================================================================================
                                  UNITED STATES
                       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 June 30, 2001

                                       OR

|_|  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934

     For the transition period from ____________ to __________.

                         Commission file number 0-28968


                         MDSI MOBILE DATA SOLUTIONS INC.
             (Exact name of registrant as specified in its charter)

             CANADA                                 NOT APPLICABLE
(Jurisdiction of incorporation)           (I.R.S. Employer Identification No.)


                              10271 Shellbridge Way
                           Richmond, British Columbia,
                                 Canada V6X 2W8
                                 (604) 207-6000

   (Address and telephone number of registrant's principal executive offices)


     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 [ ]

     The number of outstanding  shares of the Registrant's  common stock, no par
value, at August 14, 2001 was 8,621,897.

================================================================================


<PAGE>

                         MDSI Mobile Data Solutions Inc.

                             INDEX TO THE FORM 10-Q
                  For the quarterly period ended June 30, 2001


PART I - FINANCIAL INFORMATION

  ITEM 1. FINANCIAL STATEMENTS

          Condensed Consolidated Balance Sheets..............................1

          Condensed Consolidated Statements of Operations and Deficit....... 2

          Condensed Consolidated Statements of Cash Flows....................3

          Notes to the Condensed Consolidated Financial Statements...........4

  ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS................................10

  ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK..........21

PART II - OTHER INFORMATION

  ITEM 1. LEGAL PROCEEDINGS .................................................22

  ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS..........................22

  ITEM 3. DEFAULTS UPON SENIOR SECURITIES ...................................22

  ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................22

  ITEM 5. OTHER INFORMATION..................................................23

  ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K...................................23

SIGNATURES ..................................................................26


                                       i
<PAGE>

PART I -  FINANCIAL INFORMATION

  ITEM 1. FINANCIAL STATEMENTS

<TABLE>

                                                   MDSI MOBILE DATA SOLUTIONS INC.
                                                CONDENSED CONSOLIDATED BALANCE SHEETS
                                                (Expressed in United States dollars)
                                                             (Unaudited)

                                                                                                       As at
                                                                                            June 30,           December 31,
                                                                                              2001                 2000
                                                                                        ----------------     ----------------
<S>                                                                                       <C>                  <C>
ASSETS
CURRENT ASSETS
  Cash and cash equivalents                                                               $ 13,148,108         $13,238,081
  Accounts receivable, net
     Trade (net of allowance for doubtful accounts $1,983,217; 2000 - $985,000)             12,451,553          16,821,925
     Unbilled                                                                                7,364,122          12,184,446
  Income taxes receivable                                                                      153,782                   -
  Prepaid expenses                                                                           2,058,247           1,411,200
  Current portion of lease receivable                                                                -             133,723
                                                                                        ----------------     ----------------
                                                                                            35,175,812          43,789,375

INVESTMENTS (net of valuation allowance; 2001 - $2,999,992; 2000 - $250,000 (note 7))                -           3,081,447
CAPITAL ASSETS, NET                                                                         10,356,668          11,097,497
LONG TERM DEFERRED TAXES                                                                       708,350             347,350
INTANGIBLE ASSETS, NET (note 5)                                                                176,000           1,824,057
                                                                                        ----------------     ----------------
                                                                                            46,416,830          60,139,726

ASSETS OF DISCONTINUED OPERATIONS (note 9)                                                           -             641,405
                                                                                        ----------------     ----------------
TOTAL ASSETS                                                                              $ 46,416,830         $60,781,131
                                                                                        ================     ================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
  Accounts payable                                                                         $ 2,432,470         $ 3,444,457
  Accrued liabilities                                                                        6,731,773           3,625,591
  Income taxes payable                                                                               -           1,091,164
  Deferred revenue                                                                           6,003,600           7,901,837
  Current portion of long-term debt                                                             39,041              66,968
  Current obligations under capital lease                                                    2,344,784           2,094,637
                                                                                        ----------------     ----------------
                                                                                            17,551,668          18,224,654

OBLIGATIONS UNDER CAPITAL LEASES                                                             2,733,578           4,156,486
                                                                                        ----------------     ----------------
                                                                                            20,285,246          22,381,140

LIABILITIES OF DISCONTINUED OPERATIONS (note 9)                                                      -             223,024
                                                                                        ----------------     ----------------
                                                                                            20,285,246          22,604,164
STOCKHOLDERS' EQUITY
  Common stock                                                                              48,513,534          48,416,502
  Additional paid-up capital                                                                   522,621             220,700
  Treasury stock                                                                               (85,043)            (85,043)
  Retained earnings (deficit)                                                              (22,129,424)         (9,685,088)
  Comprehensive Income                                                                        (690,104)           (690,104)
                                                                                        ----------------     ----------------
                                                                                            26,131,584          38,176,967

