<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-Q


       [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
           Exchange Act of 1934 for the Quarterly Period Ended September 30,
           2003.

                                       or

       [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
           Exchange Act of 1934.

                        Commission File Number: 000-31146

                               724 SOLUTIONS INC.
             (Exact Name of Registrant as Specified in its Charter)


                 Ontario                                Inapplicable
                 -------                                ------------
     (State or Other Jurisdiction of                  (I.R.S. Employer
      Incorporation or Organization)                 Identification No.)

      4101 Yonge Street, Suite 702
           Toronto, Ontario                               M2P 1N6
      ----------------------------                      -----------
(Address of Principal Executive Office)                 (Zip Code)

                                 (416) 226-2900
                                 --------------
             (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
                                              ---     ---

         Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act). Yes     No X
                                                   ---    ---

          Common Shares, no par value - 5,983,349 shares outstanding as
                              of November 3, 2003
     (together with associated rights to purchase additional Common Shares)


<PAGE>

                               724 SOLUTIONS INC.



                                TABLE OF CONTENTS


<TABLE>
<S>       <C>                                                                                             <C>
PART I.   FINANCIAL INFORMATION.............................................................................1

          Item 1.  Financial Statements.....................................................................1

          Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations...12

          Item 3.  Quantitative and Qualitative Disclosures About Market Risk..............................22

          Item 4.  Controls and Procedures.................................................................22


PART II.  OTHER INFORMATION................................................................................23

          Item 1.  Legal Proceedings.......................................................................23

          Item 2.  Changes in Securities...................................................................23

          Item 3.  Defaults Upon Senior Securities.........................................................24

          Item 4.  Submission of Matters to a Vote of Security Holders.....................................24

          Item 5.  Other Information.......................................................................24

          Item 6.  Exhibits and Reports on Form 8-K........................................................24

                   (a)   Exhibits:.........................................................................24

                   (b)   Reports on Form 8-K:..............................................................24

SIGNATURES.................................................................................................25
</TABLE>



<PAGE>

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements
724 SOLUTIONS INC.
Consolidated Balance Sheets
(In thousands of U.S. dollars)

September 30, 2003 and December 31, 2002
<TABLE>
<CAPTION>
=============================================================================================
                                                                    2003                 2002
---------------------------------------------------------------------------------------------
                                                             (Unaudited)
<S>                                                            <C>                  <C>
Assets
Current assets:
     Cash and cash equivalents (note 2)                        $  16,973             $ 19,129
     Short-term investments (note 2)                                 975               18,562
     Restricted cash (note 2)                                        962                  962
     Accounts receivable - trade, net of allowance
       of $60 (December 31, 2002 - $150)                           2,372                2,211
     Prepaid expenses and other receivables                          810                  819
     ----------------------------------------------------------------------------------------
                                                                  22,092               41,683

Fixed assets                                                         711                1,418
Goodwill                                                           9,097                9,097
Other intangible assets                                                -                3,468
---------------------------------------------------------------------------------------------
                                                               $  31,900            $  55,666
=============================================================================================
Liabilities and Shareholders' Equity

Current liabilities:
     Accounts payable                                          $     378            $   1,253
     Accrued liabilities                                           4,457                9,892
     Note payable                                                      -                  600
     Deferred revenue                                                648                1,217
     Deferred consideration                                          491                1,415
     ----------------------------------------------------------------------------------------
                                                                   5,974               14,377
Shareholders' equity:
     Share capital (note 4):
         Authorized:
              Unlimited common shares
              Unlimited preferred shares
         Issued and outstanding:
              5,983,349 common shares
                (December 31, 2002 - 5,983,349)                  764,508              764,508
     Deferred stock-based compensation                                 -               (1,616)
     Accumulated deficit                                        (738,600)            (721,560)
     Cumulative translation adjustment                                18                  (43)
---------------------------------------------------------------------------------------------
Contingent liabilities (note 8)                                   25,926               41,289
---------------------------------------------------------------------------------------------
                                                               $  31,900            $  55,666
</TABLE>

The historic common share numbers have been adjusted to reflect the 10 for 1
share consolidation completed in the second quarter of 2003.
See accompanying notes to consolidated financial statements.


<PAGE>

724 SOLUTIONS INC.
Consolidated Statements of Operations
(In thousands of U.S. dollars, except per share amounts)

<TABLE>
<CAPTION>
================================================================================================================
                                                        Three months ended                 Nine months ended
                                                            Sept. 30,                          Sept. 30,
                                                      2003             2002              2003             2002
----------------------------------------------------------------------------------------------------------------
                                                          (Unaudited)                        (Unaudited)
<S>                                                <C>             <C>               <C>              <C>
Revenue:
     Product                                       $ 1,676         $  1,743          $  5,321         $  5,870
     Services                                        1,437            3,809             4,317            9,203
     -----------------------------------------------------------------------------------------------------------
                                                     3,113            5,552             9,638           15,073
Operating expenses:
     Cost of revenue                                 1,458            1,625             4,454            5,997
     Research and development                        2,008            3,761             7,513           13,619
     Sales and marketing                             1,370            3,419             5,727           14,137
     General and administrative                        846            1,708             3,082            5,654
     Depreciation                                      178            1,334               740            4,494
     Amortization of intangible assets               1,156            1,011             3,468            3,175
     Stock-based compensation:
         Cost of revenue                                 -               54                 8              254
         Research and development                        -            1,879             1,211            8,876
         Sales and marketing                             -              662               282            3,129
         General and administrative                      -              482               115            2,275
     Restructuring costs (note 5)                        -            3,662               300           20,649
     Write-down of fixed assets                          -            2,205                 -            6,339
     -----------------------------------------------------------------------------------------------------------
                                                     7,016           21,802            26,900           88,598
----------------------------------------------------------------------------------------------------------------
Loss from operations                                (3,903)         (16,250)          (17,262)         (73,525)

Interest income, net                                    44               60               222              585
----------------------------------------------------------------------------------------------------------------
                                                    (3,859)         (16,190)          (17,040)         (72,940)
----------------------------------------------------------------------------------------------------------------
Write-down of
Long-term investments                                    -           (5,280)                -           (5,280)
----------------------------------------------------------------------------------------------------------------
Loss for the period                                $(3,859)        $(21,470)         $(17,040)        $(78,220)
================================================================================================================
Basic and diluted loss per share                   $ (0.64)        $  (3.60)         $  (2.85)        $ (13.19)
================================================================================================================
Weighted average number of shares
   used in computing basic and diluted
   loss per share (in thousands)                     5,983            5,965             5,983            5,930
================================================================================================================
</TABLE>


The historic common share numbers have been adjusted to reflect the 10 for 1
share consolidation completed in the second quarter of 2003.

Certain comparative figures for 2002 have been reclassified to conform to the
financial statement presentation adopted in the current year.

See accompanying notes to consolidated financial statements.


