UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

                     OF THE SECURITIES EXCHANGE ACT OF 1934

                    FOR THE QUARTER ENDED SEPTEMBER 30, 2001

                        COMMISSION FILE NUMBER: 000-31561

                                  AVANTGO, INC.

             (Exact name of Registrant as specified in its charter)


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

                             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 November 12, 2001 there were 35,150,131 shares of the Registrant's Common
Stock outstanding.


                                       -1-
<PAGE>



                                  AvantGo, Inc.
                                    Form 10-Q
                               September 30, 2001

                                      INDEX

<TABLE>
<CAPTION>
PART I.  FINANCIAL INFORMATION                                                   PAGE
                                                                                 ----

<S>      <C>                                                                      <C>
ITEM 1.  Condensed Consolidated Financial Statements (Unaudited)
         Condensed Consolidated Balance Sheets as of September 30, 2001 and
         December 31, 2000                                                         3
         Condensed Consolidated Statements of Operations for the three and
         nine months ended September 30, 2001 and September 30, 2000               4
         Condensed Consolidated Statements of Cash Flows for the nine months
         ended September 30, 2001 and September 30, 2000                           5
         Notes to Condensed Consolidated Financial Statements                      7

ITEM 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations                                                    11

ITEM 3.  Quantitative and Qualitative Disclosures About Market Risk               27

PART II. OTHER INFORMATION

ITEM 1.  Legal Proceedings                                                        28

ITEM 6.  Exhibits and Reports on Form 8-K                                         28

         Signatures                                                               28
</TABLE>


                                      -2-
<PAGE>


PART I.   FINANCIAL INFORMATION

ITEM 1.  Condensed Consolidated Financial Statements

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


<TABLE>
<CAPTION>
                                                                                            September 30,      December 31,
                                                                                                2001              2000
                                                                                            -------------     ------------
                                                                                             (Unaudited)       (Note 1)
                                                                                            -------------     ------------
<S>                                                                                            <C>             <C>
ASSETS
Current assets:
    Cash and cash equivalents .............................................................    $  50,043       $  57,034
    Short-term investments ................................................................         --            16,432
    Accounts receivable, net of allowance of $1,110,000 in 2001 and $240,000 in 2000 ......        4,730           4,724
    Prepaid expenses and other current assets .............................................          752           1,186
                                                                                               ---------       ---------
          Total current assets ............................................................       55,525          79,376
    Restricted investments ................................................................        3,438           3,438
    Property and equipment, net ...........................................................        7,837           7,998
    Goodwill and other intangible assets ..................................................         --            12,803
    Other assets ..........................................................................          479             693
                                                                                               ---------       ---------
          Total assets ....................................................................    $  67,279       $ 104,308
                                                                                               =========       =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Accounts payable ......................................................................    $   1,350       $   3,227
    Accrued liabilities ...................................................................        3,999           1,527
    Accrued compensation and related benefits .............................................        2,179           2,238
    Current portion of borrowings under bank line of credit agreement .....................         --                40
    Deferred revenue ......................................................................        3,601           2,442
                                                                                               ---------       ---------
          Total current liabilities .......................................................       11,129           9,474
    Deferred revenue, net of current portion ..............................................          249              83
    Accrued restructuring charges, net of current portion .................................        1,530              --
Commitments
Stockholders' equity:
    Common stock, $0.0001 par value; 150,000,000 shares authorized; 35,037,984 and
          34,473,663 shares issued and outstanding at September 30, 2001 and December 31,
          2000, respectively ..............................................................      168,441         170,841
    Notes receivable from stockholders ....................................................         (502)           (706)
    Deferred stock compensation ...........................................................       (3,981)        (12,350)
    Revenue offset relating to warrant agreements .........................................         (718)         (1,099)
    Accumulated deficit ...................................................................     (108,927)        (61,947)
    Accumulated other comprehensive loss ..................................................           58              12
                                                                                               ---------       ---------
          Total stockholders' equity ......................................................       54,371          94,751
                                                                                               ---------       ---------
          Total liabilities and stockholders' equity ......................................    $  67,279       $ 104,308
                                                                                               =========       =========
</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             Nine Months Ended
                                                                           September 30,                 September 30,
                                                                      -----------------------       -----------------------
                                                                        2001         2000              2001        2000
                                                                      -----------------------       -----------------------
<S>                                                                   <C>            <C>            <C>            <C>
Revenues:
    License fees ................................................     $  3,796       $  2,359       $ 11,891       $  5,173
    Services ....................................................        2,060          2,277          7,741          4,580
                                                                      --------       --------       --------       --------
    Total revenues ..............................................        5,856          4,636         19,632          9,753

Costs and expenses:
    Cost of license fees ........................................          336             39            418            117
    Cost of services ............................................        1,208          1,099          4,171          2,573
    Product development .........................................        3,130          3,383         10,853          6,703
    Sales and marketing .........................................        6,929         10,019         23,741         20,015
    General and administrative ..................................        2,160          1,495          6,932          3,547
    Amortization of goodwill, other intangible assets and
          deferred stock compensation ...........................        1,249          5,289          8,163         12,030
    Purchased in-process research and development ...............           --             --             --            600
    Write-off of core technology ................................        1,981             --          1,981             --
    Restructuring and other impairment charges ..................        9,761             --         12,602             --
                                                                      --------       --------       --------       --------
    Total costs and expenses ....................................       26,754         21,324         68,861         45,585
                                                                      --------       --------       --------       --------

Loss from operations ............................................      (20,898)       (16,688)       (49,229)       (35,832)
    Interest and other income, net ..............................          654            458          2,249          1,170
                                                                      --------       --------       --------       --------

    Net loss ....................................................     $(20,244)      $(16,230)      $(46,980)      $(34,662)
                                                                      ========       ========       ========       ========

    Basic and diluted net loss per share ........................     $  (0.60)      $  (2.67)      $  (1.46)      $  (5.69)
                                                                      ========       ========       ========       ========

    Basic and diluted common shares used to calculate basic and
      diluted net loss per share ................................       33,480          6,080         32,117          6,091
                                                                      ========       ========       ========       ========
</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>
                                                                                                Nine Months Ended
                                                                                                   September 30,
                                                                                               2001            2000
                                                                                             --------        --------
<S>                                                                                          <C>             <C>
OPERATING ACTIVITIES:

       Net loss ..........................................................................   $(46,980)       $(34,662)
          Adjustments to reconcile net loss to net cash used in operating activities:
              Purchased in-process research and development ..............................         --             600
              Write-off of core technology ...............................................      1,981              --
              Restructuring and other impairment charges .................................     11,606              --
              Amortization of goodwill, other intangible assets and deferred stock
                 compensation ............................................................      8,163          12,030
              Depreciation and amortization ..............................................      2,165             553
              Amortization of revenue offset relating to warrant agreements ..............        381             295
              Issuance of common stock in exchange for services ..........................         --             188
              Changes in operating assets and liabilities:
                  Accounts receivable ....................................................        112          (1,033)
                  Prepaid expenses and other current assets ..............................        434          (1,174)
                  Accounts payable .......................................................     (1,877)          1,770
                  Accrued liabilities ....................................................        700             388
                  Accrued compensation and related benefits ..............................        222             353
                  Deferred revenue .......................................................      1,438           3,166
                                                                                             --------        --------
                    Net cash used in operating activities ................................    (21,655)        (17,526)

  INVESTING ACTIVITIES:
          Purchase of property and equipment .............................................     (2,344)         (4,620)
          (Increase) decrease in other assets ............................................        200          (2,101)
          Business acquisition, net of cash acquired .....................................         --             456
          Restricted investments .........................................................         --          (3,438)
          Proceeds from investments ......................................................     16,436             556
                                                                                             --------        --------
                    Net cash provided by (used in) investing activities ..................     14,292          (9,147)

  FINANCING ACTIVITIES:
          Repayment of obligations under bank line of credit agreement ...................        (40)            (54)
          Principal payments on capital lease obligations ................................         --              (4)
          Proceeds from issuance of convertible preferred stock, net .....................         --          30,700
          Proceeds from note receivable from stockholder .................................         --             342
          Proceeds from note repayment from stockholder ..................................        204              --
          Proceeds from issuance of common stock, net of stock repurchase ................        166           3,390
                                                                                             --------        --------
                    Net cash provided by financing activities ............................        330          34,374
                                                                                             --------        --------
Effect of exchange rate changes on cash and cash equivalents .............................         42              20
                                                                                             --------        --------
Increase (decrease) in cash and cash equivalents .........................................     (6,991)          7,721
Cash and cash equivalents at beginning of period .........................................     57,034           5,835
                                                                                             --------        --------
Cash and cash equivalents at end of period ...............................................   $ 50,043        $ 13,556
                                                                                             ========        ========
</TABLE>

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


                                      -5-
<PAGE>


<TABLE>
<CAPTION>
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

<S>                                                                               <C>       <C>
   Issuance of preferred stock in exchange for license .......................    $  --     $    40
                                                                                  =====     =======
   Issuance of preferred stock for notes receivable from stockholder .........    $  --     $   342
                                                                                  =====     =======

   Issuance of preferred stock in connection with acquisition ................    $  --     $15,466
                                                                                  =====     =======
   Deferred stock compensation related to grants of options for common stock .    $  --     $18,498
                                                                                  =====     =======
   Issuance of common stock for notes receivable from stockholder ............    $  --     $   606
                                                                                  =====     =======
   Revenue offset related to warrant agreements ..............................    $  --     $ 1,521
                                                                                  =====     =======
SUPPLEMENTAL DISCLOSURES:
   Cash paid during the period for interest ..................................    $   5     $     9
                                                                                  =====     =======
   Warrant issued in connection with a content service agreement .............    $  --     $   159
                                                                                  =====     =======
</TABLE>


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


                                      -6-

<PAGE>


     NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2001
                                   (Unaudited)


NOTE 1.  DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Basis of Presentation

     The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally  accepted  accounting  principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation  S-X.  Accordingly,  they do not include all of the information
and footnotes required by generally accepted accounting  principles for complete
financial statements. In the opinion of management,  all adjustments (consisting
of normal recurring accruals)  considered necessary for a fair presentation have
been  included.  Operating  results for the three and nine month  periods  ended
September  30, 2001 are not  necessarily  indicative  of the results that may be
expected for the year ended December 31, 2001.

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

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

     Certain  reclassifications  have been made to the financial  statements for
the  three  and  nine  months  ended  September  30,  2000  to  conform  to  the
presentation  of the  financial  statements  for the three and nine months ended
September 30, 2001.

NOTE 2.  CONCENTRATION OF CREDIT RISK

     For the three months ended September 30, 2001, two customers  accounted for
19% and 16% of total  revenues.  For the three months ended  September 30, 2000,
one  customer  accounted  for 28% of total  revenues.  For the nine months ended
September 30, 2001 and 2000, one customer accounted for 18% and 32% of revenues,
respectively.

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.

     Pro forma net loss per share has been computed as described  above and also
gives  effect,  under  Securities  and  Exchange  Commission  guidance,  to  the
conversion of preferred shares not included above that  automatically  converted
to common shares immediately prior to the closing of our initial public offering
on October 2, 2000, using the if-converted method.

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

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


                                      -7-
<PAGE>


<TABLE>
<CAPTION>
                                                                      Three Months Ended             Nine Months Ended
                                                                         September 30,                 September 30,
                                                                    -----------------------       -----------------------
                                                                      2001           2000           2001           2000
                                                                    --------       --------       --------       --------
                                                                           (in thousands, except per share amounts):
<S>                                                                 <C>            <C>            <C>            <C>
Historical:
    Net loss ....................................................   $(20,244)      $(16,230)      $(46,980)      $(34,662)
                                                                    ========       ========       ========       ========
    Weighted average shares of common stock outstanding .........     34,922         10,678         34,642         10,441
    Less weighted average shares that may be repurchased ........     (1,442)        (4,598)        (2,525)        (4,350)
                                                                    --------       --------       --------       --------
    Weighted average shares of common stock outstanding used
    in computing basic and diluted net loss per share ...........     33,480          6,080         32,117          6,091
                                                                    ========       ========       ========       ========
    Basic and diluted net loss per share ........................   $  (0.60)      $  (2.67)      $  (1.46)      $  (5.69)
                                                                    ========       ========       ========       ========
Pro forma:
    Net loss ....................................................   $(20,244)      $(16,230)      $(46,980)      $(34,662)
                                                                    ========       ========       ========       ========
Weighted average shares used in computing basic and
diluted net loss per share (from above) .........................     33,480          6,080         32,117          6,091
Adjustment to reflect the effect of the assumed
conversion of preferred stock from the date of issuance .........         --         17,131             --         15,007
                                                                    --------       --------       --------       --------
Weighted average shares used in computing pro forma
basic and diluted net loss per share ............................     33,480         23,211         32,117         21,098
                                                                    ========       ========       ========       ========

Pro forma basic and diluted net loss per share ..................   $  (0.60)      $  (0.70)      $  (1.46)      $  (1.64)
                                                                    ========       ========       ========       ========
</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 and
nine months ended September 30, 2001 and 2000 were as follows (in thousands):

<TABLE>
<CAPTION>
                                                    Three Months Ended         Nine Months Ended
                                                       September 30,              September 30,
                                                  ----------------------     ----------------------
                                                    2001          2000         2001          2000
                                                  --------      --------     --------      --------
<S>                                               <C>           <C>          <C>           <C>
Net loss ......................................   $(20,244)     $(16,230)    $(46,980)     $(34,662)
Foreign currency translation adjustments ......       (152)            7           42            20
Unrealized gain (loss) on investment ..........         --           140            4            64
                                                  --------      --------     --------      --------
Comprehensive loss ............................   $(20,396)     $(16,083)    $(46,934)     $(34,578)
                                                  ========      ========     ========      ========
</TABLE>

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.


