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

                                    FORM 10-Q

(Mark One)

|X|   Quarterly report pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934

For the quarterly period ended March 31, 2002

                                       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: 000-3156

                                  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.)

                             25881 Industrial Blvd.
                                Hayward, CA 94545

                    (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 1, 2002 there were 35,510,234 shares of the Registrant's Common Stock
outstanding.

<PAGE>

                                  AVANTGO, INC.

                                  AvantGo, Inc.
                                    Form 10-Q
                                 March 31, 2002

                                      INDEX

<TABLE>
<CAPTION>
PART I.  FINANCIAL INFORMATION                                                                PAGE
                                                                                              ----
<S>                                                                                            <C>
ITEM 1.   Condensed Consolidated Financial Statements (Unaudited)
          Condensed Consolidated Balance Sheets as of March 31, 2002 and
          December 31, 2001                                                                    3
          Condensed Consolidated Statements of Operations for the three months ended
          March 31, 2002 and March 31, 2001                                                    4
          Condensed Consolidated Statements of Cash Flows for the three months
          ended March 31, 2002 and March 31, 2001                                              5
          Notes to Condensed Consolidated Financial Statements                                 6

ITEM 2.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations                                                                9

ITEM 3.   Quantitative and Qualitative Disclosures About Market Risk                          24

PART II.  OTHER INFORMATION

ITEM 1.   Legal Proceedings                                                                   25

ITEM 6.   Exhibits and Reports on Form 8-K                                                    25

          Signatures                                                                          26
</TABLE>


                                      -2-
<PAGE>

PART I. FINANCIAL INFORMATION

ITEM 1.  Condensed Consolidated Financial Statements

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                      (in thousands, except per share data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                              March 31,         December 31,
                                                                                                 2002               2001
                                                                                                 ----               ----
<S>                                                                                           <C>                <C>
ASSETS
Current assets:
    Cash and cash equivalents ...........................................................     $  42,106          $  43,091
    Accounts receivable, net of allowance of $948 in 2002 and $965 in 2001 ..............         3,250              3,236
    Prepaid expenses and other current assets ...........................................           683                480
                                                                                              ---------          ---------
          Total current assets ..........................................................        46,039             46,807
   Restricted investments ...............................................................         3,438              3,438
   Property and equipment, net ..........................................................         6,472              6,890
   Other assets .........................................................................           260                344
                                                                                              ---------          ---------

          Total assets ..................................................................     $  56,209          $  57,479
                                                                                              =========          =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Accounts payable ....................................................................     $   1,059          $   1,243
    Accrued liabilities .................................................................         3,122              3,855
    Accrued compensation and related benefits ...........................................         1,225              1,693
    Deferred revenue ....................................................................         6,456              1,813
                                                                                              ---------          ---------
          Total current liabilities .....................................................        11,862              8,604
    Accrued restructuring charges, net of current portion ...............................         2,022              2,127
Commitments
Stockholders' equity:
Preferred stock, $0.0001 par value, issuable in Series: 10,000,000
              shares  authorized  at December 31, 2001; none and none issued and
              outstanding at March 31, 2002 and December 31, 2001, respectively .........            --                 --
Common stock, $0.0001 par value; 150,000,000 shares authorized; 35,487,394 and
      35,166,133 shares issued and outstanding at March 31, 2002 and December 31,
          2001, respectively ............................................................       168,864            168,603
    Notes receivable from stockholders ..................................................          (502)              (502)
    Deferred stock compensation .........................................................        (1,999)            (2,752)
    Revenue offset relating to warrant agreements .......................................          (465)              (592)
    Accumulated deficit .................................................................      (123,802)          (118,122)
    Accumulated other comprehensive income ..............................................           229                113
                                                                                              ---------          ---------
          Total stockholders' equity ....................................................        42,325             46,748
                                                                                              ---------          ---------
          Total liabilities and stockholders' equity ....................................     $  56,209          $  57,479
                                                                                              =========          =========
</TABLE>

         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)

<TABLE>
<CAPTION>
                                                                                          Three Months Ended
                                                                                               March 31,
                                                                                               ---------
                                                                                          2002          2001
                                                                                          ----          ----
<S>                                                                                     <C>           <C>
Revenues:
    License fees ...........................................................            $  2,588      $  4,063
    Services ...............................................................               2,194         3,244
                                                                                        --------      --------
    Total revenues .........................................................               4,782         7,307
Costs and expenses:
    Cost of license fees ...................................................                  82            25
    Cost of services .......................................................               1,137         1,488
    Product development ....................................................               2,216         4,265
    Sales and marketing ....................................................               5,222         8,814
    General and administrative .............................................               1,173         2,523
    Amortization of goodwill, other intangible assets and
          deferred stock compensation ......................................                 706         3,774
                                                                                        --------      --------
    Total costs and expenses ...............................................              10,536        20,889

