will produce desired levels of
revenues. While the majority of our international revenues are presently
denominated in US dollars, we expect an increasing portion of our international
revenues to be denominated in local currencies. We do not currently engage in
currency hedging activities. Although exposure to currency fluctuations to date
has been insignificant, future fluctuations in currency exchange rates may
adversely affect revenues from international sales.
From time to time in the past, we have granted stock options to employees,
consultants and non-employee directors and expect to continue to do so in the
future. As of June 30, 1999, we had recorded deferred compensation related to
these options in the total amount of $17.4 million representing the difference
between the deemed fair value of our common stock, as determined for accounting
purposes, and the exercise price of option at the date of grant. Future
amortization of expense arising out of options granted through June 30, 1999 is
estimated to be $3.1 million for the remaining six months of 1999, $3.4 million
for the year ended 2000, $1.4 million for the year ended 2001, $387,000 for the
year ended 2002 and $10,000 for the year ended 2003. We amortize the deferred
compensation charge monthly over the vesting period of the underlying option.
9
<PAGE>
Comparison of the Three Month Period ended June 30, 1999 to the Three Month
Period ended June 30, 1998
Net Revenues. Net revenues decreased $65,000, or 11%, to $537,000 for the
three month period ended June 30, 1999 from $602,000 for the three month period
ended June 30,1998. This decrease is primarily attributable to lower shipments
of BeOS which we believe were due to customer deferrals of orders in
anticipation of the release of version 4.5, which occurred in late June 1999.
Cost of Revenues. Cost of revenues decreased $1.4 million, or 85%, to
$239,000 for the three month period ended June 30, 1999 from $1.6 million for
the three month period ended June 30,1998. The cost of revenues for the three
month period ended June 30,1998 includes a charge of $1.2 million relating to
technology which was used with BeOS, the cost of which was no longer recoverable
from forecasted revenues.
Research and Development. Research and Development decreased $168,000, or
9%, to $1.8 million for the three month period ended June 30, 1999 from $2
million for the three month period ended June 30,1998. The net decrease results
primarily from an increase of approximately $302,000 in personnel expenses and a
decrease of approximately $457,000 in costs of licensing third party technology.
Sales and Marketing. Sales and Marketing increased $1.6 million to $2.6
million for the three month period ended June 30, 1999 from $1 million for the
three month period ended June 30,1998. This increase is primarily attributable
to the hiring of additional sales and marketing personnel and to the costs
relating to our third party developer programs including financial incentives in
the form of partial funding of developers' costs and technical support provided
to developers. Sales and marketing expenses also increased due to the launch of
new marketing programs including those related to the release of version 4.5 of
BeOS in June of 1999.
General and Administrative. General and administrative expenses increased
$16,000, or 2%, to $694,000 for the three month period ended June 30, 1999 from
$678,000 for the three month period ended June 30, 1998. This increase was
primarily attributable to the expansion of leased facilities.
Amortization of Deferred Stock Compensation. Amortization of deferred stock
compensation increased $635,000 to $1.7 million for the three month period ended
June 30, 1999, from $1.1 million for the three month period ended June 30, 1998.
These amounts represent the allocated portion of the difference between the
deemed fair value of our common stock and the exercise price of stock options
granted by us to employees, consultants and non-employee directors.
Other Income (Expense), Net. Net other income decreased $154,000, or 69%,
to $70,000 for the three month period ended June 30, 1999 from $224,000 for the
three month period ended June 30, 1998. The decrease is primarily attributable
to the decrease in interest income due to the reduced balances in our investment
portfolio.
Comparison of the Six Month Period ended June 30, 1999 to the Six Month Period
Ended June 30, 1998
Net Revenues. Net revenues increased $180,000, or 27%, to $846,000 for the
six month period ended June 30, 1999 from $666,000 for the three month period
ended June 30, 1998. This increase is attributable to the fact that the first
version of BeOS targeted primarily at end users was released in March 1998 and
that as a result we only generated revenues for three months in the six month
period ended June 30, 1998.