                                       2
<PAGE>

724 SOLUTIONS INC.
Consolidated Statements of Shareholders' Equity
(In thousands of U.S. dollars, except number of common shares)

Nine months ended September 30, 2003 and 2002
(Unaudited)
<TABLE>
<CAPTION>
===========================================================================================================================
                                                                     Deferred
                                                                  stock-based
                                                                 compensation                    Cumulative           Total
                                           Common shares     related to stock     Accumulated   translation   shareholders'
                                     Number           Amount          options         deficit    adjustment          equity
===========================================================================================================================
<S>                               <C>              <C>               <C>           <C>               <C>          <C>
Balances,
   December 31, 2001              5,837,576        $ 763,033        $ (19,582)     $ (634,153)        $ (52)      $ 109,246
Loss for the period                       -                -                -         (78,220)            -         (78,220)
Cumulative translation
   adjustment                             -                -                -               -             3               3
Deferred stock-based
   compensation                           -             (163)             163               -             -               -
Amortization of
   deferred stock-based
   compensation                           -                -           14,534               -             -          14,534
Issuance for cash on
   exercise of options               25,919              144                -               -             -             144
Issuance of common
   shares                           101,169            1,415                -               -             -           1,415
---------------------------------------------------------------------------------------------------------------------------
Balances,
   September 30, 2002             5,964,664        $ 764,429         $ (4,885)     $ (712,373)       $  (49)      $  47,122
===========================================================================================================================
Balances,
   December 31, 2002              5,983,349        $ 764,508         $ (1,616)     $ (721,560)       $  (43)      $  41,289
Loss for the period                       -                -                -         (17,040)            -         (17,040)
Cumulative translation
   adjustment                             -                -                -               -            61              61
Amortization of
   deferred stock-based
   compensation                           -                -            1,616               -             -           1,616
---------------------------------------------------------------------------------------------------------------------------
Balances,
   September 30, 2003             5,983,349        $ 764,508         $      -      $ (738,600)       $   18       $  25,926
===========================================================================================================================
</TABLE>

The historic common share numbers have been adjusted to reflect the 10 for 1
share consolidation completed in the second quarter of 2003.

See accompanying notes to consolidated financial statements.



                                       3
<PAGE>

724 SOLUTIONS INC.
Consolidated Statements of Cash Flows
(In thousands of U.S. dollars)
<TABLE>
<CAPTION>
===============================================================================================================
                                                        Three months ended                 Nine months ended
                                                            Sept. 30,                          Sept. 30,
                                                      2003             2002              2003             2002
---------------------------------------------------------------------------------------------------------------
                                                          (Unaudited)                        (Unaudited)
<S>                                               <C>             <C>               <C>              <C>
Cash flows from operating activities:
     Loss for the period                          $ (3,859)       $ (21,470)        $ (17,040)       $ (78,220)
     Items not affecting cash:
         Depreciation and amortization               1,334            2,345             4,208            7,669
         Stock-based compensation                        -            3,077             1,616           14,534
         Other non-cash expenses                       (34)             (54)                9              (40)
         Write-down of long-term investments             -            5,280                 -            5,280
         Write-down of fixed assets                      -            2,205                 -            6,339
     Change in operating assets and liabilities:
         Accounts receivable                           146              418              (161)           6,031
         Prepaid expenses and
           other receivables                           281            1,239                 9            1,145
         Accrued interest on short-term
           investments                                   -              189                 -              346
         Accounts payable                             (561)            (746)             (875)          (1,883)
         Accrued liabilities                        (3,234)          (8,422)           (5,435)          (2,856)
         Deferred consideration                       (492)               -              (866)               -
         Deferred revenue                               (4)            (773)             (569)            (132)
     ----------------------------------------------------------------------------------------------------------
     Net cash flows used in operating activities    (6,423)         (16,712)          (19,104)         (41,787)

Cash flows from financing activities:
     Principal repayment of notes payable                -             (884)             (600)          (2,217)
     Issuance of common shares                           -                -                 -              144
     ----------------------------------------------------------------------------------------------------------
     Net cash flows used in
       financing activities                              -             (884)             (600)          (2,073)
Cash flows from investing activities:
     Purchase of fixed assets                           49             (363)              (39)            (701)
     Sale of short-term investments, net             1,783           (3,101)           17,587           11,843
     Restricted cash                                   668            1,984                 -             (962)
     Purchase of intangible and other assets             -                -                 -             (457)
     ----------------------------------------------------------------------------------------------------------
     Net cash flows from investing activities        2,500           (1,480)           17,548            9,723

Foreign exchange loss on cash held
   in foreign currency                                   -              (48)                -              (39)
---------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and
   cash equivalents                                 (3,923)         (19,124)           (2,156)         (34,176)
Cash and cash equivalents, beginning
   of period                                        20,896           45,227            19,129           60,279
---------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period          $ 16,973         $ 26,103          $ 16,973       $   26,103
Supplemental disclosure of non-cash
   investing and financing activities:
     Interest received                            $     62         $    301          $    294       $    1,148
     Interest paid                                       -               52                 7              216
     Common shares issued upon
       settlement of contingent
       consideration                                     -                -                 -            1,415
---------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.



                                       4
<PAGE>

1.       BASIS OF PRESENTATION:

         The accompanying consolidated financial statements include the accounts
         of 724 Solutions Inc. and its wholly owned subsidiaries (collectively
         referred to as the "Company"). Intercompany transactions and balances
         are eliminated on consolidation.

         The consolidated financial statements are stated in U.S. dollars,
         except as otherwise noted. They have been prepared in accordance with
         Canadian generally accepted accounting principles, which conform, in
         all material respects, with U.S. generally accepted accounting
         principles. The interim financial statements follow the same accounting
         policies and methods of application as the most recent annual financial
         statements. For further information, reference should be made to the
         audited annual consolidated financial statements for the year ended
         December 31, 2002 that are included in the Company's Annual Report
         filed with the Canadian Securities Administrators on March 31, 2003 and
         with the Securities and Exchange Commission on Form 10-K filed on March
         31, 2003.

         The information furnished for the three and nine months ended September
         30, 2003 and September 30, 2002 reflect, in the opinion of management,
         all adjustments, consisting only of normal recurring adjustments,
         necessary for a fair presentation of the results of the interim periods
         presented. Interim results are not necessarily indicative of results
         for a full year.

2.       CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS:

         All short-term investments are classified as held-to-maturity because
         the Company has the positive intent and ability to hold the securities
         to maturity. Held-to-maturity securities are stated at amortized cost,
         adjusted for amortization of premiums and accretion discounts to
         maturity. The Company owns no short-term investments that are
         considered to be trading securities or available-for-sale securities.

         The components of cash and cash equivalents and short-term investments
         are as follows:

<TABLE>
<CAPTION>
       ==========================================================================================
                                                             September 30,         December 31,
                                                                      2003                 2002
       ------------------------------------------------------------------------------------------
<S>                                                               <C>                  <C>
       Cash and cash equivalents:
           Cash                                                   $ 16,973             $  6,375
           Cash equivalents:
                Government treasury bills                                -                1,554
                Corporate bonds                                          -               11,200
       ------------------------------------------------------------------------------------------
                                                                  $ 16,973             $ 19,129
       ==========================================================================================
       Short-term investments:
           Held-to-maturity:
                Term deposits                                          975                4,681
                Corporate bond                                           -               13,881
       ------------------------------------------------------------------------------------------
                                                                  $    975             $ 18,562
       ==========================================================================================
</TABLE>

         The Company has entered into letters of credit in the aggregate amount
         of $962,000 (December 31, 2002 - $962,000). See note 7(c) for further
         details.


                                       5
<PAGE>

3.       SEGMENTED INFORMATION:

         The Company operates in a single reportable operating segment, that is,
         the design and delivery of an Internet infrastructure platform and
         related applications that enable mobile network operators, financial
         institutions and other customers to deliver information and services to
         a range of Internet-enabled devices. The single reportable operating
         segment derives its revenue from the sale of software and related
         services. Information about the Company's geographical revenue and
         assets is set forth below:

<TABLE>
<CAPTION>
       ========================================================================================================
                                                         Three months ended                Nine months ended
                                                           September 30,                      September 30,
                                                      2003             2002              2003             2002
       --------------------------------------------------------------------------------------------------------
<S>                                               <C>             <C>               <C>              <C>
       Net revenue by geographic location:
           North America                          $  2,845        $   4,729         $   8,380        $  12,653
           Europe                                      249              642             1,077            1,569
           Asia Pacific                                 19              181               181              851
       --------------------------------------------------------------------------------------------------------
                                                  $  3,113        $   5,552         $   9,638        $  15,073
       ========================================================================================================
</TABLE>

         For the nine months ended September 30, 2003, two customers accounted
         for 54% and 11% of revenue. For the nine months ended September 30,
         2002, three customers accounted for 27%, 20% and 11% of revenue.