                                      -8-
<PAGE>


Geographic Information

     The Company operates in North America and Europe. Approximately 13% and 15%
of revenues,  respectively, were derived from outside North America in the three
and nine months ended September 30, 2001. Less than 10% of revenues were derived
from  outside  North  America in the three and nine months ended  September  30,
2000. At September 30, 2001 and 2000, less than 10% of the Company's assets were
located outside North America.

NOTE 6.  RESTRUCTURING AND OTHER IMPAIRMENT CHARGES

Restructuring Charges

     During the three months ended June 30, 2001, the Company  formally  adopted
and began to implement a restructuring  program in an effort to reduce operating
expenses.  The restructuring charges during the three months ended June 30, 2001
were $2.8 million, which includes $2.4 million related to excess space at one of
the Company's  Hayward  facilities,  the  impairment  of assets of $22,000,  and
$415,000 related to employee  termination  costs associated with the elimination
of 56 positions,  most of which  occurred in the U.S. and affected  employees at
all levels of the Company.

     Additionally  during the three months ended September 30, 2001, the Company
adopted and began to  implement a  restructuring  program in an effort to reduce
operating  expenses  that resulted in aggregate  charges of $9.8 million.  These
charges  included  $687,000  related to excess  space at the  Company's  Chicago
facility,  which was closed during the quarter,  and the impairment of assets of
$108,000.  The Company also revised its estimate of the restructuring  charge of
one of its Hayward facilities resulting in an additional restructuring charge of
$406,000.  Restructuring  charges  also  included  $530,000  related to employee
termination costs associated with the elimination of 28 positions, most of which
occurred in the U.S.  and affected  employees at all levels of the Company.  The
outstanding  liability associated with the employee terminations was $382,000 as
of September 30, 2001. The revised  estimate of excess payments on the remaining
Hayward  facility  costs of $2.4 million  extends  through  September  2007. The
estimate of payments on the remaining Chicago facility costs of $508,000 extends
through August 2005.  Restructuring and other impairment charges also included a
write-off of goodwill of $7.7 million and the write-off of acquired workforce of
$339,000, discussed further below.

     The following table sets forth the restructuring  activity during the three
months ended September 30, 2001 (in thousands):

<TABLE>
<CAPTION>
                                                        Total
                                      Balance at     Restructuring      Cash           Non-cash         Balance at
                                     June 30, 2001      Charges      Expenditures    Expenditures    September 30, 2001
                                     -------------      -------      ------------    ------------    ------------------
<S>                                     <C>             <C>             <C>             <C>               <C>
Facility costs ....................     $2,203          $1,093          $(224)          $  (152)          $2,920
Employee termination costs ........         15             530           (163)               --              382
Excess equipment ..................         --             108             --              (108)              --
Goodwill ..........................         --           7,691             --            (7,691)              --
Acquired workforce ................         --             339             --              (339)              --
                                        ------          ------          -----           -------           ------
Total .............................     $2,218          $9,761          $(387)          $(8,290)          $3,302
                                        ======          ======          =====           =======           ======
</TABLE>


                                      -9-

<PAGE>


     The following table sets forth the  restructuring  activity during the nine
months ended September 30, 2001 (in thousands):

<TABLE>
<CAPTION>
                                         Total
                                     Restructuring       Cash           Non-cash         Balance at
                                        Charges       Expenditures    Expenditures    September 30, 2001
                                        -------       ------------    ------------    ------------------
<S>                                     <C>              <C>             <C>                <C>
Facility costs .....................    $ 3,497          $(425)          $  (152)           $2,920
Employee termination costs .........        945           (563)               --               382
Excess equipment ...................        130             --              (130)               --
Goodwill ...........................      7,691             --            (7,691)               --
Acquired workforce .................        339             --              (339)               --
                                        -------          -----           -------            ------
Total ..............................    $12,602          $(988)          $(8,312)           $3,302
                                        =======          =====           =======            ======
</TABLE>

Impairment Write-down of Goodwill, Acquired Workforce, and Core Technology

During the third quarter of 2001,  management  identified indicators of possible
impairment of its long-lived assets, consisting of goodwill,  acquired workforce
and core technology  associated with the acquisition of Globalware  Computing in
May 2000. Such indicators included an overall decline in information  technology
spending, and anticipated increased pressure from competitors.

During July 2001,  the  Company  closed its Chicago  office and  terminated  the
employees at that location. Consequently, the value of the acquired workforce of
$339,000 was written off and included in restructuring charges.

The Company  performed asset  impairment  tests for the other  identified  asset
categories, goodwill and core technology. The test for goodwill was performed by
comparing the expected  undiscounted cash flows for a five-year  period,  plus a
terminal value for future cash flows to the total  carrying  amount of goodwill.
The assumptions  supporting the estimated cash flows, and an estimated  terminal
value,  reflect  management's best estimates.  Based on the result of this test,
the Company determined that the carrying amount of the goodwill was impaired.

Using management's best estimates,  the Company determined the fair value of the
goodwill to be zero.  Fair value was determined  using the discounted  cash flow
method,  using a  discount  rate of 20% and an  estimated  residual  value.  The
discount  rate was based  upon the  weighted  average  cost of  capital  for the
Company and comparable companies. A write-down of goodwill totaling $7.7 million
was recorded  during the third quarter of 2001,  reflecting the write off of the
entire balance of goodwill, and is included in the line item, "Restructuring and
Other Impairment Charges".

The test for core  technology  was performed by comparing  the estimated  future
gross  revenues from the product  reduced by the estimated  future direct costs,
including the costs of performing  maintenance and customer  support required to
satisfy the Company's  responsibility.  The assumptions supporting the estimated
future gross  revenues and direct costs  reflect  management's  best  estimates.
Based on the result of this  test,  the  Company  determined  that the  carrying
amount of the core technology was impaired and should be written down to zero.