Cost of Revenues. Cost of revenues decreased $1.4 million or 82%, to
$324,000 for the six month period ended June 30, 1999 from $1.7 million for the
six month period ended June 30, 1998. The cost of revenues for the six month
period ended June 30,1998 includes a charge of $1.2 million relating to
technology which was used with BeOS, the cost of which was no longer recoverable
from forecasted revenues.
Research and Development. Research and Development increased $644,000, or
21%, to $3.7 million for the six month period ended June 30, 1999 from $3
million for the six month period ended June 30,1998. The net increase is
primarily attributable to an increase in personnel costs and a decrease in
licensing costs. Personnel expenses increased by approximately $690,000 and
included a one-time charge of approximately $145,000 related to the grant of
immediately vested stock options and the acceleration of vesting of stock
options previously issued to an employee.
Sales and Marketing. Sales and Marketing increased $2.5 million to $4.3
million for the six month period ended June 30, 1999 from $1.9 million for the
six month period ended June 30,1998. This increase is primarily attributable to
the hiring of additional sales and marketing personnel and to the costs relating
to our third party developer programs including financial incentives in the form
of partial funding of developers' costs and technical support provided to
developers. Sales and marketing expenses also increased due to the amortization
of purchased technology related to the acquisition in the second quarter 1998 of
StarCode, a software development company. In 1999, sales and marketing expenses
increased due to the launch of new marketing programs including those related to
the release of version 4.5 of BeOS in June of 1999.
10
<PAGE>
General and Administrative. General and administrative expenses increased
$430,000, or 38%, to $1.6 million for the six month period ended June 30, 1999
from $1.1 million for the six month period ended June 30, 1998. This increase
was primarily attributable to increases in professional services and related
fees, increased personnel and related costs, and expansion of leased facilities.
Amortization of Deferred Stock Compensation. Amortization of deferred stock
compensation increased $1.8 million to $3.4 million for the six month period
ended June 30, 1999, from $1.6 million for the six month period ended June 30,
1998. These amounts represent the allocated portion of the difference between
the deemed fair value of our common stock and the exercise price of stock
options granted by us to employees, consultants and non-employee directors.
Other Income (Expense), Net. Net other income decreased $146,000, or 41%,
to $207,000 for the six month period ended June 30, 1999 from $353,000 for the
six month period ended June 30, 1998. The decrease is primarily attributable to
the decrease in interest income due to the reduced balances in our investment
portfolio.
Liquidity and Capital Resources
Since our inception, we have financed our operations primarily through the
sale of our equity securities and through borrowing arrangements. Cash and cash
equivalents and short-term investments decreased approximately $7.9 million to
$3.7 million at June 30, 1999, from $11.6 million at December 31, 1998. This
decrease is primarily attributable to the funding of operations.
Cash used in operating activities increased $2.4 million to $7.1 million
for the six month period ended June 30, 1999 as compared to $4.7 million for the
six month period ended June 30,1998. This increase is primarily attributable to
the increase in net loss during the six month period ended June 30, 1999.
Cash provided by investing activities increased approximately $20.1 million
to $5.1 million for the six month period ended June 30, 1999 as compared to cash
used by investing activities of $15.0 million for the six month period ended
June 30, 1998. This increase is primarily attributable to sales of short-term
investments in the six month period ended June 30,1999 to fund operations. In
the six month period ended 1998, we purchased short term investments following
the sale of Series 2 convertible preferred stock.
Cash used in financing activities for the six month period ended June 30,
1999 was approximately $40,000, which represents a $20.9 million decrease in
cash provided by financing activities from the six month period ended June 30,
1998. This decrease is primarily attributable to the net proceeds received from
the sale of Series 2 convertible preferred stock in the six month period ended
June 30,1998.