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                $ 46,416,830         $60,781,131
                                                                                        ================     ================
</TABLE>


Contingency (note 8)


                 See Notes to Consolidated Financial Statements


                                       1
<PAGE>
<TABLE>

                                                   MDSI MOBILE DATA SOLUTIONS INC.
                                           Condensed Consolidated Statements of Operations
                                                 (Expressed in United States dollars)
                                                             (Unaudited)

                                                         Three months ended June 30,               Six months ended June 30,
                                                     -----------------------------------    -----------------------------------
                                                          2001                2000               2001                2000
                                                     ---------------     ---------------    ---------------     ---------------
<S>                                                     <C>               <C>                <C>                 <C>
REVENUE
  Software and services                              $  7,713,545         $  9,508,834        $ 17,117,029       $ 19,178,024
  Hosting and information technology services           3,485,593            1,551,212           7,989,189          3,040,179
  Third party products and services                       379,697              652,718           1,527,114          1,181,136
  Maintenance and support                               2,434,330            1,973,092           4,890,934          3,997,438
                                                     ---------------     ---------------    ---------------     ---------------
                                                       14,013,165           13,685,856          31,524,266         27,396,777

DIRECT COSTS                                            7,470,154            6,296,418          17,267,388         11,847,028
                                                     ---------------     ---------------    ---------------     ---------------
GROSS PROFIT                                            6,543,011            7,389,438          14,256,878         15,549,749
OPERATING EXPENSES
  Research and development                              2,148,521            2,275,316           4,692,302          4,314,222
  Sales and marketing                                   3,721,297            3,365,434           7,185,934          6,190,898
  General and administrative                            1,757,935            2,079,216           3,460,715          4,192,777
  Restructuring charge (note 6)                         4,905,927                    -           6,105,927                  -
  Provision for doubtful accounts                               -                    -           1,202,634                  -
  Costs of merger                                               -            2,076,028                   -          2,076,028
  Amortization and provision for valuation
   of intangible assets (note 5)                           11,000               67,479           1,648,058            137,289
                                                     ---------------     ---------------    ---------------     ---------------
                                                       12,544,680            9,863,473          24,295,570         16,911,214
                                                     ---------------     ---------------    ---------------     ---------------
OPERATING LOSS                                         (6,001,669)          (2,474,035)        (10,038,692)        (1,361,465)

VALUATION ALLOWANCE ON INVESTMENTS (note 7)                     -                    -           2,749,992                  -
OTHER EXPENSE                                             311,120              176,752             371,354            389,118
                                                     ---------------     ---------------    ---------------     ---------------
LOSS BEFORE TAX PROVISION                              (6,312,789)          (2,650,787)        (13,160,038)        (1,750,583)

RECOVERY OF (PROVISION FOR) INCOME TAXES                   22,538              172,428             715,702           (118,272)
                                                     ---------------     ---------------    ---------------     ---------------
NET LOSS                                               (6,290,251)          (2,478,359)        (12,444,336)        (1,868,855)

DEFICIT, BEGINNING OF PERIOD                          (15,839,173)          (8,521,184)         (9,685,088)        (9,130,688)
                                                     ---------------     ---------------    ---------------     ---------------
DEFICIT, END OF PERIOD                               $(22,129,424)        $(10,999,543)       $(22,129,424)      $(10,999,543)
                                                     ===============     ===============    ===============     ================
Earnings (loss) per common share
  Basic                                              $      (0.73)        $      (0.29)       $      (1.44)      $      (0.22)
                                                     ===============     ===============    ===============     ================
  Diluted                                            $      (0.73)        $      (0.29)       $      (1.44)      $      (0.22)
                                                     ===============     ===============    ===============     ================
Weighted average shares outstanding
  Basic                                                 8,621,897            8,540,870           8,620,548          8,466,613
                                                     ===============     ===============    ===============     ================
  Diluted                                               8,621,897            8,540,870           8,620,548          8,466,613
                                                     ===============     ===============    ===============     ================
</TABLE>


                 See Notes to Consolidated Financial Statements


                                       2
<PAGE>
                         MDSI MOBILE DATA SOLUTIONS INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                      (Expressed in United States dollars)
                                   (Unaudited)