Loss from operations .......................................................              (5,754)      (13,582)
    Interest and other income, net .........................................                  74           774
                                                                                        --------      --------

    Net loss ...............................................................            $ (5,680)     $(12,808)
                                                                                        ========      ========

    Basic and diluted net loss per share ...................................            $  (0.16)     $  (0.41)
                                                                                        ========      ========
    Basic and diluted common shares used to calculate basic and
      diluted net loss per share ...........................................              34,946        31,339
                                                                                        ========      ========
</TABLE>

         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,
                                                                                                       ---------
                                                                                                 2002             2001
                                                                                                 ----             ----
<S>                                                                                           <C>               <C>
OPERATING ACTIVITIES:
       Net loss .........................................................................     $ (5,680)         $(12,808)
          Adjustments to reconcile net loss to net cash used in operating activities:
              Amortization of goodwill, other intangible assets and deferred stock
                 compensation ...........................................................          706             3,774
              Depreciation and amortization .............................................          682               592
              Amortization of revenue offset relating to warrant agreements .............          127               127
              Changes in operating assets and liabilities:
                  Accounts receivable ...................................................          (14)             (690)
                  Prepaid expenses and other current assets .............................         (203)             (433)
                  Accounts payable ......................................................         (184)             (477)
                  Accrued liabilities ...................................................         (297)              150
                 Accrued compensation and related benefits ..............................         (162)              559
                 Accrued restructuring liability ........................................         (541)               --
                  Deferred revenue ......................................................        4,643             3,657
                                                                                              --------          --------
                    Net cash used in operating activities ...............................         (923)           (5,549)
  INVESTING ACTIVITIES:
          Purchase of property and equipment ............................................         (264)           (1,557)
          (Increase) decrease in other assets ...........................................           84              (184)
          Proceeds from investments .....................................................           --            16,436
                                                                                              --------          --------
                    Net cash used in investing activities ...............................         (180)          (14,695)
  FINANCING ACTIVITIES:
          Repayment of obligations under bank line of credit agreement ..................           --               (40)
          Proceeds from note repayment from shareholder .................................           --               204
          Proceeds from issuance of common stock, net of stock repurchase ...............            2               (71)
                                                                                              --------          --------

                    Net cash provided by financing activities ...........................            2                93
                                                                                              --------          --------

Effect of exchange rate changes on cash and cash equivalents ............................          116               190
                                                                                              --------          --------
Increase (decrease) in cash and cash equivalents ........................................         (985)            9,429
Cash and cash equivalents at beginning of period ........................................       43,091            57,034
                                                                                              --------          --------

Cash and cash equivalents at end of period ..............................................     $ 42,106          $ 66,463
                                                                                              ========          ========

     SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

SUPPLEMENTAL DISCLOSURES:
        Cash paid during the period for interest ........................................     $     --          $      5
                                                                                              ========          ========
</TABLE>

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


                                      -5-
<PAGE>

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2002
                                   (Unaudited)

NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

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 portals to mobile devices, including
personal digital assistants and Internet-enabled phones. The Company licenses
its AvantGo M-Business Server products and AvantGo mobile applications 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 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, 2002 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2002.

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 balance sheet at December 31, 2001 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, 2001.

      Certain reclassifications have been made to the financial statements for
the three months ended March 31, 2001 to conform to the presentation of the
financial statements for the three months ended March 31, 2002

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.

NOTE 2. CONCENTRATION OF CREDIT RISK

      For the three months ended March 31, 2002, one customer accounted for 24%
of total revenues. For the three months ended March 31, 2001, one customer
accounted for 19% of total revenues.


                                      -6-
<PAGE>

NOTE 3. 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.

      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 would be anti-dilutive.

      The calculation of basic and diluted net loss per share is as follows:

<TABLE>
<CAPTION>
                                                                                 Three Months Ended
                                                                                      March 31,
                                                                                      ---------
                                                                               2002              2001
                                                                               ----              ----
                                                                    (in thousands, except per share amounts):
<S>                                                                         <C>               <C>
      Net loss ..................................................           $ (5,680)         $(12,808)
                                                                            ========          ========
      Weighted average shares of common stock outstanding .......             35,379            34,466
      Less weighted average shares that may be repurchased ......               (433)           (3,127)
                                                                            --------          --------
      Weighted average shares of common stock outstanding used
      in computing basic and diluted net loss per share .........             34,946            31,339
                                                                            ========          ========
      Basic and diluted net loss per share ......................           $  (0.16)         $  (0.41)
                                                                            ========          ========
</TABLE>

