UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

                     OF THE SECURITIES EXCHANGE ACT OF 1934

     FOR THE QUARTER ENDED MARCH 31, 2001 COMMISSION FILE NUMBER: 000-31561

                                  AVANTGO, INC.

             (Exact name of Registrant as specified in its charter)

              DELAWARE                                     94-3275789
   (State or other jurisdiction of                       (I.R.S. Employer
    incorporation or organization)                      Identification No.)

                    1700 South Amphlett Boulevard, Suite 300
                               San Mateo, CA 94402
                    (Address of principal executive offices)

                                 (510) 259-4000
              (Registrant's telephone number, including area code)

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

                                 Yes |X| No |_|

             As of May 2, 2001 there were 34,589,437 shares of the
                     Registrant's Common Stock outstanding.


                                      -1-
<PAGE>

                                  AvantGo, Inc.
                                    Form 10-Q
                                 March 31, 2001

                                      INDEX

PART I.  FINANCIAL INFORMATION                                             PAGE

ITEM 1.  Condensed Consolidated Financial Statements (Unaudited)
          Condensed Consolidated Balance Sheets as of March 31,
          2001 and December 31, 2000. .....................................  3
         . Condensed Consolidated Statements of Operations for
            the three  months ended March 31, 2001 and March 31, 2000 .....  4
         . Condensed Consolidated Statements of Cash Flows for the
            three months ended March 31, 2001 and March 31, 2000 ..........  5
         . Notes to Condensed Consolidated Financial Statements ...........  6
ITEM 2.  Management's Discussion and Analysis of Financial Condition
          and Results of Operations .......................................  8
ITEM 3.  Quantitative and Qualitative Disclosures About Market Risk ....... 18

PART II. OTHER INFORMATION
ITEM 2.  Changes in Securities and Use of Proceeds. ....................... 19
ITEM 6.  Exhibits and Reports on Form 8-K. ................................ 19
         Signatures ....................................................... 19



                                      -2-
<PAGE>



PART I. FINANCIAL INFORMATION

ITEM 1. Condensed Consolidated Financial Statements

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (in thousands)

                                                        March 31,   December 31,
                                                          2001          2000
                                                          ----          ----
                                                       (Unaudited)
                                                       -----------

ASSETS
Current Assets:

  Cash and cash equivalents ........................    $  66,463     $  57,034
  Short-term investments ...........................           --        16,432
  Accounts receivable, net of allowance of
     $315,000 in 2001 and $240,000 in 2000 .........        5,414         4,724
  Prepaid expenses and other current assets ........        1,619         1,186
                                                        ---------     ---------

   Total current assets ............................       73,496        79,376
  Restricted investments ...........................        3,438         3,438
  Property and equipment, net ......................        8,963         7,998
  Goodwill and other intangibles ...................       11,633        12,803
  Other assets .....................................          727           693
                                                        ---------     ---------

      Total assets .................................    $  98,257     $ 104,308
                                                        =========     =========


LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Accounts payable .................................    $   2,690     $   3,227
  Accrued liabilities ..............................        1,737         1,527
  Accrued compensation and related benefits ........        2,797         2,238
  Current portion of borrowings under bank
     line of credit agreement ......................           --            40
  Deferred revenue .................................        6,182         2,442
                                                        ---------     ---------
  Total current liabilities ........................       13,406         9,474
  Deferred revenue .................................           --            83
Commitments
Stockholders' Equity:
  Common stock, $0.0001 par value; 150,000,000
     shares authorized; 34,520,916 and
     34,473,663 shares issued and outstanding
     at March 31, 2001 and December 31, 2000,
     respectively ..................................      169,499       170,841
  Notes receivable from stockholders ...............         (502)         (706)
  Deferred stock compensation ......................       (8,625)      (12,350)
  Revenue offset relating to warrant
     agreements ....................................         (972)       (1,099)
  Accumulated deficit ..............................      (74,755)      (61,947)
  Accumulated other comprehensive loss .............          206            12
                                                        ---------     ---------