         For the nine months ended September 30, 2003, one customer accounted
         for 72% of accounts receivable. For the nine months ended September 30,
         2002, three customers accounted for 25%, 19% and 11% of accounts
         receivable.

<TABLE>
<CAPTION>
       ========================================================================================================
                                                     September 30, 2003                 December 31, 2002
       --------------------------------------------------------------------------------------------------------
                                                                   Goodwill                           Goodwill
                                                                  and other                          and other
                                                     Fixed       intangible             Fixed       intangible
                                                    assets           assets            assets           assets
       --------------------------------------------------------------------------------------------------------
<S>                                                <C>             <C>               <C>              <C>
       North America                               $   328         $  9,097          $    596         $ 12,565
       Europe                                          383                -               797                -
       Asia Pacific                                      -                -                25                -
       --------------------------------------------------------------------------------------------------------
                                                   $   711         $  9,097          $  1,418         $ 12,565
       ========================================================================================================
</TABLE>



                                       6
<PAGE>

4.       SHARE CAPITAL:

         (a)      Reverse stock split

         On April 24, 2003 the Company's shareholders approved a ten for one
         reverse stock split of the Company's common shares. As a result, the
         historic number of shares, historic loss per share and the weighted
         average number of shares used in compiling basic and diluted loss per
         share have been restated for all periods presented to reflect the
         reverse stock split.

         (b)      Stock options

         At September 30, 2003 and December 31, 2002, there were options
         outstanding to acquire 844,848 and 748,408 common shares of the
         Company, respectively.

         On July 30, 2003, the Company granted an additional 214,400 options
         with an exercise price of CDN $4.08 or U.S. $2.96 to employees,
         officers, directors and consultants.

         The following table summarizes the Company's options as of September
         30, 2003

<TABLE>
<CAPTION>
       =================================================================================================================
                                                                        Weighted average
                                                                           remaining       Number of
                                                     Weighted average   contractual life     options    Weighted average
       Exercise price ranges    Number of options     exercise price         (years)      exerciseable   exercise price
       -----------------------------------------------------------------------------------------------------------------
<S>                                       <C>                 <C>                  <C>         <C>              <C>
       $     -  $  5.00                   455,649               $3.85               9.1         40,092             3.15
          5.01    10.00                   215,170                6.55               8.8        110,310             5.84
         10.01    20.00                    44,187               21.64               6.0         41,201            17.79
         20.01    50.00                    19,018               48.02               6.3         18,655            38.45
         50.01   100.00                    52,039               96.01               6.8         43,000            93.58
        100.01   600.00                    58,785              271.30               7.2         24,267           293.69
       -----------------------------------------------------------------------------------------------------------------
                                          844,848             $ 30.75               8.5        277,525          $ 48.18
       =================================================================================================================
</TABLE>

         (c)      Loss per share

         The Company has excluded from the calculation of diluted earnings per
         share all common shares potentially issuable upon the exercise of stock
         options and other potentially convertible instruments that could dilute
         basic earnings per share in the future, because to do so would have
         been anti-dilutive.

         (d)      Pro forma disclosure for stock-based compensation and other
         stock-based payments:

         For companies electing not to adopt the fair value measurement for
         stock-based compensation, Canadian and US GAAP requires the disclosure
         of pro forma net income (loss) and net income (loss) per share
         information. The Company has presented this pro forma information as if
         the Company had accounted for its stock options issued from inception
         on July 28, 1997 under the fair value method. A summary of the pro
         forma disclosure and the impact on the consolidated statement of
         operations is presented in the following table:



                                       7
<PAGE>

<TABLE>
<CAPTION>
       ========================================================================================================
                                                   Three months ended                  Nine months ended
                                             September 30,    September 30,     September 30,    September 30,
                                                      2003             2002              2003             2002
       --------------------------------------------------------------------------------------------------------
<S>                                             <C>              <C>               <C>              <C>
       Loss for the period                      $   (3,859)      $  (21,470)       $  (17,040)      $  (78,220)
       Compensation expense related
         to the fair value of stock options
         In excess of amounts recognized            (3,735)          (2,760)          (11,961)         (10,416)
       --------------------------------------------------------------------------------------------------------
       Pro forma loss for the period            $   (7,594)      $  (24,230)       $  (29,001)      $  (88,636)
       ========================================================================================================
       Pro forma loss per share:
           Basic and diluted                    $   (1.27)       $   (4.06)        $   (4.85)       $  (14.95)
       ========================================================================================================
</TABLE>

         The fair value of each option granted in the period ended September 30,
         2003 has been estimated at the date of grant using the Black-Scholes
         option pricing model under the following assumptions: dividend yield of
         zero, expected volatility of 100%, risk-free rate of return of 3.66%
         and an expected life of the option of five years. The fair value of
         each option granted prior to January 1, 2003, has been estimated at the
         date of grant using the Black-Scholes option pricing model with the
         assumptions disclosed in note 9(v) of the annual consolidated financial
         statements.

         The Company has assumed no forfeiture rate, as adjustments for actual
         forfeitures are made in the period they occur. The weighted average
         grant date fair value of options issued in three months ended September
         30, 2003 was $2.23 (2002 - $3.88).

5.       RESTRUCTURING COSTS:

         The restructuring charge recorded in the second quarter of 2003 was
         related to the termination of twenty-six employees, the closure of one
         office and the partial closure of two other offices. It was partially
         offset by an adjustment to the Hosting exit costs reserve. There was no
         restructuring charge in the quarter ended September 30, 2003.


<TABLE>
<CAPTION>
       Nine months ended September 30, 2002
       ========================================================================================================
                                        Severance     Lease exit    Hosting exit     Write-down
                                                           costs           costs   of inventory          Total
       --------------------------------------------------------------------------------------------------------
<S>                                     <C>            <C>              <C>            <C>           <C>
       Provision,
          December 31, 2001             $   2,331      $   6,593        $      -       $      -      $   8,924
       Activity during the nine
       month period ended
       September 30, 2002
           Restructuring charges            7,991          4,163           5,747          2,748         20,649
           Cash payments                   (7,960)        (6,489)         (3,746)             -        (18,195)
           Non-cash charges                     -         (2,271)          1,691         (2,748)        (3,328)
       --------------------------------------------------------------------------------------------------------
       Provision,
       September 30, 2002               $   2,362     $    1,996        $  3,692       $      -      $   8,050
       --------------------------------------------------------------------------------------------------------
</TABLE>


                                       8
<PAGE>

<TABLE>
<CAPTION>
       Nine months ended September 30, 2003
       ========================================================================================================
                                        Severance     Lease exit    Hosting exit     Write-down
                                                           costs           costs   of inventory          Total
       --------------------------------------------------------------------------------------------------------
<S>                                     <C>            <C>              <C>            <C>           <C>
       Provision,
       December 31, 2002                $     967      $   1,528        $   2,487      $      -      $   4,982

       Activity during the period
       ended September 30, 2003
           Cash payments                   (1,415)        (1,358)           (812)             -         (3,585)
           Restructuring charges              525            175            (400)                          300
       --------------------------------------------------------------------------------------------------------
       Provision,
       September 30, 2003               $      77     $      345        $  1,275       $      -      $   1,697
       --------------------------------------------------------------------------------------------------------
</TABLE>

6.       STATEMENT OF COMPREHENSIVE LOSS:

         Comprehensive loss generally encompasses all changes in shareholders'
         equity except those arising from transactions with shareholders.

