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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                 ---------------

                                    FORM 10-K

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

                   For the Fiscal Year ended December 31, 2000

                                       OR

        [_]  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 000-31561

                                  AvantGo, Inc.
             (Exact Name of Registrant as Specified in its Charter)

            Delaware                                       94-3275789
 (State or Other Jurisdiction                          (I.R.S. Employer
of Incorporation or Organization)                     Identification No.)

                    1700 South Amphlett Boulevard, Suite 300
                           San Mateo, California 94402
          (Address of Principal Executive Offices, including Zip Code)

                                 (650) 638-3399
              (Registrant's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par
                                                            value $0.0001.


Indicate  by check  mark  whether  the  registrant:  (1) has filed  all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

Yes [X]  No [  ]

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

As of March 20, 2001, there were 34,471,683  shares of the  registrant's  Common
Stock,  $0.0001  par  value,  outstanding.  The  aggregate  market  value of the
registrant's  voting  stock  held by  nonaffiliates  as of  March  20,  2001 was
approximately $100 million.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the  registrant's  definitive Proxy Statement for the Annual Meeting
of  Stockholders to be held on May 14, 2001 is incorporated by reference in Part
III of this Form 10-K to the extent stated herein.

<PAGE>

                                  AVANTGO, INC.

                                    FORM 10-K

                                    CONTENTS

<TABLE>
<S>          <C>                                                                                                 <C>
ITEM 1.      BUSINESS.............................................................................................1

ITEM 2.      PROPERTIES..........................................................................................11

ITEM 3.      LEGAL PROCEEDINGS...................................................................................11

ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS...............................................11

ITEM 5.      MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS...............................11

ITEM 6.      SELECTED FINANCIAL DATA.............................................................................12

ITEM 7.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...............13

ITEM 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK..........................................28

ITEM 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.........................................................29

ITEM 9.      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE................29

ITEM 10.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT..................................................29

ITEM 11.     EXECUTIVE COMPENSATION..............................................................................29

ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT......................................29

ITEM 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS......................................................29

ITEM 14.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K....................................29
</TABLE>


<PAGE>

     This  document  contains  certain  forward-looking  statements  within  the
meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of
the Securities Act of 1933. These  forward-looking  statements involve risks and
uncertainties, including, but not limited to, those identified in the section of
this Form 10-K entitled "Factors Affecting Our Future Operating  Results," which
may cause  actual  results to differ  materially  from those  discussed  in such
forward-looking  statements.  When used in this document,  the words "believes,"
"expects," "anticipates," "intends," "plans," "future," "may," "will," "should,"
"estimates," "potential," or "continue" and similar expressions, are intended to
identify certain of these forward-looking  statements.  However, these words are
not the  exclusive  means of  identifying  such  statements.  In  addition,  any
statements that refer to expectations, projections or other characterizations of
future events or circumstances are  forward-looking  statements.  The cautionary
statements  made in this  document  should  be read as being  applicable  to all
related  forward-looking  statements  wherever  they  appear  in this  document.
Factors  that  could  cause or  contribute  to such  differences  include  those
discussed  below,  as well as those discussed in our  Registration  Statement on
Form S-1 declared effective by the Securities and Exchange Commission ("SEC") on
September 26, 2000.  We undertake no obligation to release  publicly the results
of any revision to these forward-looking  statements that may be made to reflect
events or  circumstances  occurring  subsequent  to the filing of this Form 10-K
with the SEC.  Readers are urged to review and  consider  carefully  the various
disclosures  made by us in this report and in our other  reports  filed with the
SEC that  attempt  to advise  interested  parties of the risk  factors  that may
affect our business.

     For a  detailed  discussion  of  these  risks  and  uncertainties,  see the
"Company - Specific Risks and Trends" section of this Form 10-K. We undertake no
obligation  to  update   forward-looking   statements   to  reflect   events  or
circumstances occurring after the date of this Form 10-K.

     AvantGo,  AvantGo  Enterprise,  the AvantGo  logo,  Pylon and Pylon Pro are
trademarks of the registrant.

     As used in this report on Form 10-K, unless the context otherwise requires,
the terms "we," "us" or "the  Company" and "AvantGo"  refer to AvantGo,  Inc., a
Delaware   corporation  and,  unless  the  context   otherwise   requires,   its
wholly-owned subsidiaries.

                                     PART I

ITEM 1.       BUSINESS

Overview

     We  provide  software  and  services  that  enable and  enhance  the use of
Internet-based  content and  corporate  intranets to mobile  devices,  including
personal digital assistants and Internet-enabled  phones. We license our AvantGo
M-Business Server products to help companies provide their employees, customers,
suppliers and business affiliates with easy access to business information.  Our
AvantGo  Mobile  Internet  service allows  individuals to access  Internet-based
content and applications and gives content  providers and other businesses a new
medium for reaching and interacting with new and existing customers,  increasing
customer  acquisition  and retention.  In addition,  the AvantGo Mobile Internet
service gives  businesses  the option of leveraging our base of over two million
registered  users,  giving these companies a fast and efficient means to build a
mobile audience.

Industry Background

     The Internet and internal  data  networks,  or  intranets,  have emerged as
global  communications  channels  that  enable  millions  of people  to  conduct
business and share information  electronically.  International Data Corporation,
or IDC,  estimates  that there were  approximately  400 million  Internet  users
worldwide at the end of 2000 and that the number of users will grow to about 900
million by the end of 2004.

     The dramatic  growth in the number of business and consumer  Internet users
has led to a proliferation of Web-based applications. We believe that businesses
increasingly depend upon data networks, not only for internal communication, but
also to conduct transactions and exchange information among other companies' Web
sites, remote locations, telecommuting employees, business affiliates, suppliers
and customers.  To reduce costs, increase


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<PAGE>

productivity, widen accessibility and build closer relationships with customers,
many  businesses  increasingly  use the Internet and internal data networks as a
platform for traditional  enterprise  applications such as customer relationship
management,  direct marketing,  inventory control,  human resources  management,
enterprise   resource   planning   and   manufacturing.   Similarly,   consumers
increasingly  use  the  Internet  as  a  personal  resource  for  communicating,
publishing  information  and purchasing  products and services.  Until recently,
most businesses and consumers were confined to accessing these applications from
personal computers.

     At the same time, worldwide use of mobile communications is growing rapidly
as mobile devices become more broadly available and adopted, and as cellular and
other  mobile   communications   services  become  more  widely  accessible  and
affordable.  In  addition  to the  growth  of  mobile  communications  services,
innovations in mobile device design and the creation of wireless  standards have
brought forth the development of personal digital  assistants,  Internet-enabled
phones and two-way pagers.  IDC estimates that the worldwide  shipments of smart
handheld  devices--which IDC defines as handheld  companions or personal digital
assistants, cellular phones that are capable of processing data or smart phones,
and other devices such as those used in the delivery and tracking of packages or
vertical  application  devices--will grow from approximately 13 million units in
2000 to approximately 63.4 million in 2004.

     Many individuals, accustomed to accessing information from the Internet and
corporate intranets via a desktop personal computer, are now able to access this
information while away from the office. IDC forecasts that the remote and mobile
workforce in the United States will grow to 55.4 million,  or approximately  43%
of the total U.S. workforce population,  by the end of 2004. Many businesses are
extending  applications,  content  and  services  to their  mobile  constituents
through handheld  devices to disseminate  information to employees and to create
closer  relationships with their customers,  suppliers and business  affiliates.
Similarly,  many content  providers and other  businesses are seeking to enhance
their   customer   relationships   and  build  new   distribution   and  revenue
opportunities by extending Web-based content and commerce to mobile devices.

     Many  businesses  have  invested  heavily in their  information  technology
infrastructure.  In order to build and  operate a system  capable of  supporting
mobile  devices,  these  businesses now face the challenge of integrating  their
existing  systems  with the  hundreds of  thousands  of  combinations  of mobile
devices, applications and connections to the Internet:

     o  Proliferation  of mobile  devices.  The demand for  mobile  devices  has
        spawned the growth in the number of available  mobile device designs and
        features.  Manufacturers of mobile devices have based their designs on a
        number  of  different  mobile  operating  systems,  including  the  Palm
        operating  system,  or Palm OS,  which is  licensed by Palm,  Inc.,  the
        Windows CE/Windows Pocket PC-powered  operating system which is licensed
        by Microsoft Corporation, the EPOC operating system which is licensed by
        Symbian, Inc., the RIM operating system which is licensed by Research In
        Motion,  Inc., and mobile phone operating systems.  These devices differ
        significantly in their available processing power,  memory,  screen size
        and battery life. Typically,  product developers must write and maintain
        separate  versions of applications  for each device design and operating
        system.

     o  Multitude of applications. Companies and individuals access a variety of
        Web-based  and  enterprise  applications  and content.  Accessing  these
        applications   and  content  from  mobile   devices   presents   complex
        challenges.  For  example,  these  applications,   most  of  which  were
        originally  designed for desktop use, must conform to the smaller screen
        sizes and differing data input capabilities of the mobile devices.

     o  Variety of  connections  to the Internet.  Mobile devices can access the
        Internet  and  internal   data   networks   through  many   connectivity
        alternatives,  including  wireless and dial-up  modems  similar to those
        used with telephones, infrared transmissions, which at close range allow
        for data transmission,  desktop synchronization cradles, or devices that
        allow for the rapid  synchronization  of  information  between  personal
        digital  assistants and a desktop computer and shared access  terminals,
        or kiosks that  wirelessly  transmit  data  signals to devices  within a
        radius  of   approximately   15  feet.  The  many  different   types  of
        communications   networks  create  additional  complex  challenges  when
        extending  applications and content to mobile devices.  These challenges
        are amplified by incompatible  networks  across wide geographic  regions
        and  inconsistent  network  service or wireless  signals across coverage
        areas.


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<PAGE>

     Businesses extending  applications to a mobile environment require a mobile
solution  that  supports all of the potential  combinations  of mobile  devices,
applications and connectivity options they may encounter.

The AvantGo Solution

     We provide  mobile  infrastructure  software and  services  that enable and
enhance the use of Internet-based content and corporate applications on handheld
devices and Internet-enabled  phones. Our AvantGo M-Business Server products are
designed to accelerate the exchange of information  between  companies and their
mobile  employees,  customers,  business  affiliates and suppliers.  Our AvantGo
Mobile Internet service enables businesses to extend their reach,  frequency and
quality  of  customer   interactions   via  personal   digital   assistants  and
Internet-enabled phones. Our AvantGo Mobile Internet service allows consumers to
access  and  interact  with over 1000  sources  of  Internet-based  content  and
corporate   applications   optimized  for  delivery  to  handheld   devices  and
Internet-enabled phones.

     Our AvantGo  M-Business  Server  products and our AvantGo  Mobile  Internet
service provide several key common  benefits to enterprises,  content  providers
and  companies  that  conduct   business   transactions  on  the  Internet,   or
e-businesses, including the ability to:

     o  Deliver sophisticated  applications.  Our software incorporates advanced
        configuration,  processing, storage and transmission technology designed
        to overcome mobile device limitations  including limited memory and slow
        processor  performance,  as  well  as  external  limitations,  including
        limited network communications availability.  Using our software, mobile
        devices  can store and  display  complex,  table-formatted  content  and
        graphics,  collect  data  using  innovative  methods  such  as  bar-code
        scanners built  directly into mobile devices and capturing  hand-written
        information,   including  customer  signatures,   using  touch-sensitive
        displays.

     o  Increase  access  to  information.  Our  software  is  designed  to keep
        information  up-to-date and readily  accessible,  even when a network or
        wireless connection is unavailable.  Our software allows users to easily
        update, add and remove applications and services. Additionally,  systems
        administrators  can use our software to allow for the remote delivery of
        business  information  to  individuals  within an  enterprise  or to the
        public.

     o  Develop  and  deploy  mobile   applications  that  conform  to  existing
        technology standards.  Our software is designed to enable mobile devices
        to  support  applications  that  rely on  existing  Internet  technology
        standards,  such as  hypertext  mark-up  language,  or HTML,  extensible
        mark-up language,  or XML, secure sockets layer, or SSL, and JavaScript.
        As a result,  software  developers can build and deploy  applications on
        mobile devices using the same development  tools and publishing  systems
        that they use for ordinary Web browsers and personal computers.

     Our software and services deliver distinct  benefits that enable businesses
to build and deepen relationships with their workforces, customers, partners and
business affiliates.

Benefits to enterprises :

     o  Increased  productivity.  Our  AvantGo  M-Business  Server  software  is
        designed  to  increase  the  rate  of  exchange  of  information  within
        organizations  and among  employees,  customers,  suppliers and business
        affiliates. Our software and services also streamline business processes
        such  as  billing,   procurement,   inventory   control   and   customer
        relationship  management by replacing traditional  paper-based processes
        with those using  mobile  devices.  For example,  by providing  delivery
        personnel with handheld  devices running our AvantGo  M-Business  Server
        software,  enterprises  can keep  tighter  control  over  the  invoicing
        process by enabling drivers to electronically input delivery information
        such as customer  signatures.  In  addition,  managers of  manufacturing
        companies can make faster and more informed decisions when provided with
        up-to-date operations data accessible at any time using personal digital
        assistants or  Internet-enabled  phones.  Our software  allows access to
        information from a mobile device in situations where network connections
        or wireless signals are slow or unavailable.


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<PAGE>

     o  Open platform. Our software and services, which run on operating systems
        and  hardware  platforms  that are  compatible  with HTML,  XML, SSL and
        JavaScript,  give  companies  flexibility in selecting from among a wide
        range of options.  Our software and services integrate  efficiently with
        existing systems, which enables our customers to quickly deploy a mobile
        infrastructure using applications and other technology they already own.

     o  Centralized administration.  Our enterprise software and services enable
        businesses  to  centrally  manage their  mobile  workforces  using a Web
        browser.   For  example,  our  software  enables  businesses  to  update
        applications  and  distribute  them from a single  location to dispersed
        mobile devices. Our software also simplifies  information management and
        maintenance by allowing  organizations  to create user accounts,  define
        user groups and control access.

Benefits to Media companies and other businesses:

     o  Potential  for cost  savings  and  faster  time to  market.  Instead  of
        devoting  significant  resources to build a mobile  network that may not
        operate over a variety of connectivity  combinations,  Internet  content
        providers  and other  businesses  can use our  software  and services to
        quickly  deploy  a mobile  infrastructure.  By using  our  products  and
        services,  we believe  that our  content and other  business  customers,
        which we refer to as Media and  M-Business  customers,  can quickly meet
        the mobile computing needs of their customers while remaining focused on
        their core businesses.

     o  Acquire New Customers.  We have built a network of over 1,000 sources of
        content  and  applications,  and as of  March  20,  2001 we had over two
        million   registered  AvantGo  Mobile  Internet  users.  Our  Media  and
        M-Business customers can leverage our large mobile Internet user base to
        quickly and efficiently grow their own mobile user base.

        In turn, a wider selection of our Media and M-Business customers attract
        more users to our service.  As a result,  existing  Media and M-Business
        customers  have the  opportunity  to  instantly  extend  their brand and
        service offerings to a wide consumer audience.

     o  Create new customer  touch  points.  Using our  services,  our Media and
        M-Business  customers have the opportunity to develop rich, relevant and
        personalized  customer  interactions through mobile advertising,  direct
        marketing and customer relationship management opportunities.

     o  Revenue opportunities.  We believe our AvantGo Mobile Internet user base
        increases the range of potential revenue opportunities for our Media and
        M-Business  customers  through means such as advertising,  subscriptions
        and product and service sales.

Strategy

     Our  objective  is to be the  leading  provider  of  mobile  infrastructure
software and services that enable and enhance the use of Internet-based  content
and corporate applications on handheld devices and Internet-enabled  phones. Key
elements of our strategy include the following:

     Increase compatibility through the use of open standards. We intend to make
it  possible  for  Web-based  applications  to run on a wide  variety  of mobile
devices, whether wireless or requiring desktop synchronization.  We believe that
our focus on open  standards  including  HTML,  XML,  SSL and  JavaScript,  will
encourage  application  developers to create  products and services that rely on
our software for a wide range of mobile devices. Additionally,  through our open
architecture,  we seek to attract content  providers and e-businesses to deliver
personalized information, services and applications to any mobile device.


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<PAGE>

     Focus on the needs of  enterprise  customers.  We  license  our  enterprise
software to businesses in industries  that both invest heavily in technology and
have large numbers of mobile  customers or employees.  Drawing on our experience
developing enterprise software, we intend to expand our enterprise customer base
by  supporting  additional  mobile  devices and  introducing  new  applications,
content and services to better meet the needs of these  companies.  We also will
continue to invest in our professional services organization to serve enterprise
customers with consulting, outsourcing and support needs.

     Expand applications,  content and features to increase user base. We intend
to expand our user base and  enhance  our users'  experience  by  continuing  to
improve the  functionality  of our  enterprise  software  and  services  for our
enterprise  customers and the range of optimized  content for our AvantGo Mobile
Internet users.  Toward this end, we will continue to build  relationships  with
third-party  software  developers  to use  our  infrastructure  to  deliver  new
applications with mobile  capabilities.  An increase in available  applications,
content and  features  will enable us to extend the benefits of our products and
services across a greater number of organizations in a wide range of industries,
thereby attracting new users and increasing associated revenue opportunities.

     Expand  distribution of our products through  strategic  relationships.  We
intend to continue to  actively  pursue  additional  distribution  and  bundling
agreements with device hardware  manufacturers and software  developers,  mobile
device  operating  system  vendors  and  wireless  carriers.   We  believe  that
maintaining and developing these relationships will encourage  widespread market
penetration of our software and increase our brand awareness and user base.

     Establish cooperative  relationships to increase revenue opportunities.  We
seek to create  revenue  opportunities  for content  providers and  e-businesses
through advertising,  subscription  services and m-commerce,  wireless carriers
through  increased  airtime and  hardware  and  software  manufacturers  through
increased  product  sales.  Through  these  industry  relationships,  we seek to
increase our user base and the market  adoption of our  products  and  services.
Additionally, our relationships with content providers and e-businesses have the
potential  to increase  our own revenue  opportunities  through  revenue-sharing
arrangements, advertising, subscription, and placement fees, service access fees
and professional  services. We intend to continue to work with content providers
and e-businesses to increase usage of our AvantGo Mobile Internet service and to
promote commerce opportunities.

Products and Services

     Our  infrastructure  software  and  services,  which  are  based on  common
technology,  provide the foundation for our AvantGo  M-Business  Server products
and AvantGo Mobile Internet service. We also offer professional services to help
customers  deploy and  maintain our software  and  services.  Revenues  from our
AvantGo M-Business  products,  our professional  services and our AvantGo Mobile
Internet  service  Server  accounted for  approximately  50%, 40% and 10% of our
total revenues for the year ended December 31, 1999, and approximately  56%, 20%
and 24% for the year ended December 31, 2000.  American  Express  Travel-Related
Services, Ford Motor Company and McKessonHBOC accounted for approximately 0%, 2%
and 25% of our total  revenues  during  the year  ended  December  31,  1999 and
approximately 6%, 6% and 26% for the year ended December 31, 2000.

AvantGo M-Business Server Products

     Our  AvantGo  M-Business  Server  software,  which  our  customers  install
directly  within  their  corporate  networks,  enable  organizations  to  extend
interactive enterprise applications and data to mobile workers, through either a
wireless  connection  or through  desktop  synchronization.  AvantGo  M-Business
Server software allows enterprise customers to facilitate two-way  communication
on mobile devices,  including sales force  automation,  document  publishing and
travel, expense management  applications,  field service maintenance,  inventory
management  and  logistics.  Our  AvantGo  Mobile  Internet  service,  a  hosted
solution,  allows  organizations  to run the same types of  applications  as our
AvantGo  M-Business  Server  software  without  operating  our software on their
network.  This service is well-suited  to enterprise  customers that for timing,
technical or  cost-driven  reasons do not want to install,  operate and maintain
our AvantGo M-Business Server software on their network.

     Our AvantGo M-Business Server solution,  which we license to our enterprise
customers,  accounts for the majority of our enterprise  revenues.  We also make
our  AvantGo   M-Business   Server  solution   available  to  enterprises  on  a
subscription basis.


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<PAGE>

Application Software

     Our AvantGo Mobile Engine for Microsoft  Exchange  product  enables much of
the  functionality  of  Microsoft  Exchange  to be used on mobile  devices.  Our
AvantGo Mobile Engine for Microsoft  Exchange  product enables users of handheld
devices to synchronize  between a personal  computer and a centrally  configured
server.  In June 2000, we entered into a license  agreement  with Chapura,  Inc.
that  enables  us to  provide  users  of  mobile  devices  with the  ability  to
synchronize their mobile devices with Microsoft Exchange. We license our AvantGo
Mobile Engine for Microsoft Exchange product with AvantGo M-Business Server.

     Our AvantGo  Mobile  Engine for Lotus Notes  solution  enables  much of the
functionality  of Lotus Notes to be used on mobile devices.  It enables users of
handheld  devices to  synchronize  between a personal  computer  and a centrally
configured  server.  We license our AvantGo  Mobile  Engine for Lotus Notes,  an
enterprise  server,  and sell Pylon Conduit and Pylon Pro pre-packaged  software
products.

     We  believe  that  these   applications   enable  us  to  provide  valuable
functionality to our enterprise customers and AvantGo Mobile Internet users.