  Total stockholders' equity .......................       84,851        94,751
                                                        ---------     ---------

  Total liabilities and stockholders' equity .......    $  98,257     $ 104,308
                                                        =========     =========


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


                                      -3-
<PAGE>

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

                                                           Three Months Ended
                                                                March 31,
                                                           2001          2000
                                                         --------      --------
Revenues:
 License fees ...............................            $  4,063      $    753
 Services ...................................               3,244           908
                                                         --------      --------
 Total revenues .............................               7,307         1,661
Costs and expenses:
 Cost of license fees .......................                  25            27
 Cost of services ...........................               1,419           547
 Product development ........................               3,994         1,145
 Sales and marketing ........................               8,305         3,246
 General and administrative .................               3,372         1,120
 Amortization of goodwill, other
   intangible assets and deferred
   stock compensation .......................               3,774         3,224
                                                         --------      --------

 Total costs and expenses ...................              20,889         9,309

Loss from operations ........................             (13,582)       (7,648)
 Interest and other income, net .............                 774           217
                                                         --------      --------

 Net loss ...................................            $(12,808)     $ (7,431)
                                                         ========      ========

 Basic and diluted net loss per share .......            $   (.41)     $  (1.30)
                                                         ========      ========
 Basic and diluted common shares used
   to calculate basic and diluted net
   loss per common share ....................              31,339         5,704
                                                         ========      ========

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


                                      -4-
<PAGE>



                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                                 Three Months Ended
                                                                                                     March 31,
                                                                                               2001            2000
                                                                                               ----            ----
<S>                                                                                          <C>             <C>
OPERATING ACTIVITIES:
     Net loss                                                                                $(12,808)       $ (7,431)
     Adjustments to reconcile net loss to net cash used in operating activities:
       Amortization of goodwill, other intangible assets and deferred stock compensation        3,774           3,224
       Depreciation                                                                               592             117
       Amortization of revenue offset relating to warrant agreements                              127              42
       Issuance of common stock in exchange for services                                           --              96
       Changes in operating assets and liabilities:
         Accounts receivable                                                                     (690)         (5,757)
         Prepaid expenses and other current assets                                               (433)              6
         Accounts payable                                                                        (477)            102
         Accrued liabilities                                                                      150             (56)
         Accrued compensation and related benefits                                                559             446
         Deferred revenue                                                                       3,657           5,161
                                                                                             --------        --------

          Net cash used in operating activities                                                (5,549)         (4,050)
 INVESTING ACTIVITIES:
     Purchase of property and equipment                                                        (1,557)           (778)
     Purchase of other intangibles                                                               (150)             --
     Purchase of other assets                                                                     (34)            (26)
     Proceeds from investments                                                                 16,436           1,189
                                                                                             --------        --------

          Net cash provided by investing activities                                            14,695             385
 FINANCING ACTIVITIES:
     Repayment of obligations under bank line of credit agreement                                 (40)            (18)
     Principal payments on capital lease obligations                                               --              (1)
     Proceeds from issuance of convertible preferred stock, net                                    --          27,116
     Proceeds from note receivable from stockholder                                               204              --
     Proceeds from issuance of common stock, net of stock repurchase                              (71)          1,157
                                                                                             --------        --------

          Net cash provided by financing activities                                                93          28,254
                                                                                             --------        --------
Effect of exchange rate changes on cash and cash equivalents                                      190              --
                                                                                             --------        --------

Increase in cash and cash equivalents                                                           9,429          24,589
Cash and cash equivalents at beginning of period                                               57,034           5,835
                                                                                             --------        --------

Cash and cash equivalents at end of period                                                   $ 66,463        $ 30,424
                                                                                             ========        ========


 SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

    Issuance of preferred stock for notes receivable from stockholder                        $     --        $    342
                                                                                             ========        ========

    Deferred stock compensation related to grants of options for common stock                $     --        $ 10,913
                                                                                             ========        ========