<TABLE>
<CAPTION>
       ========================================================================================================
                                             Three months ended Sept. 30,          Nine months ended Sept. 30,
                                                      2003             2002              2003             2002
       --------------------------------------------------------------------------------------------------------
<S>                                              <C>              <C>               <C>              <C>
       Loss for the period                       $  (3,859)       $ (21,470)        $ (17,040)       $ (78,220)
       Other comprehensive loss,
       net of income taxes:
       Cumulative translation adjustment               (33)               9                61                3

       --------------------------------------------------------------------------------------------------------
       Comprehensive loss
       based on U.S. GAAP                        $  (3,892)       $ (21,461)        $ (16,979)       $ (78,217)
       ========================================================================================================
</TABLE>

7.       GUARANTEES

         (a)      General indemnities

         In the normal course of operations, the Company provides
         indemnification agreements to counterparties in transactions such as
         purchase contracts, service agreements, and leasing transactions. These
         indemnification agreements sometimes require the Company to compensate
         the counterparties for costs incurred as a result of changes in laws
         and regulations (including tax legislation) or as a result of
         litigation claims or statutory sanctions that may be suffered by the
         counterparty as a consequence of the transaction. The terms of these
         indemnification agreements will vary based upon the contract. The
         nature of the indemnification agreements prevents the Company from
         making a reasonable estimate of the maximum potential amount the
         Company could be required to pay to counterparties. Historically, the
         Company has not made any significant payments under such
         indemnification. No amount has been accrued in the consolidated
         financial statements with respect to these indemnification agreements.


                                       9
<PAGE>

         (b)      Product warranties

         The Company's software license agreements generally include certain
         provisions for indemnifying customers against liabilities if the
         Company's software products infringe a third party's intellectual
         property rights. To date, the Company has not incurred any material
         costs as a result of such indemnifications and has not accrued any
         liabilities related to such obligations in the Company's consolidated
         financial statements.

         The Company's software license agreements also generally include a
         warranty that the Company's software products will substantially
         operate as described in the applicable program documentation for a
         specified period after delivery. The Company also warrants that
         services the Company performs will be provided in a manner consistent
         with industry standards and in accordance with applicable
         specifications for a specified period from performance of the service.
         To date, the Company has not incurred any material costs associated
         with these warranties.

         (c)      Letters of credit

         The Company has entered into letters of credit in the aggregate amount
         of $962,000 to guarantee future payments under contractual commitments
         (December 31, 2002 - $962,000). The commitments include $286,000
         related to insurance premiums, $491,000 related to deferred
         consideration and $185,000 to secure Company credit cards. The
         insurance and deferred compensation amounts will be paid by the end of
         2003 and the Company can cancel the credit card commitment at any time.
         The letters of credit are secured by segregated short-term investments
         and are disclosed as restricted cash on the consolidated balance sheet.

8.       CONTINGENT LIABILITIES

         The Company has been named in several class actions filed in federal
         court in the Southern District of New York between approximately June
         13, 2001 and June 28, 2001 (collectively the "IPO Allocation
         Litigation"). The IPO Allocation Litigation was filed on behalf of
         purported classes of plaintiffs who acquired the Company's common
         shares during certain periods. These lawsuits have since been
         consolidated into a single action and an amended complaint was filed on
         or about April 19, 2002. Similar actions have or since been filed
         against over 300 other issuers that have had initial public offerings
         since 1998 and all are included in a single coordinated proceeding in
         the Southern District of New York.

         The amended complaint in the IPO Allocation Litigation names as
         defendants, in addition to the Company, some or all of the current or
         former directors and officers of the Company (the "Individual
         Defendants") and certain underwriters of the Company's initial public
         offering of securities (the "Underwriter Defendants"). In general, the
         amended complaint alleges that the Underwriter Defendants: (1)
         allocated shares of the Company's offering of equity securities to
         certain of their customers, in exchange for which these customers
         agreed to pay the Underwriter Defendants extra commissions on
         transactions in other securities; and (2) allocated shares of the
         Company's initial public offering to certain of the Underwriter
         Defendants' customers, in exchange for which the customers agreed to
         purchase additional common shares of the Company in the after-market at
         certain pre-determined prices. The amended complaint also alleges that
         the Company and the Individual Defendants failed to disclose these
         facts and that the Company and the Individual Defendants were aware of,
         or disregarded, the Underwriter Defendants' conduct. In October 2002,
         the Individual Defendants were dismissed from the IPO Allocation
         Litigation without prejudice.


                                       10
<PAGE>

         In July 2003, a committee of the Company's Board of Directors
         conditionally approved a proposed partial settlement with the
         plaintiffs in this matter. The settlement would provide, among other
         things, a release of the Company and of the Individual Defendants for
         the conduct alleged in the action to be wrongful in the amended
         complaint. The Company would agree to undertake other responsibilities
         under the partial settlement, including agreeing to assign away, not
         assert, or release certain potential claims the Company may have
         against its underwriters. Any direct financial impact of the proposed
         settlement is expected to be borne by the Company's insurers. The
         committee agreed to approve the settlement subject to a number of
         conditions, including the participation of a substantial number of
         other issuer defendants in the proposed settlement, the consent of the
         Company's insurers to the settlement, and the completion of acceptable
         final settlement documentation. Furthermore, the settlement is subject
         to a hearing on fairness and approval by the Court overseeing the IPO
         Allocation Litigation.

         If the proposed settlement is not consummated, the Company intends to
         continue to vigorously defend itself and the Individual Defendants
         against these claims. However, due to the inherent uncertainties of
         litigation, and because the IPO Litigation is at a preliminary stage,
         we cannot accurately predict the ultimate outcome IPO Allocation
         Litigation.





                                       11
<PAGE>

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

OVERVIEW

724 Solutions Inc. is a leading provider of next-generation IP-based network and
data services. We were incorporated in 1997, and in 1999 we introduced our
initial products and solutions for the financial services industry. In 2001, we
began offering our Actionable Alerts and Mobile Internet Gateway products to
mobile network operators (MNO's). In October 2002, our products and solutions
for the mobile network operators were brought under the umbrella of our X-treme
Mobility Suite of products. Through our family of products, 724 Solutions
delivers reliable, scalable technology and solutions that allow mobile network
operators to rapidly deploy flexible and open, next-generation IP-based network
and data services.

Financial institutions (FI's) use 724's pro-active, alerts-based solutions to
offer services across a broad range of channels, including the mobile channel,
to their consumer customers and internal enterprise users, allowing these
organizations to improve customer satisfaction and retention while at the same
time lowering operating costs.

Our customers currently include leading mobile network operators and financial
institutions. With our corporate office in Toronto, Canada, we have development
and sales offices around the world, including Hong Kong, Germany, Switzerland,
the United Kingdom and the United States.

CRITICAL ACCOUNTING POLICIES

We periodically review our financial reporting and disclosure practices and
accounting policies to ensure they provide accurate and transparent information
relative to the current economic and business environment. As part of this
process, we have reviewed our selection, application and communication of
critical accounting policies and financial disclosures. We have determined that
the critical accounting policies relating to our core ongoing business
activities are primarily those that relate to revenue recognition. Other
important accounting policies are described in Note 2 to our audited annual
consolidated financial statements set forth in our annual report on form 10-K,
which we encourage you to read.