AvantGo Mobile Internet Service

     Our AvantGo Mobile  Internet  service allows Internet users with a handheld
device or  Internet-enabled  phone to access  Web-based  services and content in
real-time,  using a device with a wireless connection or through synchronization
with a desktop  computer.  Our AvantGo Mobile  Internet  service allows Internet
users to interact with Web-based applications and services and enter information
into  mobile  devices  for posting  onto the Web.  Through  our  AvantGo  Mobile
Internet service,  we generate  placement,  subscription,  advertising,  service
access  fee  and  professional   services   revenue  and  have   revenue-sharing
arrangements  that  provide  the  opportunity  for  us to  earn  commissions  on
advertising, subscriptions and m-commerce transactions.

     Companies  delivering  content and applications  through our AvantGo Mobile
Internet service pay an initial service fee and have the opportunity to increase
their  visibility  and  distribution  by  purchasing   AvantGo  Mobile  Internet
advertising  distribution products on our Web site and on our on-device service.
Additionally,  we receive a share of revenue  generated  by providers of content
and services on our AvantGo Mobile Internet  service.  These  agreements,  which
typically are  non-exclusive and have one-year  renewable terms,  stipulate that
the content provider may offer unlimited  content on our AvantGo Mobile Internet
service.  Currently over 1000 sources of content and  applications are optimized
for mobile  devices  and are  available  through  our  AvantGo  Mobile  Internet
service. Through March 20, 2001 we had over two million registered users.

AvantGo Professional Services

     We  employ a  professional  services  team  that  helps  our  customers  to
integrate  our software  into their  computer  networks and provides  consulting
services  for  our  enterprise  and  AvantGo  Mobile  Internet  customers  on  a
fee-for-service   basis.   AvantGo   Professional   Services  offerings  include
implementation,  consulting,  training and  technical  support,  and within each
offering, our customers have the opportunity to choose the level of service that
best meets  their  needs.  Our  service  and  support  professionals  may assist
customers in every phase and stage of mobile solution  development and delivery,
including  design,  implementation  and deployment of mobile  architectures  and
applications.

Sales and Marketing

     We maintain  two  marketing  organizations:  one to address our  enterprise
solutions  and one to address our  customer  solutions  and our  AvantGo  Mobile
Internet service.  Both of these organizations work with our hardware,  software
and  service  providers  to develop and  participate  in  marketing  activities,
including seminars, advertising and trade show events.


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<PAGE>

Enterprise

     We sell software  products,  hosted services and  professional  services to
enterprise  customers  through  our  direct  sales  force in North  America  and
third-party resellers. Organized into three geographic areas, our North American
direct sales  organization  consists of field sales  representatives,  technical
sales  consultants/engineers  and corporate sales representatives.  Our European
sales and  marketing  personnel are located in France,  Germany,  Sweden and the
United Kingdom. AvantGo Europe, Ltd., our U.K. subsidiary,  focuses on marketing
our  enterprise  products  throughout  Europe.  We do not plan to  significantly
expand our international operations beyond continuing to increase our enterprise
sales  efforts.  We augment our sales efforts with customer  service and ongoing
technical support. We also have a business development organization that pursues
and  establishes   distribution  and  marketing  relationships  with  enterprise
software   vendors.   We  intend  to   increase   the  number  of  field   sales
representatives  in North  America  and Europe.  In order to  increase  indirect
distribution  channels for our  enterprise  software,  we are also expanding our
relationships with companies that sell or bundle our products for enterprise use
and that offer additional consulting services to these enterprises.

AvantGo Mobile Internet

     We have a team of professionals  that markets and sells our mobile customer
solutions and the AvantGo Mobile Internet service on an ongoing basis to branded
content and other  business  customers.  We sell mobile  advertising,  Media and
M-Business  products and professional  services to customers  through our direct
sales force in North America and in Europe. We have focused our recent marketing
efforts on increasing the amount of content and services  available  through our
AvantGo Mobile Internet service by entering into co-marketing relationships with
manufacturers of wireless data  communications  equipment and wireless carriers.
Our business  development  team also  pursues  distribution  relationships  with
hardware  manufacturers and companies  operating popular Web site and e-commerce
businesses.

Strategic Relationships

     We have entered into agreements with major hardware and software  producers
to bundle or  integrate  our  software  with their  mobile  devices and software
products.  We have also  entered  into joint  software  development  projects to
integrate our software and AvantGo Mobile Internet content and services with the
products of software and device vendors. We believe that these relationships are
integral to our success  because  they  expose our service  offerings  to a wide
array of users and tie our products into integral  elements of the mobile device
architecture.

     Microsoft  Corporation.  Our software is integrated into Microsoft's Pocket
Internet Explorer browser that ships on  Windows-Powered  Pocket PC devices from
leading  manufacturers,   including  Hewlett-Packard  Company,  Compaq  Computer
Corporation,  Casio,  Inc.  and Symbol  Technologies,  Inc. Our software is also
available on other hardware platforms running the Microsoft Windows CE operating
system,  including  Handheld PCs, the Handheld PC Pro and the  Palm-sized PC. We
continue to explore  co-marketing  opportunities with Microsoft designed to more
broadly  distribute  our  software  to  original  equipment  manufacturers  that
pre-install  Microsoft's products, as well as to increase internal deployment of
our software  within  Microsoft's  product lines.  Our agreement with Microsoft,
which has a  two-year  renewable  term,  provides  Microsoft  with a license  to
incorporate our software with its Windows CE operating system on a non-exclusive
basis.

     Palm,  Inc. Palm, Inc. is a provider of handheld  computers,  including the
Palm  III(TM),  Palm  V(TM),  Palm  VII(TM)  series of handheld  computers.  Our
software  is  compatible  with  every  handheld  device  that  runs on the  Palm
operating  system or Palm OS, and is bundled with most of the Palm, Inc. devices
in the Palm III (TM)and Palm V(TM) families.  In 1997, we also licensed our Java
Development  Kit to Palm,  Inc.,  which is now  marketed  by Palm,  Inc.  as the
Windows Java Conduit Development Kit. Under our agreement with Palm, Inc., Palm,
Inc. bundles our software with its Palm(TM) devices on a non-exclusive basis.

     McKessonHBOC. McKessonHBOC is a global pharmaceutical supply management and
healthcare information technology company. Since October 1998,  McKessonHBOC has
been using our AvantGo M-Business Server software and our professional  services
to develop and deliver an inventory  tracking and management system. In addition
to streamlining  the product  delivery  process,  McKessonHBOC  expects that our
AvantGo M-Business Server software will help improve its operational efficiency,
reduce operating costs and increase customer satisfaction. Our license agreement
with McKessonHBOC,  which has a three-year term, provides that McKessonHBOC will
license our


                                       7
<PAGE>

AvantGo  M-Business  Server and AvantGo  Client  software on equipment  owned by
McKessonHBOC for use by McKessonHBOC employees and contractors.

     Content Providers and Other Businesses.  We provide the tools necessary for
Media and M-Business  customers to easily make their content  available to users
of mobile  devices and we optimize this content for delivery to mobile  devices.
Our AvantGo Mobile Internet service which offers content and  applications  from
over 1,000  sources  that we  categorize  and optimize for access by our AvantGo
Mobile  Internet  users.  As of March 20, 2001, the ten most  regularly  visited
sources of content are The Wall Street Journal Interactive Edition,  Yahoo!, The
Weather  Channel(R),  USATODAY.com,  The New York Times Front  Page,  Fool.com -
Quotes and News, Stock Smart Stock Tracker, MSN Mobile,  Expedia To Go, and CNET
NEWS.COM.

Technology

     Our technology builds upon open standards to deliver Internet-based content
and applications to handheld devices and  Internet-enabled  phones. The software
and  services  built  using  our  technology  take  into  account  the  specific
limitations  and  capabilities  of mobile  devices,  wireless  data networks and
Internet-based  applications.  Our software  products  allow mobile devices with
limited memory, low processing power and unreliable or limited network access to
effectively  interact with systems and  applications  designed to serve personal
computers with high-speed, reliable Internet access.

Components of AvantGo Server

     Our  AvantGo  Server is  designed  to allow our  customers  to use  AvantGo
software in their own computing  environment.  Our AvantGo Server  technology is
designed to enable  customers  to add more systems and support as they add users
without  increasing  the risk of system  failure.  Our  architecture  allows our
AvantGo   Server  to  be  deployed  in   configurations   ranging   from  simple
single-server  configurations to large-scale  configurations  involving multiple
servers aligned in clusters.  Our AvantGo Server runs on Microsoft's  Windows NT
and Windows 2000, Sun Microsystems'  Solaris operating system, Linux and FreeBSD
and is designed to meet the reliability  and  performance  requirements of large
enterprises, as well as our AvantGo Mobile Internet service.

     Server Core. Our AvantGo Server core provides an expandable  framework that
performs many functions on behalf of mobile devices.  Because wireless  networks
have limited  capacity,  processing power and memory,  our technology shifts the
processing load from mobile devices to the server.  Our architecture is designed
to make the most efficient use of slow,  expensive  wireless networks by relying
on servers to compress data before  transmitting  it to the mobile  device.  Our
AvantGo Server provides reliable and secure communications so that software that
resides on the mobile  device is not  encumbered  with the many  device-specific
communications  issues. Our AvantGo Server can integrate with existing directory
services,  such as Lightweight  Directory  Access Protocol and Windows NT Domain
Services for  identifying and  administering  information to users and groups of
users.

     Server-side  Web Module.  Our AvantGo  server-side  Web module  extends our
server core to provide  real-time  wireless  access to the Internet,  and allows
mobile devices without wireless  capabilities to synchronize with Internet-


                                       8
<PAGE>

based  applications and services.  By shifting the processing of information and
secure  sockets layer from the mobile device to a server,  our  server-side  Web
module allows mobile devices to access all existing Internet-based applications,
content and services.  Depending upon the  capabilities of the mobile device and
on user preferences,  our server-side  Internet module can  simultaneously  send
large  quantities of information and data,  search the Internet in real-time and
compress data and files.

     Server-side  Administration Module.  Administrators can use the server-side
administration module to assign and deliver applications, content or services to
particular  users or groups of users,  as well as control user  preferences  and
settings.  Our  server-side   administration  module  enables  installation  and
upgrading  of  software  on mobile  devices in  addition  to  reporting  on user
activity. At the discretion of the server administrator,  our end users can also
self-administer   their   settings   and   preferences   with  the   server-side
administration  module. Both server  administrators and end users can access our
server-side administration module with any Web browser.

Components of AvantGo Client

     Client Core. Our AvantGo Client  software  allows the user to interact with
various  applications,  content and services on the mobile  device.  Our AvantGo
Client core  software  is not  required  to  interact  with our AvantGo  Server.
Devices such as Internet-enabled  phones can access some portions of our AvantGo
Server even though they lack our AvantGo Client software. As part of providing a
framework for client-side modules, our AvantGo Client core transforms directives
from our  AvantGo  Server  into the  appropriate  commands  recognizable  by the
specific device.

     Client-side Web Module.  We provide a client-side Web module to display and
navigate  Web  content  including  text,  graphics  and  hyper-text  links.  Our
client-side Web module also supports the execution of standard  JavaScript along
with code that is specific to the particular operating system or hardware device
to  provide  our users with an  interactive  experience  even if a device  lacks
real-time capabilities.  Additionally, HTML forms can be automatically organized
by our client-side Web module for later transmission from mobile devices with or
without wireless connectivity.

Intellectual Property Rights

     We  regard  our  intellectual   property  protection  for  our  proprietary
technology,  products and  services as critical to our  success.  To protect our
proprietary  technology,  products and  services,  we rely on a  combination  of
patent, trademark, copyright and trade secret protection and confidentiality and
license  agreements  with our  employees,  customers,  business  affiliates  and
others.

     We  have  filed  a  number  of  non-provisional   patent  applications  and
provisional patent applications in the United States, and one Patent Cooperative
Treaty   (International)   application,   directed   to   aspects  of  our  core
technologies.  We  have  applied  for  registration  in the  United  States  and
internationally  of several of our  trademarks  and service marks  including the
AvantGo  circle logo and the name  "AvantGo."  We have  applied for and obtained
copyright registration in the United States for our software products.

     We also license some of our intellectual property to others,  including our
AvantGo Client technology and various trademarks and copyrighted material. While
we attempt to ensure that the quality of our brand is  maintained,  others might
take actions that materially harm the value of either these  proprietary  rights
or our reputation.

     We  license  technology  from  others,   including  some  portions  of  our
compression-decompression  technology,  security and  encryption  technology and
personal  information  management  technology.   If  these  technologies  become
unavailable  to us, we would need to license  other  technology  and redesign or
redevelop portions of our system.

     We attempt to avoid infringing the proprietary  rights of others,  although
we have not done an exhaustive patent search.  Our competitors may claim that we
are infringing their intellectual  property and, if they are successful,  we may
be unable to obtain a license or similar agreement to use the technology we need
to conduct our business.


                                       9
<PAGE>

Employees

     As of  December  31,  2000,  we had 342  full-time  employees.  None of our
employees  subject  to a  collective  bargaining  agreement,  and we have  never
experienced a work  stoppage.  We believe that our relations  with our employees
are good.

     The executive officers of the Company as of March 20, 2001 are as follows:

<TABLE>
<CAPTION>
Name                                        Age   Position
----                                        ---   --------
<S>                                         <C>   <C>
Richard Owen............................    35    Chief Executive Officer and Chairman of the Board of Directors
Felix Lin...............................    37    Co-Founder and Vice Chairman of the Board of Directors
Linus Upson.............................    30    Co-Founder and Chief Technology Officer and Director
David B. Cooper, Jr. ...................    45    Chief Financial Officer
Michael Aufricht........................    40    General Manager, AvantGo Mobile Internet
Phillip Hibberd.........................    43    General Manager, AvantGo Europe
David Moore.............................    35    Vice President, Product Development
</TABLE>

     Richard  Owen has served as our chief  executive  officer and as one of our
directors since February 2000 and has been employed by us since January 2000. He
has been our Chairman of the Board since January 2001.  From  September  1998 to
December 1999,  Mr. Owen served as vice  president of Dell Online  Worldwide for
Dell Computer Corporation.  From July 1992 to September 1998, Mr. Owen served in
a variety of roles, including  international  business development,  director of
supply  chain  integration  and general  manager of Japan Home and Small  Office
Sales  at  Dell  Computer  Corporation.  From  1987 to  1990,  Mr.  Owen  was an
information  technology  consultant with KPMG Management  Consultants in London,
England. Mr. Owen is also a director of FTD.com, Inc. Mr. Owen holds a Bachelors
Degree in Mathematics and Economics from Nottingham  University in England and a
Master of Science in Management from the  Massachusetts  Institute of Technology
Sloan School of Management.

     Felix Lin is one of our  co-founders and has served as one of our executive
officers  and  directors  since July  1997.  Mr.  Lin  currently  serves as Vice
Chairman of the Board.  From February  2000 to January  2001,  Mr. Lin served as
Chairman of the Board.  From July 1997 to February  2000,  Mr. Lin was our chief
executive  officer.  Prior to founding AvantGo,  from October 1994 to June 1997,
Mr. Lin was the director of Internet strategy for Versant Object Technology. Mr.
Lin served as database  product  marketing  manager at NeXT Computer,  Inc. from
February 1992 until October 1994. From October 1990 to January 1992, Mr. Lin was
product manager at Cadre Technology (now Sterling  Software).  From June 1988 to
June 1990, Mr. Lin was a principal  consultant and consulting manager for Oracle
Consulting  Group  at  Oracle  Corporation.  Mr.  Lin  holds  a B.S.  degree  in
Electrical  Engineering,  and a Master of Science in Computer  Science  from the
Massachusetts  Institute of  Technology,  and a Master of Science in  Management
from the Massachusetts Institute of Technology Sloan School of Management.

     Linus Upson is one of our  co-founders  and has served as our president and
as one of our directors  since July 1997. Mr. Upson has also served as our chief
technology  officer since February 1998. From March 1997 to July 1997, Mr. Upson
was not employed. From May 1996 to March 1997, Mr. Upson was a software engineer
at Netscape  Communications.  From January  1996 to April 1996,  Mr. Upson was a
software engineer at Netcode Corporation. From January 1995 to January 1996, Mr.
Upson was a consultant for his own company,  Virtual Pages, Inc. From April 1993
to January 1995, Mr. Upson was a software engineer at NeXT Computer, Inc.

     David B. Cooper, Jr. has served as our chief financial officer since August
2000.  From August 1998 to May 2000,  Mr.  Cooper  served as vice  president and
chief financial  officer of Powerbar Inc. From October 1994 to January 1998, Mr.
Cooper served as executive vice president and chief financial  officer of Edison
Brothers  Stores,  Inc.,  where he also served on the board of  directors.  From
November 1993 to April 1994,  Mr. Cooper served as executive  vice president and
chief financial  officer of Del Monte Fresh Produce Company.  From April 1986 to
October 1993,  Mr. Cooper served as the treasurer and as vice  president at Dole
Food Company.  Mr. Cooper also served as senior vice  president of Castle & Cook
Holmes, an affiliate of Dole Food Company from January 1993 to October 1993, and
as director of finance and as treasurer of Flexi-Van, Inc., an affiliate of Dole
Food  Company from October 1984 through  October  1993.  From  February  1982 to
September 1984, Mr. Cooper was an assistant  manager


                                       10
<PAGE>

at Chemical  Bank.  From 1978 to 1981,  Mr.  Cooper was a  financial  analyst at
Continental Grain Company, a diversified  agribusiness and commodities firm. Mr.
Cooper  holds a B.A.  degree in  Economics  from Yale  University  and an M.B.A.
degree from New York University.

     Michael  Aufricht has served as general  manager of AvantGo Mobile Internet
since March 2000 and held the position of vice president of AvantGo.com  for our
company from December 1999 to March 2000.  From April 1992 to November 1999, Mr.
Aufricht  held a  variety  of senior  management  positions  at The Walt  Disney
Company's  Buena Vista Home  Entertainment,  including  senior  vice  president,
Retail  Services  from October 1997 through  November  1999,  vice  president of
retail marketing from September 1994 through  September 1997,  director of brand
marketing  from  November  1993  through  August  1994 and  director of Canadian
marketing  from April 1992 through  October 1993.  From  September 1988 to March
1992, Mr.  Aufricht was a manager at The Alliance  Consulting  Group.  From July
1984 to July 1986, Mr. Aufricht was an associate brand manager at the Pepsi-Cola
Company.  Mr. Aufricht holds a B.S. from the University of California,  Berkeley
and an M.B.A. from the Harvard Graduate School of Business Administration.

     Phillip  Hibberd has served as our general  manager of AvantGo Europe since
May 2000. From April 1999 to April 2000, he was director,  business  development
at Protege,  Ltd. UK, a technology  incubator firm where he was  responsible for
the  launch of AvantGo in  Europe.  From April 1998 to March  1999,  he was vice
president  and  general  manager  of  BEA  Systems  Inc.,  a  market  leader  in
transactional middleware. From January 1997 to March 1998, he was a board member
at MSB  Consultants,  responsible  for  developing  that  company's  merger  and
acquisition  strategy.  MSB  Consultants  was  acquired  by New Era of  Networks
(Neon),  Mr. Hibberd,  an EAI software  company,  in 1997. From December 1991 to
December 1996,  Mr. Hibberd was sales and marketing  director at Tibco Inc. From
April 1987 to November  1991 he was sales  director at Reuters.  From  September
1982 to March 1987, he was sales manager at Hewlett-Packard Company. Mr. Hibberd
holds a BS (Hons) in  Engineering  from City  University,  London  and an M.B.A.
degree from the London Business School.

     David Moore has served as our vice president of product  development  since
September  1997.  From May 1996 to August  1997,  Mr.  Moore was an  engineering
manager at Netscape Communications. From January 1990 to January 1995, Mr. Moore
was a software  engineer at NeXT Software,  Inc. From June 1986 to December 1989
Mr. Moore was a software engineer at IBM Corporation.  Mr. Moore holds a B.S. in
Computer Science from Syracuse University.

ITEM 2.       PROPERTIES

     Our principal  headquarters  are in San Mateo,  California,  where we lease
approximately  25,000 square feet.  We have another  principal  facility,  which
occupies   approximately   83,000  square  feet  of  leased  space  in  Hayward,
California.  In  addition to these  facilities,  we lease a facility in Chicago,
Illinois and London,  United  Kingdom.  We believe that existing  facilities are
adequate for our needs through calendar year 2001.


ITEM 3.       LEGAL PROCEEDINGS

     We are not a party to any material pending legal proceedings.  However,  we
may from time to time become a party to various legal proceedings arising in the
ordinary course of our business.


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

     None.


                                     PART II

ITEM 5.       MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
              STOCKHOLDER MATTERS

     The Company's  Common Stock has been traded on the Nasdaq  National  Market
under the symbol "AVGO" since our initial public offering on September 27, 2000.
The following table sets forth the high and low closing sales


                                       11
<PAGE>

prices as reported on the Nasdaq  National  Market for each quarter during which
our common stock has been traded on the Nasdaq National Market.

                                                          High             Low
Fiscal Year 2000

Third Quarter (commencing September 27, 2000)            22.734            20.00
Fourth Quarter                                           19.75              4.75

     As of March 20, 2001 we had  approximately  299 stockholders of record.  We
have never paid  dividends on our capital stock.  We currently  intend to retain
any future  earnings for use in our business,  and  therefore do not  anticipate
paying any cash dividends in the foreseeable future.