NOTE 4.  COMPREHENSIVE LOSS

      Statement of Financial Accounting Standard (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, 2002 and 2001 were as follows (in thousands):

                                                          Three Months Ended
                                                              March 31,
                                                              ---------
                                                           2002         2001
                                                           ----         ----

Net loss ........................................       $(5,680)       $(12,808)
Foreign currency translation adjustments ........           116             214
Unrealized gain on investment ...................            --               4
                                                        -------        --------
Comprehensive loss ..............................       $(5,564)       $(12,590)
                                                        =======        ========


                                      -7-
<PAGE>

NOTE 5.  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 North America and Europe. Approximately 15% and
14% of revenues were derived from outside North America in the three months
ended March 31, 2002 and 2001, respectively. At March 31, 2002 and 2001, less
than 10% of the Company's assets were located outside North America.

NOTE 6. RESTRUCTURING CHARGES

      In April 2001, management approved and the Company formally adopted and
began to implement a restructuring program in an effort to reduce operating
expenses. The Company incurred a charge of approximately $2.8 million in the
second quarter of 2001 relating to the restructuring. During the third quarter
of 2001, the Company reported additional charges of approximately $9.8 million,
which included approximately $406,000 related to adjustments to facility exit
costs as a result of a rapidly deteriorating real estate market. In the fourth
quarter of 2001, management approved and the Company implemented a further
restructuring program that resulted in aggregate charges of $2.5 million, which
included approximately $1.2 related to adjustments to facility exit costs as a
result of continuing deterioration in the real estate market.

      The following table sets forth the restructuring activity during the three
months ended March 31, 2002 (in thousands):

<TABLE>
<CAPTION>
                                                            Total
                                        Balance at      Restructuring        Cash           Non-cash         Balance at
                                    December 31, 2001      Charges       Expenditures     Expenditures     March 31, 2002
                                    -----------------      -------       ------------     ------------     --------------
<S>                                      <C>              <C>              <C>              <C>                <C>
Facility lease costs                     $ 4,133          $    --          $ (524)          $    --            $ 3,609
Employee termination costs                   325               --             (17)               --                308
                                         -------          -------          ------           -------            -------
Total                                    $ 4,458          $    --          $ (541)          $    --            $ 3,917
</TABLE>

NOTE 7.  LEGAL PROCEEDINGS

      In October 2001, a purported shareholder class action lawsuit was filed in
the United States District Court for the Southern District of New York against
the Company, certain of its officers and directors, and the underwriters of its
initial public offering. The suit purports to be a class action filed on behalf
of purchasers of the Company's common stock during the period from September 27,
2000 to December 6, 2000. The complaint alleges that the underwriter defendants
agreed to allocate stock in the Company's initial public offering to certain
investors in exchange for excessive and undisclosed commissions and agreements
by those investors to make additional purchases of stock in the aftermarket at
pre-determined prices. Plaintiffs allege that the prospectus for the Company's
initial public offering was false and misleading in violation of the securities
laws because it did not disclose these arrangements. The complaint seeks
unspecified damages on behalf of the purported class. Over 300 companies
involved in an initial public offering have been named as defendants in nearly
identical lawsuits filed by some of the same plaintiffs' law firms. The Company
believes that it has meritorious defenses, and intends to defend the action
vigorously; however, due to inherent uncertainties in litigation, management
cannot predict accurately the ultimate outcome of the litigation. An adverse
judgment in a large monetary amount could have a material adverse impact on the
financial position, and consequently the business and results of operations.


                                      -8-
<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 "Risk Factors," 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 for year ended December 31, 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 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(R) Enterprise products, today called
AvantGo M-Business ServerTM products. In May 1999, we introduced our AvantGo
Mobile Internet ServiceTM. In May 2000, we purchased Globalware Computing and
began integrating its Pylon software products and consulting services into our
mobile offerings. In October 2000, we completed our initial public offering. In
July 2001, September 2001 and March 2002, respectively, we launched AvantGo
Mobile SalesTM, AvantGo Mobile DeliveryTM and AvantGo Mobile PharmaTM - mobile
business applications that interoperate with our AvantGo M-Business Server
products.