REVENUE RECOGNITION

SOURCES OF REVENUE

We derive revenue from licensing our products and providing related services,
including installation, integration, training, maintenance and support, and
application hosting services. We recognize revenue from our license agreements
when all the following conditions are met:

     o    We have an executed license agreement with the customer;
     o    We have delivered the software product to the customer;
     o    The amount of the fees to be paid by the customer is fixed and
          determinable; and
     o    Collection of these fees is deemed probable.

Typically, software license agreements are multiple element arrangements that
include related maintenance and implementation fees. Accordingly, the fee is
allocated to each element in the arrangement based on the respective vendor
specific objective evidence of value (VSOE) of each element. For those contracts
for which we do not have sufficient VSOE, we use the residual method to record


                                       12
<PAGE>

revenues. Under this method, if we have VSOE for all undelivered elements
(typically, services and maintenance) we can record the remaining value of the
contract as license revenue after allocating full value to the undelivered
elements.

For license and services agreements that provide significant commitments to
refunds and/or penalties on the services and/or license components should the
system not perform according to documented specifications, we defer recognition
of revenue for the amount subject to refund or penalty until we achieve
contractually defined milestones or until customer acceptance has occurred, as
the case may be for such agreements.

PRODUCT REVENUE

Product revenue consists of the following:

     o    Fixed License Fee Arrangement - a one-time license fee for a fixed
          number or copies of unlimited use of the software with a perpetual
          term. We typically recognize the upfront fees in the period the
          contract is executed or shortly thereafter.
     o    Variable License Fee Arrangement - a variable license fee based on the
          numbers of users in a period. Revenue is recognized on an ongoing
          basis and will vary with the number of our customers' end users.
     o    Reseller Arrangement - the reseller typically pays a non-refundable
          licensing fee for our software and/or a royalty fee based on the
          related number of users. We recognize revenue associated with
          non-refundable license fees when we have met our revenue recognition
          criteria for license agreements as outlined above.
     o    Solutions Arrangement - there are two key factors that distinguish
          what we consider to be a solutions sale versus a software and services
          sale. Firstly, in a solutions sale, there may initially be a higher
          mix of revenue for services than in a software sale. Secondly, in a
          solutions sale the services include the development and implementation
          of customized software code and more complex interfaces than in a
          software sale, where the contracted services are primarily
          installation services. Recognition of revenue from such contracts will
          primarily be based on the percentage of work completed as described
          below under service revenue.

SERVICE REVENUE

IMPLEMENTATION AND CUSTOMER SERVICE FEES

Revenue from implementation and customer services includes fees for
implementation of our product offerings, consulting and training services.
Customers are charged a fee based on time and expenses. Revenue from
implementation and customer service fees is recognized as the services are
performed or deferred until we achieve contractually defined milestones or until
customer acceptance has occurred, as the case may be, for such contracts.

MAINTENANCE FEES

We receive revenue from maintaining and servicing our products for customers.
The maintenance fee is typically equal to a specified percentage of the
customer's license fee. If associated with the fixed fee license model, the
maintenance revenues received will be recorded as deferred revenue and
recognized on a straight-line basis over the contract period. When associated
with the variable fee license model, any maintenance payments will be recognized
on a monthly basis as earned.


                                       13
<PAGE>

HOSTING FEES

We no longer provide hosting services directly. Instead, we have arranged an
alliance with Computer Sciences Corporation (CSC), whereby CSC is our preferred
hosting partner for current and future customer deployments where hosting is or
will be required. Under our existing hosting contracts, we typically charge
customers a monthly flat fee or a monthly fee based on the number of users. The
fees are recognized on a monthly basis.

For a more detailed description of our revenue recognition policies, please
refer to note 2(c) of our annual audited consolidated financial statements for
the year ended December 31, 2002.

RESULTS OF OPERATIONS

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED TO THREE AND NINE MONTHS
ENDED SEPTEMBER 30, 2002

Our consolidated financial statements have been prepared in accordance with
Canadian generally accepted accounting principles. These principles conform in
all material respects with U.S. generally accepted accounting principles.

REVENUE

PRODUCT REVENUE

In the three months ended September 30, 2003, product revenue was $1.7 million,
unchanged from the same period in 2002. In the nine months ended September 30,
2003, product revenue decreased to $5.3 million, including $860,000 related to a
contract cancellation fee in the first quarter of 2003, from $5.9 million for
the corresponding period in 2002. Due to continuing poor economic conditions,
our FI customers were reluctant to make large upfront commitments on license
fees as they had done in previous years. In addition, our change in strategy to
focus more on sales to MNO's, who typically have a longer sales cycle, has
resulted in a decrease in license revenue in 2003 compared to 2002.

SERVICE REVENUE

Service revenue decreased to $1.4 million and $4.3 million for the three and
nine months ended September 30, 2003, respectively, compared to $3.8 million and
$9.2 million in the corresponding periods in 2002. Service revenue declined in
2003 because there were fewer projects and the projects completed were, on
average, smaller than those completed in the previous year.

OPERATING EXPENSES

COST OF REVENUE

Cost of revenue (COR) consists primarily of personnel costs associated with
customer support, training, and implementations as well as amounts paid to
third-party consulting firms for those services, together with an allocation of
expenses for our facilities and administration.

Cost of revenue was $1.5 million and $4.5 million for the three and nine months
ended September 30, 2003, respectively, compared to $1.6 million and $6.0
million for the corresponding periods in 2002. COR has decreased in 2003 because
we have completed fewer projects and they have tended to be


                                       14
<PAGE>

narrower in scope than those completed in 2002 and because we have eliminated
costs not essential to our focus on the mobile network operator and financial
institution markets. Cost of revenue as a percentage of revenue, was 47% for the
three months ended September 30, 2003 and 46% for the nine months ended
September 30, 2003, compared to 29% and 40% for the corresponding periods in
2002.

RESEARCH AND DEVELOPMENT

Research and development expenses include compensation of software development
teams working on the continuing enhancement of our products as well as our
quality assurance and testing activities. These expenses also include the cost
of retaining independent contractors and consultants, software licensing
expenses, and allocated operating expenses.

Research and development (R&D) decreased to $2.0 million and $7.5 million for
the three and nine months ended September 30, 2003, respectively, compared to
$3.8 million and $13.6 million for the corresponding periods in 2002. The
decrease is a result of our restructuring initiatives that have reduced our R&D
headcount as we developed a more streamlined, integrated and focused product
road map and reduced duplication in the R&D process. We continue to evaluate our
R&D expenditure needs based on our new product architecture and services and the
current market environment. R&D expense, as a percentage of revenue, was 65% and
78% for the three months and the nine months ended September 30, 2003,
respectively, compared to 68% and 90% for the same periods in 2002.

SALES AND MARKETING

Sales and marketing expenses include compensation of sales and marketing
personnel, public relations and advertising, trade shows, marketing materials
and allocated operating expenses.

Sales and marketing (S&M) expenses were $1.4 and $5.7 million for the three and
nine months ended September 30, 2003, respectively, compared to $3.4 million and
$14.1 million for the corresponding periods in 2002. The decrease is a result of
the reduction in the number of sales and marketing personnel and reduced
spending on discretionary marketing programs. We continue to monitor our sales
and marketing expenditures to ensure that they remain aligned with our targeted
opportunities as well as prevailing market conditions. S&M expense, as a
percentage of revenue, was 44% and 59% for the three months and the nine months
ended September 30, 2003, respectively, compared to 62% and 94% for the same
periods in 2002.

GENERAL AND ADMINISTRATIVE

General and administrative (G&A) expenses include salaries and benefits for
corporate personnel and other general and administrative expenses such as
facilities, travel and professional consulting costs. Our corporate staff
includes executive officers and business development, financial planning and
control, legal, human resources and corporate administration staff.