We require substantial working capital to fund our operations. We expect to
continue to experience losses from operations and negative cash flows for at
least the next twelve month period. In July 1999, we completed the initial
public offering of our common stock and raised approximately $32.4 million in
net cash proceeds. We raised an additional $3.1 million in net proceeds in
August 1999 upon the underwriters' exercise of their over-allotment option. The
proceeds of the initial public offering will be used for working capital and
general corporate purposes, including any expansion of our sales and marketing
efforts, increases in research and development activities, and licensing and
acquisition of new technologies. Since inception, we have experienced losses and
negative cash flow from operations and expect to continue to experience
significant negative cash flow in the foreseeable future. In addition, in the
future, we may need to raise additional capital and we cannot be certain that we
will be able to obtain additional financing on favorable terms, if at all. If we
cannot raise additional capital on acceptable terms, if and when needed, we may
not be able to further develop or enhance BeOS, take advantage of future
opportunities or respond to competitive pressures or unanticipated requirements,
any of which could have a material adverse effect on our business and results of
operations.
Year 2000 Issue
The "Year 2000 Issue" is typically the result of limitations of certain
software written using two digits rather than four digits to define the
applicable year. If software with date-sensitive functions are not Year
2000compliant, they may recognize a date using "00" as the year 1900 rather than
the year 2000.
Risks
We believe that our principle product, BeOS, has been designed to avoid the
Year 2000 Issue. However, if for any reason, BeOS is not Year 2000 compliant, we
could face unexpected expenses redesigning BeOS, which could harm our business
and reputation and delay any market acceptance for BeOS.
11
<PAGE>
In addition, our operating system operates in complex network environments
and directly and indirectly interacts with a number of other hardware and
software systems and applications. These hardware system and software
applications may contain errors or defects associated with the Year 2000 Issue.
We are presently unable to predict to what extent our business may be affected
if hardware systems or software applications and tools that operate in
conjunction with our operating system experience the Year 2000 Issue. Known or
unknown errors or defects that affect the operation of BeOS, when used in
conjunction with other hardware or software, could result in delay or loss of
revenues, damage to our reputation and possible litigation, any of which could
materially adversely affect our business and results of operations.
We also depend on the Internet and more specifically on our BeDepot.com
Website for release and distribution of BeOS and related support tools and
applications. The Internet is a medium which is susceptible to the Year 2000
Issues. The Year 2000 Issue could result in a system failure or miscalculations
causing significant disruption of our Web site operations, including, among
other things, interruptions in the distribution of BeOS and related support
tools and applications over the Internet. This could also include disruption in
the distribution of third party software applications over our electronic
commerce Web site. It is possible that this disruption will continue for an
extended period of time. Any disruption in our Web site operations or our
electronic commerce site could result in loss of revenues and could harm our
reputation and business. Also, Year 2000 compliance efforts may involve
significant time and expense, and uncorrected problems could materially and
adversely affect our business.
Readiness
We have initiated an internal review of our information systems including
software programs used in our accounting and financial reporting functions.
Based on our review to date and preliminary information gathered from third
party vendors, we do not believe that there are any significant Year 2000 Issues
relating to our information systems. However, our review to date has been
preliminary and is not expected to be completed until the third quarter of 1999.
We will continue to request vendors of the material hardware and software
components of our information systems to provide assurances of their Year 2000
compliance. We plan to complete this process during the third quarter of 1999.We
are currently assessing our material non-information technology systems and will
seek assurances of Year 2000 compliance from providers of these systems. Our
costs incurred to date with respect to Year 2000 compliance have not been
significant. While we believe our future Year 2000 compliance costs will not be
significant, we have no way of ascertaining this until our testing is complete
and key vendors and suppliers are contacted. We may not be able to completely
evaluate whether our systems will need to be revised or replaced and the cost
associated with such efforts. If our efforts to address Year 2000 risks are not
successful, or if suppliers or other third parties with whom we conduct business
do not successfully address such risks, it could have a material adverse effect
on our business.
Contingency Plans
We have not yet fully developed a comprehensive contingency plan to address
situations that may result if we are unable to achieve Year 2000 readiness of
our critical operations. Development of contingency plans is in progress and is
expected to be developed in detail and expanded during the second half of
1999.We may not be able to develop a contingency plan that will adequately
address all Year 2000 issues. Our failure to develop and implement, if
necessary, an appropriate contingency plan could materially adversely affect our
business and results of operations.