    Issuance of common stock for notes receivable from stockholder                           $     --        $    356
                                                                                             ========        ========

    Revenue offset related to warrant agreements                                             $     --        $  1,521
                                                                                             ========        ========

SUPPLEMENTAL DISCLOSURES:
    Cash paid during the period for interest                                                 $      5        $      3
                                                                                             ========        ========

    Warrant issued in connection with a content service agreement                            $     --        $    159
                                                                                             ========        ========
</TABLE>

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


                                      -5-
<PAGE>

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2001
                                   (Unaudited)

NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Basis of Presentation

     The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally  accepted  accounting  principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation  S-X.  Accordingly,  they do not include all of the information
and footnotes required by generally accepted accounting  principles for complete
financial statements. In the opinion of management,  all adjustments (consisting
of normal recurring accruals)  considered necessary for a fair presentation have
been included. Operating results for the three month period ended March 31, 2001
are not necessarily  indicative of the results that may be expected for the year
ended December 31, 2001.

     The balance  sheet at December  31, 2000 has been  derived from the audited
financial  statements  at that date but does not include all of the  information
and footnotes required by generally accepted accounting  principles for complete
financial statements.

     For further information, refer to the consolidated financial statements and
footnotes  thereto  included in the Company's annual report on Form 10-K for the
year ended December 31, 2000.


NOTE 2. 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   earnings  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  earnings  per  share  when our  option to
repurchase these shares lapses.

     Pro forma 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 closing of our initial public offering
on October 2, 2000, using the if-converted method.

     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  calculation  of  historical  pro forma  basic and diluted net loss per
share is as follows:
<TABLE>
<CAPTION>

                                                                                 Three Months Ended
                                                                                      March 31,
                                                                              2001                   2000
                                                                            --------               --------
                                                                        (in thousands, except per share amounts):
<S>                                                                         <C>                    <C>
Historical:
 Net loss ..............................................................    $(12,808)              $ (7,431)
                                                                            ========               ========

 Weighted average shares of common stock outstanding ...................      34,466                 10,178

 Less weighted average shares that may be repurchased ..................      (3,127)                (4,474)
                                                                            --------               --------

 Weighted average shares of common stock outstanding used
 in computing basic and diluted net loss per share .....................      31,339                  5,704
                                                                            ========               ========

 Basic and diluted net loss per share ..................................    $  (0.41)              $  (1.30)
                                                                            ========               ========

Pro forma:
 Net loss ..............................................................    $(12,808)              $ (7,431)
                                                                            ========               ========

 Weighted average shares used in computing basic and
 diluted net loss per share (from above) ...............................      31,339                  5,704

Adjustment to reflect the effect of the assumed
 conversion of preferred stock from the date of issuance ...............          --                 12,340
                                                                            --------               --------

 Weighted average shares used in computing pro forma
 basic and diluted net loss per share ..................................      31,339                 18,044
                                                                            ========               ========

 Pro forma basic and diluted net loss per share ........................    $  (0.41)              $  (0.41)
                                                                            ========               ========
</TABLE>


                                      -6-
<PAGE>

NOTE 3. COMPREHENSIVE LOSS

     Financial   Accounting  Standards  Board  (SFAS)  No.  130  "Reporting  for
Comprehensive  Income",  established  standards  of  reporting  and  display  of
comprehensive  income and its components of net income and "Other  Comprehensive
Income". "Other Comprehensive Income" refers to revenues, expenses and gains and
losses that are not included in net income but rather are  recorded  directly in
stockholders'  equity. The components of comprehensive loss for the three months
ended March 31, 2001 and 2000 were as follows (in thousands):

                                             Three months ended
                                                   March 31,
                                             2001           2000
                                           --------       --------
Net loss                                   $(12,808)      $ (7,431)
Foreign currency translation adjustments        218             26
                                           --------       --------
Comprehensive loss                         $(12,590)      $ (7,405)
                                           ========       ========


NOTE 4. BUSINESS SEGMENT INFORMATION

     The Company operates in a single operating segment,  providing software and
services that enable and enhance the use of Internet-based content and corporate
applications  to mobile  devices,  including  personal  digital  assistants  and
Internet-enabled phones.