G&A expenses decreased to $846,000 and $3.1 million for the three and nine
months ended September 30, 2003, respectively, compared to $1.7 million and $5.7
million for the corresponding periods in 2002. The decrease in G&A expenses
reflects our restructuring initiatives that have reduced complexity in our
business in order to align our infrastructure with the current market
environment.

DEPRECIATION AND AMORTIZATION

Depreciation expense was $178,000 and $740,000 in the three and nine months
ended September 30, 2003, respectively, compared to $1.3 million and $4.5
million in the corresponding periods in 2002.


                                       15
<PAGE>

Depreciation is down significantly because we have decommissioned redundant
fixed assets and reduced our capital expenditure budgets as part of our
restructuring initiatives.

Amortization expense was $1.2 million and $3.5 million for the three and nine
months ended September 30, 2003, respectively, compared to $1.0 million and $3.2
million in the corresponding periods in 2002. The amortization expense recorded
in 2003 and 2002 represents the amortization of acquired technology, which is
being amortized over a period of two to five years. At September 30, 2003, the
carrying value of our depreciable intangible assets is nil.

STOCK-BASED COMPENSATION

Stock-based compensation was nil and $1.6 million in the three and nine months
ended September 30, 2003, respectively, compared to $3.1 million and $14.5
million in the corresponding periods in 2002. The 2002 nine month expense
included significant charges related to the immediate recognition of deferred
stock-based compensation associated with employees who were terminated as part
of our restructuring plan as well as the immediate recognition of the
unamortized portion of the deferred stock compensation for those employees who
tendered their options as part of our stock option exchange initiative in
January 2002. In addition, the deferred stock compensation associated with the
Tantau acquisition was higher in 2002 as it was fully amortized by the end of
January 2003. There is currently no Deferred Stock-based Compensation to be
amortized.

RESTRUCTURING COSTS

With the downturn in general economic conditions, in the second quarter of 2001
we began to identify areas to reduce costs by eliminating duplicate resources
and positions, narrowing our product offerings and streamlining our operating
processes. We will continue to evaluate our costs on an ongoing basis.

Net restructuring charges were nil and $300,000 in the three and nine months
ended September 30, 2003, respectively, compared to $3.7 million and $20.6
million in the corresponding periods in 2002. Additionally, in the three and
nine month periods ended September 30, 2002, we recorded charges related to the
decommissioning of redundant fixed assets of $2.2 million and $6.3 million,
respectively. There have been no fixed assets write-downs in 2003.

The $300,000 net charge in the second quarter of 2003 included $525,000 related
to severance costs and $175,000 related to lease exit costs. These charges were
partially offset by a $400,000 reduction to our hosting provision. Included in
our "Accrued Liabilities" as at September 30, 2003 is approximately $1.7 million
in restructuring reserves. This includes severance costs of $77,000, lease exit
costs of $345,000 and hosting exit costs of $1.3 million. See note 5 to our
consolidated financial statements for the three and nine months ended September
30, 2003 for further details.

INTEREST INCOME

Interest income decreased to $44,000 and $222,000 for the three and nine months
ended September 30, 2003, respectively, compared to $60,000 and $585,000 in the
corresponding periods in 2002. Interest was derived from cash and cash
equivalent balances and short-term investments. Interest income is net of
interest expense relating to our note payable. The note was fully repaid by the
end of the first quarter of 2003. Interest income decreased in the three and
nine months ended September 30, 2003 compared to the same periods in 2002 due to
declining interest rates and because we have reduced holdings of cash and cash
equivalent balances and short-term investments.


                                       16
<PAGE>

NET LOSS

Our net loss decreased to $3.9 million and $17.0 million for the three and nine
months ended September 30, 2003, respectively, compared to $21.5 million and
$78.2 million in the corresponding periods in 2002.

Our net loss has decreased due to a number of factors. We incurred significant
restructuring charges and write downs of intangible and fixed assets in 2002
related to our restructuring efforts. Stock-based compensation charges and
depreciation expense are down significantly in 2003 and our restructuring
initiatives have resulted in significantly lower operating costs.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating activities decreased to $6.4 million and $19.1
million for the three and nine months ended September 30, 2003, respectively,
compared to $16.8 million and $41.8 million for the corresponding periods in
2002, as we have significantly reduced our workforce and expense structure as a
result of our restructuring efforts. Net cash used in operating activities for
the three months ended September 30, 2003 consisted of our net loss of $3.9
million plus cash outflows of $3.7 million related to non-recurring severance,
historic acquisition, hosting exit and deferred consideration payments and
$100,000 related to other working capital changes offset by non-cash items,
primarily depreciation and amortization charges of $1.3 million.

As at September 30, 2003, we had commitments to make $670,000 in minimum lease
payments through 2005, primarily related to our facilities and equipment
rentals. As a result of our restructuring initiatives, we have vacated some of
our premises and we have been successful in reducing our future lease
commitments with our landlords.

Cash used in financing activities was nil and $600,000 for the three and nine
month periods ending September 30, 2003, respectively, compared to $884,000 and
$2.1 million in the corresponding periods in 2002. The $600,000 represents the
final two payments of our note payable that was repaid in the first quarter of
2003. There have been no common share issuances in 2003. In the nine months
ended September 30, 2002, principal payments on the note totaled $1.3 million
and we had a cash source of $144,000 resulting from the exercise of options.

Excluding the sale (purchase) of short-term investments and restricted cash
changes, we had a cash source of $49,000 from investing activities, resulting
from the sale of redundant fixed assets, in the three months ended September 30,
2003 compared to a cash use of $363,000 in the same period in 2002. For the nine
months ended September 30, 2003, cash used in investing activities not related
to short-term investments and restricted cash changes was $39,000 compared to
$1.2 million in the same period of 2002. We have significantly reduced our
capital assets budget.

Total cash used, excluding the sale (purchase) of short-term investments and
restricted cash changes, was $6.4 million and $19.7 million for the three and
nine month periods ending September 30, 2003, respectively, compared to $18.0
million and $45.0 million in the corresponding periods in 2002. This was mainly
due to our significantly lower operating costs.


                                       17
<PAGE>

Due to the operational savings resulting from our restructuring and based on
current estimates, we expect that cash from the sales of our products and our
existing cash and cash equivalents and short-term investments will be sufficient
to cover our cash requirements, including planned capital expenditures, for at
least the next 12 months. We may require additional financing if we expand our
operations at a faster rate than currently expected, if our costs unexpectedly
increase, or if we seek to effect one or more significant acquisitions.

RECENT ACCOUNTING PRINCIPLES

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure, an amendment of FASB Statement No.
123." This Statement amends FASB Statement No. 123, "Accounting for Stock-Based
Compensation," to provide alternative methods of transition for a voluntary
change to the fair value method of accounting for stock-based employee
compensation. In addition, this Statement amends the disclosure requirements of
Statement No. 123 to require prominent disclosure of the pro forma impact of
fair value accounting for stock options in both annual and interim financial
statements. Certain of the disclosure modifications are required for fiscal
years ending after December 15, 2002 and are included in the notes to these
consolidated financial statements.