FACTORS AFFECTING OUR BUSINESS, OPERATING RESULTS AND FINANCIAL CONDITION
The following is a discussion of certain risks, uncertainties and other
factors that currently impact or may impact Be's business, operating results
and/or financial condition. Anyone making an investment decision with respect to
Be's Common Stock or other securities of the Company is cautioned to carefully
consider these factors, along with the "Risk Factors" discussed in the Company's
Amended Registration Statement on Form S-1 (File No. 333-77855).
We have incurred significant net losses and we may never achieve profitability.
We incurred significant net losses of approximately $7.8 million in 1996,
$10.4 million in 1997 and $16.9 million in 1998. As of June 30, 1999, we had an
accumulated deficit of approximately $61.0 million. We expect to incur
significant additional losses and continued negative cash flow from operations
in 1999 and beyond and we may never become profitable.
We expect to continue to incur significant sales and marketing, research
and development and general and administrative expenses. We will need to
generate significant revenues to achieve profitability and positive operating
cash flows. Even if we do achieve profitability and positive operating cash
flow, we may not be able to sustain or increase profitability or positive
operating cash flow on a quarterly or annual basis.
12
<PAGE>
The market for Internet appliances may not evolve and we may not be able to
compete effectively in this market.
Our business and prospects depend on the development and market acceptance
of Internet appliances and our ability to successfully market BeOS as a viable
operating system for Internet appliances. The market for Internet appliances is
new, unproven and subject to rapid technological change. This market may never
develop or may develop at a slower rate than we anticipate. In addition, our
success in marketing BeOS as a platform for Internet appliances is dependent
upon developing and maintaining relationships with industry-leading computer and
consumer electronics manufacturers, Internet service providers and content
creators. There is already intense competition to offer non-PC devices that
provide access to the Internet and enable digital media content on the Internet.
Companies such as Microsoft Corporation, Oracle Corporation, Apple Computer,
Inc. and Spyglass, Inc. have operating systems that are being used or may be
used for Internet appliances. These companies have an established market
presence, relationships with computer and consumer electronic manufacturers who
will develop and market Internet appliances, and have significantly greater
financial, marketing and technical resources than we do. These companies,
together with a large number of smaller companies who offer operating systems
that may be used for Internet appliances, may capture a larger portion of the
market than we do. Our failure to establish relationships with other companies
that offer Internet appliances and establish BeOS in this market would have a
material adverse effect on our business and prospects.
We have only one product that may never gain broad market acceptance.
BeOS is our only product and we will derive all of our revenue for the
foreseeable future from sales of BeOS. To date, BeOS has been used primarily by
a limited number of enthusiasts and application developers. Our business and
prospects are highly dependent on the broader market acceptance of BeOS as a
viable platform for a wide variety of applications and devices enabling digital
media and Internet-based applications. The ability of BeOS to gain broad support
from developers, enthusiasts and OEMs is unproven. BeOS may never gain broad
market acceptance among consumers and OEMs. At present, a large base of
commercially available software developed for use on BeOS does not exist.
Consumers and OEMs may not perceive any significant advantages over traditional
operating systems such as Microsoft Windows, Apple's Mac OS or the UNIX-based
operating systems. In addition, we may be unable to demonstrate the commercial
viability and cost-effective nature of BeOS. We may also be unsuccessful at
marketing BeOS as the operating system of choice among professional users,
consumers or applications developers. As a result, potential customers may not
purchase BeOS and OEMs may not elect to incorporate BeOS in their products. If
BeOS is not accepted or adopted by an increasing number of developers and OEMs,
our business and prospects will be materially adversely affected.
Traditional or new operating systems could evolve to more effectively
address the digital media requirements of users and OEMs. For example,
enhancements and features could be added to Microsoft's Windows operating system
and Apple's Mac OS which could significantly decrease the differences between
BeOS and these operating systems. As a result, any technical or marketing
advantage we may have had in the market for operating systems could be lost and
the demand and acceptance of BeOS would diminish.