     5(b) USE OF PROCEEDS FROM SALE OF REGISTERED SECURITIES

     On October  2, 2000,  we sold  6,325,000  shares of our common  stock in an
initial  public  offering  at  a  price  of  $12.00  per  share  pursuant  to  a
Registration  Statement  on Form  S-1  (Registration  No.  333-38888)  that  was
declared  effective by the Securities  and Exchange  Commission on September 26,
2000.  Credit Suisse First Boston,  Merrill,  Lynch & Co. and CIBC World Markets
were the managing  underwriters  of the offering.  The aggregate  proceeds to us
from the offering were approximately $70,587,000 after deducting an aggregate of
$5,313,000 in underwriting  discounts and commissions to the underwriters.  None
of the proceeds of the offering was paid by us,  directly or indirectly,  to any
director,  officer or general partners of us or any of their  associates,  or to
any persons owning ten percent or more of our outstanding  stock. In addition to
underwriting discounts and commissions, the expenses incurred in connection with
the offering were  approximately  $2.2 million,  including $0.9 million of legal
costs,  $0.6 million of accounting  costs,  $0.4 million,  including of printing
costs and other costs  approximately  $0.3  million.  During the period from the
offering to December  31, 2000,  we invested  all of the proceeds in  commercial
paper, government securities and corporate debt securities.


ITEM 6.       SELECTED FINANCIAL DATA

     The consolidated  statement of operations data for the years ended December
31, 2000,  1999 and 1998 and the period from June 30, 1997  (inception)  through
December 31, 1997,  and the related  balance sheet data as of December 31, 2000,
1999, 1998 and 1997 are derived from the  consolidated  financial  statements of
AvantGo, which have been audited by Ernst & Young LLP, independent auditors, and
are contained in Item 8 of Part II of this Form 10-K. The selected  statement of
operations data for the period from June 30, 1997  (inception)  through December
31, 1997 and the balance sheet data as of December 31, 1997 and 1998 are derived
from audited financial statements not included in Item 8 of Part II of this Form
10-K.  We have  prepared  this  selected  information  on the same  basis as the
audited financial statements and have included all adjustments,  consisting only
of  normal  recurring   adjustments,   that  we  consider   necessary  for  such
presentation of the financial  condition and operating results for such date and
periods.  When you read this selected  financial  data, it is important that you
read the AvantGo historical  financial  statements and related notes included in
Item 8 of Part II of this Form  10-K.  Historical  results  are not  necessarily
indicative of future results.

     The information set forth below is not necessarily indicative of results of
future  operations  and  should  be  read  in  conjunction  with   "Management's
Discussion and Analysis of Financial  Condition and Results of  Operations"  and
the consolidated  financial statements and notes to those statements included in
Items 7 and 8 of Part II of this Form 10-K.



                                       12
<PAGE>

                      SELECTED CONSOLIDATED FINANCIAL DATA

                      (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                                           Period from
                                                                                                          June 30, 1997
                                                                                                          (inception) to
                                                                       Year Ended December 31,              December 31,
                                                              ----------------------------------------    --------------
                                                                 2000            1999            1998          1997
                                                              ---------        --------        -------        -------
<S>                                                           <C>              <C>             <C>            <C>
Consolidated Statement of Operations Data:
Revenues:
    License fees ..........................................   $   9,087        $  1,443        $   189        $    --
    Services ..............................................       7,231           1,446            198             --
                                                              ---------        --------        -------
        Total revenues ....................................      16,318           2,889            387             --
Costs and expenses:
    Cost of license fees ..................................         161              60             10             --
    Cost of services (1) ..................................       3,916           1,312            210             --
    Product development (2) ...............................      10,055           2,745          1,108            140
    Sales and marketing (3) ...............................      29,382           4,291          1,229             61
    General and administrative (4) ........................       8,042           1,404            410             89
    Purchased in-process research and
      development .........................................         600              --             --             --
    Amortization of goodwill, other intangible assets
      and deferred stock compensation......................      16,582           2,605             71             --
                                                              ---------        --------        -------        -------
        Total costs and expenses ..........................      68,738          12,417          3,038            290
                                                              ---------        --------        -------        -------
Loss from operations ......................................     (52,420)         (9,528)        (2,651)          (290)
Interest income (expense), net ............................       2,582             313             48             (1)
                                                              ---------        --------        -------        -------
Net loss ..................................................   $ (49,838)       $ (9,215)       $(2,603)       $  (291)
                                                              =========        ========        =======        =======
Basic and diluted net loss per share ......................   $   (4.13)       $  (2.11)       $ (0.95)       $ (0.20)
                                                              =========        ========        =======        =======

Common  shares used to calculate  basic and diluted
net loss per common share .................................      12,077           4,377          2,735          1,464
                                                              =========        ========        =======        =======

<CAPTION>
                                                                                   December 31,
                                                                                   ------------
                                                                 2000            1999           1998           1997
                                                              ---------        --------        -------        -------
<S>                                                           <C>              <C>             <C>            <C>
Consolidated Balance Sheet Data:
Cash, cash equivalents and short-term investments .........   $  73,466        $  9,810        $ 2,124        $ 1,024
Working capital ...........................................      69,402           9,809          1,951            960
Total assets ..............................................     104,308          12,499          2,434          1,136
Long-term obligations, net of current portion . ...........          --              41            116             --
Total stockholders' equity ................................      94,751          10,724          2,068          1,069
</TABLE>


----------

     (1)  Excluding  $383,  $181,  and  $9 in  amortization  of  deferred  stock
          compensation for the years ended December 31, 2000, 1999 and 1998.

     (2)  Excluding  $1,809,  $750 and $38 in  amortization  of  deferred  stock
          compensation for the years ended December 31, 2000, 1999 and 1998.

     (3)  Excluding  $3,290,  $1,211 and $15 in  amortization  of deferred stock
          compensation for the years ended December 31, 2000, 1999 and 1998.

     (4)  Excluding  $7,861,  $463  and $9 in  amortization  of  deferred  stock
          compensation for the years ended December 31, 2000, 1999 and 1998.


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

The  following  commentary  should  be read in  conjunction  with the  financial
statements  and  related  notes  contained  elsewhere  in this  Form  10-K.  The
discussion   contains   forward-looking   statements   that  involve  risks  and
uncertainties.  These statements relate to future events or our future financial
performance.  In many cases,  you can  identify  forward-looking  statements  by
terminology such as "may," "will," "should," "expects," "plans,"  "anticipates,"
"believes,"  "estimates,"  "predicts,"  "potential," "intend," or "continue," or
the negative of such terms


                                       13
<PAGE>

and other comparable  terminology.  These statements are only  predictions.  Our
actual  results  may  differ   materially   from  those   anticipated  in  these
forward-looking  statements as a result of a variety of factors,  including, but
not limited to, those set forth under "Risk  Factors" and  elsewhere in the Form
10-K.

OVERVIEW

     We were incorporated in June 1997 as a Delaware  corporation under the name
Bombardier Software, Inc. and changed our name to AvantGo, Inc. in January 1998.
In September  1998,  we launched our AvantGo  Enterprise  products and services,
today called AvantGo M-Business Server solutions. In May 1999, we introduced our
AvantGo Mobile Internet service. In May 2000, we purchased  Globalware Computing
and began  integrating  its software  products and consulting  services into our
mobile  offerings.  In October 2000, we completed  our initial  public  offering
raising approximately $68.3 million in net proceeds, after deducting underwriter
discounts,  commissions and other offering expenses.  Although our revenues have
increased each quarter since  inception,  we have never been  profitable.  As of
December 31, 2000, we had an accumulated deficit of approximately $61.9 million.

OUR BUSINESS

     Our primary sources of revenues are generated by our license agreements and
our services  agreements.  License  revenues for our AvantGo  M-Business  Server
products, which are typically based on fixed-fee agreements, are recognized when
we have  executed an agreement  with a customer,  delivery and  acceptance  have
occurred the fee is fixed or  determinable,  and the  collection  of the related
receivable is deemed probable.  Historically, our services revenue has consisted
primarily of  professional  services and technical  support  fees.  Revenue from
professional  services is  recognized  on a monthly  basis as the  services  are
performed. Technical support fees are recognized ratably on a monthly basis over
the course of the support period,  typically twelve months. Our services revenue
also includes  amounts derived from the operation of our AvantGo Mobile Internet
service,  which include placement,  subscription,  and advertising  revenues and
revenue sharing arrangements.  Placement and advertising revenues are recognized
ratably over the period of time in which placement or advertising is provided.

     The cost of license fees  consists  primarily  of  royalties  paid to other
software  vendors  whose  products  are  included  in  our  enterprise  software
products,  as well as costs incurred to manufacture,  package and distribute our
enterprise  software  products  and  related  documentation.  Cost  of  services
includes cost of professional  services,  customer service and support and costs
related to running our AvantGo Mobile  Internet  service.  Cost of  professional
services and  technical  support  consists  primarily of the cost of  personnel.
Costs  related to our AvantGo  Mobile  Internet  service  consist of the cost of
personnel, co-location facilities and bandwidth. Because the cost of services is
greater than cost of license  fees,  cost of revenues as a  percentage  of total
revenues may fluctuate based on the mix of products and services sold.

     Our costs and  expenses  are  classified  into  three  general  operational
categories:   product  development,   sales  and  marketing,   and  general  and
administrative.  In addition,  our operating  expenses  include  amortization of
goodwill,   intangible  assets,  deferred  stock-based  compensation  and  other
acquisition-related  costs,  as well as a charge  for  in-process  research  and
development which is related to our acquisition of Globalware in May 2000.

     We classify all charges to the product  development,  sales and  marketing,
and general and  administrative  categories based on the nature of the expenses.
Each of these three  categories  include  commonly  recurring  expenses  such as
salaries,  employee  benefits,  travel and  entertainment  costs,  and allocated
communication,  rent and depreciation  costs. We allocate these expenses to each
of the  functional  areas that derive a benefit  from such  expenses  based upon
their  respective  headcount.  The sales  and  marketing  category  of costs and
expenses  also  includes  sales  commissions  and  expenses  related  to  public
relations and advertising,  trade shows and marketing collateral materials.  The
general  and  administrative   category  of  operating  expenses  also  includes
administrative and professional services fees.

     In connection  with the granting of stock options to, and restricted  stock
purchases by, our employees,  we recorded deferred stock  compensation  totaling
approximately  $26.3 million as of December 31, 2000. This amount represents the
difference  between the  exercise  and the deemed fair value of our common stock
for financial  accounting purposes on the date these stock options were granted.
This  amount is included as a  component  of  stockholders'  equity and is being
amortized by charges to operations  over the vesting period of the options using
a graded method. The


                                       14
<PAGE>

amortization  of the  remaining  deferred  stock  compensation  will  result  in
additional charges to operations through fiscal year 2004.

     We have incurred significant losses and negative cash flows from operations
since our inception.  As of December 31, 2000, we had an accumulated  deficit of
$61.9 million. We had 342 full-time employees as of December 31, 2000.

RESULTS OF OPERATIONS

     The following  table sets forth certain  financial  data,  derived from our
audited  statements of  operations,  as a percentage  of total  revenues for the
periods indicated.

<TABLE>
<CAPTION>
                                                                                      Year Ended
                                                                                     December 31,
                                                                          ---------------------------------
                                                                            2000          1999       1998
                                                                          -------       -------     -------
<S>                                                                       <C>           <C>         <C>
 Revenues:
      License fees.................................................          56%           50%         49%
      Services.....................................................          44            50          51
                                                                          -------       -------     -------
           Total revenues..........................................         100           100         100
 Costs and expenses:
      Cost of license fees.........................................           1             2           3
      Cost of services.............................................          24            45          54
      Product development..........................................          62            95         286
      Sales and marketing..........................................         180           149         318
      General and administrative...................................          49            49         106
      Purchased in-process research and development................           4            --          --
      Amortization of goodwill, other intangible assets, and
           deferred stock compensation                                      101            90          18
                                                                          -------       -------     -------
 Total costs and expenses..........................................         421           430         785
                                                                          -------       -------     -------

 Loss from operations..............................................        (321)         (330)       (685)
 Interest and other income, net....................................          16            11          12
                                                                          -------       -------     -------
 Net loss..........................................................        (305)%        (319)%      (673)%
                                                                          =======       =======     =======
</TABLE>


Comparisons of the Year Ended December 31, 2000 and 1999

Revenues

     License  Fees.  License  fee  revenues  increased  approximately  530% from
approximately $1.4 million for the year ended December 31, 1999 to approximately
$9.1 million for the year ended  December 31, 2000.  This increase was primarily
due to continued expansion of our enterprise sales team.

     Services.  Services revenue increased approximately 400% from approximately
$1.4 million for the year ended December 31, 1999 to approximately  $7.2 million
for the year ended December 31, 2000.  This increase was primarily  attributable
to increased  consulting services performed in connection with increased license
fees, as well as the continued  expansion of our AvantGo Mobile Internet service
organization.

     Deferred  revenues  reflected  on our  balance  sheet were $2.5  million at
December  31, 2000 as  compared  to  $247,000  at December  31, 1999 and will be
recognized as revenue as services are performed.


                                       15
<PAGE>

Costs and Expenses

     Cost of License Fees. Our cost of license fees increased approximately 168%
from approximately $60,000 for the year ended December 31, 1999 to approximately
$161,000  for the year ended  December  31, 2000.  This  increase was  primarily
attributable to an increase in license fee revenue during the period.  We expect
the cost of license  fees to  increase  as we enter into  agreements  with other
software developers and incorporate their products into ours.

     Cost of Services.  Our cost of services  increased  approximately 198% from
approximately $1.3 million for the year ended December 31, 1999 to approximately
$3.9 million for the year ended  December 31, 2000.  This increase was primarily
due to increased expenditures resulting from the expansion of our AvantGo Mobile
Internet  service  consulting  services  organization.  We expect these costs to
increase as we build these service organizations.

     Product Development.  Product development expenses increased  approximately
266% from  approximately  $2.7  million for the year ended  December 31, 1999 to
approximately  $10.1 million for the year ended December 31, 2000. This increase
was primarily a result of increased hiring of engineers and product  development
personnel. We expect product development expenses to increase in future periods.

     Sales and Marketing. Our sales and marketing expenses include those related
to compensation,  public  relations and  advertising,  trade shows and marketing
materials.  Sales  and  marketing  expenses  increased  approximately  585% from
approximately $4.3 million for the year ended December 31, 1999 to approximately
$29.4 million for the year ended December 31, 2000.  This increase was primarily
a result of increased  personnel-related expenses. We expect sales and marketing
expenses to increase in future periods.

     General and Administrative. Our general and administrative expenses consist
primarily  of  salaries,  recruiting  and related  costs for  general  corporate
functions including executive,  accounting and administrative  personnel,  lease
expenses,  facilities costs and other miscellaneous  general corporate expenses.
Our  general  and  administrative  expenses  increased  approximately  473% from
approximately $1.4 million for the year ended December 31, 1999 to approximately
$8.0  million  for the year ended  December  31,  2000.  This  increase  was due
primarily  to  increased  personnel-related  expenses.  We  expect  general  and
administrative  costs to  increase  in future  periods  as we add  personnel  to
support the expansion of our operations,  incur  additional  expenses related to
the anticipated  growth of our business both  domestically and  internationally,
and fulfill our responsibilities as a public company.

     Purchased  in-process research and development.  In connection with our May
26, 2000  acquisition  of Globalware we have incurred an expense of $600,000 for
purchased in-process research and development consisting of technology developed
by Globalware. This is a non-recurring charge.

     Amortization  of goodwill,  other  intangible  assets,  and deferred  stock
compensation.  We are  amortizing  the amount of goodwill,  core  technology and
acquired  workforce  that we purchased in  connection  with our  acquisition  of
Globalware.  These intangible assets,  which total  approximately $15.9 million,
are  being  amortized  over  three  years   following  the   acquisition   date.
Amortization  expense  from the goodwill  and other  intangible  assets was $3.1
million for the year ended December 31, 2000. No  amortization  was recorded for
goodwill and other intangible assets in 1999.

     We are also  amortizing the amount that equals the  difference  between the
fair value of stock options  granted to our employees and  consultants  and what
were considered to be the deemed fair values of our common stock, in the case of
option grants to employees, and on values based on the Black-Scholes formula for
valuing  options,  in the case of grants to  non-employees,  in each case on the
date of the grants  over  vesting  periods  using a graded  vesting  method.  We
recognized approximately $2.6 million of related compensation expense during the
year ended  December 31, 1999 and  approximately  $13.3 million  during the year
ended December 31, 2000.

     Interest Income (Expense), Net. Net interest income increased approximately
725%  from  approximately  $313,000  for the year  ended  December  31,  1999 to
approximately  $2.6 million for the year ended December 31, 2000.  This increase
was  primarily  due to  increased  cash  balances  as a  result  of our  private
placement  financing  completed  in March  and  April  2000 and  initial  public
offering in September 2000.


                                       16
<PAGE>

Comparison of the Year Ended December 31, 1999 and 1998

Revenues

     License Fees. Our actual license fees revenue increased  approximately 663%
from  approximately  $189,000 for the years ended  December 31, 1998 to
approximately  $1.4 million for the year ended December 31, 1999.  This
increase was primarily due to the release of our enterprise product.

     Services.   Our  services  revenues   increased   approximately  630%  from
approximately  $198,000 for the year ended  December  31, 1998 to  approximately
$1.4 million for the year ended  December 31,  1999.  This  increase in services
revenue  was  primarily  due to a full year of  operations  of our  professional
services group.

Costs and Expenses

     Cost of License Fees. Our cost of license fees increased approximately 500%
from $10,000 for the year ended December 31, 1998 to  approximately  $60,000 for
the year ended  December  31,  1999.  This  increase in cost of license fees was
primarily due to royalty payments to other software  suppliers whose software is
part of our enterprise product.

     Cost of Services.  Our cost of services  increased  approximately 525% from
approximately  $210,000 for the year ended  December  31, 1998 to  approximately
$1.3 million for the year ended  December 31, 1999.  This increase was primarily
due to increased personnel in the consulting and web operations groups.

     Product   Development.   Our   product   development   expenses   increased
approximately  148% from  approximately $1.1 million for the year ended December
31, 1998 to  approximately  $2.7  million for the year ended  December 31, 1999.
This  increase  was  primarily a result of  increased  hiring of  engineers  and
product development personnel.

     Sales  and   Marketing.   Our  sales  and  marketing   expenses   increased
approximately  249% from  approximately $1.2 million for the year ended December
31, 1998 to  approximately  $4.3  million for the year ended  December 31, 1999.
This  increase was  primarily  due to an increase in the number of personnel and
related costs.

     General  and  Administrative.   Our  general  and  administrative  expenses
increased  approximately  242% from  approximately  $410,000  for the year ended
December 31, 1998 to approximately  $1.4 million for the year ended December 31,
1999.  This increase was primarily due to increases in personnel costs resulting
from increased hiring of administrative personnel.

     Amortization  of  goodwill,  other  intangible  assets and  deferred  stock
compensation.  We  recognized  approximately  $71,000  of  related  compensation
expense during the year ended December 31, 1998 and  approximately  $2.6 million
during the year ended  December 31, 1999.  This  increase was  primarily  due to
options  awarded to employees at below deemed fair market value  amortized  over
the options' vesting periods.

     Interest Income (Expense), Net. Net interest income increased approximately
552%  from  approximately  $48,000  for the  year  ended  December  31,  1998 to
approximately  $313,000 for the year ended December 31, 1999.  This increase was
primarily due to interest  earned on increased  cash balances as a result of our
private placement financings completed in June 1999.

Liquidity and Capital Resources

     On October 2, 2000,  we closed our initial  public  offering  of  6,325,000
shares of common stock,  which included  825,000  shares in connection  with the
exercise  of the  underwriters'  over-allotment  option,  at $12 per  share.  We
received net proceeds of  approximately  $68.3 million in cash,  after deducting
underwriter  discounts,  commissions and other offering  expenses.  Prior to our
initial  public  offering,  we  financed  our  operations  from  the sale of our
preferred  and common  stock.  As of  December  31,  2000,  we had cash and cash
equivalents of  approximately  $57.0


                                       17
<PAGE>

million,   an  increase  from  approximately  $5.8  million  of  cash  and  cash
equivalents  held as of December  31,  1999.  As of December  31,  2000,  we had
short-term investments of approximately $16.4 million,  representing an increase
of approximately $12.5 million from investments held as of December 31, 1999. As
of December  31,  2000,  our working  capital was  approximately  $69.9  million
compared to approximately $9.8 million at December 31, 1999.

     Net cash used in operating  activities  totaled  $28.1  million for the for
fiscal year 2000,  as compared  with $6.6 million for the  comparable  period in
1999. The principal use of cash was to fund our losses from operations. Net cash
provided by  financing  activities  during this period  totaled  $102.7  million
during fiscal year 2000 as compared with $15.2 million for the comparable period
in 1999. Net cash provided by financing  activities  primarily  consisted of the
proceeds of issuances of common  stock  issued in our initial  public  offering,
issuances of preferred stock, and promissory notes in these periods and included
proceeds from a $300,000 equipment line of credit in 1999.

     Since our inception,  our investing  activities have consisted primarily of
purchases of fixed assets,  principally computer hardware and software.  Capital
expenditures totaled $8.1 million in fiscal year 2000, as compared with $871,000
for the  comparable  period in 1999.  Cash was also used in fiscal  year 2000 to
establish a security deposit  supporting a $3.4 million letter of credit related
to the lease of our offices in Hayward, CA.

     We currently anticipate that our current cash, cash equivalents, short-term
investments and credit facility, together with the net proceeds from our initial
public  offering,  will be  sufficient  to meet our  anticipated  cash needs for
working  capital  and  capital  expenditures  for the next  twelve  months.  Our
anticipated  cash needs must be considered  in light of the risks,  expenses and
difficulties  encountered by companies at an early stage of  development.  These
and other factors could cause actual cash needs for working  capital and capital
expenditures to differ materially from those referred to above.

Recent Accounting Pronouncements

     In December  1999,  the  Securities  and Exchange  Commission  issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial  Statements." SAB
101  provides  guidance on the  recognition,  presentation,  and  disclosure  of
revenue in financial  statements of all public registrants.  The adoption of SAB
101 has not had a material  impact on our  revenue  recognition  policies or our
reported results of operations.