Effective January 1, 2003, the Company adopted the initial recognition and
measurement provisions of FASB interpretation No. 45 "Guarantees, Including
Indirect Guarantees of Indebtedness of Others," which apply on a prospective
basis to certain guarantees issued or modified after December 31, 2002. FIN 45
requires that a liability be recognized for the estimated fair value of the
guarantee at its inception. The Company has entered into agreements that contain
features which meet the definition of a guarantee under FIN 45 as described in
note 7. Historically, the Company has not made significant payments related to
these guarantees. The adoption of FIN 45 did not have a material impact on the
business, results of operations and financial condition of the Company.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities, an interpretation of ARB No. 51." This
Interpretation addresses the consolidation by business enterprises of variable
interest entities as defined in the Interpretation. The Interpretation applies
to variable interests in variable interest entities created after January 31,
2003, and to variable interests in variable interest entities obtained after
January 31, 2003. The interpretation must be applied by the Company in its 2003
annual reporting period. The Interpretation requires certain disclosures in
financial statements issued after December 15, 2003 if it is reasonably possible
that the Company will consolidate or disclose information about variable
interest entities when the Interpretation becomes effective. The application of
this Interpretation will not have a material effect on the Company's financial
statements.

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

Statements contained in this report which are not historical facts are
forward-looking statements within the meaning of Section 21E of the U.S.
Securities Exchange Act of 1934, as amended. A forward-looking statement may
contain words such as "anticipate that," "believes," "continue to," "estimates,"
"expects to," "hopes," "intends," "plans," "to be," "will be," "will continue to
be," or similar words. These forward-looking statements include the statements
herein regarding: future developments in the financial services and mobile
network industries; our estimated cost reductions; our future ability to fund
our operations and become profitable; our development of new products and
relationships; our plans to operate in the mobile network operator and financial
institutions markets; the rate at which consumers will adopt wireless
applications; our ability to increase our customer base; the services that we or
our customers will introduce and the benefits that end users will receive from
these services; the impact of entering new markets; our plans to use or not to
use certain types of technologies in the future; our future



                                       18
<PAGE>

cost of revenue, gross margins and net losses; our future restructuring,
research and development, sales and marketing, general and administrative,
stock-based compensation, depreciation and amortization expenses; our future
interest income; the value of our goodwill and other intangible assets; our
future capital expenditures and capital requirements; and the anticipated impact
of changes in applicable accounting rules.

The accuracy of these statements may be impacted by a number of business risks
and uncertainties that could cause actual results to differ materially from
those projected or anticipated. These risks include the risks described in our
SEC filings, including our annual report on Form 10-K. These risks are also
described in our filings with the Canadian Securities Administrators, including
our prospectuses, material change reports, Annual Information Form and
Management Information Circular. We encourage you to carefully review these
risks in order to evaluate an investment in our securities. Some of the key
risks that could cause actual results to differ materially from those projected
or anticipated also include the risks discussed below. We do not undertake any
obligation to update this forward-looking information, except as required under
applicable law.

GENERAL INDUSTRY, ECONOMIC AND MARKET CONDITIONS
Our future revenues and operating results are dependent to a large extent upon
general economic conditions, conditions in the wireless market and within that
market our primary target markets of mobile network operators and financial
institutions. As economic activity slowed in these markets beginning in 2001,
our customers began deferring their spending on our products and our revenues
began to decline. Our sales cycle has lengthened significantly as potential
customers have reduced their spending commitments and their willingness to make
investments in new wireless services. Moreover, adoption of wireless services
has not proceeded as rapidly as we previously anticipated. For example, in 2002,
Bank of Montreal and Wells Fargo, two of our initial customers, ceased offering
their wireless banking and/or brokerage services. If general economic conditions
continue to be adverse, if the economies in which our target customers are
located enter into a recession, or if demand for our solutions does not expand,
our ability to increase our customer base may be limited, and our revenue may
decrease further.

ENTERING NEW MARKETS
We have made mobile network operators an important focus of our activities. In
order to encourage these potential customers to adopt and implement our
solutions, we may incur higher costs than we have in the past, and we may not be
able to attract a large number of these customers. Mobile network operators may
not be successful in rolling out our services, and subscribers to these services
may not seek to use them. Any developments of this kind could limit our ability
to sell our solutions to companies in this industry, may increase our expenses
and may damage our reputation.

INTERNATIONAL MARKETS
In December 2000, we first recognized revenues from sales in international
markets. We had expected that sales in these regions would be a major factor in
our growth, particularly since the use of wireless networks and wireless devices
have generally proceeded more rapidly outside North America. However, some key
countries in these regions have experienced decreasing economic activity, and
our sales to these regions declined beginning in the third quarter of 2001. This
trend did not reverse in 2002 nor in the first nine months of 2003 and it may
not reverse in the fourth quarter of 2003 or thereafter, resulting in us not
being able to increase our customer base, and accordingly, limited growth from
these markets.

LIQUIDITY
In order to help ensure that we would have sufficient capital to take advantage
of our core business opportunities, we have taken significant actions since the
second quarter of 2001 to reduce our operating expenses. However, most of our
operating expenses, such as employee compensation and lease payments


                                       19
<PAGE>

for facilities and equipment, are relatively stable, and these expense levels
are based in part on our expectations regarding future revenues. As a result,
any sustained shortfall in our revenues relative to our expectations would
negatively impact our operating results. Accordingly, if the cost-cutting
actions that we have taken are insufficient, we may not have sufficient capital
to fund our operations, and additional capital may not be available on
acceptable terms, if at all. Any of these outcomes could adversely impact our
ability to respond to competitive pressures or could prevent us from conducting
all or a portion of our planned operations. We may need to undertake additional
measures to reduce our operating expenses in the future.

INVESTMENTS IN OTHER COMPANIES
For year ended December 31, 2001, we realized a loss of $4.6 million on sales of
our long-term investments and recorded a loss provision of $10.0 million against
these investments as they have experienced a significant other than temporary
decline in their value. In addition, in the third quarter of 2002, we recorded
an additional loss provision of $5.3 million. Because of the continuing
volatility in the financial markets, as well as other factors, we expect to
limit the extent to which we make equity investments in other non-core companies
during the next few fiscal quarters, and possibly longer. As a result, we may
not take advantage of investment opportunities that could provide significant
financial benefits to our company, or that could provide us with the opportunity
to build relationships with other companies in our industry and target markets.

INVESTMENTS IN NEW TECHNOLOGIES
During fiscal 2001, we made significant investments in new technology assets to
help expedite customer adoption of our solutions, including interactive voice
response technology, technologies relating to short messaging services and
technology to allow mobile applications to be executed with real-time
interaction. In accordance with our accounting policy, we review the carrying
value of these assets, considering key factors such as our estimate of customer
demand for these assets and the assets' fit with our product strategy. For the
year ended December 31, 2002, we recorded a charge of $2.7 million relating to
our decision not to use these assets that we purchased to resell to our
customers. In the future, if there are any circumstances in which there is a
decline in the carrying value of these assets or if we decide not to pursue
these technologies if we determine that customer demand for them is not
substantial, we may need to record additional charges.

RECEIVABLES
A significant portion of our receivables are derived from companies in foreign
countries. Due to varying economic conditions and business practices in these
countries, our collections cycle from these customers may be longer than our
past experience. As adverse economic conditions persist, there is a greater risk
that our customers will have difficulties in paying us in accordance with the
terms of their contracts, and our risk of bad debt may increase substantially in
future fiscal periods.

HOSTING SERVICES
In January 2002, we formalized our plan to transfer the management of our
application hosting services to Computer Sciences Corporation ("CSC"). We will
continue to be dependent on CSC to provide secure hosting services for our
software products. If CSC becomes unable to deliver these services, or other
circumstances occur that affect CSC or its computer systems, our hosting
services may be substantially impaired. If any of these circumstances occur and
cause us to fail to deliver our hosting services, we may lose customers, our
reputation may suffer, and our ability to attract new customers may be damaged.