We face intense competition from companies with significantly greater financial,
marketing, and technical resources
The market for computer operating systems is intensely competitive. This
market is dominated by one company, Microsoft Corporation, which has
significantly greater brand recognition, market presence and financial,
marketing and distribution resources than we do. Other companies that offer
competing operating systems include Apple Computer, Inc., IBM, Oracle
Corporation, Sony Corporation and a number of companies that offer versions of
the UNIX operating system, including SGI, the Hewlett-Packard Company and Sun
Microsystems. In addition, we face competition from a number of smaller
companies developing and marketing UNIX-based operating systems such as Linux.
Many of our current and potential competitors have longer operating histories, a
larger customer base, a greater number of applications, greater brand
recognition, and greater financial, technical, marketing and distribution
resources than we do. As a result, we may have difficulty increasing the number
of BeOS users and attracting OEMs and third party developers to create devices
and software that will use BeOS.
13
<PAGE>
Our success depends on our ability to establish and maintain strategic
relationships, and the loss of any of our strategic relationships could harm our
business and have an adverse impact on our revenue.
Our success in increasing the number of BeOS users, particularly in the
Internet appliance market, depends in large part on our ability to establish and
maintain strategic relationships with industry-leading computer and consumer
electronic manufacturers and Internet service and content providers. We have
entered into agreements with four OEMs and a number of resellers and
distribution partners. We cannot be certain that we will be able to reach
agreements with additional partners on a timely basis or at all, or that these
partners will devote adequate resources to promote BeOS. We may be unable to
enter into new agreements with additional partners on terms favorable to us or
at all. If we are unable to develop or maintain relationships with OEMs, we will
have difficulty selling and gaining market acceptance for BeOS and our business
and results of operations will be materially adversely affected.
Our success depends upon availability of third party applications that operate
on BeOS.
Demand and market acceptance for BeOS will significantly depend upon the
availability of an increasing number of third party applications that operate on
the BeOS platform. These applications include video and audio editing programs,
3D games, creative audio and video content development and manipulation, and
personal productivity applications.
We intend to encourage the development of an increasing number of
applications that operate on BeOS by attracting third party developers to the
BeOS platform and by maintaining our existing developer relationships through
marketing, technical support and financial incentives for third party
developers. However, third party developers are generally under no obligation to
develop applications based on the BeOS platform. A developer's decision to write
applications for BeOS is based in part on the perception and analysis of the
relative technical, financial and other benefits of developing applications for
the BeOS platform versus writing applications for more popular operating systems
such as Microsoft's Windows or Apple's Mac OS. If we fail to attract a
sufficient number of application developers who develop and market successful
applications on BeOS, the demand for BeOS and our business will suffer.
Moreover, any delay or unsuccessful release of third party applications could
have a material adverse effect on our business and results of operations.
We may not be able to respond to the rapid technological change in the markets
in which we compete.
The markets in which we participate or seek to participate are subject to:
. rapid technological change
. frequent product upgrades and enhancements;
. changing customer requirements for new products and features; and
. multiple, competing and evolving industry standards.
The introduction of operating systems that contain new technologies and the
emergence of new industry standards could render BeOS less desirable or
obsolete. In particular, we expect that changes in the Internet-based technology
and digital media enabling technology will require us to rapidly evolve and
adapt our products to be competitive. As a result, the life cycle of each
release of BeOS is difficult to estimate. To be competitive, we will need to
develop and release new products and operating system upgrades that respond to
technological changes or evolving industry standards on a timely and
cost-effective basis. We cannot be certain that we will successfully develop and
market these types of products and operating system upgrades or that our
products will achieve market acceptance. If we fail to produce technologically
competitive products in a cost-effective manner and on a timely basis, our
business and results of operations could suffer materially.
14
<PAGE>
Our revenues and operating results are subject to significant fluctuations and
our stock price may fall if we fail to meet the expectations of the public
market.