     In March  2000,  the FASB issued  interpretation  No. 44,  "Accounting  for
Certain  Transactions  Involving  Stock  Compensation  -  an  interpretation  of
Accounting Principles Board (APB) Opinion No. 25" (FIN 44). FIN 44 clarifies the
application  of APB 25 and is effective July 1, 2000. The adoption of FIN 44 did
not have a material  effect on the  Company's  financial  position or results of
operations.

COMPANY-SPECIFIC RISKS AND TRENDS

RISKS RELATED TO OUR BUSINESS

Increasing  competition  could harm our ability to maintain or increase sales of
our products or reduce the prices we can charge for our products.

     We face growing  competition and we expect this competition to intensify in
the future. Our competitors  include both start-up companies  designing software
and services similar to ours and established  companies seeking to capitalize on
the mobile Internet market.

     Our enterprise  software and services compete primarily with offerings from
the following types of companies:

     o   server  synchronization  software  providers,   including  Palm,  Inc.,
         PUMATECH, Inc. and Oracle Corporation,

     o   handheld  application  development  environment  providers,   including
         PUMATECH, Inc., IBM Corporation; and Microsoft Corporation; and


                                       18
<PAGE>

     o   application service providers, including Aether Systems, Inc.

     Our AvantGo Mobile  Internet  service  competes with the service  offerings
from the following types of companies:

     o   value-added  wireless service providers,  such as Palm, Inc.'s Palm.Net
         and OmniSky Corporation; and

     o   wireless  Internet  portals,   such  as  InfoSpace,   Inc.  and  Oracle
         Corporation's Portal to Go.

     As the mobile device and wireless markets mature, we expect  competition to
intensify. This competition presents us with several risks. Many of our existing
and potential  competitors  have  substantially  greater  financial,  technical,
marketing and  distribution  resources than we do. Several of these  competitors
have greater name recognition and more established relationships with our target
customers.  Our  competitors  may be able to use these  advantages to adopt more
aggressive  pricing  policies  and products  that  compete  with our  enterprise
software and offer more attractive terms to customers.  As a result, we may lose
customers  or may be  required to limit the amount we can charge  customers  for
these  products.  In addition,  current and potential  competitors may establish
cooperative relationships among themselves or with third parties to compete more
effectively  with us.  Further,  existing and potential  competitors may develop
enhancements  to or future  generations of  competitive  products that will have
better  performance  features than our products.  Any of these factors,  if they
occur, would likely cause our sales and revenues to fall.  Finally,  competition
in the mobile Internet  sector could harm our ability to generate  revenues from
our AvantGo  Mobile  Internet  service,  undermining  our  potential  for future
growth.

Our future  success will depend on our ability to anticipate  and keep pace with
technological  change, and if we experience delays in developing and introducing
software  compatible  with new products  and  technologies,  our business  would
suffer.

     The market for mobile Internet software is becoming highly  competitive and
is characterized by evolving industry standards,  rapid technological change and
frequent product  introductions.  To remain  competitive,  we must  continuously
develop new  products  and  services  and adapt our  software to function on new
devices and  operating  systems  designed and marketed by other  companies.  The
development of software and services like ours can be difficult,  time-consuming
and  costly,  and we could  lose  market  share if we  encounter  delays  in the
development and introduction of our future software products.  Additionally, our
business could be seriously harmed if:

     o   competitors   develop  new  technologies  and  products  which  provide
         comparable  functionality  at  reduced  prices  to  our  customers  and
         potential customers;

     o   we  fail  to  anticipate  technological  trends  or  evolving  industry
         standards or to adapt our software and services to these new trends and
         standards;

     o   other companies  develop products that render our software  obsolete or
         less desirable to consumers; or

     o   technical,   legal,  financial  or  other  obstacles  prevent  us  from
         improving  our  software  and  services  to  adapt to  changing  market
         conditions.

We have a history of losses and anticipate increased losses in the future.

     Since our inception, we have never been profitable.  We incurred net losses
of  approximately  $2.6  million,  $9.2 million and $49.8  million for the years
ended  December 31, 1998,  1999 and 2000.  From inception  through  December 31,
2000, we had an accumulated  deficit of $61.9  million.  Our costs and operating
expenses were  approximately  $3.0 million,  $12.4 million and $68.7 million for
the years ended  December  31, 1998,  1999 and 2000.  Our success will depend in
large  part  upon  our  ability  to  generate   sufficient  revenue  to  achieve
profitability and to effectively maintain existing relationships and develop new
relationships with enterprise customers, content providers and e-businesses.  In
particular,  we intend to expend  significant  financial  resources  on  product
development and sales and marketing.  As a result, we expect to incur additional
losses and continued  negative  cash flow from  operations  for the  foreseeable
future, and we may not achieve or maintain profitability.


                                       19
<PAGE>

Because our quarterly  operating  results are volatile and difficult to predict,
period-to-period  comparisons  of our  operating  results  are  not  necessarily
meaningful and you should not rely on them as indications of future performance.

     Our revenues  consist  primarily  of fees  received  from  licensees of our
enterprise software,  which accounted for 56% of our revenues for the year ended
December 31, 2000 and 50% of our revenues for the year ended  December 31, 1999.
We also obtain significant  revenues from professional  services rendered to our
enterprise customers.  In 1999 and 2000, advertising and placement fees from our
AvantGo Mobile Internet service also generated a portion of our revenue. Because
our  licensing,  professional  services  and  AvantGo  Mobile  Internet  service
revenues  can  vary  substantially  from  month to month  and are  difficult  to
predict,  and we  expect  to  continue  to rely on these  revenues,  our  future
quarterly  revenues and  operating  results may  fluctuate  substantially.  As a
result of these factors,  we believe that  quarter-to-quarter  or other periodic
comparisons of our revenue and operating results are not necessarily meaningful,
and that these comparisons may not be accurate indicators of future performance.
Examples of the factors that could cause our quarterly results to vary include:

     o   failure to close key enterprise agreements as contemplated;

     o   termination  of  important  contracts,  including  those with  American
         Express   Travel-Related   Services,   Inc.,  Ford  Motor  Company  and
         McKessonHBOC ; and

     o   long sales cycles for our products.

     Because  our  staffing  and  operating  expenses  are based on  anticipated
revenue  levels and  because a high  percentage  of our costs are  fixed,  small
variations  in the timing of the  recognition  of specific  revenue  could cause
significant  variations in operating results from quarter to quarter.  If we are
unable to adjust  spending in a timely manner to compensate  for any  unexpected
revenue  shortfall,  any  significant  revenue  shortfall  would  likely have an
immediate  negative  effect on our  business.  It is likely  that in some future
quarter or quarters our operating results will be below public expectations.  If
this occurs, we would expect to experience an immediate and significant  decline
in the market price of our common stock.

We depend on our enterprise software as a primary source of our revenues, and we
do not know if  businesses  will  adopt  our  enterprise  products  and  related
services or continue to make investments in technology products such as ours.

     Our enterprise  software,  which consists of our AvantGo M-Business Server,
AvantGo Mobile Engine for Microsoft Exchange and AvantGo Mobile Engine for Lotus
Notes, products, together with related technical support fees, has accounted for
56% of our  revenues in 2000 and 50% of our  revenues in 1999.  We expect that a
significant portion of our revenues,  particularly over the next two years, will
depend  upon the  continued  and growing  market  acceptance  of our  enterprise
software  products.  The lifecycle of our products is particularly  difficult to
estimate because of growing competition and the changing marketplace.  Also, the
sales cycle for our products is lengthy. Our enterprise software may not achieve
acceptance among businesses and other organizations. A decline in the demand for
our enterprise  software or our failure to  successfully  develop,  introduce or
market new or enhanced  products in a timely manner would have a negative impact
on sales of our enterprise  products,  jeopardizing our most important source of
revenues. Also, because of the recent economic downturn, many of our current and
prospective  customers may elect to delay or postpone  investments in technology
such as ours,  which  would  harm our  enterprise  sales  efforts  and cause our
business to suffer.

The failure of the market for mobile  devices to develop as expected  would harm
our revenues.

     The emergence of markets for our software is critically  dependent upon the
rapid  expansion of the market for mobile  devices  including  personal  digital
assistants,  handheld computers,  smart phones, pagers and other mobile devices.
This market has only  recently  emerged  and is rapidly  growing.  This  growth,
however,  may not  continue.  Any  slowdown  in the growth of adoption of mobile
devices would likely  reduce the demand for our software and  services,  causing
our  enterprise  license  and  service  revenues  to fall  and  undermining  our
revenue-sharing  opportunities on m-commerce  transactions occurring through our
AvantGo Mobile Internet service.


                                       20
<PAGE>

A significant  portion of our  enterprise  revenues comes from a small number of
customers,  and any  decrease in revenues  from these  customers  could harm our
operating results.

     We  currently  derive a  significant  portion  of our  enterprise  software
revenues from a small number of major customers.  For example,  American Express
Travel-Related Services, Ford Motor Company and McKessonHBOC,  our three largest
customers,  represented 6%, 6% and 26% of our total revenues for the fiscal year
2000.  We expect that  McKessonHBOC  will  continue to  represent a  significant
portion of our revenues over the next year. Any disruption or termination of our
commercial relationships with McKessonHBOC would harm our revenues.

The  emergence  of a dominant  platform  for  mobile  devices  could  reduce our
customer base and revenues.

     The marketplace for mobile devices is currently  characterized  by a number
of competing  operating  systems and standards for handheld devices and cellular
telephones. Currently, our customers and potential customers often use a variety
of  mobile  devices  with  multiple  connectivity  options.  One of the  primary
benefits of our  products is their  ability to operate  across a wide variety of
platforms.  If a dominant  platform for mobile devices  emerges,  the demand for
interoperable software may decline and the need for our software may diminish.

We depend  on our  ability  to  market  successfully  the  functionality  of our
software.

     Even if the market for mobile devices continues to expand, our success will
depend,  among other  things,  on whether  businesses  and  consumers  adopt our
products and services for obtaining  Web-based  information and  applications on
the Internet and intranets. We have expended considerable resources on sales and
marketing of our products and services. During the year ended December 31, 2000,
our sales and marketing  expenses were  approximately  $29.4 million.  We expect
that these  expenses  will  continue to  increase  as we grow.  If our sales and
marketing  efforts are  inadequate and we are unable to build our visibility and
brand name,  our  enterprise  revenues will fall and consumer use of our AvantGo
Mobile  Internet  service  will fail to  develop,  jeopardizing  our  ability to
generate transaction-based commissions from that service.

If we  fail to  maintain  our  existing  relationships  or  enter  into  new key
relationships  with  leading  hardware  and  software  manufacturers,  our brand
awareness and the use of our products and services would suffer.

     The success of our product and service offerings depends, in large part, on
our ability to develop and  maintain  relationships  with  leading  hardware and
software  manufacturers,  such as Palm,  Inc. and  Microsoft  Corporation,  that
bundle  our  software  with  their  product   offerings.   We  depend  on  these
relationships to:

     o   distribute our products to purchasers of mobile devices;

     o   increase usage of our AvantGo Mobile Internet service;

     o   build brand awareness through product marketing; and

     o   cooperatively market our products and services.

     All of our agreements with these companies are non-exclusive and have broad
rights of  termination.  In  addition,  these  agreements  do not require  these
companies  to bundle  our  software  with all of their  product  offerings.  For
example, our software is bundled with the Palm, Inc. devices in the Palm III and
V families,  but is not bundled  with the Palm,  Inc.  devices in the Palm VIITM
family, and Palm, Inc. may choose not to bundle our software with future product
offerings.

     Some of these  manufacturers,  including  Palm,  Inc.,  have  services that
compete with our AvantGo Mobile Internet service. Any of these manufacturers may
choose either to promote its competing service or promote the services of one or
more of our other  competitors,  which  could  limit the  growth of our  AvantGo
Mobile Internet service.  If we fail to maintain these  relationships or fail to
enter into relationships with other leading hardware or software  manufacturers,
the  distribution  of our software to consumers and our AvantGo Mobile  Internet
service would suffer.


                                       21
<PAGE>

Our  success  depends  on strong  performance  by  equipment  manufacturers  and
software companies with whom we have key relationships.

     Because we depend on equipment  manufacturers  like Palm, Inc. and software
companies like Microsoft Corporation to help distribute our software and promote
our AvantGo Mobile Internet  service,  the growth of our AvantGo Mobile Internet
service is dependent  in part upon their  success.  If the  products  that these
companies  sell, or the operating  systems upon which these  products are based,
were to lose popularity,  or if any of these equipment manufacturers or software
companies cease to distribute our software in significant  volumes, our business
would suffer.

We may not be able to maintain and expand our agreements with content  providers
and  e-businesses  which  may  limit or  reduce  the use of our  AvantGo  Mobile
Internet service.

     A significant portion of the traffic to our AvantGo Mobile Internet service
comes from the existing  users of our content  providers and  e-businesses  that
deliver content to our website.  To expand our AvantGo Mobile Internet  service,
we  must  maintain  quality  relationships  with  these  content  providers  and
e-businesses and enter into new  relationships  that provide our users access to
compelling  content  and  services.   Our  objective  is  to  promote  Web-based
transactions effected through the use of mobile devices and to obtain a share of
the  revenues  generated  by those  transactions.  If we fail to add  additional
valuable content and services, Internet users may be less likely to actively use
our service and to engage in commercial  transactions using our service,  which,
in turn, would harm our business.

     All of our agreements with content providers and e-businesses survive for a
short period of time and are  non-exclusive.  These  companies may choose not to
renew their agreements with us or may terminate their agreements at any time. If
any of these agreements terminate, we will experience a decline in the number of
websites  that are optimized for use with mobile  devices,  and our  competitive
position  could  suffer.   Further,   while  we  intend  to  pursue   additional
relationships  with content  providers and  e-businesses,  we may not experience
sustained increases in user traffic from these affiliations.

Our future results could be harmed by risks  associated  with our expansion into
Europe and other international markets.

     We are selling our products in the United States and abroad.  We manage our
European sales and marketing  operations  through our U.K.  subsidiary,  AvantGo
Europe,  Ltd. Although revenues from  international  sales represented less than
10% of our  revenues  in fiscal  year 2000,  we  anticipate  that  revenue  from
international  operations  will  represent  an  increasing  portion of our total
revenue.  Our  business  will  therefore  be  increasingly  subject to the risks
associated  with doing  business  internationally.  We expect  that the costs of
developing overseas revenues will exceed those revenues. Accordingly, our future
results could be harmed by a variety of factors, including:

     o   changes in foreign currency exchange rates;

     o   the adoption of incompatible platforms or standards;

     o   trade protection measures and import or export licensing  requirements;
         and

     o   potentially negative consequences from changes in tax laws.

Acquisitions  we consummate in the future may disrupt our business and cause our
existing stockholders to suffer dilution.

     As  part of our  business  strategy,  we may  acquire  or  make  additional
investments in businesses,  products and  technologies  that complement ours. We
may  experience  difficulties  integrating  the operations of companies we might
acquire,  into ours.  As a result,  we may divert  management  attention  to the
integration that would otherwise be available for the ongoing development of our
core business. Acquisitions have inherent risks, including:


                                       22
<PAGE>

     o   risks related to the strategic utility of technology acquired;

     o   difficulties   assimilating   acquired   operations,   technologies  or
         products;

     o   unanticipated costs; and

     o   adverse  effects  on  relationships   with  customers,   suppliers  and
         employees.

     We  may  not  be  successful  in  integrating  any  businesses,   products,
technologies  or personnel  we acquire,  and our failure to do so would harm our
business.  Similarly,  we cannot guarantee that we may not have to write off any
of our investments or that our investments will yield a significant  return,  if
any. In addition, to finance acquisitions, we may issue equity securities, which
may dilute your investment, or incur significant indebtedness,  which could harm
our business.

If we fail to manage our planned  future  expansion  effectively,  we may not be
able to meet the needs of our customers or attract new customers.

     We expect to continue to expand our operations for the foreseeable  future.
We expect to hire additional new employees to support our professional services,
product  development,  marketing  and  administrative  groups.  Because  of  the
technical nature of our products, we anticipate that it will take several months
to train new personnel.  We have limited experience in training large numbers of
new staff.

     We  must  also  develop  our  operating,   administrative,   financial  and
accounting  systems and controls,  locate  additional  office space and maintain
close  coordination  among  our  product   development,   accounting,   finance,
marketing,  and customer support operations.  Failure to accomplish any of these
objectives  would  impede our ability to deliver  products in a timely  fashion,
fulfill  existing  customer  commitments  and attract and retain new  customers,
which would harm our business.

Competition  for  personnel  could  harm our  ability  to  develop or market new
products or provide professional services necessary to sustain our growth.

     We may be unable to retain our key  employees or to attract,  assimilate or
retain other highly qualified  employees in the future. We are based in Northern
California, where competition for employees with technical expertise is intense,
and we  have  from  time to time  experienced,  and we  expect  to  continue  to
experience,  difficulty  in hiring  and  retaining  employees  with  appropriate
qualifications.  In  particular,  the  mobile  computer  industry  is a  complex
industry  that  requires  a unique  knowledge  base,  and the loss of  technical
knowledge  and industry  expertise  among our key  personnel,  or our failure to
obtain  necessary  additional  expertise,  could  result in  delays in  software
development,  loss of sales and a diversion of management  resources which could
harm our business.

Our success depends on retaining key personnel.

     Our  future  success  depends  to a  significant  extent  on the  continued
services  of our  senior  management  and other key  personnel.  The loss of the
services of our management team or other key employees may harm our business. We
have  no  employment  agreements  that  prevent  any of our key  personnel  from
terminating  their  employment  at any time.  We do not maintain key person life
insurance on any of our officers.

Our  software may contain  defects or errors which would delay  shipments of our
products, harm our reputation and increase our costs.

     Our  software  is  complex  as it must  operate  across a broad  variety of
operating  systems,  devices and  connectivity  options  and meet the  stringent
requirements of our customers. We must develop our products and services quickly
to keep pace with the rapidly changing software and telecommunications  markets.
Despite  testing by our customers and us,  software as complex as ours is likely
to contain  undetected  errors or defects,  especially when first  introduced or
when new  versions  are  released.  Our  software may not be free from errors or
defects  after  delivery  to  customers  has begun,  which  could  result in the
rejection of our software or services,  damage to our


                                       23
<PAGE>

reputation,  lost revenue,  diverted development resources and increased service
and support costs, any of which could harm our business.

     Recently,  there have been reports of computer viruses  impacting  handheld
device operating systems.  Viruses and publicity about them may adversely impact
sales of our  products  and usage of our AvantGo  Mobile  Internet  service.  In
particular,  if  anti-virus  protection  which  users deem to be adequate is not
developed to combat these viruses,  this could have a material adverse effect on
our business,  both in our  enterprise  license  business as well as our AvantGo
Mobile Internet service.

We do not maintain  redundant  facilities for our servers,  and system  failures
resulting  from  earthquakes,  power outages or other  causes,  or accidental or
intentional  security  breaches could disrupt our operations,  cause us to incur
significant expenses, expose us to liability and harm our reputation.

     Our operations depend upon our ability to maintain and protect our computer
systems,  which  are  located  at  our  corporate  headquarters  in  San  Mateo,
California  and at facilities  owned and operated by Level 3  Communications  in
Sunnyvale,  California.  We currently do not have  redundant  facilities for our
servers.  Our  systems  therefore  are  vulnerable  to  damage  from  break-ins,
unauthorized  access,  vandalism,   fire,  floods,   earthquakes,   power  loss,
telecommunications  failures and similar  events.  The  potential  impact on the
Company and our general  infrastructure  of being located near major  earthquake
faults is unknown,  but operating results could be materially adversely affected
in the  event  of a major  earthquake.  In  addition,  California  has  recently
experienced  significant  power  shortages,  which have  resulted in brief power
outages in parts of the state.  These blackouts  could cause  disruptions to our
operations,  especially our AvantGo Mobile Internet service,  which is housed at
Level 3  Communications  and during a blackout could become  inaccessible to our
users.  Additionally,  these  blackouts  could  disrupt  the  operations  of our
distributors,  resellers, and customers.  Although we maintain insurance against
break-in, unauthorized access, vandalism, fires, floods, earthquakes and general
business  interruptions,  the  amount of  coverage  may not be  adequate  in any
particular case, and will not likely compensate us for all the damages caused by
these or similar events.

     We  may  be  unable  to  prevent  computer   programmers  or  hackers  from
penetrating  our network  security  from time to time.  A breach of our security
could  seriously  damage  our  reputation,  which  would harm our  business.  In
addition,   because  a  hacker  who  penetrates   our  network   security  could
misappropriate  proprietary  information or cause interruptions in our services,
we might be required to expend significant  resources to protect against,  or to
alleviate,  problems caused by hackers.  We might also face liability to persons
harmed by misappropriation of secure information if it is determined that we did
not exercise sufficient care to protect our systems.

Increasing  government  regulation  could  cause  demand  for our  products  and
services to grow more slowly or to decline.

     We are subject not only to regulations  applicable to businesses generally,
but also to laws and regulations directly applicable to the Internet. Demand for
our  software  in certain  countries,  and our ability to meet this  demand,  is
subject  to  export  controls  on  hardware  and  on  the  encryption   software
incorporated  into  our  products.  In  addition,  state,  federal  and  foreign
governments  may  adopt  laws and  regulations  governing  any of the  following
issues:

     o   user privacy;

     o   taxation of electronic commerce;

     o   the online distribution of specific material or content; and

     o   the characteristics and quality of online products and services.