      We provide mobile enterprise software and services that enable and enhance
the use of Internet-based content and corporate applications on handheld devices
and Internet-enabled phones. We designed our AvantGo M-Business Server products
and mobile business applications to automate business processes and improve the
exchange of information between companies and their employees and customers,
resulting in improved business efficiencies and more effective customer
interactions. We license our AvantGo M-Business Server products and mobile
business applications to help companies provide their employees, customers,
suppliers and business affiliates with easy access to business information. We
host our AvantGo Mobile Internet Service to enable our Media and M-Business
customers to deliver their content and applications to our over 5 million
registered AvantGo Mobile Internet Service users. Our AvantGo Mobile Internet
Service also allows consumers to access and interact with over 2000 sources of
Internet-based content and corporate applications optimized for delivery to
handheld devices and Internet-enabled phones.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

      Our discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires us to make
estimates and


                                      -9-
<PAGE>

judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure or contingent assets and liabilities. On an
on-going basis, we evaluate our estimates, including those related to
uncollectible accounts, intangible assets and restructuring. We base our
estimates on historical experience and on various other assumptions that we
believe to be reasonable under the circumstances, the results of which form the
basis for making judgments about amounts and timing of revenue costs and
expenses, the carrying values of assets and the recorded amount of liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.

      We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our consolidated
financial statements.

Revenue Recognition

      We generally license our enterprise software under non-cancelable license
agreements and provide services including training, consulting and maintenance.
Maintenance consists of product support services and unspecified product
updates. We sell placement service contracts which provide customers with
priority visibility on our website, and also sell advertising on the device
delivered through the AvantGo Mobile Internet service, a service that is free to
consumers.

      We recognize license revenues 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 using the residual method.
In instances where no vendor-specific objective evidence exists and the only
undelivered element is maintenance, we recognize revenues ratably over the term
of the agreement. Our agreements with our customers and resellers generally do
not contain product return rights. We recognize revenues from maintenance, which
consist of fees for ongoing support and product updates, ratably over the term
of the agreement, which is typically one year.

      For sales made through distributors, resellers and original equipment
manufacturers, we recognize revenue at the time these partners report to us that
they have sold the software to the end user and all revenue recognition criteria
have been met.

      Consulting revenues are primarily related to implementation services
performed on a time-and-materials basis under separate service arrangements. We
generate training revenues from classes offered both on-site and at customer
locations. We recognize revenues from time-and-materials consulting engagements
and training services as we perform the services. Occasionally we enter into
short-term fixed price consulting contracts. Under these arrangements, we
recognize revenues as work progresses using the percentage-of-completion method,
which relies on estimates of total expected contract revenue and costs. We
follow this method since reasonably dependable estimates of the revenue and
costs applicable to various stages of a contract can be made. Recognized
revenues are subject to revisions as the contract progresses to completion. We
make revisions in recognized revenues in the period in which the facts that give
rise to the revision become known to us.

      We recognize revenues from placement agreements ratably over the service
period, which in most instances is between three months and one year. We
recognize advertising revenues 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 agreement.

      We also earn revenues from advertising barter transactions. We recognize
revenues and costs from advertising barter transactions during the period in
which the placement or advertising is delivered. We record barter transactions
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
services provided, we use historical pricing of comparable cash transactions.


                                      -10-
<PAGE>

Allowance for Doubtful Accounts

      We maintain allowances for doubtful accounts for estimated losses
resulting from the inability of our customers to make required payments. If the
financial condition of our customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances may be
required.

Restructuring

      We have recorded restructuring charges, some of which are based on
estimates regarding the sublease of excess space at several of our facilities.
If actual market conditions are less favorable than those projected by
management, and we are unable to sublease the excess space as soon as estimated,
or for the estimated rate, then additional restructuring charges may be required
in the future.

OUR BUSINESS

      We generate our primary sources of revenues through our license agreements
and our services agreements. We recognize license revenues for our AvantGo
M-Business Server products, which are typically based on fixed-fee agreements,
when we have executed an agreement with a customer, delivery and acceptance have
occurred, the fee is fixed or determinable, and we deem the collection of the
related receivable to be probable. Historically, our services revenues have
consisted primarily of consulting revenues and technical support fees. We
recognize revenues from consulting services on a monthly basis as the services
are performed. We recognize technical support fees ratably on a monthly basis
over the course of the support period, typically twelve months. Our services
revenues also include amounts derived from the operation of our AvantGo Mobile
Internet Service, generated through placement, subscription and advertising
revenues, and revenue sharing arrangements. We recognize placement and
advertising revenues 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, hardware, co-location facilities and Internet connectivity charges.
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.

      We classify our costs and expenses 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, and deferred stock-based compensation. For the
three months ended March 31, 2002 only amortization of deferred stock-based
compensation was recorded as all goodwill and intangible assets were written off
in 2001.

      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 $23.6 million as of March 31, 2002. This amount represents the
difference between the exercise and the deemed fair value of our common stock
for financial


                                      -11-
<PAGE>

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

      We have incurred significant losses and negative cash flows from
operations since our inception. As of March 31, 2002, we had an accumulated
deficit of $123.8 million. We had 198 full-time employees as of March 31, 2002.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001

      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,
2002 and 2001 are not necessarily indicative of the results that may be expected
for any future period.