Our revenues and operating results will likely vary significantly from
period to period due to a number of factors, many of which are outside our
control, including :
. demand for and acceptance of our operating system;
. deferral of customer orders in anticipation of new products, product
enhancements or upgrades by us or by our competitors;
. the timing and availability of key applications developed by third parties
to be used in BeOS;
. delays and defects in BeOS;
. ability to attract and retain key strategic partners, including OEMs and
third party application developers;
. new product releases and product enhancements by us and our competitors;
. changes in our pricing policies or the pricing policies of our competitors;
. the mix of sales channels through which our products and services are sold;
. the mix of domestic and international sales;
. risks inherent in international operations, including foreign currency
fluctuations;
. potential acquisitions and integration of technology or businesses;
. changes in accounting standards, including standards relating to revenue
recognition, business combinations and stock-based compensation; and .
impact of any Year 2000 issues.
Based on these factors, we may fail to meet the expectations of the public
market in any given period and our stock price would likely be materially
adversely affected.
We are highly dependent on third party development tools.
We are highly dependent on development tools provided by a limited number
of third party vendors. Development tools are software applications that assist
programmers in the development of applications. Together with our application
developers, we primarily rely upon software development tools provided by Cygnus
Solutions and Perforce Software. If Cygnus or Perforce fail to support or
maintain these development tools, we will either have to devote resources to
maintain and support the tools ourselves or transition to another vendor. Any
maintenance or support of the tools by us or the transition could be costly,
time consuming, could delay our product release and upgrade schedule, and could
delay the development and availability of third party applications used on BeOS.
Failure to procure the needed software development tools or any delay in the
availability of third party applications could negatively impact our ability and
the ability of third party application developers to release and support BeOS
and the applications that run on it. These factors could negatively and
materially affect the acceptance and demand for BeOS, our business and
prospects.
In our effort to increase market acceptance for BeOS, we may forego near-term
revenue by providing BeOS at little or no cost to potential users.
In an attempt to increase the number of users and market acceptance of
BeOS, we may choose to forego immediate revenue potential by providing BeOS at
little or no cost. Users, therefore, may be unwilling to pay for any upgrades or
new releases of BeOS. Our decision to forego near-term revenue in expectation of
increasing the number of BeOS users may not yield market acceptance and future
revenues. In addition, we may reduce prices in response to competitive factors
or to pursue new market opportunities.
15
<PAGE>
We expect continued erosion in the average selling prices of our products.
We have experienced erosion in the average selling prices of our products
due to a number of factors, including:
. competitive pricing pressures;
. rapid technological changes; and
. sales discounts.
We anticipate that the average selling prices of our products will
fluctuate and decrease in the future in response to these factors. We also
anticipate that the average selling price of our products will decrease as we
market BeOS to Internet appliances and other low-cost device manufacturers.
Therefore, to maintain or increase our gross margins, we must develop and
introduce new products and product enhancements on a timely basis. We must also
continually reduce our product costs. In addition, our average selling prices
fluctuate based on changes in the percentage of revenues derived from the
different sales channels used to sell our products. For example, the retail
price for sales of BeOS is generally higher than the wholesale price used for
sales to resellers, distributors and OEMs. As our average selling prices
decline, we must increase our unit sales volume to maintain or increase our
revenue. If our average selling prices decline more rapidly than our costs, our
gross margins will decline, which could seriously harm our business and results
of operations.
We face risks relating to our product returns and price reduction policies.
We provide most of our distributors and resellers with product return
rights for stock balancing or limited product evaluation. Stock balancing rights
permit distributors to return products to us for credit, subject to some
limitations. We may experience significant returns in the future and our
reserves may be inadequate to cover such returns. We also provide most of our
distributors and resellers with price protection rights. Price protection rights
require that we grant retroactive price adjustments for inventories of our
products held by distributors or resellers if we lower our prices for these
products. Product returns or price protection rights could have a material
adverse effect on business and results of operations.
We are dependent on the licensing of enabling technologies from third parties.