     One or more states or the federal  government could enact regulations aimed
at companies like us, which provide software that facilitates e-commerce and the
distribution  of content over the Internet.  The  likelihood of the enactment of
regulation in these areas will increase as the Internet  becomes more  pervasive
and  extends to more  people's  daily  lives.  Any  legislation,  regulation  or
taxation of or  concerning  electronic  commerce  could dampen the growth of the
Internet and decrease its acceptance as a communications  and commercial medium.
If a  reduction  in


                                       24
<PAGE>

growth  occurs as a result of these events,  demand for our client  software and
AvantGo Mobile Internet service could decline significantly.

We may be subject to liability for transmitting  information,  and our insurance
coverage may be inadequate to protect us from this liability.

     We could be exposed to liability  with respect to  third-party  information
that our users access with our software.  Claimants  might  assert,  among other
things, that, by directly or indirectly providing links to Web sites operated by
third parties,  we should be liable for copyright or trademark  infringement  or
other wrongful actions by third parties through these websites.  They could also
assert  that our  third-party  information  contains  errors or  omissions,  and
consumers  could  seek  damages  for  losses  incurred  if they  rely  upon that
information.  Even if these  claims do not result in liability to us, they would
likely  divert   management's   attention  and  resources  and  we  could  incur
significant costs in investigating and defending against these claims.  Although
we carry general  liability  insurance,  our  insurance may not cover  potential
claims  of this type or may not be  adequate  to cover  all  costs  incurred  in
defense of potential  claims or to indemnify  us for all  liability  that may be
imposed.

We rely on intellectual property rights, and we may not be able to obtain patent
or other protection for our technology, products or services.

     We rely on a combination of patent,  copyright,  trademark and trade secret
laws,  confidentiality  procedures  and  contractual  provisions  to protect our
proprietary technology, products and services. We also believe that factors such
as  the  technological  and  creative  skills  of  our  personnel,  new  product
developments,  frequent product  enhancements and name recognition are essential
to establishing and maintaining a technology leadership position.

     We seek to protect our  proprietary  software and written  materials  under
trade secret,  patent and copyright laws, which afford only limited  protection.
We do not know if these or other applications will ever be issued or, if issued,
whether  they will contain  claims with the scope that we seek,  or whether they
will survive legal  challenges that may be brought.  Any such legal  challenges,
whether or not successful, may be expensive to defend.  Furthermore,  others may
develop  technologies  that are similar or superior to our  technology or design
around any patents which may issue.

     Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy  aspects of our  software  or to obtain and use  information
that we regard as proprietary.  In addition,  the laws of some foreign countries
do not ensure that our means of protecting our proprietary  rights in the United
States or abroad  will be  adequate.  We have  entered  into  source code escrow
agreements  with a  limited  number of our  customers  and  business  affiliates
requiring  release of our source code in  circumstances  such as our bankruptcy.
These agreements  generally provide that each party to the agreement will have a
limited,  non-exclusive  right  to use our  code in the  event  that  there is a
bankruptcy proceeding by or against us, if we cease to do business or if we fail
to meet  our  contractual  obligations.  This may  increase  the  likelihood  of
misappropriation  by third parties.  If we are unable to adequately  protect our
intellectual property, it could materially affect our financial performance.  In
addition,   potential   competitors  may  be  able  to  develop   non-infringing
technologies or services similar to ours.

We may be sued by third parties for  infringement of their  proprietary  rights,
and litigation or threatened  litigation  could require us to incur  significant
litigation  or  licensing  expenses,  prevent us from  selling  our  software or
require  us  to  make   expensive   modifications   to  our  software  to  avoid
infringement.

     The wireless communications, handheld computers and software industries are
characterized  by the  existence  of a large  number  of  patents  and  frequent
litigation  based on allegations of patent  infringement or other  violations of
intellectual  property  rights.  As the  number of  participants  in our  market
increases,  the  likelihood of an  intellectual  property claim against us could
increase.  We expect that we may increasingly be subject to infringement  claims
as the number of products and competitors in our industry  segment grows and the
functionality of products in different  industry  segments  overlaps.  Any claim
made against us, regardless of merit, could be time-consuming to defend,  result
in costly  litigation,  divert  management's  attention  and  resources or cause
product release delays.  In addition,  this kind of claim, if successful,  could
require us to discontinue the use of infringing  software code or processes,  to
cease the use and sale of infringing products,  to incur significant  litigation
costs  and  expenses  and to  develop  non-infringing  technology  or to  obtain
licenses to the alleged  infringing  technology under which we might be required
to pay expensive royalties. We may be unable to develop alternative technologies
or to obtain a license to use software


                                       25
<PAGE>

formerly  used by us or, if a license  were  obtainable,  the terms might not be
commercially  acceptable  to us. In the event of a  successful  claim of product
infringement  against  us and our  failure or  inability  to obtain a license or
develop or acquire non-infringing technology, our business would suffer.

We incorporate software licensed from third parties into our products, and if we
lose these licenses, our sales could be disrupted.

     We currently license software from third parties to provide security and to
enable  AvantGo users to access  electronic  mail,  contacts and other  personal
information.  If we were found to be in breach of any of our license agreements,
or, in any event, upon termination,  we would have to discontinue the use of the
licensed software,  cease the use and sale of products containing this software,
and incur expenses to develop or obtain licenses to other technology.  We may be
unable to  develop  alternative  technologies  or to obtain a license to use the
software formerly licensed to us on commercially reasonable terms.

     Although  we are  generally  indemnified  against  claims  that  technology
licensed  to us  infringes  the  intellectual  property  rights of others,  such
indemnification  is not always available for all types of intellectual  property
and in some  cases  the scope of such  indemnification  is  limited.  Even if we
receive  broad  indemnification,  third  party  indemnitors  may  not  have  the
financial  resources  to  fully  indemnify  us in  the  event  of  infringement,
resulting in substantial  exposure to us. We cannot be assured that infringement
claims arising from the incorporation of this technology will not be asserted or
prosecuted  against us. These claims,  even if not meritorious,  could result in
the expenditure of significant financial and managerial resources in addition to
potential  redevelopment  costs  and  delays,  all  of  which  could  materially
adversely affect our business, operating results and financial condition.

Our stock price may continue to be volatile and an active trading market for our
common stock may never develop or be sustained.

     The stock markets,  particularly  the Nasdaq  National  Market on which our
common  stock  is  listed,   have  experienced   significant  price  and  volume
fluctuations,  and the market  prices of  companies  focused on the Internet and
wireless communications have been highly volatile. Furthermore, the market price
of our common stock could decline, and investors may not be able to resell their
shares at or above the purchase  price.  The market price of our common stock is
likely to be  highly  volatile  and could be  subject  to wide  fluctuations  in
response to factors including:

     o   actual or anticipated variations in our quarterly operating results;

     o   announcements  of  new  product  or  service  offerings  by us  or  our
         competitors;

     o   changes in the handheld and wireless device industries;

     o   technological innovations;

     o   competitive developments;

     o   departure of key personnel;

     o   changes in financial estimates by securities analysts; and

     o   changes in interest rates and other general economic conditions.

     In the past,  securities class action  litigation has often been instituted
against  companies  following periods of volatility in the market price of their
securities.  If  brought  against  us,  securities  litigation  could  result in
substantial costs and a diversion of our management's attention and resources.


                                       26
<PAGE>

Future sales of our common stock may cause our stock price to decline.

     Sales of  significant  amounts of our common stock in the public  market or
the  perception  that sales of  significant  amounts of common  stock will occur
could  adversely  affect  the  market  price of our  common  stock or our future
ability to raise  capital  through an offering of our equity  securities.  As of
December  31, 2000 we had  approximately  34.5  million  shares of common  stock
outstanding,  of which  6,325,000  were freely  tradable,  except for any shares
purchased by our  "affiliates"  as defined in Rule 144 of the  Securities Act of
1933. Our remaining  shares  outstanding  are  restricted  securities and become
eligible for sale on March 26, 2001,  subject to the  limitations  of Rules 144,
144(k) and 701. Sales of a large number of restricted  shares, or shares held by
affiliates,  could  have an adverse  effect on the  market  price for our common
stock.  Substantially  all  of  the  holders  of  these  restricted  securities,
including  our officers  and  directors,  have  entered into lock-up  agreements
providing that, subject to limited  exceptions,  they will not sell, directly or
indirectly,  any common stock until March 26, 2001. The managing underwriter for
our initial public offering may release these shares at any time without notice.

We are  uncertain of our ability to obtain  additional  financing for our future
capital needs.

     We may need to raise additional funds to respond to competitive  pressures,
acquire   complementary   businesses  or   technologies  or  take  advantage  of
unanticipated opportunities.  Our future liquidity and capital requirements will
depend  upon  numerous  factors,  including  costs and  timing of  expansion  of
research and development efforts and the success of such efforts, the success of
our existing and new service  offerings and competing  technological  and market
developments.  These factors will impact our future capital requirements and the
adequacy of our  available  funds.  If additional  funds are raised  through the
issuance of equity securities, the percentage ownership of our stockholders will
be reduced,  stockholders may experience  additional  dilution in net book value
per share or such equity  securities may have rights,  preferences or privileges
senior to those of our  stockholders.  There can be no assurance that additional
financing will be available when needed on terms favorable to us, if at all.

Provisions  in our charter  documents  and Delaware law could prevent or delay a
change in control, which could reduce the market price of our common stock.

     Provisions of our certificate of incorporation and bylaws,  and of Delaware
law, could limit the price that investors  might be willing to pay in the future
for shares of our common stock and may have the effect of delaying or preventing
a change of control or changes in our management. These provisions:

     o   allow the board of directors to issue  preferred stock without any vote
         or further action by the stockholders;

     o   eliminate the right of stockholders to act by written consent without a
         meeting;

     o   eliminate cumulative voting in the election of directors; and

     o   divide  our board of  directors  into  three  classes,  with each class
         serving a staggered three-year term.

     Provisions of Delaware law may  discourage,  delay or prevent  someone from
acquiring or merging with us. These provisions  prevent us from engaging,  under
limited circumstances,  in a merger or sale of more than 10% of our assets, with
a stockholder who owns 15% or more of our  outstanding  voting stock, as well as
affiliates and associates of the stockholder, for three years following the date
that the stockholder  became an owner of 15% or more of our  outstanding  voting
stock unless:

     o   the  transaction is approved by the board of directors  before the date
         the interested stockholder attained that status;

     o   upon the closing of the  transaction  that resulted in the  stockholder
         becoming an interested stockholder, the interested stockholder owned at
         least 85% of the voting  stock of the  corporation  outstanding  at the
         time the transaction commenced; or


                                       27
<PAGE>

     o   on or after the date the business  combination is approved by the board
         and authorized at an annual or special  meeting of  stockholders  by at
         least  two-thirds of the outstanding  voting stock that is not owned by
         the interested stockholder.

You  should not  unduly  rely on  forward-looking  statements  because  they are
inherently uncertain.

     You should not rely on  forward-looking  statements in this document.  This
document   contains   forward-looking   statements   that   involve   risks  and
uncertainties.  We use  words  such  as  "believes,"  "expects,"  "anticipates,"
"intends," "plans," "future," "may," "will," "should," "estimates," "potential,"
or "continue" and similar  expressions to identify  forward-looking  statements.
You should not place undue reliance on these forward-looking  statements,  which
apply  only as of the  date of this  document.  The  forward-looking  statements
contained in this  document are subject to the  provisions of Section 27A of the
Securities Act of 1933 and Section 21E of the  Securities  Exchange Act of 1934.
Our actual  results  could differ  materially  from those  anticipated  in these
forward-looking statements for many reasons, including the risks described above
and elsewhere in this document

ITEM 7A.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We are  exposed to the impact of  interest  rate  changes and change in the
market values of our investments.

     Interest Rate Risk.  We are exposed to the impact of short-term  changes in
interest rates. Our exposure primarily relates to our investment  portfolio.  We
invest our excess cash in high quality corporate and municipal debt instruments.
Investments  in both fixed rate and floating rate interest  earning  instruments
carries a degree of interest  rate risk.  Fixed rate  securities  may have their
fair market value adversely impacted by a rise in interest rates, while floating
rate securities may produce less income than expected if interest rates fall. As
a result,  changes in interest  rates may cause us to suffer losses in principal
if forced to sell securities that have declined in market value or may cause our
future investment income to fall short of expectations. Our investment portfolio
is designated as available-for-sale,  and accordingly is presented at fair value
in the consolidated balance sheet.

     We protect and  preserve our invested  funds with  investment  policies and
procedures  that  limit  default,  market  and  reinvestment  risk.  We have not
utilized derivative financial instruments in our investment portfolio.

     As of December 31, 2000, we had cash and cash  equivalents,  and marketable
securities  of $73.5  million.  Cash and cash  equivalents  consist  of cash and
highly liquid short-term investments with original maturities of three months or
less at the date of purchase.  Marketable securities are classified as available
for sale,  with  maturities  greater than three months.  Our interest  income is
sensitive  to changes in the  general  level of United  States  interest  rates,
particularly   since  the  majority  of  our   investments   are  in  short-term
instruments.  Due to the nature of our short-term investments, we have concluded
that there is no  material  market risk  exposure.  Therefore,  no  quantitative
tabular  disclosures  are  required.  At December  31,  2000,  our cash and cash
equivalents and short-term  investments  consisted primarily of demand deposits,
money market funds, U.S. government  obligations,  and corporate debt securities
held by three major financial institutions in the United States.

     Foreign  Currency  Exchange Risk. We develop  products in the United States
for sale in North America,  Asia and Europe. As a result,  our financial results
could be affected by factors such as changes in foreign currency  exchange rates
or weak economic  conditions in foreign  markets.  Since our sales are currently
priced in U.S. dollars and translated to local currency amounts, a strengthening
of the dollar could make our products less  competitive in foreign  markets.  We
have one foreign  subsidiary  whose expenses are incurred in its local currency.
As  exchange  rates  vary,  its  expenses,   when  translated,   may  vary  from
expectations and adversely impact overall expected profitability.  Our operating
results have not been  significantly  affected by exchange rate  fluctuations in
2000.


                                       28
<PAGE>

ITEM 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         Our consolidated financial statements included in this Report beginning
at page F-1 are incorporated herein by reference.


ITEM 9.       CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
              FINANCIAL DISCLOSURE

     Not Applicable.


                                    PART III

ITEM 10.      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The  information  required  by  Item  10  of  Form  10-K  with  respect  to
identification  of directors is  incorporated  by reference from the information
contained  in  the  section  captioned  "Election  of  Directors"  in  AvantGo's
definitive Proxy Statement for the Annual Meeting of Stockholders to be held May
14,  2001  (the  "Proxy  Statement"),  a copy of which  will be  filed  with the
Securities and Exchange Commission before the date 120 days after the end of our
2000 fiscal year.  For  information  with respect to the  executive  officers of
AvantGo, see "Employees" at the end of Part I of this report.


ITEM 11.      EXECUTIVE COMPENSATION

     The  information  required  by  Item 11 of Form  10-K  is  incorporated  by
reference from the  information  contained in the section  captioned  "Executive
Compensation" in the Proxy Statement.


ITEM 12.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The  information  required  by  Item 12 of Form  10-K  is  incorporated  by
reference  from the  information  contained in the section  captioned  "Security
Ownership of Certain Beneficial Owners and Management" in the Proxy Statement.


ITEM 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The  information  required  by  Item 13 of Form  10-K  is  incorporated  by
reference  from the  information  contained  in the section  captioned  "Certain
Relationships and Related Transactions" in the Proxy Statement.


                                     PART IV

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

(a)(1) Financial Statements

       (1)  Report of Ernst & Young LLP, Independent Auditors, dated January 19,
            2001 (See page F-2 hereof).

       (2)  Consolidated  Balance  Sheets as of December 31, 2000 and 1999. (See
            page F-3 hereof).

       (3)  Consolidated Statements of Operations for the years  ended  December
            31, 2000, 1999 and 1998 (See page F-4 hereof).

       (4)  Consolidated Statements of Stockholder's  Equity for the years ended
            December  31,  2000,  1999,  1998  and  1997  (See pages F-5 and F-6
            hereof).

       (5)  Consolidated  Statements  of Cash Flows for the years ended December
            31, 2000, 1999 and 1998 (See page F-7 hereof).

       (6)  Notes to Consolidated Financial  Statements.  (See pages F-8 through
            F-21 hereof).

(a)(2) Financial Statement Schedules

                     Schedule No.         Description
                     ------------         -----------
                     Schedule II          Valuation and Qualifying Accounts


                                       29
<PAGE>

     Other schedules are not provided because of the absence of conditions under
which they are  required or because  the  required  information  is given in the
financial statements or notes thereto.

     (a)(3) Exhibits.  The  following  is a  complete list of  Exhibits filed as
part of this Form 10-K.

Exhibit
  No        Description
-------     -----------
  2.1*      Agreement  and  Plan  of  Merger  by and  among  AvantGo,  Inc.,  GC
            Acquisition,  Inc., Globalware Computing,  Inc. and the stockholders
            of Globalware Computing, Inc. dated as of May 26, 2000.
  2.2*      Escrow and Indemnity  Agreement by and among  AvantGo,  Inc.,  Chase
            Manhattan  Bank and Trust  Company,  N.A.,  as escrow  agent and the
            stockholders of Globalware Computing, Inc.
  3.1*      Seventh Amended and Restated Certificate of Incorporation. Reference
            is made to Exhibit 3.2 of the registrant's Registration Statement on
            Form S-1 (No.  333-38888) filed with the Commission on June 8, 2000,
            as amended (the "Form S-1").
  3.2*      Amended and Restated Bylaws. (See Exhibit 3.4 to Form S-1).
  4.1*      Form of common stock certificate.
  4.2*      Fourth Amended and Restated  Investors'  Rights  Agreement dated May
            19, 2000.
  10.1*     Form of Indemnification Agreement (See Exhibit 10.1 to Form S-1).
  10.2*     1998  Globalware  Computing,  Inc.  stock option plan.  (See Exhibit
            10.56 to Form S-1).
  10.3*     1997 Stock Option Plan, as amended.
  10.4*     Form of Notice of Option Grant and Stock Option Agreement.
  10.5*     Form of 2000 Employee Stock Purchase Plan.
  10.6*     Form of 2000 Stock Incentive Plan.
  10.7*     Stock Option Grant Program for Non-employee Directors.
  10.8*     401(k)  Standardized  Profit Sharing Plan Adoption  Agreement by and
            between AvantGo, Inc. and Paychex Retirement Services, dated January
            1, 1998.
  10.9*     Founders Stock Purchase  Agreement by and between AvantGo,  Inc. and
            Felix Lin, dated August 11, 1997. (See Exhibit 10.16 to Form S-1).
  10.10*    Founders Stock Purchase  Agreement by and between AvantGo,  Inc. and
            Linus Upson, dated August 11, 1997. (See Exhibit 10.17 to Form S-1).
  10.11*    Employment  Offer Letter  between  AvantGo,  Inc. and Richard  Owen,
            dated December 4, 1999. (See Exhibit 10.34 to Form S-1).
  10.12*    Pledge  Agreement  between AvantGo,  Inc. and David B. Cooper,  Jr.,
            dated August 30, 2000. (See Exhibit 10.58 to Form S-1).
  10.13*    Full Recourse  Promissory  Note executed by David B. Cooper,  Jr. in
            favor of AvantGo,  Inc. dated August 30, 2000. (See Exhibit 10.59 to
            Form S-1).
  10.14*    Change of Control Agreement by and between David B. Cooper,  Jr. and
            AvantGo,  Inc.  dated  August 30, 2000.  (See Exhibit  10.60 to Form
            S-1).
  10.15*    Amended  and  Restated  Change of Control  Agreement  by and between
            AvantGo,  Inc. and Felix Lin,  dated October 13, 1997.  (See Exhibit
            10.22 to Form S-1).
  10.16*    Change of Control Agreement by and between AvantGo, Inc. and Richard
            Owen, dated January 24, 2000. (See Exhibit 10.23 to Form S-1).
  10.17*    Amended  and  Restated  Change of Control  Agreement  by and between
            AvantGo,  Inc. and Linus Upson, dated October 13, 1997. (See Exhibit
            10.24 to Form S-1).
  10.18*+   Master Agreement by and between  AvantGo,  Inc. and American Express
            Travel-Related Services Company, Inc., dated February 16, 2000. (See
            Exhibit 10.30 to Form S-1).
  10.19*    Warrant  to  purchase  Series D  preferred  stock  issued to Imagine
            Health, Inc., dated March 8, 2000. (See Exhibit 10.33 to Form S-1).
  10.20*    Consulting  Agreement  between  AvantGo,  Inc.  and R.B.  Webber and
            Company, dated April 16, 1998. (See Exhibit 10.35 to Form S-1).