Geographic Information

     The Company operates in the North America and in Europe.  Approximately 14%
of revenues  were derived from outside  North  America in the three months ended
March 31,  2001.  Less than 10% of revenues  were  derived  from  outside  North
America in the three months  ended March 31,  2000.  At March 31, 2001 and March
31,  2000,  less than 10% of the  Company's  assets were located  outside  North
America.

     One customer accounted for 19% and 34% of the Company's revenues during the
three months ended March 31, 2001 and 2000, respectively.

NOTE 5. SUBSEQUENT EVENTS

     On April 24, 2001, we announced our plans to reduce future  operating costs
through  certain  restructuring   actions.  In  particular,   we  announced  our
intentions  to reduce our workforce by  approximately  50 people and to record a
non-cash  restructuring  charge related to the disposal of excess  equipment and
office space.


                                      -7-
<PAGE>

ITEM 2. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations

FORWARD-LOOKING STATEMENTS

     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-Q 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  contained in our Annual Report on Form 10-K
filed with the Securities and Exchange Commission on April 2, 2001. 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-Q 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.

     As used in this report on Form 10-Q, 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.

OVERVIEW

     We  provide  software  and  services  that  enable and  enhance  the use of
Internet-based content and corporate  applications 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 2.5 million
registered  users,  giving these companies a fast and efficient means to build a
mobile audience.

     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.  In
May 1999, we introduced our AvantGo  Mobile  Internet  service.  In May 2000, we
completed  our  purchase  of  Globalware  Computing  and began  integrating  its
software  products and  consulting  services.  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  March  31,  2001,  we had an  accumulated  deficit  of
approximately $74.8 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.


                                      -8-
<PAGE>


     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.

     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  includes  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  $28.4 million as of March 31, 2001.  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.  The
amortization  of the  remaining  deferred  stock  compensation  will  result  in
additional charges to operations through fiscal year 2004.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000

     The following  table sets forth certain  financial  data,  derived from our
unaudited  statements of  operations,  as a percentage of total revenues for the
periods  indicated.  The operating  results for the three months ended March 31,
2001 and 2000 are not necessarily indicative of the results that may be expected
for any future period.

                                                              Three Months Ended
                                                                  March 31,
                                                                2001    2000
                                                                ----    ----

Revenues:
   License fees                                                   56%     45%
   Services                                                       44%     55%
                                                                ----    ----

   Total revenues                                                100%    100%
Costs and expenses:
   Cost of license fees                                            0%      2%
   Cost of services                                               19%     33%
   Product development                                            55%     69%
   Sales and marketing                                           114%    195%
   General and administrative                                     46%     67%
   Amortization of goodwill, other intangible assets and
     deferred stock compensation                                  52%    194%
                                                                ----    ----
   Total costs and expenses                                      286%    560%
                                                                ----    ----

Loss from operations                                            (186%)  (460%)
   Interest and other income, net                                 11%     13%
                                                                ----    ----
   Net loss                                                     (175%)  (447%)
                                                                ====    ====


Comparisons of Three Months Ended March 31, 2001 and 2000

Revenues

     Total revenue was approximately $7.3 million and $1.7 million for the three
months ended March 31, 2001 and 2000, respectively,  representing an increase in
the first  quarter of 2001 of  approximately  $5.6  million,  or 340%,  over the
comparable quarter of the prior year. The growth in revenues  period-over-period
reflects our relatively early stage of development and is primarily attributable
to our expanding sales force.  Revenues may not increase at the same rate in the
future.