                                                              Three Months Ended
                                                                   March 31,
                                                                   ---------
                                                               2002        2001
                                                               ----        ----
Revenues:
        License fees .....................................       54%        56%
        Services .........................................       46%        44%
                                                               ----       ----
        Total revenues ...................................      100%       100%
Costs and expenses:
        Cost of license fees .............................        2%         0%
        Cost of services .................................       24%        20%
        Product development ..............................       46%        58%
        Sales and marketing ..............................      109%       121%
        General and administrative .......................       25%        35%
        Amortization of goodwill, other intangible assets
            and deferred stock compensation ..............       15%        52%
                                                               ----       ----
        Total costs and expenses .........................      221%       286%
                                                               ----       ----
Loss from operations .....................................     (121%)     (186%)
        Interest and other income, net ...................        2%        11%
                                                               ----       ----
        Net loss .........................................     (119%)     (175%)
                                                               ====       ====

Comparisons of Three Months Ended March 31, 2002 and 2001

Revenues

      Total revenues were approximately $4.8 million and $7.3 million for the
three months ended March 31, 2002 and 2001, representing a decrease in the first
quarter of 2002 of approximately $2.5 million, or 35%, from the comparable
quarter of the prior year. The decline in revenues for the three months ended
March 31, 2002 from the three months ended March 31, 2001 was primarily
attributable to an overall downturn in the economy, one of the results of which
has been reduced capital spending on technology, including mobile enterprise
software and professional services, as well as longer sales cycles.
Consequently, sales of licenses and associated services, and sales of
advertising have been negatively impacted. The decline in revenues reflects a
decreased volume of licenses and services sold, rather than a decrease in
prices.

      License Fees. License fee revenues decreased approximately $1.5 million,
or 36%, from approximately $4.1 million for the three months ended March 31,
2001 to approximately $2.6 million for the three months ended


                                      -12-
<PAGE>

March 31, 2002. The decline in license fee revenues for the three months ended
March 31, 2002 from the three months ended March 31, 2001 was primarily
attributable to the circumstances described in the immediately preceding
paragraph.

      Services. Services revenue decreased approximately $1.0 million, or 32%,
from approximately $3.2 million for the three months ended March 31, 2001 to
approximately $2.2 million for the three months ended March 31, 2002. This
decrease was due to both decreased consulting services performed in the latter
period, as a result of fewer license sales to new customers, and decreased
advertising sales as a result of a downturn in the advertising market.

      We also earn revenues from advertising barter transactions. We recognize
revenues and costs from advertising barter transactions during the period in
which we deliver the advertising or distribution product. We record barter
transactions 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, we use historical pricing of comparable
cash transactions. Revenues earned from barter transactions were $0 and $46,000
for the three months ended March 31, 2002 and 2001. We do not expect barter
revenue to be a significant portion of revenue in the future.

      Deferred revenues reflected on our balance sheet were $6.4 million at
March 31, 2002 as compared to $6.2 million at March 31, 2001.

      We have seen a rapid and increasingly severe downturn in the United States
economy that continued through the first quarter of 2002. Although we expect
this economic downturn to continue into the second quarter of 2002, 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 increased approximately
$57,000, or 228%, from approximately $25,000 for the three months ended March
31, 2001 to approximately $82,000 for the three months ended March 31, 2002.
This increase was primarily attributable to increased royalty expenses incurred
as a result of reselling other software developers' products in conjunction with
ours during the quarter ended March 31, 2002. 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 decreased approximately $351,000,
or 24%, from approximately $1.5 million for the three months ended March 31,
2001 to approximately $1.1 million for the three months ended March 31, 2002.
This decrease was primarily attributable to a reduction in headcount as a result
of the restructuring program that we implemented during 2001.

      Product Development. Product development expenses decreased approximately
$2.0 million, or 48%, from approximately $4.3 million for the three months ended
March 31, 2001 to approximately $2.2 million for the three months ended March
31, 2002. This decrease was primarily attributable to a reduction in headcount
as a result of the restructuring program that we implemented during 2001. To
date, all software and development costs have been expensed in the period
incurred.

      Sales and Marketing. Our sales and marketing expenses include those
related to compensation, public relations, advertising, trade shows and
marketing materials. Sales and marketing expenses decreased


                                      -13-
<PAGE>

approximately $3.6 million, or 41%, from approximately $8.8 million for the
three months ended March 31, 2001 to approximately $5.2 million for the three
months ended March 31, 2002. This decrease was primarily attributable to a
reduction in headcount as a result of the restructuring program that we
implemented during 2001, as well as a reduction in the level of advertising
expenditures relating to our AvantGo Mobile Internet service.