NOTE 7.  RECENT ACCOUNTING PRONOUNCEMENTS

     In July 2001, the Financial Accounting Standards Board issued Statements of
Financial  Accounting  Standards No. 141, Business  Combinations (SFAS 141), and
No. 142,  Goodwill and Other  Intangible  Assets (SFAS 142).


                                      -10-
<PAGE>


SFAS 141 eliminates the  pooling-of-interests  method of accounting for business
combinations  except for qualifying  business  combinations  that were initiated
prior to July 1, 2001.  SFAS 141 further  clarifies  the  criteria to  recognize
intangible  assets  separately from goodwill.  The  requirements of SFAS 141 are
effective for any business combination accounted for by the purchase method that
is completed after June 30, 2001. Under SFAS 142,  goodwill and indefinite lived
intangible  assets are no longer  amortized  but are reviewed  annually (or more
frequently if impairment indicators arise) for impairment.  Separable intangible
assets  that are not  deemed  to have an  indefinite  life will  continue  to be
amortized over their useful lives (but with no maximum life).  The  amortization
provisions of Statement  142 apply to goodwill and  intangible  assets  acquired
after June 30,  2001.  SFAS 142 will have no affect on the  Company's  financial
statements in that all goodwill and intangible  assets have been written off due
to impairment during the three months ended September 30, 2001.

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

FORWARD-LOOKING STATEMENTS

     This  document  contains  certain  forward-looking  statements  within  the
meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of
the Securities Act of 1933. These  forward-looking  statements involve risks and
uncertainties, including, but not limited to, those identified in the section of
this Form 10-Q entitled "Factors Affecting Our Future Operating  Results," which
may cause  actual  results to differ  materially  from those  discussed  in such
forward-looking  statements.  When used in this document,  the words "believes,"
"expects," "anticipates," "intends," "plans," "future," "may," "will," "should,"
"estimates," "potential," or "continue" and similar expressions, are intended to
identify certain of these forward-looking  statements.  However, these words are
not the  exclusive  means of  identifying  such  statements.  In  addition,  any
statements that refer to expectations, projections or other characterizations of
future events or circumstances are  forward-looking  statements.  The cautionary
statements  made in this  document  should  be read as being  applicable  to all
related  forward-looking  statements  wherever  they  appear  in this  document.
Factors  that  could  cause or  contribute  to such  differences  include  those
discussed  below,  as well as those  contained in our Annual Report on Form 10-K
filed with the  Securities  and Exchange  Commission for year ended December 31,
2000. We undertake no obligation to release publicly the results of any revision
to these  forward-looking  statements  that  may be made to  reflect  events  or
circumstances occurring subsequent to the filing of this Form 10-Q with the SEC.
Readers are urged to review and consider carefully the various  disclosures made
by us in this report and in our other reports filed with the SEC that attempt to
advise interested parties of the risk factors that may affect our business.

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

OVERVIEW

     We  provide  software  and  services  that  enable and  enhance  the use of
Internet-based content and corporate  applications to mobile devices,  including
personal digital assistants and Internet-enabled  phones. We license our AvantGo
M-Business  Server,  AvantGo Mobile  Sales(R),  AvantGo Mobile  Delivery(R)  and
AvantGo Pylon products to help  companies  provide their  employees,  customers,
suppliers and business affiliates with easy access to business information.  Our
AvantGo Mobile Internet  service allows media  properties and businesses to host
their Internet-based content and applications to reach and interact with new and
existing customers,  increasing customer acquisition and retention. In addition,
our AvantGo Mobile  Internet  service gives  businesses the option of leveraging
our base of over 3.5 million registered users, giving these companies a fast and
efficient means to build a mobile audience.

     We were incorporated in June 1997 as a Delaware  corporation under the name
Bombardier Software, Inc. and changed our name to AvantGo, Inc. in January 1998.
In September 1998, we launched our AvantGo M-Business products and services.  In
May 1999, we introduced our AvantGo  Mobile  Internet  service.  In May 2000, we
completed  our  purchase  of  Globalware  Computing  and began  integrating  its
software  products and  consulting


                                      -11-
<PAGE>


services.  In October  2000, we completed our initial  public  offering  raising
approximately  $68.3  million  in  net  proceeds,  after  deducting  underwriter
discounts,  commissions  and other offering  expenses.  In 2001, we launched our
AvantGo Mobile Sales and AvantGo Mobile Delivery products. Although our revenues
have increased year-over-year since inception, we have never been profitable. As
of September 30, 2001, we had an  accumulated  deficit of  approximately  $108.9
million.

OUR BUSINESS

     Our primary sources of revenues are generated by our license agreements and
our services  agreements.  License revenues for our AvantGo  M-Business  Server,
AvantGo Mobile Sales(R),  AvantGo Mobile Delivery(R) and AvantGo Pylon products,
which are typically based on fixed-fee  agreements,  are recognized when we have
executed an agreement with a customer,  delivery has occurred,  the fee is fixed
or  determinable,  and  the  collection  of the  related  receivable  is  deemed
probable.   Historically,  our  services  revenue  has  consisted  primarily  of
professional  services and  technical  support fees.  Revenue from  professional
services  is  recognized  on a  monthly  basis as the  services  are  performed.
Technical support fees are recognized ratably on a monthly basis over the course
of the support  period,  typically  twelve  months.  Our  services  revenue also
includes  amounts  derived  from the  operation of our AvantGo  Mobile  Internet
service,  which  includes  M-Business  Channel  revenues,  distribution  product
revenues,  and  advertising  revenues.   Advertising  and  distribution  product
revenues are recognized when delivered.

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

     Our costs and  expenses  are  classified  into  three  general  operational
categories:   product  development,   sales  and  marketing,   and  general  and
administrative.  In addition,  our operating  expenses  include  amortization of
goodwill,  other  intangible  assets,  and  deferred  stock-based  compensation.
Operating  expenses  also include  non-recurring  costs of purchased  in-process
research and development,  restructuring and other impairment  charges,  and the
write-off of core  technology  related to the  acquisition  of Globalware in May
2000.  Goodwill and core  technology  were written off in the three months ended
September  30,  2001.  For  more  information,  see  Note  6  of  the  Condensed
Consolidated Financial Statements.

     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,  information technology, 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 $25.5 million as of September 30, 2001. This amount represents the
difference  between the  exercise  and the deemed fair value of our common stock
for financial  accounting purposes on the date these stock options were granted.
This  amount is included as a  component  of  stockholders'  equity and is being
amortized by charges to operations  over the vesting period of the options.  The
amortization  of the  remaining  deferred  stock  compensation  will  result  in
additional charges to operations through fiscal year 2004.