The demand and acceptance of our product is also dependent upon our ability
to license key enabling technologies. We license from third parties compression
and decompression algorithms known as "codecs" and communications protocols that
facilitate the movement of rich media data and large files and enables the
connection of consumer products such as digital camcorders or set-top boxes
directly to a personal computer. We may be unable to license these enabling
technologies at favorable terms or at all which may result in lower demand for
BeOS.
We may be unable to manage any growth that we may experience.
To succeed in the implementation of our business strategy, we must rapidly
execute our sales and marketing strategy, further develop and enhance our
products and product support capabilities, and implement effective planning and
operating processes. To manage any anticipated growth we must:
. establish and manage multiple relationships with OEMs, Internet service and
content providers and other third parties;
. continue to implement and improve our operational, financial and management
information systems; and
. hire, train and retain additional qualified personnel.
Our systems, procedures and controls may not be adequate to support our
operations, and our management may not be able to perform the tasks required to
capitalize on market opportunities for our products and services. If we fail to
manage our growth effectively, our business could suffer materially.
Product defects may harm our business and reputation.
Computer operating systems, including BeOS, and related software products
frequently contain errors or bugs. We have detected and may continue to detect
errors and product defects in connection with new releases and upgrades of our
operating system and related products. Despite our internal testing and testing
by current and potential customers, errors may be discovered after BeOS or
related software and tools are installed and used by customers. These errors
could result in reduced or lost revenue, delay in market acceptance, diversion
of development resources, damage to our reputation, or increased service and
warranty costs, any of which could materially adversely affect our business and
results of operations.
Our products must successfully integrate with products from other vendors,
such as third party software applications and computer hardware. As a result,
when problems occur in a personal computer or any other device or network using
our products, it may be difficult to identify the source of the problem. The
occurrence of hardware and software errors, whether caused by our products or
another vendor's products, may result in reduced or loss of market acceptance of
our products, and any necessary product revisions may force us to incur
significant expenses. The occurrence of these problems could materially
adversely affect our business and results of operations.
16
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We considered the provision of Financial Reporting Release No. 48
"Disclosure of Accounting Policies for Derivative Financial Instruments and
Derivative Commodity Instruments, and Disclosure of Quantitative and Qualitative
Information about Market Risk Inherent in Derivative Financial Instruments,
Other Financial Instruments and Derivative Commodity Instruments." We had no
holdings of derivative financial or commodity instruments at June 30, 1999.
However, we are exposed to financial market risks, including changes in foreign
currency exchange rates and interest rates. Much of our revenue and capital
spending is transacted in U.S. dollars. However, the expenses and capital
spending of our French subsidiary are transacted in French francs. Results of
operations from our French subsidiary are not material to the results of our
operations, therefore, we believe that foreign currency exchange rates should
not materially adversely affect our overall financial position, results of
operations or cash flows. We believe that the fair value of our investment
portfolio or related income would not be significantly impacted by increases or
decreases in interest rates due mainly to the short-term nature of our
investment portfolio. However, a sharp increase in interest rates could have a
material adverse effect on the fair value of our investment portfolio.
Conversely, sharp declines in interest rates could seriously harm interest
earnings of our investment portfolio.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Sales of Registered Securities and Use of Proceeds
The effective date for of the Registration Statement for Be's initial
public offering, filed on Form S-1 under the Securities Act of 1933 (File No.
333-77855) was July 20, 1999. The class of securities registered was Common
Stock. The offering commenced on July 20,1999. The managing underwriters for the
offering were Volpe Brown Whelan & Company and Needham & Company, Inc.
Pursuant to the Registration Statement, Be sold 6,557,465 shares of its
Common Stock (which includes 557,465 shares sold to pursuant to the
underwriters' exercise of their over-allotment option) at $6.00 per share, for
an aggregate offering price of $39.3 million. Be incurred expenses of
approximately $3.8 million, of which $2.7 million represented underwriting
discounts and commissions and approximately $1.1 million represented other
expenses related to the offering. The proceeds of the offering, net of all
expenses, was approximately $35.5 million.