      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, and
other miscellaneous general corporate expenses. Our general and administrative
expenses decreased approximately $1.3 million, or 54%, from approximately $2.5
million for the three months ended March 31, 2001 to approximately $1.2 million
for the three months ended March 31, 2002. This decrease was due primarily to a
decrease in the number of executive, finance and administrative employees as a
result of the restructuring program that we implemented during 2001.

      Amortization of goodwill, other intangible assets and deferred stock
compensation. Until we determined that goodwill and other intangible assets were
impaired and were written off in September 2001, we had been amortizing the
amount of goodwill and acquired workforce that we purchased in connection with
our acquisition of Globalware, using the straight-line method. We are also
amortizing the amount that equals the difference between the exercise price of
stock options granted to our employees and consultants and 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 $0 and $1.3 million of amortization of
goodwill and other intangible assets during the three months ended March 31,
2002 and 2001. We recognized approximately $700,000 and $2.4 million of
amortization of deferred stock compensation during the three months ended March
31, 2002 and 2001. We anticipate that the amortization of the remaining deferred
stock compensation will result in additional charges through 2004.

      Because goodwill and other intangible assets were determined to be
impaired and were written off in September 2001, there will be no further
amortization.

      Interest and Other Income, Net. Net interest and other income decreased
approximately $700,000, or 90%, from approximately $770,000 for the three months
ended March 31, 2001 to approximately $70,000 for the three months ended March
31, 2002. This decrease was primarily due to a decrease in net interest earned
as a result of decreased cash balances.

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 $124.4
million through March 31, 2002. As of March 31, 2002, we had $42.1 million of
cash and cash equivalents and short-term investments, a decrease from $43.1
million of cash and cash equivalents and short-term investments held as of
December 31, 2001. As of March 31, 2002, our working capital was approximately
$34.2 million compared to approximately $38.2 million on December 31, 2001.

      Net cash used in operating activities totaled $923,000 for the three
months ended March 31, 2002, as compared with $5.5 million for the comparable
period in 2001. During the three months ended March 31, 2002, we received a
payment of $6.0 million from our largest customer, McKesson Corporation. This
was the final scheduled payment on a three-year contract which will expire in
March 2003. During the comparable period in 2001, we received a scheduled
payment of $5.0 million from McKesson Corporation. The principal use of cash was
to fund our losses from operations. Net cash provided by financing activities
totaled $2,000 during the three months ended March 31, 2002, as compared with
$93,000 for the comparable period in 2001.

      Since our inception, our investing activities have consisted primarily of
purchases of fixed assets, principally computer hardware and software, and
leasehold improvements. Capital expenditures totaled $264,000 in the


                                      -14-
<PAGE>

three months ended March 31, 2002, as compared with $1.6 million for the
comparable period in 2001. The decrease was primarily due to the reduction of
expenditures related to leasehold improvements for our Hayward office and the
reduction of expenditures for computer hardware. During the three months ended
March 31, 2001, we converted all of our investments to cash and cash
equivalents, which provided $16.4 million of net cash from investing activities.

      We believe that our current cash and cash equivalents 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. We cannot assure that additional financing
will be available when needed on terms favorable to us, if at all.

      The following summarizes our contractual obligations at March 31, 2002,
and the effect such obligations are expected to have on our liquidity and cash
flows in future periods (in thousands):

<TABLE>
<CAPTION>
                                           Less Than
                                           1 year     1-3 years  4-5 years   Total
<S>                                        <C>        <C>        <C>         <C>
      Non-cancelable operating leases      $2,688     $4,905     $4,667      $12,260
</TABLE>

      Included in the table above is the restructuring liability of $3.9 million
associated with charges related to excess office space.

RISK FACTORS

The slowdown in the adoption of mobile devices and mobile applications has
harmed and could continue to 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 suffered recent setbacks due to the decline in general economic
conditions, particularly in the technology sector. Moreover, the economic
slowdown has caused prospective customers to reduce their budgets for
information technology projects, such as mobile application deployments. This
economic slowdown has reduced the rate of growth in the adoption of mobile
devices, and associated products and services. Sustained economic slowdown could
continue to reduce demand for our software and services.

We may be unable to fund our future operating and capital requirements and,
therefore, may be unable to execute on our business strategy.