<TABLE>

                                                                                 Six months ended June 30,
                                                                         -------------------------------------
                                                                                2001                2000
                                                                         ----------------     -----------------
<S>                                                                        <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net loss from continuing operations                                   $(12,444,336)         $ (1,868,855)
     Items not affecting cash:
       Depreciation and amortization                                          3,516,066             1,345,724
       Write down in value of surplus capital assets (note 6)                   563,780                     -
       Valuation allowance on investments                                     2,749,992                     -
       Deferred income taxes                                                   (361,000)                    -
       Stock based compensation charge                                          301,921                     -
       Changes in non-cash operating working capital items                    7,494,658            (2,263,188)
                                                                         ----------------     -----------------
     Net cash provided by (used in) operating activities                      1,821,081            (2,786,319)
                                                                         ----------------     -----------------
CASH FLOWS FROM FINANCING ACTIVITIES
     Issuance of common shares                                                   97,032             3,365,615
     Repayment of long-term debt                                                (27,927)              (31,250)
     Repayment of capital leases                                             (1,172,761)             (193,368)
                                                                         ----------------     -----------------
     Net cash provided by financing activities                               (1,103,656)            3,140,997
                                                                         ----------------     -----------------
CASH FLOWS FROM INVESTING ACTIVITIES
     Long term lease receivable                                                 133,723               190,776
     Proceeds on settlement (cost on acquisition) of investments                331,458            (2,748,029)
     Acquisition of intangible assets                                                 -              (220,000)
     Acquisition of capital assets                                           (1,690,960)           (2,414,980)
                                                                         ----------------     -----------------
     Net cash used in investing activities                                   (1,225,779)           (5,192,233)
                                                                         ----------------     -----------------
     Net cash provided by continuing operations                                (508,354)           (4,837,555)
     Net cash provided by discontinued operations                               418,381                55,494
                                                                         ----------------     -----------------
NET CASH OUTFLOW                                                                (89,973)           (4,782,061)

Effects of foreign exchange fluctuations on cash                                      -              (260,666)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                               13,238,081            14,612,923
                                                                         ----------------     -----------------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                   $ 13,148,108          $  9,570,196
                                                                         ================     =================
</TABLE>


                 See Notes to Consolidated Financial Statements



                                       3
<PAGE>
                         MDSI MOBILE DATA SOLUTIONS INC.

            Notes to the Condensed Consolidated Financial Statements
                    For the three months ended June 30, 2001
                      (Expressed in United States dollars)
                                   (Unaudited)


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     (a)  Basis of presentation

          These  financial  statements  have been  prepared in  accordance  with
          accounting  principles  generally  accepted  in the United  States for
          interim  financial  reporting and pursuant to the  instructions of the
          United States Securities and Exchange Commission Form 10-Q and Article
          10 of Regulation  S-X. While these  financial  statements  reflect all
          normal recurring  adjustments which are, in the opinion of management,
          necessary for fair  presentation of the results of the interim period,
          they do not include all of the information  and footnotes  required by
          generally  accepted  accounting   principles  for  complete  financial
          statements. For further information, refer to the financial statements
          and  footnotes  thereto  included in the Annual  Report of MDSI Mobile
          Data  Solutions  Inc. (the "Company" or "MDSI") filed on Form 10-K for
          the year ended December 31, 2000.

     (b)  Reporting currency

          The  Company  changed  its  reporting  currency  to  the  U.S.  dollar
          effective  January 1, 2000. The change in reporting  currency was made
          to improve  investors'  ability to compare the Company's  results with
          those of most other publicly traded businesses in the industry.  These
          consolidated   financial   statements  and  those  amounts  previously
          reported  in  Canadian  dollars  have been  translated  from  Canadian
          dollars to U.S.  dollars by translating  assets and liabilities at the
          rate in effect at the  respective  balance sheet date and revenues and
          expenses at the average rate for the reporting  period.  Any resulting
          foreign exchange gains and losses are recorded as a separate component
          of  shareholder  equity and  described  as  accumulated  comprehensive
          income (loss).

          Comprehensive Income for the period can be summarized as follows:

<TABLE>
                                                Three months ended June 30,             Six months ended June 30,
                                            ----------------------------------     ----------------------------------
                                                2001                 2000               2001                2000
           -----------------------------------------------------------------------------------------------------------
          <S>                              <C>                  <C>               <C>                  <C>
           Net income from continuing
             operations                     $ (6,290,251)        $ (2,478,359)     $ (12,444,336)       $ (1,868,855)
           Comprehensive items
               - Translation adjustment                -                    -                  -           (260,666)
           -----------------------------------------------------------------------------------------------------------
           Comprehensive income for
             period                         $ (6,290,251)        $ (2,478,359)     $ (12,444,336)       $ (2,129,521)
           -----------------------------------------------------------------------------------------------------------
</TABLE>

     (c)  Use of estimates

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



                                       4
<PAGE>
                         MDSI MOBILE DATA SOLUTIONS INC.