EMPLOYEES
Our ability to execute our business successfully depends in large part upon our
ability to have a sufficient number of qualified employees to achieve our goals.
However, if our workforce is not properly sized to


                                       20
<PAGE>

meet our operating needs, our ability to achieve and maintain profitability is
likely to suffer. As indicated in this report, we have substantially reduced the
number of our employees. This means that we use a smaller number of employees to
conduct some of the operations that were previously performed by a larger
workforce, which could cause disruption of our business. In addition, the morale
of our current employees may have been adversely affected by previous workforce
reductions, reducing their performance. Our ability to attract potential new
employees in the future may suffer if our reputation suffers as a result of
these staffing reductions.

GROSS MARGINS
We believe that certain factors in the current market may contribute to the risk
that our gross margins will decrease in future fiscal quarters. We may have to
lower our prices, in order to accommodate our customers. In addition, due to the
downturn in the economy, many of our customers are reluctant to make a
commitment to pay a large upfront license fee, which could also cause our
revenues to decrease. With a greater percentage of our revenues coming from
services, if we are not successful in reducing our costs of sales, and our
customers continue to purchase licenses on an as-needed basis, we will
experience a decrease in our gross margins.

LITIGATION
The Company and certain of its present and former officers and directors were
named as defendants in a series of purported class actions relating to our
initial public offering. Litigation may be time consuming, expensive, and
distracting from the conduct of our business, and the outcome of litigation may
be difficult to predict. The adverse resolution of any of these proceedings
could have a material adverse effect on our business, results of operations, and
financial condition.










                                       21
<PAGE>

Item 3.     Quantitative and Qualitative Disclosures About Market Risk

IMPACT OF INTEREST RATE EXPOSURE

As of September 30, 2003, we had approximately $18.9 million in cash, cash
equivalents, short-term investments and restricted cash, of which $1.9 million
consisted of short-term investments. A significant portion of the cash earns
interest at variable rates. In addition, although our short-term investments are
fixed-rate instruments, the average term is short. Accordingly, our interest
income is effectively sensitive to changes in the level of prevailing interest
rates. This is partially mitigated by the fact that we generally do not
liquidate our short-term investments before their maturity dates.


IMPACT OF FOREIGN EXCHANGE RATE EXPOSURE

Our functional currency is the U.S. dollar. In the past, the majority of our
non-US dollar denominated expenses were incurred in Canadian dollars. As a
result of our recent restructuring efforts, in the foreseeable future the
majority of our non-US dollar denominated expenses will be incurred in Euros.
Changes in the value of these currencies relative to the U.S. dollar may result
in currency gains and losses, which could affect our operating results. In the
three months ended September 30, 2003, we incurred realized and unrealized
foreign currency gains relating to the translation of our non-US denominated
monetary assets and liabilities of approximately $25,000.


Item 4.  Controls and Procedures

Prior to the filing date of this report, management, including the Company's
Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness
and operation of the Company's disclosure controls and procedures. The Chief
Executive Officer and Chief Financial Officer concluded that, as of September
30, 2003, the disclosure controls and procedures were effective, in all material
respects, to ensure that information required to be disclosed in the reports the
Company files and submits under the Exchange Act is recorded, processed,
summarized and reported as and when required. There have been no significant
changes in the Company's internal controls or in other factors, which could
significantly affect internal controls subsequent to the date the Company
carried out its evaluation. There were no significant deficiencies or material
weaknesses identified in the evaluation and therefore, no corrective actions
were taken.




                                       22
<PAGE>


PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

         The Company has been named in several class actions filed in federal
court in the Southern District of New York between approximately June 13, 2001
and June 28, 2001 (collectively the "IPO Allocation Litigation"). The IPO
Allocation Litigation was filed on behalf of purported classes of plaintiffs who
acquired the Company's common shares during certain periods. These lawsuits have
since been consolidated into a single action and an amended complaint was filed
on or about April 19, 2002. Similar actions have or since been filed against
over 300 other issuers that have had initial public offerings since 1998 and all
are included in a single coordinated proceeding in the Southern District of New
York.

         The amended complaint in the IPO Allocation Litigation names as
defendants, in addition to the Company, some or all of the current or former
directors and officers of the Company (the "Individual Defendants") and certain
underwriters of the Company's initial public offering of securities (the
"Underwriter Defendants"). In general, the amended complaint alleges that the
Underwriter Defendants: (1) allocated shares of the Company's offering of equity
securities to certain of their customers, in exchange for which these customers
agreed to pay the Underwriter Defendants extra commissions on transactions in
other securities; and (2) allocated shares of the Company's initial public
offering to certain of the Underwriter Defendants' customers, in exchange for
which the customers agreed to purchase additional common shares of the Company
in the after-market at certain pre-determined prices. The amended complaint also
alleges that the Company and the Individual Defendants failed to disclose these
facts and that the Company and the Individual Defendants were aware of, or
disregarded, the Underwriter Defendants' conduct. In October 2002, the
Individual Defendants were dismissed from the IPO Allocation Litigation without
prejudice.

         In July 2003, a committee of the Company's Board of Directors
conditionally approved a proposed partial settlement with the plaintiffs in this
matter. The settlement would provide, among other things, a release of the
Company and of the Individual Defendants for the conduct alleged in the action
to be wrongful in the amended complaint. The Company would agree to undertake
other responsibilities under the partial settlement, including agreeing to
assign away, not assert, or release certain potential claims the Company may
have against its underwriters. Any direct financial impact of the proposed
settlement is expected to be borne by the Company's insurers. The committee
agreed to approve the settlement subject to a number of conditions, including
the participation of a substantial number of other issuer defendants in the
proposed settlement, the consent of the Company's insurers to the settlement,
and the completion of acceptable final settlement documentation. Furthermore,
the settlement is subject to a hearing on fairness and approval by the Court
overseeing the IPO Allocation Litigation.

         If the proposed settlement is not consummated, the Company intends to
continue to vigorously defend itself and the Individual Defendants against these
claims. However, due to the inherent uncertainties of litigation, and because
the IPO Litigation is at a preliminary stage, we cannot accurately predict the
ultimate outcome IPO Allocation Litigation.


Item 2.  Changes in Securities

         None.



                                       23
<PAGE>

Item 3.  Defaults Upon Senior Securities

         None.


Item 4.  Submission of Matters to a Vote of Security Holders

         None.


Item 5.  Other Information

         On October 29, 2003, Mr. Lloyd Darlington resigned from the Company's
Board of Directors and its Corporate Governance Committee, Audit Committee and
Human Resources and Compensation Committee.


Item 6.  Exhibits and Reports on Form 8-K

(A)      EXHIBITS:

              The following exhibits are filed with this Report:

<TABLE>
<CAPTION>
                  NO.      DESCRIPTION
                  ---      -----------
<S>               <C>
                  31.1       Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer
                  31.2       Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer
                  32.1       Section 1350 Certification of the Chief Executive Officer
                  32.2       Section 1350 Certification of the Chief Financial Officer
</TABLE>


(B)      REPORTS ON FORM 8-K:

         During the period covered by this Report, the Company furnished
         one report on Form 8-K:

            July 31, 2003:  reporting the Company's results of operations
                            for the three months ended June 30, 2003.



                                       24
<PAGE>

                                   SIGNATURES


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


<TABLE>
<CAPTION>
              SIGNATURES                              TITLES                                         DATE
              ----------                              ------                                         ----
<S>                                      <C>                                                 <C>



 /S/ JOHN J. SIMS                        Chief Executive Officer (principal                   November 11, 2003
-----------------------------------      executive officer)
     John J. Sims




 /S/ GLENN BARRETT                       Chief Financial Officer (principal                   November 12, 2003
------------------------------------     financial and accounting officer)
     Glenn Barrett
</TABLE>