                                      -12-
<PAGE>


RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001
AND 2000

     The following  table sets forth certain  financial  data,  derived from our
unaudited  statements of  operations,  as a percentage of total revenues for the
periods  indicated.  The  operating  results for the three and nine months ended
September 30, 2001 and 2000 are not  necessarily  indicative of the results that
may be expected for any future period.

<TABLE>
<CAPTION>
                                                              Three Months Ended        Nine Months Ended
                                                                  September 30,           September 30,
                                                              -----------------         -----------------
                                                              2001         2000         2001         2000
                                                              ----         ----         ----         ----
Revenues:
<S>                                                           <C>          <C>          <C>          <C>
   License fees ...........................................     65%          51%          61%          53%
   Services ...............................................     35%          49%          39%          47%
                                                              ----         ----         ----         ----
   Total revenues .........................................    100%         100%         100%         100%
Costs and expenses:
   Cost of license fees ...................................      6%           1%           2%           1%
   Cost of services .......................................     21%          24%          21%          26%
   Product development ....................................     53%          73%          55%          69%
   Sales and marketing ....................................    118%         216%         121%         205%
   General and administrative .............................     37%          32%          36%          37%
   Amortization of goodwill, other intangible assets
       and deferred stock compensation ....................     21%         114%          42%         123%
   Purchased in-process research and development ..........      0%           0%           0%           6%
   Write-off of core technology ...........................     34%           0%          10%           0%
   Restructuring and other impairment charges .............    167%           0%          64%           0%
                                                              ----         ----         ----         ----
   Total costs and expenses ...............................    457%         460%         351%         467%
                                                              ----         ----         ----         ----
Loss from operations ......................................   (357%)       (360%)       (251%)       (367%)
   Interest and other income, net .........................     11%          10%          12%          12%
                                                              ----         ----         ----         ----
   Net loss ...............................................   (346%)       (350%)       (239%)       (355%)
                                                              ====         ====         ====         ====
</TABLE>

Comparisons of Three and Nine Months Ended September 30, 2001 and 2000

Revenues

     Total revenue was approximately $5.9 million and $4.6 million for the three
months ended September 30, 2001 and 2000, respectively, representing an increase
in the third quarter of 2001 of  approximately  $1.3  million,  or 26%, over the
comparable  quarter of the prior year.  Total  revenue was  approximately  $19.6
million and $9.8 million for the nine months ended  September 30, 2001 and 2000,
respectively,  representing an increase of approximately $9.8 million,  or 101%,
over the  comparable  period of the prior year.  The growth in revenues  for the
three months ended  September 30, 2001 over the three months ended September 30,
2000 is primarily  attributable to product line expansion and improved marketing
and selling programs. The growth in revenues for the nine months ended September
30, 2001 over the nine months ended September 30, 2000 is primarily attributable
to sales force and product line  expansion.  The growth in revenues  reflects an
increased  volume of licenses  and  services  sold,  rather  than a  substantive
increase in price. Revenues may not increase at the same rate in the future.

     License Fees. License fee revenues increased approximately $1.4 million, or
61%, from  approximately  $2.4 million for the three months ended  September 30,
2000 to  approximately  $3.8 million for the three months  ended  September  30,
2001. License fee revenues increased  approximately $6.7 million,  or 130%, from
approximately


                                      -13-
<PAGE>


$5.2 million for the nine months ended September 30, 2000 to approximately $11.9
million for the nine months ended  September 30, 2001. The growth in license fee
revenues  for the three months  ended  September  30, 2001 over the three months
ended September 30, 2000 is primarily attributable to product line expansion and
improved marketing and selling programs.  The growth in license fee revenues for
the nine months ended  September  30, 2001 over the nine months ended  September
30, 2000 is primarily attributable to sales force and product line expansion.

     Services.  Services revenue decreased  approximately $217,000, or 10%, from
approximately  $2.3  million for the three months  ended  September  30, 2000 to
approximately  $2.1 million for the three months ended  September 30, 2001. This
decrease is due  primarily to  decreased  consulting  services  performed in the
latter period.  Services revenue increased  approximately $3.1 million,  or 69%,
from $4.6 million for the nine months ended September 30, 2000 to  approximately
$7.7 million for the nine months ended  September  30, 2001.  This  increase was
primarily  attributable to increased  consulting services performed in the first
six months of the latter period in connection  with  increased  license fees, as
well as increased  revenue  derived from sales of  distribution  and advertising
products.

     We also earn revenues from advertising  barter  transactions.  Revenues and
costs from advertising  barter  transactions are recognized during the period in
which the advertising or distribution product is delivered.  Barter transactions
are  recorded at the fair value of the goods or services  provided or  received,
whichever is more readily determinable in the circumstances.  In determining the
value of the goods or services provided,  the Company uses historical pricing of
comparable  cash  transactions.  Revenues earned from barter  transactions  were
$45,000 and  $49,000 for the three  months  ended  September  30, 2001 and 2000,
respectively.  Revenues  earned  from  barter  transactions  were  $173,000  and
$244,000 for the nine months ended September 30, 2001 and 2000, respectively. We
do not  expect  barter  revenue  to be a  significant  portion of revenue in the
future.

     Deferred  revenues  reflected  on our  balance  sheet were $3.9  million at
September 30, 2001 as compared to $3.4 million at September 30, 2000.

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

     Costs and Expenses

     Cost of License  Fees.  Our cost of license  fees  increased  approximately
$297,000,  or 762%,  from  approximately  $39,000  for the  three  months  ended
September  30,  2000 to  approximately  $336,000  for  the  three  months  ended
September 30, 2001. Cost of license fees increased  approximately  $301,000,  or
257%, from  approximately  $117,000 for the nine months ended September 30, 2000
to  approximately  $418,000 for the nine months ended September 30, 2001.  These
increases were primarily  attributable to royalty expenses  incurred as a result
of reselling other software developers' products in conjunction with ours during
the quarter  ended  September  30,  2001.  We expect the cost of license fees to
increase  as we  enter  into  agreements  with  other  software  developers  and
incorporate their products into ours.

     Cost of Services. Our cost of services increased approximately $109,000, or
10%, from  approximately  $1.1 million for the three months ended  September 30,
2000 to  approximately  $1.2 million for the three months  ended  September  30,
2001.  Cost of services  increased  approximately  $1.6  million,  or 62%,  from
approximately  $2.6  million for the nine  months  ended  September  30, 2000 to
approximately $4.2 million for the nine months ended


                                      -14-
<PAGE>


September 30, 2001. These increases were primarily due to increased expenditures
resulting  from the  expansion  of our  AvantGo  Mobile  Internet  service,  and
expansion  of our  consulting  services  organization.  We expect these costs to
increase  to the  extent  that  our  AvantGo  Mobile  Internet  service  and our
consulting services organization continue to expand.