     License Fees.  License fee revenues  increased  approximately  $3.3 million
from  approximately  $753,000  for the three  months  ended  March  31,  2000 to
approximately  $4.1  million  for the three  months  ended March 31,  2001.  The
increases  in  the  dollar   amounts  of  license  fee  revenues  are  primarily
attributable  to increases in sales of licenses to new customers  resulting from
increased headcount in our sales force.

     Services.  Services  revenue  increased  approximately  $2.3  million  from
approximately   $908,000   for  the  three   months  ended  March  31,  2000  to
approximately  $3.2  million for the three  months  ended March 31,  2001.  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


                                      -9-
<PAGE>

Mobile Internet service organization.

     Deferred revenues reflected on our balance sheet were $6.2 million at March
31, 2001 as compared to $5.4 at March 31, 2000.

     We have seen a rapid and increasingly  severe downturn in the United States
economy during the fourth quarter of fiscal 2000 and the first quarter of fiscal
2001.  Although we expect  this  economic  downturn to continue  into the second
quarter of fiscal  2001,  we cannot be certain as to the severity or duration of
this downturn.  Nor can we predict the extent and timing,  if any, of the impact
of the economic  downturn in the United  States on economies in other  countries
and geographic regions in which we conduct business.  If the economic conditions
in the United  States fail to improve or if wider or global  economic  slowdowns
occur,  the demand for our products and services may be reduced.  In addition to
reducing our customers' and prospective  customers' budgets for our products and
services,  these  economic  slowdowns may also  adversely  affect our customers'
ability  to pay for our  products  and  services.  Accordingly,  these  economic
slowdowns may have a material adverse impact on our business,  operating results
and financial condition.

Costs and Expenses

     Cost of License  Fees.  Our cost of license  fees  decreased  approximately
$2,000 from  approximately  $27,000 for the three months ended March 31, 2000 to
approximately  $25,000 for the three months ended March 31, 2001.  This decrease
was primarily  attributable  to the expiration of prepaid  technology  royalties
during the quarter  ended March 31, 2001.  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  $872,000
from  approximately  $547,000  for the three  months  ended  March  31,  2000 to
approximately  $1.4  million for the three  months  ended March 31,  2001.  This
increase  was  primarily  due  to  increased  expenditures  resulting  from  the
expansion of our AvantGo Mobile Internet service and expansion of our consulting
services  organization.  We expect  these  costs to  increase to the extent that
services revenues increase.

     Product Development.  Product development expenses increased  approximately
$2.8  million from  approximately  $1.1 million for the three months ended March
31, 2000 to  approximately  $4.0  million for the three  months  ended March 31,
2001. This increase was primarily a result of increased  hiring of engineers and
product development personnel. To date, all software development costs have been
expensed in the period incurred.

     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 $5.1 million
from  approximately  $3.2  million for the three  months ended March 31, 2000 to
approximately  $8.3  million for the three  months  ended March 31,  2001.  This
increase was  attributable  to increases in the number of employees in our sales
and  marketing  organizations,  and  related  costs,  such  as  increased  sales
commissions,   as  well  as  increased   advertising   and   marketing   program
expenditures.

     General and  Administrative.  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 $2.3 million
from  approximately  $1.1  million for the three  months ended March 31, 2000 to
approximately  $3.4  million for the three  months  ended March 31,  2001.  This
increase was due  primarily to an increase in the number of  executive,  finance
and administrative employees.

     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,  in  addition  to  other  related  acquisition  costs.  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 $3.2 million of such expenses during the three
months  ended March 31, 2000 and  approximately  $3.8  million  during the three
months  ended  March  31,  2001.  We  anticipate  that the  amortization  of the
additional deferred stock compensation will result in additional charges through
fiscal year 2004. We also recognized  approximately $1.3 million of amortization
of goodwill and other intangible  assets during the three months ended March 31,
2001. There was no amortization of goodwill and other intangible assets included
in the three  months  ended March 31,  2000.  We expect to  continue  amortizing
goodwill and other intangible assets through fiscal year 2002.