                                       30
<PAGE>

  Exhibit
    No      Description
  -------   -----------
  10.21*    Consulting  Agreement  between  AvantGo,  Inc. and RB Webber,  dated
            December 11, 1998. (See Exhibit 10.36 to Form S-1).
  10.22*    QuickStart  Loan and Security  Agreement with Silicon Valley Bank in
            the amount of $300,000,  dated January 28, 1998.  (See Exhibit 10.37
            to Form S-1).
  10.23*    Irrevocable Standby Letter of Credit No. SVB001S with Silicon Valley
            Bank in the amount of $3,250,000,  dated June 2, 2000.  (See Exhibit
            10.38 to Form S-1).
  10.24*+   License  Agreement  by  and  between  AvantGo,   Inc.  and  McKesson
            Corporation,  dated October 1, 1998, as amended  August 31, 1999 and
            March 7, 2000. (See Exhibits 10.39, 10.40 and 10.41 to Form S-1).
  10.25*+   Agreement for  Implementation of Licensor Software  Materials by and
            between  AvantGo,  Inc. and Palm Computing Inc., dated June 1, 1999.
            (See Exhibit 10.43 to Form S-1).
  10.26*+   Marketing and Distribution  Agreement by and between  AvantGo,  Inc.
            and Microsoft  Corporation,  dated June 2, 1999, as amended  January
            25, 2000. (See Exhibits 10.44 and 10.45 to Form S-1).
  10.27*+   Enterprise  License Agreement by and between AvantGo,  Inc. and Ford
            Motor Company,  dated December 9, 1999, as amended  January 31, 2000
            and March 7,  2000.  (See  Exhibits  10.46,  10.47 and 10.48 to Form
            S-1).
  10.28*    Bayshore Corporate Center Office Lease by and between AvantGo,  Inc.
            and  Cornerstone  Properties I, LLC, dated June 23, 1997, as amended
            January,  30, 1998; April 27, 1998;  November 16, 1998, and April 2,
            1999. (See Exhibits  10.49,  10.50,  10.51,  10.52 and 10.53 to Form
            S-1).
  10.29*    Bayshore Corporate Center Office Lease by and between AvantGo,  Inc.
            and  Cornerstone  Properties  I, LLC,  dated  August 5,  1999.  (See
            Exhibit 10.54 to Form S-1).
  10.30*    Net  Lease  by and  between  AvantGo,  Inc.  and The  Multi-Employer
            Property  Trust,  dated March 31, 2000.  (See Exhibit  10.55 to Form
            S-1).
  10.31     Promissory Note executed by  Mike  Aufricht and  AvantGo, Inc. dated
            April 20, 2000.
  10.32+    Amendments  to License  Agreement by and between  AvantGo,  Inc. and
            McKesson Corporation dated October 1, 1998 (as amended through March
            7, 2000)  December 30, 2000 and undated  amendments  to Exhibit B to
            License Agreement.
  21.1      Subsidiaries of the Registrant
  23.1      Consent of Ernst & Young LLP, Independent Auditors.
  24.1      Power of Attorney (see signature page)

----------
     (*)    Incorporated by reference to the registrant's Registration Statement
            on Form S-1 (No.  333-38888)  filed with the  Commission  on June 8,
            2000, as amended.

  +  Confidential treatment granted on portions of this exhibit.

     (6)    Reports on Form 8-K

     None.


                                       31
<PAGE>

                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the  undersigned,  thereunto duly  authorized,  on the 30th day of
March, 2001.

                                                    AvantGo, Inc.
                                       --------------------------------------
                                                    (REGISTRANT)



                                       By: /s/ Richard Owen
                                           ----------------------------------
                                           Richard Owen
                                           Chief Executive Officer and
                                           Chairman of the Board of Directors



                                POWER OF ATTORNEY

     Know all  persons  by these  presents,  that each  person  whose  signature
appears below  constitutes  and appoints  Richard Owen as his  attorney-in-fact,
with the power of substitution,  for him in any and all capacities,  to sign any
amendments  to this  Report on Form 10-K,  and to file the same,  with  exhibits
thereto and other  documents in connection  therewith,  with the  Securities and
Exchange   Commission,   hereby   ratifying   and   confirming   all  that  said
attorney-in-fact,  or his substitute or substitutes,  may do or cause to be done
by virtue hereof.

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


<TABLE>
<CAPTION>
            Name                                                  Title                                   Date
            ----                                                  -----                                   ----
<S>                                               <C>                                                  <C>
Principal Executive Officers:

                /s/ Richard Owen
------------------------------------------------  Chief Executive Officer and Chairman of the          March 30, 2001
                  Richard Owen                                 Board of Directors


                 /s/ Felix Lin
------------------------------------------------    Vice Chairman of the Board of Directors            March 30, 2001
                   Felix Lin


Principal Financial and Principal
   Accounting Officer:

                /s/ David Cooper
------------------------------------------------            Chief Financial Officer                    March 30, 2001
                  David Cooper

Additional Directors:

         /s/ Christopher B. Hollenbeck
------------------------------------------------                    Director                           March 30, 2001
           Christopher B. Hollenbeck


                /s/ Dennis Jones
------------------------------------------------                    Director                           March 30, 2001
                  Dennis Jones
</TABLE>


                                       32
<PAGE>


<TABLE>
<S>                                                                 <C>                                <C>

              /s/ Robert J. Lesko
------------------------------------------------                    Director                           March 30, 2001
                Robert J. Lesko


                /s/ Linus Upson
------------------------------------------------                    Director                           March 30, 2001
                  Linus Upson


             /s/ Gregory L. Waldorf
------------------------------------------------                    Director                           March 30, 2001
               Gregory L. Waldorf


             /s/ Jeffrey T. Webber
------------------------------------------------                    Director                           March 30, 2001
               Jeffrey T. Webber


             /s/ Peter H. Ziebelman
------------------------------------------------                    Director                           March 30, 2001
               Peter H. Ziebelman
</TABLE>



                                       33
<PAGE>


                                  AVANTGO, INC.



                          INDEX TO FINANCIAL STATEMENTS



                                                                            Page
AvantGo, Inc.:

Report of Ernst & Young LLP, Independent Auditors........................    F-2

Consolidated Balance Sheets..............................................    F-3

Consolidated Statements of Operations....................................    F-4

Consolidated Statements of Stockholders' Equity..........................    F-5

Consolidated Statements of Cash Flows....................................    F-7

Notes to Consolidated Financial Statements...............................    F-8





                                      F-1
<PAGE>

               Report of Ernst & Young LLP, Independent Auditors

The Board of Directors and Stockholders
AvantGo, Inc.

We have audited the accompanying consolidated balance sheets of AvantGo, Inc. as
of  December  31,  2000 and 1999,  and the related  consolidated  statements  of
operations,  stockholders' equity, and cash flows for each of the three years in
the period  ended  December  31, 2000.  Our audits also  included the  financial
statement  schedule  listed in Item  14(a) of this  Annual  Report on Form 10-K.
These financial statements and schedule are the responsibility of the management
of AvantGo,  Inc. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.


We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.


     In our opinion,  the consolidated  financial  statements  referred to above
present fairly, in all material respects, the consolidated financial position of
AvantGo, Inc. at December 31, 2000 and 1999, and the consolidated results of its
operations  and its cash flows for each of the three  years in the period  ended
December 31, 2000, in conformity with accounting  principles  generally accepted
in the United  States.  Also in our opinion,  the financial  statement  schedule
referred  to above,  when  considered  in  relation  to the  basic  consolidated
financial  statements  taken  as a  whole,  presents  fairly,  in  all  material
respects, the information set forth therein.



                                       /s/  ERNST & YOUNG LLP



Walnut Creek, California
January 19, 2001




                                      F-2
<PAGE>

                                  AVANTGO, INC.

                           CONSOLIDATED BALANCE SHEETS
                      (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                                    December 31,
                                                                                            -----------------------------
                                                                                                2000             1999
                                                                                            ------------     ------------
<S>                                                                                         <C>              <C>
                                         ASSETS
Current Assets:
     Cash and cash equivalents ..........................................................   $     57,034     $      5,835
     Short-term investments .............................................................         16,432            3,975
     Accounts receivable, net of allowance for doubtful accounts of $240,000 in 2000
       and $50,000 in 1999, respectively ................................................          4,724            1,478
     Prepaid expenses and other current assets ..........................................          1,186              255
                                                                                            ------------     ------------
       Total current assets .............................................................         79,376           11,543
Restricted investments...................................................................          3,438               --
Property and equipment, net .............................................................          7,998              893
Goodwill and other intangibles ..........................................................         12,803               --
Other assets ............................................................................            693               63
                                                                                            ------------     ------------
       Total assets .....................................................................   $    104,308     $     12,499
                                                                                            ============     ============

                          LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
     Accounts payable ...................................................................   $      3,227     $        846
     Accrued liabilities ................................................................          1,527              327
     Accrued compensation and related benefits ..........................................          2,238              239
     Current portion of capital lease obligations .......................................             --                4
     Current portion of borrowings under bank line of credit agreement ..................             40               71
     Deferred revenue ...................................................................          2,442              247
                                                                                            ------------     ------------
       Total current liabilities ........................................................          9,474            1,734

Deferred revenue ........................................................................             83               --

Borrowings under bank line of credit agreement, net of current portion ..................             --               41
Commitments
Stockholders' Equity:
     Convertible preferred stock, $0.0001 par value, issuable in Series: 10,000,000
       shares  authorized  at December 31, 2000;  none and 11,472,082 shares
       issued and outstanding at December 31, 2000 and 1999, respectively ...............             --           19,480
     Common stock, $0.0001 par value; 150,000,000 shares authorized;
       34,473,663 and 9,630,062  shares issued and outstanding
       at December 31, 2000 and 1999, respectively ......................................        170,841           10,928
     Notes receivable from stockholders .................................................           (706)            (100)
     Deferred stock compensation ........................................................        (12,350)          (7,475)
     Revenue offset relating to warrant agreements ......................................         (1,099)              --
     Accumulated deficit ................................................................        (61,947)         (12,109)
     Accumulated other comprehensive income .............................................             12               --
                                                                                            ------------     ------------
       Total stockholders' equity .......................................................         94,751           10,724
                                                                                            ------------     ------------
       Total liabilities and stockholders' equity .......................................   $    104,308     $     12,499
                                                                                            ============     ============
</TABLE>


                             See accompanying notes.


                                      F-3
<PAGE>

                                  AVANTGO, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (In thousands, except per share data)


<TABLE>
<CAPTION>
                                                                                        Year Ended December 31,
                                                                                -----------------------------------------
                                                                                  2000             1999            1998
                                                                                --------         --------         -------
<S>                                                                             <C>              <C>              <C>
Revenues:
     License fees ......................................................        $  9,087         $  1,443         $   189
     Services ..........................................................           7,231            1,446             198
                                                                                --------         --------         -------
          Total revenues ...............................................          16,318            2,889             387

Costs and expenses:
     Cost of license fees ..............................................             161               60              10
     Cost of services (1) ..............................................           3,916            1,312             210
     Product development (2) ...........................................          10,055            2,745           1,108
     Sales and marketing (3) ...........................................          29,382            4,291           1,229
     General and administrative (4) ....................................           8,042            1,404             410
     Purchased in-process research and development .....................             600             --              --
     Amortization  of  goodwill, other intangible  assets,
     and deferred stock compensation ...................................          16,582            2,605              71
                                                                                --------         --------         -------
          Total costs and expenses .....................................          68,738           12,417           3,038
                                                                                --------         --------         -------
Loss from operations ...................................................         (52,420)          (9,528)         (2,651)

Other income (expense):
     Interest income (expense), net ....................................           2,582              313              48
                                                                                --------         --------         -------
          Net loss .....................................................        $(49,838)        $ (9,215)        $(2,603)
                                                                                ========         ========         =======
     Basic and diluted net loss per share ..............................        $  (4.13)        $  (2.11)        $ (0.95)
                                                                                ========         ========         =======

     Common  shares  usesd to  calculate  basic and diluted  net
       loss per common share ...........................................          12,077            4,377           2,735
                                                                                ========         ========         =======
</TABLE>

----------

(1)   Excluding $383, $181 and $9 in amortization of deferred stock compensation
      for the year ended December 31, 2000, 1999 and 1998, respectively.

(2)   Excluding  $1,809,   $750  and  $38  in  amortization  of  deferred  stock
      compensation  for the  year  ended  December  31,  2000,  1999  and  1998,
      respectively.

(3)   Excluding  $3,290,  $1,211  and  $15 in  amortization  of  deferred  stock
      compensation  for the  year  ended  December  31,  2000,  1999  and  1998,
      respectively.

(4)   Excluding   $7,861,   $463  and  $9  in  amortization  of  deferred  stock
      compensation  for the  year  ended  December  31,  2000,  1999  and  1998,
      respectively.


                             See accompanying notes.


                                      F-4
<PAGE>

                                  AVANTGO, INC.

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                             Convertible                                        Notes       Deferred
                                                           Preferred Stock               Common Stock         Receivable      Stock
                                      Comprehensive    -----------------------     -----------------------       from        Compen-
                                      Income (Loss)      Shares        Amount        Shares         Amount   Stockholders    sation
                                      -------------    ---------      -------      ---------      --------   ------------  ---------
<S>                                   <C>              <C>             <C>         <C>             <C>           <C>         <C>
BALANCES AT DECEMBER 31, 1997                          4,434,156       1,327       6,578,000          33           --            --

  Issuance of Series B preferred
    stock, net of issuance costs .....                 3,301,886       3,480              --          --           --            --
  Exercise of stock options ..........                        --          --       1,698,120          63           --            --
  Repurchase of common stock .........                        --          --        (412,000)        (12)          --            --
Deferred stock compensation ..........                        --          --              --         456           --          (456)
Amortization of deferred stock
    compensation .....................                        --          --              --          --           --            71
  Net loss and comprehensive loss ....                        --          --              --          --           --
                                                       ---------     -------       ---------     -------      -------       -------
BALANCES AT DECEMBER 31, 1998                          7,736,042       4,807       7,864,120         540           --          (385)

  Issuance of Series C preferred
    stock, net of issuance costs .....                 3,659,898      14,373              --          --           --            --
  Issuance of Series C preferred .....
    stock in exchange for
    cancellation of notes payable ....                    76,142         300              --          --           --            --
  Exercise of stock options ..........                        --          --       1,805,942         694         (100)           --
  Repurchase of common stock .........                        --          --         (40,000)         (1)          --            --
  Deferred stock compensation ........                        --          --              --       9,695           --        (9,695)
  Amortization of deferred stock
    compensation .....................                        --          --              --          --           --         2,605
  Net loss and comprehensive Loss ....                        --          --              --          --           --            --
                                                       ---------     -------       ---------     -------      -------       -------

<CAPTION>
                                               Revenue                            Accumulated
                                                Offset                               Other             Total
                                             Relating to       Accumulated       Comprehensive     Stockholders'
                                               Warrants          Deficit          Income (Loss)        Equity
                                             ----------        ---------         -------------     ------------
<S>                                          <C>               <C>               <C>               <C>
BALANCES AT DECEMBER 31, 1997                        --             (291)                 --            1,069

  Issuance of Series B preferred
    stock, net of issuance costs .....               --               --                  --            3,480
  Exercise of stock options ..........               --               --                  --               63
  Repurchase of common stock .........               --               --                  --              (12)
Deferred stock compensation ..........               --               --                                   --
Amortization of deferred stock
    compensation .....................               --               --                  --               71
  Net loss and comprehensive loss ....               --           (2,603)                 --           (2,603)
                                              ---------        ---------           ---------        ---------
BALANCES AT DECEMBER 31, 1998                        --           (2,894)                 --            2,068

  Issuance of Series C preferred
    stock, net of issuance costs .....               --               --                  --           14,373
  Issuance of Series C preferred .....
    stock in exchange for
    cancellation of notes payable ....               --               --                  --              300
  Exercise of stock options ..........               --               --                  --              594
  Repurchase of common stock .........               --               --                  --               (1)
  Deferred stock compensation ........               --               --                  --               --
  Amortization of deferred stock
    compensation .....................               --               --                  --            2,605
  Net loss and comprehensive Loss ....               --           (9,215)                 --          (9,215)
                                              ---------        ---------           ---------        ---------
</TABLE>

                                      F-5
<PAGE>


                                  AVANTGO, INC.

          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY--(Continued)

                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                   Convertible                                        Notes
                                                                 Preferred Stock               Common Stock         Receivable
                                            Comprehensive    -----------------------     -----------------------       from
                                            Income (Loss)      Shares        Amount        Shares         Amount   Stockholders
                                            -------------    ---------      -------      ---------      --------   ------------
<S>                                         <C>              <C>            <C>          <C>            <C>        <C>
BALANCES AT DECEMBER 31, 1999                                11,472,082        19,480      9,630,062     10,928       (100)
  Issuance of common stock for services ...                          --            --         12,500        187         --
  Issuance of Series D  preferred  stock
    in  connection with license ...........                       4,785            40             --         --         --
  Issuance of Series D preferred  stock,
    net of issuance costs .................                   3,726,094        31,042             --         --         --

  Exercise of stock options ...............                          --            --      1,794,445      4,157       (606)
  Repurchase of common stock ..............                          --            --       (496,167)      (141)        --
  Deferred stock compensation .............                          --            --             --     18,218         --
  Amortization of deferred stock
    compensation ..........................                          --            --             --         --         --
  Issuances of Series D warrant in
    connection with content services
    agreement..............................                      71,562           159             --         --         --
  Issuance of Series E  preferred  stock
    in connection with acquisition ........                   1,933,300        15,466             --         --         --
  Issuance of common stock options in
    connection with acquisition ...........                          --            --             --      1,444         --
  Issuance of common stock in connection
    with initial public offering, net of
    issuance costs of $7,560 ..............                                                6,325,000     68,340
  Deferred revenue relating to warrants....                          --         1,521             --         --         --
  Amortization of warrant .................                          --            --             --         --         --
  Conversion of preferred  stock into
  common stock upon initial public offering                 (17,207,823)      (67,708)    17,207,823     67,708
  Net loss ................................    $(49,838)             --            --             --         --         --
    Foreign currency translation adjustment          16              --            --             --         --         --
  Unrealized loss on investment............          (4)             --            --             --         --         --
                                               --------     -----------    ----------     ----------   --------      -------
  Comprehensive loss ......................    $(49,826)             --            --             --         --         --
                                               ========     ===========    ==========     ==========   ========      =======


BALANCES AT DECEMBER 31, 2000 .............                           0    $        0     34,473,663   $170,841      $(706)
                                                            ===========    ==========     ==========   ========      =======

<CAPTION>
                                                 Deferred         Revenue                            Accumulated
                                                   Stock           Offset                               Other             Total
                                                  Compen-       Relating to       Accumulated       Comprehensive     Stockholders'
                                                  sation          Warrants          Deficit          Income (Loss)        Equity
                                                ----------      -----------      -------------     --------------     -------------
<S>                                             <C>             <C>              <C>               <C>                <C>
BALANCES AT DECEMBER 31, 1999..............        (7,475)               0           (12,109)            --              10,724
  Issuance of common stock for services ...            --               --                 --            --                 187
  Issuance of Series D  preferred  stock
    in  connection with license ...........            --               --                 --            --                  40
  Issuance of Series D preferred  stock,
    net of issuance costs .................            --               --                 --            --              31,042

  Exercise of stock options ...............            --               --                 --            --               3,551
  Repurchase of common stock ..............            --               --                 --            --                (141)
  Deferred stock compensation .............       (18,218)              --                 --            --                  --
  Amortization of deferred stock
    compensation ..........................        13,343               --                 --            --              13,343
  Issuances of Series D warrant in
    connection with content services
    agreement..............................            --               --                 --            --                 159
  Issuance of Series E  preferred  stock
    in connection with acquisition ........            --               --                 --            --              15,466
  Issuance of common stock options in
    connection with acquisition ...........            --               --                 --            --               1,444
  Issuance of common stock in connection
    with initial public offering, net of
    issuance costs of $7,560 ..............                                                                              68,340
  Deferred revenue relating to warrants                --           (1,521)                --            --                  --
  Amortization of warrant .................            --              422                 --            --                 422
  Conversion of preferred  stock into
    common stock upon initial public
    offering ..............................                                                                                  --
  Net loss ................................            --               --            (49,838)           --             (49,838)
    Foreign Currency translation adjustment            --               --                 --            16                  16
  Unrealized loss on investment ...........            --               --                 --            (4)                 (4)

  Comprehensive loss ......................            --               --                 --            --                  --
                                                 --------          --------          --------        ------            --------

BALANCES AT DECEMBER 31, 2000 .............      $(12,350)         $(1,099)          $(61,947)          $12             $94,751
                                                 ========          ========          ========        ======            ========
</TABLE>

                             See accompanying notes


                                      F-6
<PAGE>


                                  AVANTGO, INC.

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                                Year Ended
                                                                                               December 31,
                                                                                               ------------
                                                                                    2000             1999            1998
                                                                                  ---------        --------        -------
<S>                                                                               <C>              <C>             <C>
OPERATING ACTIVITIES:
  Net loss ...................................................................    $ (49,838)       $ (9,215)       $(2,603)
  Adjustments  to  reconcile  net loss to net cash used in  operating
  activities:
    Purchased in process research and development ............................          600              --             --
    Amortization of goodwill, other intangible assets, and deferred stock
       compensation ..........................................................       16,582           2,605             71
    Depreciation and amortization ............................................        1,013             163             50
    Amortization of revenue offset relating to warrant agreements ............          422              --             --
    Issuance of common stock in exchange for services ........................          187              --             --
    Changes in  operating  assets and  liabilities,  net of  business
    acquisition:
      Accounts receivable ....................................................       (3,174)         (1,426)           (52)
      Prepaid expenses and other current assets ..............................         (929)           (230)           (22)
      Other assets ...........................................................         (613)            (15)            (6)
      Accounts payable .......................................................        2,326             764             82
      Accrued liabilities ....................................................        1,000             295              2
      Accrued compensation and related benefits ..............................        1,999             200             32
      Deferred revenue .......................................................        2,278             231             16
                                                                                  ---------        --------        -------
        Net cash used in operating activities ................................      (28,147)         (6,628)        (2,430)

INVESTING ACTIVITIES:
  Purchase of property and equipment .........................................       (8,051)           (871)          (168)
  Business acquisition, net of cash acquired .................................          456              --             --
  Restricted Investments......................................................       (3,438)             --             --
  Cash paid for investments ..................................................      (20,781)        (10,000)            --
  Proceeds from investments ..................................................        8,428           6,025             --
                                                                                  ---------        --------        -------
        Net cash used in investing activities ................................      (23,386)         (4,846)          (168)

FINANCING ACTIVITIES:
  Borrowings under bank line of credit agreement .............................           --              --            189
  Repayment of obligations under bank line of credit agreement ...............          (72)            (71)            (6)
  Principal payments on capital lease obligations ............................           (4)            (10)           (16)
  Proceeds from issuance of convertible preferred stock, net .................       31,042          14,373          3,480
  Proceeds from issuance of convertible notes payable ........................           --             300             --
  Proceeds from issuance of common stock, net ................................       71,750             593             51
                                                                                  ---------        --------        -------
        Net cash provided by financing activities ............................      102,716          15,185          3,698
                                                                                  ---------        --------        -------
Effect of foreign exchange rate changes on cash and cash equivalents .........           16              --             --
                                                                                  ---------        --------        -------
Increase in cash and cash equivalents ........................................       51,199           3,711          1,100
Cash and cash equivalents at beginning of period .............................        5,835           2,124          1,024
                                                                                  ---------        --------        -------
Cash and cash equivalents at end of period ...................................    $  57,034        $  5,835        $ 2,124
                                                                                  =========        ========        =======


SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

  Issuance of preferred stock in exchange for convertible notes payable.......    $      --        $    300        $    --
                                                                                  =========        ========        =======
  Issuance of preferred stock in exchange for license ........................    $      40        $     --        $    --
                                                                                  =========        ========        =======
  Issuance of preferred stock in connection with acquisition .................    $  15,466        $     --        $    --
                                                                                  =========        ========        =======
  Issuance of common stock for notes receivable from stockholder .............    $     606        $    100        $    --
                                                                                  =========        ========        =======
  Warrant issued in connection with a content service agreement ..............    $     159        $     --        $    --
                                                                                  =========        ========        =======
SUPPLEMENTAL DISCLOSURES:
  Cash paid during the period for interest ...................................    $       9        $     18        $    12
                                                                                  =========        ========        =======
</TABLE>

                             See accompanying notes.