     Product Development.  Product development expenses decreased  approximately
$253,000,  or 7%, from  approximately  $3.4  million for the three  months ended
September  30, 2000 to  approximately  $3.1  million for the three  months ended
September 30, 2001.  This decrease is primarily  attributable  to a reduction in
headcount as a result of the restructuring  program that the Company implemented
during  the three  months  ended June 30,  2001.  Product  development  expenses
increased  approximately  $4.2 million,  or 62%, from approximately $6.7 million
for the nine months ended September 30, 2000 to approximately  $10.9 million for
the nine months ended  September 30, 2001.  This increase was primarily a result
of increased hiring of engineers and product development  personnel prior to the
implementation of the restructuring  program. To date, all software  development
costs have been expensed in the period incurred.

     Sales and Marketing. Our sales and marketing expenses include those related
to compensation,  public  relations and  advertising,  trade shows and marketing
materials. Sales and marketing expenses decreased approximately $3.1 million, or
31%,  from  approximately  $10 million for the three months ended  September 30,
2000 to  approximately  $6.9 million for the three months  ended  September  30,
2001.  This  decrease is primarily  attributable  to a reduction in the level of
advertising  expenditures  relating to our AvantGo Mobile Internet  service,  as
well as a reduction in headcount as a result of the  restructuring  program that
the Company  implemented  during the three months ended June 30, 2001. Sales and
marketing   expenses  increased   approximately  $3.7  million,   or  19%,  from
approximately  $20  million  for the nine  months  ended  September  30, 2000 to
approximately  $23.7 million for the nine months ended  September 30, 2001. This
increase was  attributable  to an increase in the number of employees,  prior to
the  implementation  of the restructuring  programs,  in our sales and marketing
organizations, and related costs, such as increased sales commissions.

     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  increased  approximately  $665,000,  or 44%, from  approximately  $1.5
million for the three  months ended  September  30, 2000 to  approximately  $2.2
million  for  the  three  months   ended   September   30,  2001.   General  and
administrative  expenses  increased  approximately  $3.4  million,  or 95%, from
approximately  $3.5  million for the nine  months  ended  September  30, 2000 to
approximately  $6.9 million for the nine months ended September 30, 2001.  These
increases were due primarily to an increase in the number of executive,  finance
and administrative  employees,  prior to the implementation of the restructuring
program during the three months ended June 30, 2001.

     Amortization  of  goodwill,  other  intangible  assets and  deferred  stock
compensation.  We have been  amortizing the amount of goodwill,  core technology
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 fair value of stock options  granted to
our employees  and  consultants  and what were  considered to be the deemed fair
values of our common  stock,  in the case of option  grants to employees  and on
values based on the  Black-Scholes  formula for valuing options,  in the case of
grants to  non-employees,  in each case on the date of the grants  over  vesting
periods using a graded vesting method.  Amortization of deferred compensation is
calculated using a declining balance method.

     We recognized approximately $5.3 million of amortization of goodwill, other
intangible assets and deferred stock compensation  during the three months ended
September 30, 2000 and approximately  $1.2 million during the three months ended
September 30, 2001. We recognized  approximately $12 million for the nine months
ended  September  30, 2000 and  approximately  $8.2  million for the nine months
ended September 30, 2001. We anticipate  that the  amortization of the remaining
deferred stock  compensation  will result in additional  charges  through fiscal
year 2004.


                                      -15-
<PAGE>


     Included in total  amortization  expense is  approximately  $2.6 million of
amortization  of goodwill  and other  intangible  assets  during the nine months
ended  September  30,  2001.  There was no  amortization  of goodwill  and other
intangible  assets  during the three months ended  September 30, 2001 due to the
determination  during the quarter that the assets were  impaired.  Consequently,
goodwill and other  intangible  assets have been written off as of September 30,
2001,  and there will be no further  amortization.  We recognized  approximately
$1.3 million and $1.7 million,  respectively,  of  amortization  of goodwill and
other  intangible  assets  during the three and nine months ended  September 30,
2000.  See  Note  6  to  the  Condensed   Consolidated   Financial   Statements,
"Restructuring and Other Impairment Charges" for further information.

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

     Write-off of core  technology.  During the third quarter of 2001, due to an
overall decline in information  technology spending,  and anticipated  increased
pressure  from  competitors,  we  concluded  that core  technology  would not be
recoverable.  An impairment  assessment,  test and  measurement  resulted in the
recording  of a write-off  of core  technology  of $2.0  million  related to the
acquisition of Globalware in May 2000. See Note 6 to the Condensed  Consolidated
Financial  Statements,  "Restructuring and Other Impairment Charges" for further
information.

     Restructuring and other impairment  charges.  During the three months ended
September 30, 2001, we adopted and began to implement a restructuring program in
an effort to reduce operating expenses.  This restructuring  program resulted in
aggregate charges of $9.8 million. These charges included a non-recurring charge
of $687,000 related to excess space at the Company's Chicago facility, which was
closed during the quarter, and the impairment of assets of $108,000. The Company
also revised its estimate of the  impairment  of one of its Hayward  facilities,
resulting  in an  additional  non-recurring  restructuring  charge of  $406,000.
Restructuring  charges also included  $530,000  related to employee  termination
costs associated with the elimination of 28 positions, most of which occurred in
the U.S. and affected employees at all levels of the Company.  Also included was
the write-down of goodwill and other intangible assets of $8.0 million. See Note
6 to the Condensed Consolidated  Financial Statements,  "Restructuring and Other
Impairment Charges," for further information regarding these activities.

     Interest and Other  Income,  Net.  Net interest and other income  increased
approximately $196,000, or 43%, from approximately $458,000 for the three months
ended  September 30, 2000 to  approximately  $654,000 for the three months ended
September 30, 2001. Net interest and other income increased  approximately  $1.0
million,  or 92%,  from  approximately  $1.2  million for the nine months  ended
September  30, 2000 to  approximately  $2.2  million  for the nine months  ended
September 30, 2001.  This increase was primarily due to increased  cash balances
as a result of the closing of our initial public offering in October 2000.