      Since our inception, we have never been profitable. From inception through
March 31, 2002, we had an accumulated deficit of $123.8 million. Because we are
not currently generating sufficient cash to fund our operations, we may be
forced to rely on external financing to meet future operating and capital
requirements. Any projections of future cash needs and cash flows are subject to
substantial uncertainty. Our operating and capital requirements depend upon
several factors, including the rate of market acceptance of our products and
services, our ability to expand our customer base and increase revenues, our
level of expenditures for product development, marketing and sales, general
administration and purchases of equipment, and other factors. If our operating
and capital requirements vary materially from those currently planned, we may
require additional financing sooner than anticipated. We cannot assure that
financing will be available in amounts or on terms acceptable to us, if at all.
Further, if we issue equity securities, stockholders may experience additional
dilution, or the new equity securities may have rights, preferences or
privileges senior to those of existing holders of our


                                      -15-
<PAGE>

common stock. Debt financing, if available, may involve restrictive covenants,
which could restrict our operations or finances. If we cannot raise funds, if
needed, on acceptable terms, we may not be able to continue our operations, grow
market share, take advantage of future opportunities or respond to competitive
pressures or unanticipated requirements. This in turn, could materially and
adversely impact our business, operating results and financial condition.

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, McKesson
Corporation, our largest customer, represented 24% of our total revenues for the
first quarter of 2002. We expect that McKesson Corporation will continue to
represent a significant portion of our revenues through March 2003. Any
disruption or termination of our commercial relationship with McKesson
Corporation would harm our revenues and results of operations.

If we fail to meet the continued listing requirements of the Nasdaq National
Stock Market, our stock could be delisted.

      Our stock is currently listed on the Nasdaq National Market. The Nasdaq
Stock Market's Marketplace Rules impose certain minimum financial requirements
on us for the continued listing of our stock. One such requirement is a minimum
bid price on our stock of $1.00 per share be maintained over a certain period of
time prescribed by Nasdaq. Our stock price has, from time to time, fallen below
the minimums set forth by those rules. If we remain below minimum levels for an
extended period, the Nasdaq National Market may delist our stock. If we are
delisted and cannot obtain listing on another major market or exchange, our
stock's liquidity would suffer, and we would likely experience reduced analyst
coverage and investor interest. Such factors may result in a decrease in our
stock's trading price. Delisting also may restrict us from issuing additional
securities or securing additional financing.

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

      Our mobile enterprise software, which consists of our AvantGo M-Business
Server, and our mobile enterprise applications, including AvantGo Mobile Sales,
AvantGo Mobile Delivery, and AvantGo Pharma Sales, as well as AvantGo Pylon
products, has accounted for 54% of our revenues in the three months ended March
31, 2002, 56% of our revenues in 2001, and 56% of our revenues in 2000. We
expect that a significant portion of our revenues 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.

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 intense competition, and we expect this competition to grow 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 market. Competition in our industry is primarily on the basis of product
functionality, compatibility with other hardware and software, and price.

      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., Extended Systems and Oracle Corporation;


                                      -16-
<PAGE>

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

            o     application service providers, including Aether Systems, Inc.;

            o     mobile personal information management application providers,
                  including Synchrologic and Extended Systems;

            o     mobile sales force automation application providers, including
                  Siebel Systems;

            o     mobile pharmaceutical application providers, including
                  Dendrite; and

            o     mobile delivery application 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 GoAmerica, Inc.; 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 our
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 revenues to fall.

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 offices in Hayward, California and at
facilities owned by Level 3 Communications in Sunnyvale, California. We
currently do not have redundant facilities. Our systems therefore are vulnerable
to damage from vendor shutdowns, break-ins, unauthorized access, vandalism,
fire, floods, earthquakes, power loss, telecommunications failures, terrorist
acts such as that occurring on September 11, 2001 and similar events.

      The potential impact on us 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 experienced power shortages in the recent past, which resulted in
brief power outages, or "blackouts", in parts of the state. Any such blackouts
in the future could cause disruptions to our operations, especially our AvantGo
Mobile Internet Service, which 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.


                                      -17-
<PAGE>

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 enterprise 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.

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.

      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 mobile
software and Internet technologies. 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
                  McKesson Corporation; 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.

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.


                                      -18-
<PAGE>

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
mobile devices. We have expended considerable resources on sales and marketing
of our products and services. During the quarter ended March 31, 2002, our sales
and marketing expenses were approximately $5.2 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 further, jeopardizing our ability to
generate revenue from the sale of advertising and distribution products.

If we adopt additional economic incentives to retain our current employees or
attract new employees, stockholder equity could be diluted.

      The purchase price of many outstanding stock options held by our employees
is above the current fair market value of our common stock. To adequately
motivate and retain our employees, and to attract new employees, we may need to
provide additional economic incentives. For example, our board of directors may
seek to increase the stock pool in our existing 2000 Stock Incentive Plan or
adopt a new equity incentive plan, such as the new 2001 Stock Incentive Plan, to
retain current employees and attract new employees. If we issue additional stock
options or additional stock grants to current or new employees, our existing
stockholders will suffer dilution.

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. Some of
these manufacturers have products or services that compete with AvantGo's mobile
software. Any of these manufacturers may choose either to promote its competing
product or service or promote the services of one or more of our other
competitors, which could limit the growth of our business.