     Interest and Other  Income,  Net.  Net interest and other income  increased
approximately  $557,000 from  approximately  $217,000 for the three months ended
March 31, 2000 to  approximately  $774,000  for the three months ended March 31,
2001.  This increase was primarily due to increased cash balances as a result of
the closing of our initial public offering in October 2000.


                                      -10-
<PAGE>

Liquidity and Capital Resources

     Since inception,  we have funded our operations  primarily through the sale
of equity  securities,  through  which we have  raised  net  proceeds  of $122.9
million  through  March 31, 2001. As of March 31, 2001, we have $66.5 million of
cash and cash equivalents.

     Net cash used in  operating  activities  totaled $5.5 million for the three
months ended March 31, 2001,  as compared  with $4.1 million for the  comparable
period  in  2000.  The  principal  use of  cash  was to  fund  our  losses  from
operations. Net cash provided by financing activities totaled $93,000 during the
three  months  ended  March 31,  2001,  as compared  with $28.3  million for the
comparable  period in 2000, which included  proceeds from our series D preferred
round of financing.

     Since our inception,  our investing  activities have consisted primarily of
purchases of fixed assets,  principally computer hardware and software.  Capital
expenditures  totaled $1.6 million in the three months ended March 31, 2001,  as
compared  with  $778,000  for the  comparable  period in 2000.  The  increase is
primarily due to expenditures related to leasehold  improvements for our Chicago
and San Mateo offices.

     We currently anticipate that our current cash and cash equivalents 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
at least the next 12 months.  However,  we may need to raise additional funds in
order to support  more rapid  expansion,  develop new or enhanced  services  and
products, 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.  The factors  described
earlier in this paragraph 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.

FACTORS AFFECTING OUR FUTURE OPERATING RESULTS

     You should consider  carefully the risks and uncertainties  described below
and the other  information  in this report.  They are not the only ones we face.
Additional risks and uncertainties that we are not aware of or that we currently
deem  immaterial  also may impair our business.  If any of the  following  risks
actually occur, our business, financial condition and operating results could be
materially  adversely  affected and the trading  price of our common stock could
decline.

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

     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


                                      -11-
<PAGE>

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  will
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.  From inception through
March 31, 2001, we had an accumulated deficit of $74.8 million. 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.

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 56% of our  revenues for the three months ended March 31,
2001. We also obtain significant revenues from professional services rendered to
our  enterprise  customers.  In the year ended  December  31, 2000 and the three
months ended March 31, 2001,  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.  Our  prospects  must  be
considered  in light of the risks,  expenses  and  difficulties  encountered  by
companies at an early stage of  development,  particularly  companies in new and
rapidly evolving  markets,  such as Internet  software.  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.


                                      -12-
<PAGE>

     Our enterprise  software,  which consists of our AvantGo M-Business Server,
AvantGo Mobile Engine for Web, AvantGo Mobile Engine for Microsoft  Exchange and
AvantGo Mobile Engine for Lotus Notes, products, together with related technical
support  fees,  has  accounted for 61% of our revenues in the three months ended
March 31, 2001 and 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. 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.  The
sales cycle for our products is lengthy.  Due to the recent  economic  downturn,
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.

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  5%,  6% and 19% of our  total  revenues  for the  first
quarter of fiscal  year 2001.  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 quarter ended March 31, 2001,
our sales and marketing expenses were  approximately  $8.3 million.  As revenues
increase,  we expect that these expenses will continue to increase. 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 either 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 will 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., Microsoft Corporation, and Research
in Motion Ltd., that bundle or offer 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


                                      -13-
<PAGE>

the Palm, Inc.  devices in the Palm III and V families,  but is not bundled with
the Palm, Inc. devices in the Palm VII(TM) 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 will suffer.

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 Research
in Motion Ltd.,  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.

The use of our AvantGo Mobile  Internet  service may be reduced if we are unable
to maintain and expand our agreements with content providers and e-businesses.