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 $124.1
million through September 30, 2001. As of September 30, 2001, we had $50 million
of cash and cash equivalents and short-term  investments,  a decrease from $73.5
million  of cash and cash  equivalents  and  short-term  investments  held as of
December  31,  2000.  As  of  September  30,  2001,  our  working   capital  was
approximately  $44.4 million compared to approximately $69.9 million on December
31, 2000.

     Net cash used in operating  activities  totaled  $21.7 million for the nine
months  ended  September  30,  2001,  as  compared  with $17.5  million  for the
comparable period in 2000. The principal use of cash was to fund our losses from
operations.  Net cash provided by financing  activities  totaled $330,000 during
the nine months ended September 30, 2001, as compared with $34.4 million for the
comparable  period in 2000, which included  proceeds from our series D preferred
round of financing.


                                      -16-
<PAGE>


     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 $2.3 million in the nine
months  ended  September  30,  2001,  as  compared  with  $4.6  million  for the
comparable  period in 2000.  The decrease is 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 nine months ended
September  30,  2001,  we  converted  all of our  investments  to cash  and cash
equivalents, which provided $16.4 million of net cash from investing activities.

     We anticipate 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.  There can be no assurance that additional
financing will be available when needed on terms favorable to us, if at all.

FACTORS AFFECTING OUR FUTURE OPERATING RESULTS

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

The slowdown in the adoption of the mobile device marketplace could 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.  This  economic  slowdown  has  reduced  the rate of  growth  in the
adoption of mobile  devices,  and  associated  products and services.  Sustained
economic slowdown could reduce demand for our software and services.

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

     Since our inception, we have never been profitable.  From inception through
September 30, 2001, we had an accumulated deficit of $108.9 million. Because the
Company is not currently generating sufficient cash to fund its operations,  the
Company may be forced to rely on external  financing to meet future  capital and
operating requirements.  Any projections of future cash needs and cash flows are
subject to substantial  uncertainty.  The Company's capital  requirements depend
upon several factors,  including the rate of market  acceptance,  its ability to
expand its customer base and increase  revenues,  its level of expenditures  for
marketing and sales, purchases of equipment, and other factors. If the Company's
capital  requirements vary materially from those currently planned,  the Company
may require additional  financing sooner than anticipated.  The Company can make
no assurance that financing will be available in amounts or on terms  acceptable
to the Company,  if at all.  Further,  if the Company issues 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
common  stock,  and  debt  financing,  if  available,  may  involve  restrictive
covenants  which could  restrict the Company's  operations  or finances.  If the
Company cannot raise funds, if needed,  on acceptable terms, the Company may not
be able to continue its operations,  grow market share, take advantage of future
opportunities or respond to competitive pressures or unanticipated requirements.
This in turn, could negatively impact the Company's business,  operating results
and financial condition, and we may not achieve profitability.


                                      -17-
<PAGE>


The Company was recently named in a securities class action lawsuit that could
materially harm its business and financial condition and result in a decline in
the Company's stock price.

     The Company, certain of its officers and directors, and the underwriters of
the Company's  initial  public  offering  were recently  named to a class action
lawsuit,  alleging a violation of securities  laws. See "Part II - Item 1. Legal
Proceedings." This pending litigation, and any subsequent litigation against the
Company or its 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 operation.  Such an event is likely to
cause our stock price to decline substantially.

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

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

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

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

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

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


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

     Our enterprise  software,  which consists of our AvantGo M-Business Server,
AvantGo  Mobile  Sales,  AvantGo  Mobile  Delivery and AvantGo  Pylon  products,
together  with related  technical  support  fees,  has  accounted for 61% of our
revenues in the nine months ended  September 30, 2001 and 56% of our revenues in
2000 and 50% of our revenues in 1999.  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


                                      -18-
<PAGE>


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.

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 19% of our total revenues for the
third  quarter of fiscal year 2001.  We expect that  McKesson  Corporation  will
continue to represent a significant  portion of our revenues for the next twelve
to  eighteen   months.   Any   disruption  or   termination  of  our  commercial
relationships with McKesson Corporation would harm our revenues.

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

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

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

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

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

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

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

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

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

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

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


                                      -19-
<PAGE>


If we fail to meet  the  continued  listing  requirements  of the  Nasdaq  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.  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.

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

     Our revenues  consist  primarily  of fees  received  from  licensees of our
enterprise software,  which accounted for 56% of our revenues for the year ended
December 31, 2000 and 61% of our  revenues  for the nine months ended  September
30,  2001.  We also  obtain  significant  revenues  from  professional  services
rendered to our  enterprise  customers.  In the year ended December 31, 2000 and
the nine months ended September 30, 2001,  advertising and distribution  product
fees from our AvantGo  Mobile  Internet  service also generated a portion of our
revenue.  Because  our  licensing,  professional  services  and  AvantGo  Mobile
Internet  service  revenues can vary  substantially  from month to month and are
difficult to predict,  and we expect to continue to rely on these revenues,  our
future quarterly revenues and operating results may fluctuate substantially.  As
a result of these factors, we believe that  quarter-to-quarter or other periodic
comparisons of our revenue and operating results are not necessarily meaningful,
and that these comparisons may not be accurate indicators of future performance.
Our  prospects  must  be  considered  in  light  of  the  risks,   expenses  and
difficulties  encountered  by  companies  at  an  early  stage  of  development,
particularly  companies in new and rapidly  evolving  markets,  such as Internet
software. Examples of the factors that could cause our quarterly results to vary
include:

     o    failure to close key enterprise agreements as contemplated;

     o    termination  of important  contracts,  including  those with  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.


                                      -20-
<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
the Internet and intranets. We have expended considerable resources on sales and
marketing of our products and services.  During the quarter ended  September 30,
2001,  our sales and marketing  expenses  were  approximately  $6.9 million.  As
revenues increase,  we expect that these expenses will continue to increase.  If
our sales and marketing  efforts are  inadequate  and we are unable to build our
visibility and brand name, our enterprise revenues will fall and consumer use of
our AvantGo  Mobile  Internet  service  will fail to develop,  jeopardizing  our
ability  to  generate  revenue  from the sale of  advertising  and  distribution
products.

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

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

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

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;


                                      -21-
<PAGE>


     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.

If we fail to manage future expansion effectively,  we may be unable to meet our
customers' needs or to attract new customers.

     We expect to continue to expand our operations for the foreseeable  future.
We expect to hire additional new employees to support our professional services,
product development,  sales, marketing and administrative groups. Because of the
technical nature of our products, we anticipate that it will take several months
to train new  personnel.  We must also  develop our  operating,  administrative,
financial and accounting  systems and controls,  and maintain close coordination
among our product  development,  accounting,  finance,  marketing,  and customer
support  operations.  Failure to accomplish any of these objectives would impede
our ability to deliver products in a timely fashion,  fulfill existing  customer
commitments and attract and retain new customers, which would harm our business.