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
promote the benefits and adoption of mobile technology, as well as in some
instances distribute our software, the sales growth of our products and services
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, or if they change
operating systems to which we cannot adapt, our business would suffer.

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 certain areas of our operations for the
foreseeable future. For example, we expect to hire additional new employees to
support our sales organization. Because of the technical nature of our products
and certain industry specific information that is required to adequately sell
our products, we anticipate that it will take several months to train new
personnel. Failure to accomplish this objective would impede our


                                      -19-
<PAGE>

ability to deliver products in a timely fashion, fulfill existing customer
commitments and attract and retain new customers, which would harm our business.

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. If we fail to continue to provide valuable content and services,
mobile device 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 15% of our revenues
in the three months ended March 31, 2002. Our business therefore is subject to
the risks associated with doing business internationally. The costs of
developing overseas revenues may exceed those revenues. Accordingly, our future
results could be harmed by a variety of factors, including:

            o     changes in foreign currency exchange rates;

            o     inflation;

            o     the adoption of incompatible platforms or standards;

            o     trade protection measures and import or export licensing
                  requirements;

            o     potentially negative consequences from changes in tax laws;
                  and

            o     weak economic conditions in foreign markets.

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.

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

      Despite recent reductions in workforce, we will continue to recruit key
personnel. 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 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


                                      -20-
<PAGE>

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

      Computer viruses have been reported to impact handheld device operating
systems. Viruses and publicity about them may adversely impact adoption of
mobile technology and sales of our products and services. 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 our business.

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 a variety of third parties. 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.

We were named in a securities class action lawsuit that could materially harm
our business and financial condition and result in a decline in our stock price.

      AvantGo, certain of our officers and directors, and the underwriters of
our initial public offering are parties to a class action lawsuit alleging a
violation of securities laws. This pending litigation, and any subsequent
litigation against us or our affiliates or employees, regardless of the outcome,
may result in substantial costs and expenses and significant diversion of
management, which could materially adversely affect our business.

      Due to inherent uncertainties in litigation, we cannot predict accurately
the ultimate outcome of the litigation. An adverse judgment in a large monetary
amount could have a material adverse impact on our financial position, and
consequently our business and results of operations. Such an event would likely
cause our stock price to decline substantially.

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.


                                      -21-
<PAGE>

      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
regulations 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
products and services could 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 which, if any of 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 certain limited circumstances. These
agreements generally provide that each party to the agreement will have a
limited, non-exclusive right to use our code should one of these circumstances
occur, such as 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 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.



                                      -22-
<PAGE>

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. 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     securities class action litigation, or other civil litigation,
                  brought against us by third parties, regardless of outcome;

            o     changes in financial estimates by securities analysts; and

            o     changes in interest rates and other general economic
                  conditions.

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.

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.

      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.


                                      -23-
<PAGE>

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 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.


                                      -24-
<PAGE>

      As of March 31, 2002, we had unrestricted cash and cash equivalents of
$42.1 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. Our interest income is sensitive to changes in the general
level of U.S. interest rates, particularly since the majority of our investments
are in short-term instruments. Due to the nature of our cash and cash
equivalents, we have concluded that there is no material market risk exposure.
At March 31, 2002, our cash and cash equivalents 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. We
had no short-term investments at March 31, 2002.

      Foreign Currency Exchange Risk. We develop products in the United States
for sale in North America 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 were not significantly affected by exchange rate fluctuations in the
first quarter of 2002.

PART II OTHER INFORMATION

ITEM 1. Legal Proceedings

      In October 2001, a purported shareholder class action lawsuit was filed in
the United States District Court for the Southern District of New York against
us, certain of our officers and directors, and the underwriters of our initial
public offering. The suit is a class action filed on behalf of purchasers of our
common stock during the period from September 27, 2000 to December 6, 2000. The
complaint alleges that the underwriter defendants agreed to allocate stock in
our initial public offering to certain investors in exchange for excessive and
undisclosed commissions and agreements by those investors to make additional
purchases of stock in the aftermarket at pre-determined prices. Plaintiffs
allege that the prospectus for our initial public offering was false and
misleading in violation of the securities laws because it did not disclose these
arrangements. The complaint seeks unspecified damages on behalf of the purported
class. Over 300 companies involved in an initial public offering have been named
as defendants in nearly identical lawsuits filed by some of the same plaintiffs'
law firms. We believe we have meritorious defenses, and we intend to defend the
action vigorously.

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 ended March 31, 2002.


                                      -25-
<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 10, 2002            By: /s/ David B. Cooper, Jr.
                              --------------------------------------------------
                              David B. Cooper, Jr.
                              Chief Financial Officer
                              (Principal financial and chief accounting officer)


                                      -26-