            Notes to the Condensed Consolidated Financial Statements
                    For the three months ended June 30, 2001
                      (Expressed in United States dollars)
                                   (Unaudited)


2.   SEGMENTED INFORMATION

     Segmented information

          On June 1, 2000 the Company  completed  it's  merger  with  Connectria
          Corporation  (note 4). As Connectria is considered to operate in a new
          business  segment,  Hosting and  Information  Technology (IT) Services
          (formerly e-Business),  and the transaction has been treated using the
          pooling of interests  method,  the Company has reflected the merger by
          segregating the Hosting and IT Services  segment for the three and six
          month period ending June 30, 2001, as well as 2000.

          During the three months ended June 30, 2001 the Company  realigned its
          internal  operating  structure.  As a result of this  realignment  the
          Company now considers its Advantex and Wireless ASP product lines part
          of its Field Service segment,  and has renamed the segment  previously
          know as "e-Business",  "Hosting and IT Services" to better reflect the
          nature of the business  activity in this  segment.  As a result of the
          realignment  certain figures  previously  classified as Hosting and IT
          Services  (e-Business)  have been  reclassified  to the Field  Service
          segment. For the three months ended June 30, 2001 the reclassification
          results in operating  earnings  increasing  in Hosting and IT Services
          (and a  corresponding  decrease in Field  Service) by $593,912 (2000 -
          $752,609),  and for the six months  ending June 30, 2001 it results in
          an  increase in  operating  earnings  from  Hosting and IT Services of
          $814,606 (2000 - $1,271,501) than would have otherwise been presented.
          There is nil effect of the reclassification on revenues for any of the
          periods presented.

     Business Segments
<TABLE>
                                       Three months ended June 30, 2001              Three months ended June 30, 2000

                                     Field         Hosting and IT                 Field        Hosting and IT
                                    Service         Services(1)      Total       Service          Services(1)       Total
                                 -------------------------------------------------------------------------------------------
<S>                              <C>               <C>          <C>            <C>               <C>           <C>
  Revenue                        $ 10,440,355      $ 3,572,810  $ 14,013,165   $ 12,110,566      $ 1,575,290   $ 13,685,856
  Operating earnings (loss)        (5,915,793)         (85,876)   (6,001,669)    (2,484,685)          10,650     (2,474,035)
  Depreciation & Amortization         858,662          156,483     1,015,145        804,236           23,656        827,892

  Long lived assets                 8,721,817        1,810,851    10,532,668     16,429,979          529,635     16,959,614
  Capital Expenditures                136,066          145,533       281,599      1,059,046          104,367      1,163,413



                                        Six months ended June 30, 2001                 Six months ended June 30, 2000
                                     Field         Hosting and IT                 Field        Hosting and IT
                                    Service         Services(1)      Total       Service          Services(1)       Total
                                 -------------------------------------------------------------------------------------------
  Revenue                        $ 23,417,014      $ 8,107,252  $ 31,524,266   $ 24,301,798     $ 3,094,979     $27,396,777
  Operating earnings (loss)       (10,183,649)         144,957   (10,038,692)    (1,374,747)         13,282      (1,361,465)
  Depreciation & Amortization       3,180,064          336,002     3,516,066      1,295,868          49,856       1,345,724

  Long lived assets                 8,721,817        1,810,851    10,532,668     16,429,979         529,635      16,959,614
  Capital Expenditures              1,107,110          583,850     1,690,960      2,307,588         107,392       2,414,980
-----------------------------
(1)  The Hosting and IT Services  (formerly  e-Business)  operating segment also
     includes revenues from third-party products and services.
</TABLE>



                                       5
<PAGE>
                         MDSI MOBILE DATA SOLUTIONS INC.

            Notes to the Condensed Consolidated Financial Statements
                    For the three months ended June 30, 2001
                      (Expressed in United States dollars)
                                   (Unaudited)


2.   SEGMENTED INFORMATION (continued)

     Geographic information

     The  Company  earned  revenue  from  sales to  customers  in the  following
     geographic locations:

<TABLE>

                                            Three months ended June 30,     Six months ended June 30,
                                               2001            2000            2001           2000
          --------------------------------------------------------------------------------------------
<S>                                         <C>          <C>                                <C>
          Canada....................      $   358,761      $   217,300     $   636,637    $   453,607
          United States.............       11,611,893       10,412,336      24,967,471     22,492,312
          Europe....................        1,884,588        2,690,226       4,927,058      4,060,477
          Other.....................          157,923          365,994         993,100        387,381
          --------------------------------------------------------------------------------------------
                                          $14,013,165      $13,685,856     $31,524,266    $27,396,777