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,
Internet  users may be less likely to actively  use our service and to engage in
commercial  transactions  using our  service,  which,  in turn,  would  harm our
business.

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

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

     We sell our  products  in the  United  States  and  abroad.  We manage  our
European sales and marketing  operations  through our U.K.  subsidiary,  AvantGo
Europe,  Ltd. Revenues from international  sales represented 15% of our revenues
in the nine months ended September 30, 2001, and we anticipate that revenue from
international  operations  will  represent  an  increasing  portion of our total
revenue.  Our  business  will  therefore  be  increasingly  subject to the risks
associated  with doing  business  internationally.  We expect  that the costs of
developing overseas revenues will exceed those revenues. Accordingly, our future
results could be harmed by a variety of factors, including:

     o    changes in foreign currency exchange rates;


                                      -22-
<PAGE>


     o    the adoption of incompatible platforms or standards;

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

     o    potentially negative consequences from changes in tax laws.

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.

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.

     During 2001, we implemented a restructuring plan and reduced our workforce.
Despite this reduction 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.

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

     The purchase price of outstanding stock options held by the majority of our
employees is above the current fair market value of the Company's  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 to  reincentivize  current
employees.  If the Company issues  additional  stock options or additional stock
grants to  current or new  employees,  our  existing  stockholders  will  suffer
dilution.

                                      -23-
<PAGE>


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

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

     Computer  viruses have been reported to impact  handheld  device  operating
systems. Viruses and publicity about them may adversely impact our product sales
and  usage  of  our  AvantGo  Mobile  Internet  service.   In  particular,   the
unavailability  of anti-virus  protection  that our users deem to be adequate to
combat these viruses could have a material adverse effect on both our enterprise
license business as well as our AvantGo Mobile Internet service.

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

     Our operations depend upon our ability to maintain and protect our computer
systems,  which are located at our offices in Hayward and San Mateo,  California
and at  facilities  owned and operated by Level 3  Communications  in Sunnyvale,
California.  We currently do not have redundant  facilities for our servers. Our
systems therefore are vulnerable to damage from break-ins,  unauthorized access,
vandalism, fire, floods, earthquakes,  power loss,  telecommunications failures,
terrorist  acts such as that  occurring  on  September  11, 2001 in New York and
similar   events.   The  potential   impact  on  the  Company  and  our  general
infrastructure  of being located near major  earthquake  faults is unknown,  but
operating results could be materially adversely affected in the event of a major
earthquake. In addition,  California recently experienced power shortages, 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 is housed at Level 3 Communications
and during a blackout  could  become  inaccessible  to our users.  Additionally,
these blackouts could disrupt the operations of our distributors, resellers, and
customers. Although we maintain insurance against break-in, unauthorized access,
vandalism,  fires, floods,  earthquakes and general business interruptions,  the
amount of  coverage  may not be adequate in any  particular  case,  and will not
likely compensate us for all the damages caused by these or similar events.

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

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

     We are subject not only to 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;


                                      -24-
<PAGE>


     o    taxation of electronic commerce;

     o    the online distribution of specific material or content; and

     o    the characteristics and quality of online products and services.

     One or more states or the federal  government could enact regulations aimed
at companies like us, which provide software that facilitates e-commerce and the
distribution  of content over the Internet.  The  likelihood of the enactment of
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
client software and AvantGo Mobile Internet service could decline significantly.

We may be subject to liability for transmitting  information,  and our insurance
coverage may be inadequate to fully cover us against this liability.

     We could be exposed to liability  with respect to  third-party  information
that our users access with our  software.  Even if these claims do not result in
liability to us, they would likely divert  management's  attention and resources
and we could incur  significant  costs in  investigating  and defending  against
these claims.  Although we carry general liability insurance,  our insurance may
not cover potential  claims of this type or may be inadequate to cover all costs
incurred in defense of potential  claims or to  indemnify  us for all  liability
that may be imposed.

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

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

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

     Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy  aspects of our  software  or to obtain and use  information
that we regard as proprietary.  In addition,  the laws of some foreign countries
do not ensure that our means of protecting our proprietary  rights in the United
States or abroad  will be  adequate.  We have  entered  into  source code escrow
agreements  with a  limited  number of our  customers  and  business  affiliates
requiring  release of our source code in 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.


                                      -25-
<PAGE>


     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.

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

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

     o    actual or anticipated variations in our quarterly operating results;

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

     o    changes in the handheld and wireless device industries;

     o    technological innovations;

     o    competitive developments;

     o    departure of key personnel;

     o    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.  As of
September  30,  2001 we had  approximately  35  million  shares of common  stock
outstanding,  of which 34.3 million were freely tradable,  except for any shares
purchased by our  "affiliates"  as defined in Rule 144 of the  Securities Act of
1933. Sales of a large


                                      -26-
<PAGE>


number of restricted  shares, or sales of shares held by affiliates,  could have
an adverse effect on the market price for our common stock.

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.




                                      -27-
<PAGE>


     Interest  Rate Risk.  We  protect  and  preserve  our  invested  funds with
investment  policies and procedures that limit default,  market and reinvestment
risk. We have not utilized  derivative  financial  instruments in our investment
portfolio.  As of September 30, 2001, we had cash and cash  equivalents of $50.0
million,  consisting  of cash and  highly  liquid  short-term  investments  with
original maturities of three months or less at the date of purchase. Declines in
interest rates over time will result in lower interest income.

     Foreign  Currency  Exchange Risk. We develop  products in the United States
for sale  throughout  the world.  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, our expenses,  when translated,  may vary from expectations
and adversely impact overall expected profitability.  Our operating results have
not been  significantly  affected by  exchange  rate  fluctuations  in the third
quarter of 2001.  If, during the remainder of 2001,  the U.S.  dollar  uniformly
decreases  in strength  by 10%  relative  to the  currency of our foreign  sales
subsidiary,  our operating results for the remainder of 2001 would likely not be
significantly affected.

PART II  OTHER INFORMATION

ITEM 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
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.  Nearly two hundred other
issuers have been named as defendants in nearly identical lawsuits filed by some
of the same plaintiffs' law firms.

ITEM 6.  Exhibits and Reports on Form 8-K

     (b) Reports on Form 8-K.

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


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:  November 14, 2001                By: /s/ David B. Cooper, Jr.
                                        ----------------------------------------
                                        David B. Cooper, Jr.
                                        Chief Financial Officer
                                        (Principal financial and
                                        chief accounting officer)


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