                                      F-7
<PAGE>

                                  AVANTGO, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000


1.   THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company

     AvantGo,  Inc.  (the  "Company")  was  incorporated  on  June  30,  1997 in
Delaware. The Company provides software and services that enable and enhance the
use of  Internet-based  content  and  corporate  intranets  to  mobile  devices,
including personal digital assistants and  Internet-enabled  phones. The Company
licenses its AvantGo  M-Business  Server products to help its customers  provide
their employees,  customers,  suppliers and business affiliates with easy access
to business information.  The AvantGo Mobile Internet service allows individuals
to access  Internet-based  content and applications and gives content  providers
and other  businesses  a new medium for reaching  and  interacting  with new and
existing customers, increasing customer acquisition and retention.


Basis of Presentation

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

     The functional  currency of the Company's  foreign  subsidiary is the local
currency.  The Company  translates all assets and liabilities to U.S. dollars at
the current exchange rates as of the applicable  balance sheet date. Revenue and
expenses are  translated  at the average  exchange  rate  prevailing  during the
period.  The gains and losses  resulting from the changes in exchange rates from
year to year have been reported in other comprehensive  income. Gains and losses
resulting from the translation for the foreign subsidiary's financial statements
have not been  material to date.  Net gains and losses  resulting  from  foreign
exchange transactions were not significant during any of the periods presented.

Use of Estimates

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

Cash and Cash Equivalents

     Cash and cash  equivalents  consist of cash and highly  liquid  investments
with insignificant interest rate risk and original maturities of three months or
less at the date of  purchase  and are stated at cost,  which  approximate  fair
value. Cash equivalents  consist  principally of investments in short-term money
market instruments.

Restricted Investments

     At December 31, 2000, the Company's  restricted  investments are classified
as  available-for-sale  but are pledged as collateral against a letter of credit
(see Note 10).  Restricted  investments  are held in the Company's name by major
financial institutions.

Short-Term Investments

     Short-term   investments   consist  principally  of  commercial  paper  and
corporate notes with original  maturities greater than 90 days and are stated at
amounts  that  approximate  fair  market  value.  The Company  accounts  for its
short-term  investments  in accordance  with  Statement of Financial  Accounting
Standards  No.  115,  "Accounting  for  Certain  Investments  in Debt and Equity
Securities."  Management  determines  the  appropriate  classification  of  debt
securities at the time of purchase and reevaluates  such  designation as of each
balance  sheet date.  The  Company  classifies  its  short-term  investments  as
available-for-sale.  Available-for-sale  investments  are recorded at fair value
with  unrealized  gains and losses  reported in other  comprehensive  loss. Fair
values of  investments  are  based on quoted  market  prices,  where  available.


                                      F-8
<PAGE>

                                  AVANTGO, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000


Interest and other income includes realized gains and losses and declines in the
value of short-term  investments  determined to be other than  temporary,  which
have been immaterial to date. These valuation  adjustments are derived using the
specific  identification  method for determining  the cost of investments  sold.
Dividend and interest income is recognized when earned.

Fair Value of Financial Instruments

     The carrying value of the Company's  financial  instruments,  which include
cash and cash equivalents,  short-term investments, accounts receivable, current
liabilities,  and notes  receivable from  stockholders,  approximate  their fair
value.

Property and Equipment

     Property and equipment are stated at cost less accumulated depreciation and
amortization.  Depreciation is computed using the straight-line  method over the
estimated  useful  lives of three  years.  Equipment  under  capital  leases  is
amortized  over the  shorter  of the  estimated  useful  life or the life of the
lease.  Leasehold improvements are amortized over the lease life of seven years.
Useful  lives  are  evaluated  regularly  by  management  in order to  determine
recoverability in light of current technological conditions.

Goodwill and Other Intangible Assets

     Goodwill and other intangible  assets result from prepayments of technology
royalties and from the Globalware Computing  acquisition accounted for under the
purchase  method (see Note 2).  Amortization  of goodwill  and other  intangible
assets is  provided on the  straight-line  basis over the  respective  estimated
useful lives of the assets. The Company  periodically  evaluates whether changes
have occurred that would require revision of the remaining estimated useful life
of the  assigned  goodwill  or  intangible  assets or  render  the  goodwill  or
intangibles not recoverable.  If such circumstances arise, the Company would use
an estimate of the undiscounted value of expected future operating cash flows to
determine  whether  the  goodwill  or  intangibles  are  impaired.  To date,  no
impairment losses have been recorded.

Software Development Costs

     The Company  accounts for software  development  costs in  accordance  with
Financial  Accounting Standards Board ("FASB") Statement No. 86, "Accounting for
the Costs of Computer Software to be Sold, Leased or Otherwise  Marketed" ("FASB
86"), under which certain software  development costs incurred subsequent to the
establishment  of  technological  feasibility are capitalized and amortized over
the  estimated  lives of the  related  products.  Technological  feasibility  is
established upon completion of a working model. Through December 31, 2000, costs
incurred  subsequent to the establishment of technological  feasibility have not
been significant and all software development costs have been charged to product
development expense in the accompanying consolidated statements of operations.

Concentration of Credit Risk

     Financial   instruments   that   potentially   subject  the  Company  to  a
concentration  of credit risk consist of cash and cash  equivalents,  short-term
investments and accounts  receivable.  Cash and cash  equivalents and short-term
investments are deposited with four high-credit quality financial  institutions.
Accounts receivable consists of balances due from a limited number of customers.
The Company markets,  sells and grants credit to its customers without requiring
collateral or third-party guarantees. The Company monitors


                                      F-9
<PAGE>

                                  AVANTGO, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000


its exposure for credit losses and maintains  appropriate  allowances.  To date,
the Company has not experienced any material losses with respect to its accounts
receivable. For the year ended December 31, 1999 two customers accounted for 25%
and 15%,  respectively of total  revenues.  For the year ended December 31, 2000
one of these customers accounted for 26% of total revenues.

Revenue Recognition

     The Company licenses software under  non-cancelable  license agreements and
provides services including training, consulting and maintenance,  consisting of
product support  services and  unspecified  product  updates.  The Company sells
placement service contracts which provide customers with priority  visibility on
the Company's  web-site,  and also sells  advertising  on the website and on the
device  delivered  through  AvantGo Mobile  Internet,  a service that is free to
consumers.

     License revenues are recognized when a non-cancelable license agreement has
been signed,  the software product has been shipped,  there are no uncertainties
surrounding   product   acceptance,   the  fees  are   fixed  or   determinable,
collectibility is probable,  and  vendor-specific  objective  evidence exists to
allocate the total fee to elements of the  arrangement.  In  instances  where no
vendor-specific  objective  evidence exists and the only undelivered  element is
maintenance,  revenue is recognized ratably over the term of the agreement.  The
Company's  agreements  with its customers  and resellers do not contain  product
return  rights.  Revenues  from  maintenance,  which consist of fees for ongoing
support  and  product  updates,  are  recognized  ratably  over  the term of the
contract,  typically one year.  Consulting  revenues are  primarily  related  to
implementation  services  performed on a time-and materials basis under separate
service arrangements.  Training revenues are generated from classes offered both
on-site  and at  customer  locations.  Revenues  from  consulting  and  training
services are recognized as the services are performed.

     Revenues from placement  agreements are recognized ratably over the service
period,  which  in  most  instances  is  between  three  months  and  one  year.
Advertising  revenues  are  recognized  based  upon the  lesser  of the ratio of
impressions delivered over the total guaranteed impressions or the straight line
basis over the term of the advertising contract.

     The Company  also earns  revenues  from  advertising  barter  transactions.
Revenues and costs from advertising  barter  transactions are recognized  during
the  period  in  which  the  placement  or  advertising  is  delivered.   Barter
transactions are recorded at the fair value of the goods or services provided or
received,  whichever  is more  readily  determinable  in the  circumstances.  In
determining  the value of the  goods or  services  provided,  the  Company  uses
historical pricing of comparable cash transactions.  Revenues earned from barter
transactions were $407,000 and $92,000 for the years ended December 31, 2000 and
1999. No revenues were earned from barter transactions for 1998.

Stock-Based Compensation

     The Company  accounts for employee stock options using the intrinsic  value
method  in  accordance  with  Accounting   Principles   Board  Opinion  No.  25,
"Accounting  for Stock  Issued to  Employees"  ("APB  25"),  and has adopted the
disclosure-only  alternative of FASB Statement No. 123,  "Accounting  for Stock-
Based Compensation" ("FASB 123").

     In  March  2000,  the  FASB  issued   Interpretation  No.  44  ("FIN  44"),
"Accounting  for  Certain   Transactions   Involving  Stock  Compensation  -  an
Interpretation  of APB Opinion No. 25." FIN 44 clarifies the  application of APB
25 with respect to stock-related compensation.  The Company's adoption of FIN 44
on July 1, 2000 did not have a  material  effect on the  financial  position  or
results of operations.

     All stock option  awards to  non-employees  are accounted for at their fair
value, as calculated using the Black-Scholes  model, in accordance with FASB 123
and Emerging  Issues Task Force  Consensus  No.  96-18,  "Accounting  for Equity
Instruments  That Are  Issued  to Other  Than  Employees  for  Acquiring,  or in
Conjunction  with  Selling,  Goods  or  Services"  ("EITF  96-18").  The  option
arrangements are subject to periodic re-valuation over their vesting terms.


                                      F-10
<PAGE>

                                  AVANTGO, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000


Advertising Expense

     The cost of advertising is expensed as incurred.  Advertising  costs, which
are included in sales and  marketing  expense,  were  approximately  $8,772,000,
$91,000 and  $51,000,  for the years ended  December  31,  2000,  1999 and 1998,
respectively, including $83,000 resulting from non-monetary transactions for the
year ended December 31, 1999.

Net Loss Per Share

     Basic  and  diluted  net loss per  share  information  for all  periods  is
presented under the requirement of FASB Statement No. 128,  "Earnings per Share"
("FASB 128").  Basic and diluted net loss per share has been computed  using the
weighted-average number of shares of common stock outstanding during the period,
less  shares that may be  repurchased,  and  excludes  any  dilutive  effects of
options, warrants, and convertible securities. Shares subject to repurchase will
be  included  in the  computation  of net loss  per  share  when  the  Company's
commitment to repurchase these shares lapses.

     Pro  forma  basic and  diluted  net loss per  share  has been  computed  as
described above and also gives effect,  under Securities and Exchange Commission
guidance,  to the  conversion  of  preferred  shares  not  included  above  that
automatically  converted to common shares immediately prior to the completion of
the Company's  initial public offering,  using the if-converted  method from the
original date of issuance (See Note 6).

     Diluted net loss per share reflects the potential dilution of securities by
adding other common stock equivalents,  including stock options,  shares subject
to repurchase, warrants and convertible preferred stock, to the weighted average
number of common shares  outstanding for a period, if dilutive.  All potentially
dilutive securities have been excluded from the computation,  as their effect is
anti-dilutive.

     The following table presents the calculation of basic and diluted,  and pro
forma basic and diluted net loss per share (in  thousands,  except share and per
share amounts):

<TABLE>
<CAPTION>
                                                                                     Year Ended December 31,
                                                                         -------------------------------------------------
                                                                              2000              1999               1998
                                                                         ------------       ------------       -----------
<S>                                                                      <C>                <C>                <C>
Historical:
   Net loss ...........................................................  $    (49,838)      $     (9,215)      $    (2,603)
                                                                         ============       ============       ===========
   Weighted average shares of common stock outstanding ................    16,366,727          8,924,914         7,419,275
   Less weighted average shares that may be repurchased ...............    (4,289,389)        (4,548,317)       (4,684,523)
                                                                         ------------       ------------       -----------

   Weighted average shares of common stock
     outstanding used in computing basic and
     diluted net per loss share .......................................    12,077,338          4,376,597         2,734,752
                                                                         ============       ============       ===========
   Basic and diluted net loss per share ...............................  $      (4.13)      $      (2.11)      $     (0.95)
                                                                         ============       ============       ===========

Pro Forma:
   Net loss ...........................................................  $    (49,838)
                                                                         ============
   Weighted-average shares used in computing basic
     and diluted net loss per share (from above) ......................    12,077,338
</TABLE>



                                      F-11
<PAGE>

                                  AVANTGO, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000


<TABLE>
<S>                                                                        <C>
   Pro forma adjustment to reflect weighted effect of
     conversion of convertible  preferred  stock from the date
     of issuance (unaudited) ..........................................    11,312,443
                                                                           ----------
   Weighted-average shares used in computing pro
     forma basic and diluted net per loss share (unaudited) ...........    23,389,781
                                                                           ==========
   Pro forma basic and diluted net loss per share (unaudited) .........    $    (2.13)
                                                                           ==========
</TABLE>

     If the Company had reported net income,  the  calculation of historical and
pro forma basic and diluted loss per share would have included  approximately an
additional  9,866,258,  5,226,544 and 5,135,357 common equivalent shares related
to the outstanding stock options,  shares subject to repurchase and warrants not
included above  (determined using the treasury stock method) for the years ended
December 31, 2000, 1999 and 1998, respectively.

Income Taxes

     The Company accounts for income taxes in accordance with FASB Statement No.
109,  "Accounting for Income Taxes" ("FASB 109"),  which requires the use of the
liability  method in accounting for income taxes.  Under FASB 109,  deferred tax
assets and liabilities  are measured based on differences  between the financial
reporting  and tax bases of assets and  liabilities  using enacted tax rates and
laws that are  expected to be in effect  when the  differences  are  expected to
reverse.

Segment Information

     The Company  adopted  FASB 131 in the year ended  December  31,  1998.  The
Company  has only  one  operating  segment  for  which  management  reviews  the
consolidated  data, and therefore there is no impact on the Company's  financial
statements of adopting FASB 131.

Recent Accounting Pronouncements

     In December  1999,  the  Securities  and Exchange  Commission  issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial  Statements." SAB
101  provides  guidance on the  recognition,  presentation,  and  disclosure  of
revenue in financial  statements of all public registrants.  The adoption of SAB
101 has not had a material impact on the Company's revenue recognition  policies
or their reported results of operations.

     Statement of Financial Accounting Standard No.133 ("SFAS 133"),  Accounting
for  Derivative  Instruments  and  Hedging  Activities,  as amended by SFAS 137,
Accounting for Derivative  Instruments and Hedging  Activities - Deferral of the
Effective Date of FASB  Statement No. 133, and SFAS 138,  Accounting for Certain
Derivative  Instruments  and Certain  Hedging  Activities,  is effective for the
Company as of January 1, 2001. The standards  require that the Company recognize
all  derivatives  as either


                                      F-12
<PAGE>

                                  AVANTGO, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000


assets or liabilities  measured at fair value.  The statement also requires that
changes in the derivative's fair value be recognized in earnings unless specific
hedge accounting criteria are met. The Company believes the adoption of SFAS 133
will not have a material effect on the financial statements,  since it currently
does not hold derivative instruments or engage in hedging activities.

2.       Business Acquisition

     Effective May 26, 2000, the Company  acquired  Globalware  Computing,  Inc.
("Globalware"), a company which develops and sells software designed to increase
connectivity  between business and personal databases using handheld devices, in
a transaction  accounted  for as a purchase.  The  operations of Globalware  are
included  in  the  consolidated   statement  of  operations  from  the  date  of
acquisition.   The  purchase   consideration  was  approximately  $17.1  million
consisting  of 1,933,300  shares of preferred  stock with a fair value of
$15,500,000,  stock  options to acquire  180,438  shares of common  stock with a
fair value of $1,400,000, and approximately $200,000 of acquisition costs.

     The  fair  values  of  equity  securities  issued  by  the  Company  in the
acquisition were determined as follows: common stock--$8.00 per share based on a
discount  from recent per share prices of  preferred  stock sales to reflect the
superior  rights of the preferred  stock;  and common stock  options--$8.00  per
share based on a fair value  computation  as of the  acquisition  date using the
Black-Scholes valuation mode.

     The purchase consideration was allocated to the acquired assets and assumed
liabilities based on deemed fair values as follows (in thousands):

<TABLE>
<S>                                                                                              <C>
     Net tangible assets..................................................................       $   666
     Intangible assets:
          Purchased technology............................................................         3,100
          Assembled workforce.............................................................           530
          Goodwill........................................................................        12,214
                                                                                                  ------
               Total intangible assets....................................................        15,844
     Purchased in-process research and development charged to operations for the year
           ended December 31, 2000........................................................           600
                                                                                                 -------
               Total purchase consideration...............................................       $17,110
                                                                                                 =======
</TABLE>

     Goodwill arising from the acquisition is being amortized on a straight-line
basis over three years.  Identified  intangible  assets will be  amortized  over
their estimated useful lives over three years.

     Purchased  in-process research and development consists of a single project
to develop connectivity  software that enables end users to conduct wireless and
modem  synchronization from Palm devices to the Globalware server. This tool has
been added to the  Company's  suite of products.  The  Company's  management  is
primarily  responsible for estimating the fair value of the purchased in-process
research  and  development.  The  Company  estimated  the  revenues,  costs  and
resulting  net cash flows from the project,  and  discounted  the net cash flows
back to  their  net  present  value.  These  estimates  were  based  on  several
assumptions,  including  those  summarized  below.  The resultant value was then
adjusted to reflect only the value  creation  effort of Globalware  prior to the
acquisition  and further  reduction by the estimated  value of core  technology,
which was included in capitalized purchased technology.

     Revenues and operating profit  attributable to the in-process  research and
development were estimated over a three-year  projection  period.  The resulting
projected net cash flows were discounted to their present value using a discount
rate of 23%, which was calculated based on the weighted-average cost of capital,
adjusted  for the  technology  risk  associated  with the  purchased  in-process
research and  development.  The technology risk was considered to be significant
due to the rapid pace of technological change in the software industry.


                                      F-13
<PAGE>

                                  AVANTGO, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000


     The  following   unaudited  pro  forma  adjusted  summary   represents  the
consolidated results of operations for the year ended December 31, 2000 and 1999
as if the acquisition of Globalware had been  consummated on January 1, 1999 and
is not intended to be indicative  of future  results (in  thousands,  except per
share amounts) (unaudited).

<TABLE>
<CAPTION>
                                                                           Year ended
                                                                          December 31,
                                                                       2000          1999
                                                                       ----          ----
<S>                                                                  <C>          <C>
Pro forma adjusted total revenues.................................   $17,281      $  4,324
Pro forma adjusted net loss.......................................   (51,359)      (14,190)
Pro forma adjusted net loss per share--basic and diluted..........   $ (3.80)     $  (2.25)
</TABLE>

     The pro forma results of operations  include  historical  operations of the
Company  and  Globalware  adjusted  to reflect  certain  pro forma  adjustments,
including  amortization of goodwill and other intangible assets arising from the
acquisition and do not include the charge for purchased  in-process research and
development of $600,000 since it is a nonrecurring  charge. These results do not
purport to be indicative of what would have  occurred had the  acquisition  been
made as of those  dates or the results of  operations  which may occur in future
periods.

3.   SHORT-TERM INVESTMENTS

     The following is a summary fair value of available  for sale  securities at
December 31, 2000 (in thousands)

<TABLE>
<CAPTION>
                                                                     Gross            Gross
                                                 Amortized         Unrealized       Unrealized          Fair
                                                    Cost             Gains           Losses             Value
                                                ---------------------------------------------------------------

<S>                                               <C>              <C>               <C>                <C>
Money market mutual funds                         $23,051          $    --           $     --           $23,051

Auction rate preferred stock                        9,785                                  --             9,785

Corporate bonds and commercial paper               38,540                6                (10)           38,536
                                                ---------------------------------------------------------------
                                                  $71,376          $     6           $    (10)          $71,372
                                                ===============================================================

Included in short-term investments                                                                      $16,432
Included in cash and cash equivalents                                                                    54,940
                                                                                                        -------
                                                                                                        $71,372
                                                                                                        =======
</TABLE>

     Short-term  investments  consisted  primarily  of money  market  funds  and
commercial paper as of December 31, 1999. The amortized cost of such investments
approximated their fair value.