     Existing  users of our content  providers  and  e-businesses  that  deliver
content to our website  account for a significant  portion of the traffic to our
AvantGo Mobile Internet Service.  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 sell our  products  in the  United  States  and  abroad.  We manage  our
European sales and marketing  operations  through our U.K.  subsidiary,  AvantGo
Europe,  Ltd. Revenues from international  sales represented 14% of our revenues
in the three months ended March 31, 2001,  and 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:

     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.


                                      -14-
<PAGE>

     If we fail to successfully integrate any businesses, products, technologies
or personnel that we acquire,  that would harm our business. We cannot guarantee
that  we will  not  need  to  write  off  any of our  investments  or  that  our
investments  will  yield a  significant  return,  if any.  We may  issue  equity
securities to finance acquisitions, which would dilute our current stockholders'
investment,  or we may incur  significant  indebtedness,  which  could  harm our
business.

If we fail to manage future expansion effectively,  we may be unable to meet our
customers' needs or to 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 must also  develop our  operating,  administrative,
financial and accounting  systems and controls,  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.  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 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
our  product  sales  and  usage  of our  AvantGo  Mobile  Internet  service.  In
particular,  the unavailability of anti-virus  protection that our users deem to
be adequate to combat these viruses could have a material adverse effect on both
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,  or  "blackouts",  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


                                      -15-
<PAGE>

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 government  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 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 fully cover us against this liability.

     We could be exposed to liability  with respect to  third-party  information
that our users access with our  software.  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 be inadequate 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


                                      -16-
<PAGE>

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  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 our
loss of these licenses could disrupt our sales.

     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  of such  agreements,  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.

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
March  31,  2001 we had  approximately  34.5  million  shares  of  common  stock
outstanding,  of which 31.3 million were freely tradable,  except for any shares
purchased by our  "affiliates"  as defined in Rule 144 of the  Securities Act of
1933. Sales of a large number of restricted  shares,  or sales of shares held by
affiliates,  could  have an adverse  effect on the  market  price for our common
stock.

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,


                                      -17-
<PAGE>

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

     o    on or after such 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 3. 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 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 March 31, 2001, we had cash and cash  equivalents  of $66.5  million,
consisting  of cash and  highly  liquid  short-term  investments  with  original
maturities of three months or less at the date of purchase. Declines in interest
rates over time will result in lower interest income.

     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
the first quarter of 2001.  If, during the  remainder of 2001,  the U.S.  dollar
uniformly  decreases  in strength by 10% relative to the


                                      -18-
<PAGE>

currency  of our  foreign  sales  subsidiary,  our  operating  results  for  the
remainder of 2001 would likely not be significantly affected.


PART II -- OTHER INFORMATION

Item 2. Change in Securities and Use of Proceeds

(c) Recent Sales of Unregistered Securities

During  the  period  covered  by this  report on Form  10-Q,  we issued and sold
unregistered securities as follows:

o      From  January 1, 2001  through  March 31,  2001,  we  granted  options to
purchase  approximately 2.1 million shares of common stock at a weighted average
exercise price of  approximately  3.99 per share to employees,  consultants  and
directors  under our 2000 Stock  Incentive  Plan. The sale and issuance of these
shares was exempt from  registration  under the  Securities Act pursuant to Rule
701 promulgated thereunder on the basis that these options were offered and sold
either  pursuant to a written  compensatory  benefit plan or pursuant to written
contracts  relating  to  consideration,  as provided by Rule 701, or pursuant to
Section 4(2) of the  Securities Act on the basis that the  transactions  did not
involve a public offering.

ITEM 6. Exhibits and Reports on Form 8-K

(b)  Reports on Form 8-K.

     We filed no reports on Form 8-K  during  the  quarter  covered by this Form
10-Q.


                                      -19-
<PAGE>

SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                        AVANTGO, INC.

Date:  May 9, 2001                     By: /s/ David B. Cooper, Jr.
                                        ----------------------------
                                        David B. Cooper, Jr.
                                        Chief Financial Officer
                                        (Principal financial and chief
                                        accounting officer)