From the effective date of the Registration Statement through June 30,
1999, the Company invested $25.0 million of the proceeds in commercial paper and
applied the balance to working capital. The use of proceeds from the offering
does not represent a material change in the use of proceeds described in the
prospectus used in the offering.
Sales of Unregistered Securities
From April 1, 1999 to June 30, 1999, the Company sold 198,604 shares of
Common Stock to 5 employees / optionees pursuant to exercises of fully vested
options granted under the Company's 1992 Stock Option Plan at a weighted average
exercise price of $0.17 per share. The Company received an aggregate of $33,011
in cash. All sales of stock pursuant to option exercises were made in reliance
on Rule 701 under the Securities Act of 1933.
17
<PAGE>
ITEM 3. DEFAULT UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
In the quarterly period ended June 30, 1999, the following matters were
submitted to the security holders of the Company:
In May 1999, the Company's stockholders approved the following proposals:
. The stockholders approved a proposal to reincorporate the Company in the
State of Delaware with votes cast as follows: 17,315,144 shares for; 32,720
shares against; and 10,363,564 shares abstained;
. The stockholders approved a proposal to amend the Company's Certificate of
Incorporation to amend the authorized capital of the Company to consist of
78,000,000 shares of Common Stock and 2,000,000 shares of Preferred Stock
effective at the closing of the initial public offering with votes cast as
follows: 17,292,936 shares for; 54,928 shares against; and 10,363,564
shares abstained;
. The stockholders approved the adoption of the 1999 Equity Incentive Plan
and the Employee Stock Purchase Plan with votes cast as follows: 17,316,886
shares for; 30,978 shares against; and 10,363,564 shares abstained;
. The stockholders approved the adoption of the 1999 Non-Employee Directors'
Stock Option Plan with votes cast as follows: 17,284,936 shares for; 62,928
shares against; and 10,363,564 shares abstained; and
. The stockholders approved a form of Indemnity Agreement for use as an
agreement between the Company and its officers and directors with votes
cast as follows: 17,315,144 shares for; 32,720 shares against; and
10,363,564 shares abstained.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
3.1* Amended and Restated Certificate of Incorporation
3.2* Bylaws
4.1* Form of common stock certificate
27.1 Financial Data Schedule (EDGAR version only)
* Filed with the Company's Registration Statement on Form S-1, Registration
No. 333-77855, declared effective by the Securities and Exchange Commission
on July 20, 1999, incorporated herein by reference.
(b) Reports on Form 8-K
None
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BE INCORPORATED
<TABLE>
<CAPTION>
<S> <C>
By: /s/ JEAN-LOUIS F. GASSEE Date: September 2, 1999
------------------------
Jean-Louis F. Gassee
President, Chief Executive Officer and Director
By: /s/ WESLEY S. SAIA Date: September 2, 1999
------------------------
Wesley S. Saia
Vice President and Chief Financial Officer
</TABLE>
19
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Financial Statements for the six month period ending June 30, 1999
included in the Company's Form 10-Q filed September 2, 1999 and is qualified in
its entirety by reference to such statements.
</LEGEND>
<CIK> 0000895921
<NAME> BE INCORPORATED
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,318
<SECURITIES> 2,335
<RECEIVABLES> 242
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,154
<PP&E> 1,118
<DEPRECIATION> (560)
<TOTAL-ASSETS> 6,401
<CURRENT-LIABILITIES> 4,213
<BONDS> 0
38,268
0
<COMMON> 5
<OTHER-SE> (36,531)
<TOTAL-LIABILITY-AND-EQUITY> 6,401
<SALES> 846
<TOTAL-REVENUES> 846
<CGS> 324
<TOTAL-COSTS> 324
<OTHER-EXPENSES> 12,948
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (74)
<INCOME-PRETAX> (12,293)
<INCOME-TAX> 0
<INCOME-CONTINUING> (12,293)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,293)
<EPS-BASIC> (3.07)
<EPS-DILUTED> (3.07)
</TABLE>