                                      F-14
<PAGE>

                                  AVANTGO, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000


4.   PROPERTY AND EQUIPMENT

     Property and equipment consists of the following (in thousands):

                                                                December 31,
                                                             ------------------
                                                             2000         1999
                                                             ------       -----
       Computers and equipment...........................    $5,275       $ 915
       Furniture, fixtures and improvements..............     3,954         196
                                                             ------       -----
                                                              9,229       1,111
       Less accumulated depreciation and amortization....    (1,231)       (218)
                                                             ------       -----
                                                             $7,998       $ 893
                                                             ======       =====

5.   GOODWILL AND OTHER INTANGIBLE ASSETS

     Goodwill and other intangible  assets consists of the following at December
31, 2000 (in thousands)


                                                             Life (years)
Purchased technology                         $ 3,100             3
Assembled workforce                              530             3
Prepaid technology royalties                      40             3
Goodwill                                      12,214             3
                                             -------
Goodwill and other intangible assets          15,884
Accumulation amortization                     (3,081)
                                             -------
Goodwill and other intangible assets, net    $12,803
                                             =======

     The Company did not have  goodwill or other  intangible  assets at December
31, 1999.





6.   INCOME TAXES

     There has been no provision for U.S. federal, state or foreign income taxes
for any period as the Company has incurred  operating  losses in all periods and
for all jurisdictions.

     Deferred income taxes reflect the net tax effects of temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets are as follows (in thousands):

                                                               December 31,
                                                          ---------------------
                                                            2000          1999
                                                          --------      -------
      Deferred tax assets:
         Net operating loss carryforwards..............   $ 13,985      $ 3,542
         Deferred revenue                                      976           99
         Other.........................................      2,227          261
                                                          --------      -------
      Total deferred tax assets........................     17,188        3,902
      Valuation allowance..............................    (17,188)      (3,902)
                                                          --------      -------
      Net deferred tax assets..........................   $     --      $    --
                                                          ========      =======

     Realization  of deferred tax assets is dependent upon future  earnings,  if
any, the timing and amount of which are uncertain. Accordingly, the net deferred
tax assets  have been  fully  offset by a  valuation  allowance.  The  valuation
allowance  increased  by  $12,116,000  and  $2,764,000  during  the years  ended
December 31, 2000 and 1999, respectively.

     As of December 31, 2000, the Company had net operating  loss  carryforwards
for federal income tax purposes of approximately $35.0 million,  which expire in
fiscal years 2012 through 2020 and federal  research and development tax credits
of approximately $500,000 which expire in the years 2012 through 2020.

     Utilization  of the  Company's  net  operating  loss  carryforwards  may be
subject  to  a  substantial  annual  limitation  due  to  the  ownership  change
limitations  provided by the Internal Revenue Code and similar state provisions.
Such an annual  limitation  could result in the  expiration of the net operating
loss carryforwards before utilization.

7.   BANK LINE OF CREDIT AGREEMENT

     In January 1998, the Company entered into a line of credit agreement with a
bank which provides for borrowings of up to $300,000. Borrowings of $40,000 were
outstanding under the line of credit at December 31, 2000.  Borrowings under the
line of credit bear interest at the bank's prime plus 0.5% (9.5% at December 31,
2000).  The line of credit matures in July 2001 and borrowings are payable in 32
equal monthly installments  commencing in December 1998.  Outstanding borrowings
under the  agreement  are  collateralized  by  substantially  all the  Company's
assets.


                                      F-15
<PAGE>

                                  AVANTGO, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000


8.   CONVERTIBLE NOTES PAYABLE

     In April 1999, the Company issued a convertible note payable to a vendor in
exchange for $300,000 in cash. The note payable bore interest at 8% per year and
was  convertible  into shares of Series C preferred  stock at $3.94 per share at
the  option  of the  payee  and  upon the sale of such  shares  by the  Company.
However, no interest was payable by the Company in case of conversion.  The note
payable was converted  into 76,142 shares of the Company's  Series C convertible
preferred  stock in connection with the Company's sale of the preferred stock in
June 1999.

9.  STOCKHOLDERS' EQUITY

Common Stock

     In October 2000, the Company sold 6,325,000 shares of common stock in its
initial public offering,  including the underwriters  over-allotment  of 825,000
shares, with proceeds, net of commissions, to the Company of approximately $68.3
million.  In  conjunction  with the  initial  public  offering,  all of the then
outstanding  shares of Series A, B, C, D and E of the Company's  preferred stock
converted into shares of common stock on a one-to-one basis.

Preferred Stock

      Effective  September  2000, the  stockholders  of the Company  approved an
amendment to the Company's certificate of incorporation  authorizing  10,000,000
shares of preferred stock. The Board of Directors has the authority to issue the
preferred  stock  in one or  more  series  and to fix its  rights,  preferences,
privileges,  and  restrictions,   including  dividend  rights,  dividend  rates,
conversion  rights,  voting  rights,  terms of  redemption,  redemption  prices,
liquidation  preferences , and the number of shares  constituting  any series or
designation of the series.

Common Stock Issued to Founders

     In August and  September  1997,  the Company  issued  5,600,000  shares and
872,000 shares of common stock respectively, to the Company's founders at $0.005
per share, which the Company determined to be the fair value of the common stock
upon the formation of the Company. These common shares are subject to repurchase
rights which allow the Company to  repurchase  the shares at $0.005 per share in
the event of  termination  of  employment,  death or  disability.  Of the August
issuance,  25% is not subject to  repurchase,  and the other 75%  provides for a
lapse of repurchase rights ratably over 48 months.  The September stock issuance
generally  expires  25%  after the  first  year and  ratably  over  three  years
thereafter.  At December 31,  2000,  603,500  shares were subject to  repurchase
rights.

Warrants

     On February  1, 2000,  the  Company  issued a warrant to  purchase  117,558
shares of series D preferred stock at an exercise price of $8.36 per share.  The
warrant was issued in connection with a Content and Service  agreement  pursuant
to which the Company and Yahoo!  have agreed to co-brand  their content and make
it available to users of their services.  The service component of the agreement
provides that the Company  agrees to make the AvantGo Mobile  Internet  service,
including  but not limited to Yahoo!'s  content,  available to Yahoo!  users.  A
total of 58,779 shares vested at the closing of the Company's Series D


                                      F-16
<PAGE>

                                  AVANTGO, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000


Preferred  Stock  financing in March 2000.  The  remaining  shares vested on the
effective  date of the  Company's  initial  public  offering.  The  warrant  was
exercised  in October  2000 in a net  issuance  for a total of 71,562  shares of
common stock.  The fair value of $437,000 was estimated using the  Black-Scholes
valuation  model with the  following  assumptions:  risk-free  interest  rate of
6.50%,  expected life of 3 years,  expected dividend yield of 0%, and volatility
of 70%. The fair value of this warrant is being charged to  operations  over the
term of the business arrangement.

     The company issued a second warrant on February 1, 2000 to purchase 117,558
shares of Capital Stock at the average fair value of the company's  common stock
over the most recent twenty  business days before the vesting date.  The warrant
expired  when the Company  agreed to purchase  $1,000,000  of  advertising  from
Yahoo, in accordance with terms of the warrant.

     In March 2000, the company  entered into a software  license  agreement and
three year Channel Management Agreement  (Agreements).  In connection with these
Agreements,  the company issued a warrant to purchase 358,851 shares of Series D
preferred  stock at an  exercise  price of  $8.36  per  share.  The  warrant  is
immediately  exercisable  and non  forfeitable  and expires three years from the
issue date. The fair value of the warrant of $1,521,000 was calculated using the
Black-Scholes valuation model with the following assumptions: risk-free interest
rate of 6.5%;  expected  life of 3 years;  expected  dividend  yield of 0%;  and
volatility  rate of 70%. The  estimated  fair value was  originally  recorded in
equity and is being amortized as a reduction to revenue over the three year term
of the Agreements.

Employee Stock Purchase Plan

     The Board of Directors  adopted the 2000 Employee  Stock Purchase Plan (the
"ESPP") in May 2000 that was  effective  upon the  completion  of the  Company's
initial public offering of its common stock. A total of 350,000 shares of common
stock have been  reserved for issuance  under our ESPP.  Eligible  employees may
purchase  common stock at the lesser of the Company's  initial  public  offering
price  per  share of  common  stock  or 85% of the  last  day of the  applicable
six-month  purchase  period.  As of December 31, 2000, no shares had been issued
under the ESPP and the first purchase period ends on July 31, 2001.

Stock Option Plan

     The Company has reserved  13,213,600  shares of common stock under the 1997
Stock Option Plan (the "1997 Plan").  The 1997 Plan provides for incentive stock
options, as defined by the Internal Revenue Code, to be granted to employees, at
an  exercise  price not less than  100% of the fair  value at the grant  date as
determined by the Board of Directors,  unless the optionee is a 10% shareholder,
in which  case the option  price will not be less than 110% of such fair  market
value. The 1997 Plan also provides for  nonqualified  stock options to be issued
to employees and  consultants  at an exercise  price of not less than 85% of the
fair value at the grant date.  Options granted  generally have a maximum term of
10 years from grant date, are immediately  exercisable and generally vest over a
four year period.  The plan  provides that shares issued under the plan prior to
vesting are subject to repurchase by the Company upon  termination of employment
at the original price paid for the shares.  The  repurchase  rights lapse at the
rate of 25%  after one year and  ratably  on a  monthly  basis  for three  years
thereafter.   As  of  December  31,  2000,  2,245,180  shares  were  subject  to
repurchase.

     In  January  2000  and  July  2000,  the  Board of  Directors  reserved  an
additional  1,800,000 and 4,000,000  shares of common stock,  respectively,  for
issuance under the 1997 Plan.

     In May 2000, the Board of Directors  adopted the 2000 Stock  Incentive Plan
(the "2000 Plan").  There are 1,500,000  shares of common stock  authorized  for
issuance  under the plan and any shares  reserved but not granted under the 1997
Plan or  returned  to the 2000 Plan upon  termination  of  options  will also be
available for issuance.  The terms of the 2000 Plan are substantially similar to
the 1997 Plan,  except that options  cannot be exercised  prior to vesting,  and
there are no repurchase rights.


                                      F-17
<PAGE>

                                  AVANTGO, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000


     A summary  of the  Company's  stock  option  activity  under the Plan is as
follows:

                                                                    Weighted-
                                                   Number of         Average
                                                    Shares        Exercise Price
                                                  ---------       --------------
     Granted ................................         4,000          $0.03
                                                  ---------
Outstanding at December 31, 1997 ............         4,000           0.03
     Granted ................................     2,295,320           0.06
     Exercised ..............................    (1,698,120)          0.04
     Canceled ...............................       (60,000)          0.13
                                                  ---------
Outstanding at December 31, 1998 ............       541,200           0.12
     Granted ................................     3,891,000           1.09
     Exercised ..............................    (1,805,942)          0.38
     Canceled ...............................       (30,000)          0.13
                                                  ---------
Outstanding at December 31, 1999 ............     2,596,258           1.40
     Granted ................................     6,552,520           5.83
     Exercised ..............................    (1,794,445)          2.37
     Canceled ...............................      (234,587)          4.45
                                                  ---------
Outstanding at December 31, 2000 ............     7,119,746          $5.12
                                                  =========

     The following table summarizes  information about stock options outstanding
and exercisable at December 31, 2000:

<TABLE>
<CAPTION>
                                                    Options Outstanding                   Options Exercisable
                                                    -------------------                   -------------------
                                                          Weighted-
                                                           Average
                                                          Remaining       Weighted-                      Weighted-
                                                         Contractual       Average                        Average
                  Range of              Number of           Life          Exercise       Number of       Exercise
                Exercise Prices           Shares         (in Years)        Price           Shares         Price
                ---------------           ------         ----------        -----           ------         -----
<S>                                     <C>              <C>             <C>            <C>             <C>
                 $0.03--0.75               487,866            8.03        $ 0.26          433,299        $ 0.24
                 $1.25--2.33             2,639,708            8.91          2.02        2,614,022          2.04
                 $2.90--3.50               583,125            9.24          3.18          583,125          3.18
                 $4.50--5.63               304,600            9.44          4.88          293,100          4.85
                  6.00--7.25               220,734            9.69          6.24          124,234          6.00
                  8.36-8.90              2,110,208            9.61          8.58        2,110,208          8.58
                 9.45--10.00               507,005            9.75          9.55          387,655          9.45
                    12.00                  257,500            9.74         12.00          257,500         12.00
                    16.13                    9,000            9.80         16.13            --              --
                                         ---------                                      ---------
                    Total                7,119,746            9.12          5.12        6,803,143          4.99
</TABLE>


Shares Reserved for Future Issuance


As of December 31, 2000,  shares of common  stock  reserved for future  issuance
were as follows:

Stock options available for grant................................    2,475,785
Stock options outstanding........................................    7,119,746
Warrants outstanding.............................................      358,851
                                                                       -------
Total shares reserved for future issuance........................    9,954,382
                                                                     =========


                                      F-18
<PAGE>

                                  AVANTGO, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000


Pro Forma Disclosure of the Effect of Stock-Based Compensation

     Pro forma  information  regarding  results of  operations  and net loss per
share is required  by FASB 123,  which also  requires  that the  information  be
determined as if the Company had accounted for its employee  stock options under
the fair  value  method  of FASB 123.  The fair  value  for  these  options  was
estimated at the date of grant using a  Black-Scholes  option pricing model with
the following weighted average  assumptions:  a risk-free interest rate of 6.0%,
no dividend yield, a weighted  average  expected life of the option of 4.5 years
and  volatility  factors of 0, 0 and 0.7 for the years ended  December 31, 1998,
1999 and 2000, respectively.

     The option  valuation  models are developed for use in estimating  the fair
value  of  traded  options  that  have no  vesting  restrictions  and are  fully
transferable.  In addition,  option valuation models require the input of highly
subjective assumptions,  including the expected life of the options. Because the
Company's employee stock options have  characteristics  significantly  different
from  those of traded  options  and  because  changes  in the  subjective  input
assumptions  can  materially  affect the fair value  estimate,  in  management's
opinion,  the  existing  models do not  necessarily  provide a  reliable  single
measure of the fair value of its employee stock options.

     Had compensation cost for the Company's stock-based compensation plans been
determined  using the fair value at the grant dates for awards under those plans
calculated  using the minimum  value method of FASB 123, the  Company's net loss
and pro forma basic and diluted net loss per share would have been  increased to
the pro forma amounts indicated below (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                                            Year Ended December 31,
                                                                ----------------------------------------------
                                                                    2000               1999             1998
                                                                    ----               ----             ----
<S>                                                             <C>                  <C>              <C>
     Pro forma net loss......................................   $(51,096)            $(6,411)         $(2,532)
     Pro forma basic and diluted net loss per share..........   $  (4.23)            $ (1.46)         $ (0.95)
</TABLE>

     The  weighted  average  fair value of options  granted,  which is the value
assigned to the options under FASB 123, was $4.35,  $3.18, and $0.29 for options
granted during the years ended December 31, 2000, 1999 and 1998 respectively.

     The pro  forma  impact  of  options  on the net  loss for the  years  ended
December  31, 2000 and 1999 is not  representative  of the effects on net income
(loss) for future years,  as future years will include the effects of additional
years of stock option grants.

Deferred Stock Compensation

     The Company recorded deferred stock compensation of $17,636,000, $8,186,000
and  $456,000  during  the  years  ended  December  31,  2000,  1999  and  1998,
respectively,  representing  the  difference  between the exercise price and the
deemed fair value for  financial  accounting  purposes of the  Company's  common
stock on the date the stock  options  were  granted.  In the absence of a public
market for the Company's  common  stock,  the deemed fair value was based on the
price per share of recent  preferred stock  financings.  These amounts are being
amortized by charges to operations  over the vesting  periods of the  individual
stock  options  using a graded  vested  method.  Such  amortization  amounted to
approximately  $11,998,000,  $2,432,000 and $71,000 for the years ended December
31, 2000,  1999 and 1998,  respectively.  The expected annual  amortization  for
stock options granted through December 31, 2000, (assuming no cancellations) for
the next four years will be as follows:


                                      F-19
<PAGE>

                                  AVANTGO, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000


               2001....................................      $7,206,000
               2002....................................      $3,341,000
               2003....................................      $1,160,000
               2004....................................        $ 70,000

     The Company also recorded  deferred  stock  compensation  of  approximately
$582,000  and  $1,509,000  during the years  ended  December  31, 2000 and 1999,
respectively,  relating to the  issuance  of 174,000  and 266,000 of  consultant
options for  administrative  and sales and marketing  services.  This amount was
computed using the Black-Scholes option valuation model. Unvested shares will be
remeasured  at each  measurement  date,  as they are  variable  awards,  and the
related  amortization  will be charged to operations  over the remaining term of
the related consulting  agreements.  Such amortization amounted to approximately
$1,345,000  and  $173,000  for the  years  ended  December  31,  2000 and  1999,
respectively.  The  assumptions  used to compute the value of the options at the
grant  date  under  Black-Scholes  are as  follows:  expected  volatility,  0.7;
expected life, 5 years;  expected  dividend  yield,  0%; and risk-free  interest
rate, 6.0%.

Notes Receivable From Stockholders

     During  2000  and  1999,   the  Company   issued   $948,000  and  $100,000,
respectively,  of full recourse notes  receivable from  stockholders  which bear
interest at rates ranging from 6.5% to 8.5% per annum in  consideration  for the
exercise of stock options and the purchase of Series D Preferred  Stock.  During
2000, a note receivable of $342,000 was repaid in full plus interest.  The notes
are  collateralized  by the  underlying  shares  of common  stock and  mature on
various dates through fiscal 2005.

10.  COMMITMENTS

Leases

     The Company leases its  facilities  under various  noncancelable  operating
leases that expire at various dates through 2007.  Rent expense under  operating
lease arrangements  amounted to $1,537,000,  $374,000 and $109,000 for the years
ended December 31, 2000, 1999, and 1998  respectively.  The original cost on the
equipment  under capital leases is $34,000 and is fully amortized as of December
31,  2000.  The  capital  lease  obligations  are paid in full.  Future  minimum
payments under operating leases are as follows (in thousands):

Year ending December 31,
          2001..................................................      $  3,486
          2002..................................................         2,851
          2003..................................................         2,213
          2004..................................................         2,300
          2005..................................................         2,327
          Thereafter............................................         4,059
                                                                      --------
                                                                      $ 17,236
                                                                      ========

     The Company  maintains  two  restricted  certificates  of deposit  totaling
$3,438,000 held as collateral for the operating  leases for two of the Company's
facilities.

11.  EMPLOYEE BENEFIT PLAN

     The Company has a 401(k) plan that allows eligible  employees to contribute
up to 15% of their pretax salary, subject to annual limits. Contributions by the
Company  are at the  discretion  of the  Board of  Directors.  No  discretionary
contributions have been made by the Company to date.


                                      F-20
<PAGE>

                                  AVANTGO, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000


12.      RELATED PARTY TRANSACTION

     The Company has entered into two consulting  agreements  with R.B. Webber &
Company,  Inc., which is related to one of the Company's directors.  Pursuant to
these consulting agreements, R.B. Webber & Company, Inc. has provided consulting
services  to the  Company  with  respect  to the  development  of the  Company's
business  plan and the  performance  of a market  study.  The Company  paid R.B.
Webber & Company,  Inc. $392,000,  $115,000 and $24,000 for such services during
the years ended December 31, 2000, 1999, and 1998 respectively.

13.      QUARTERLY RESULTS OF OPERATIONS(UNAUDITED)

     The following table contains, for the period presented,  selected data from
our  consolidated  Statements of Operations.  The data has been derived from our
unaudited  consolidated  financial  statements,  and,  in  the  opinion  of  our
management,  include  all  adjustments,  consisting  only  of  normal  recurring
adjustments  that  are  necessary  for a fair  presentation  of the  results  of
operations for these periods.

<TABLE>
<CAPTION>
                                                              [In thousands, except per share data]
                                                                        Three Months Ended
                                                  March 31           June 30         September 30        December 31
<S>                                             <C>               <C>                <C>                 <C>
2000
Total revenues                                    $ 1,661           $  3,456           $  4,636           $  6,565
Total costs and expenses                            9,309             14,952             21,324             23,153
Net loss                                           (7,431)           (11,001)           (16,231)           (15,175)
Basic and diluted net loss per share                (1.30)             (1.69)             (2.67)             (0.50)

1999
Total revenues                                    $   228           $    561           $  1,052           $  1,048
Total costs and expenses                            1,343              2,132              3,591              5,351
Net loss                                           (1,108)            (1,565)            (2,369)            (4,173)
Basic and diluted net loss per share                (0.31)             (0.38)             (0.51)             (0.82)
</TABLE>






                                      F-21
<PAGE>

                                  AVANTGO, INC.


Schedule II: Valuation and Qualifying Accounts
(in thousands)

<TABLE>
<CAPTION>
                                                    Balance at     Additions           Balance at
                                                    Beginning       Charged              End of
                                                    of Period      to Expense            Period
                                                    ---------      ----------            ------
<S>                                                <C>             <C>                 <C>
Year ended December 31, 2000:
   Allowance for doubtful accounts                 $       50       $   190             $   240
                                                   --------------------------------------------
                                                   $       50       $   190             $   240
                                                   ============================================

Year ended December 31, 1999:
   Allowance for doubtful accounts                 $       --       $    50             $    50
                                                   --------------------------------------------
                                                   $       --       $    50             $    50
                                                   ============================================
</TABLE>




                                      F-22