</TABLE>

3.   EARNINGS (LOSS) PER COMMON SHARE

     Basic earnings (loss) per common share is calculated by dividing net income
     (loss) by the weighted average number of common shares  outstanding  during
     the period.  Diluted  earnings  (loss) per share was calculated by dividing
     net  income  (loss)  by the sum of the  weighted  average  number of common
     shares  outstanding plus all additional  common shares that would have been
     outstanding  if  potentially  dilutive  common  shares had been issued.  In
     periods  for  which  there is a  reported  net loss,  potentially  dilutive
     securities have been excluded from the calculation as their effect would be
     anti-dilutive.

     The  following  table  reconciles  the  number  of shares  utilized  in the
     earnings (loss) per common share calculations for the periods indicated:

<TABLE>

                                                           Three months ended              Six months ended
                                                                 June 30,                      June 30,
                                                        ------------------------        -----------------------
                                                           2001           2000            2001         2000
                                                        ----------    -----------      -----------  -----------

<S>                                                     <C>             <C>             <C>           <C>
      Weighted average shares outstanding.........      8,621,897       8,540,870       8,620,548     8,466,613

      Common stock equivalents

      Stock options...............................              -               -               -             -
                                                        ----------    -----------      -----------  -----------
      Total shares for diluted earnings (loss) per
        common share                                    8,621,897       8,540,870       8,620,548     8,466,613
                                                        ==========    ===========      ===========  ===========
</TABLE>


                                       6
<PAGE>
                         MDSI MOBILE DATA SOLUTIONS INC.

            Notes to the Condensed Consolidated Financial Statements
                    For the three months ended June 30, 2001
                      (Expressed in United States dollars)
                                   (Unaudited)


4.   ACQUISITIONS

     On June 1, 2000 the  Company  acquired  all of the issued  and  outstanding
     shares of Connectria Corporation  ("Connectria"),  a privately held company
     based in St. Louis,  Missouri,  an information  services (IT) provider,  an
     application   service   provider  (ASP)  and  provider  of  online  service
     management  solutions for service  companies.  The Company  issued  845,316
     common shares,  and 583,037 employee stock options to acquire common shares
     of the Company in exchange for all of the outstanding  stock and options of
     Connectria.  Merger related expenses of $2,076,028 are included in the Cost
     of merger  for the six months  ended  June 30,  2000.  The  transaction  is
     accounted for under the pooling of interest  method of  accounting  and all
     historical  financial  information  contained  herein has been  restated to
     include the combined  results of  operations,  financial  position and cash
     flows of Connectria.

     Separate results of the operations for the periods prior to the merger with
     Connectria are as follows:


                                                                     March 31,
                                                                  --------------
                                                                       2000
                                                                  --------------
     Revenue:
     MDSI Mobile Data Solutions Inc.                              $ 12,191,232
     Connectria Corporation                                          1,519,689
                                                                  --------------
     Combined Revenue                                             $ 13,710,921
                                                                  ==============
     Net Income:
     MDSI Mobile Data Solutions Inc.                              $    612,495
     Connectria Corporation                                             (2,991)
                                                                  --------------
     Combined Net Income                                          $    609,504
                                                                  ==============
     Other changes in Stockholders' Equity:
     MDSI Mobile Data Solutions Inc.                              $   (260,666)
     Connectria Corporation                                                  -
                                                                  --------------
     Combined changes in Stockholders' Equity                     $   (260,666)
                                                                  ==============

5.   INTANGIBLE ASSETS

<TABLE>
                                                                            June 30,         December 31,
                                                                              2001               2000
                                                                         -------------      -------------
<S>                                                                       <C>                <C>
Goodwill                                                                  $ 2,615,751        $ 2,615,751
Commerical web site domain name                                               220,000            220,000
Less:  accumulated amortization and impairment provision                   (2,659,751)        (1,011,694)
                                                                         -------------      -------------
                                                                          $   176,000        $ 1,824,057
                                                                         =============      =============
</TABLE>



                                       7
<PAGE>
                         MDSI MOBILE DATA SOLUTIONS INC.

            Notes to the Condensed Consolidated Financial Statements
                    For the three months ended June 30, 2001
                      (Expressed in United States dollars)
                                   (Unaudited)


5.   INTANGIBLE ASSETS (continued)

     In connection  with the  Company's  announced  restructuring  (note 6), the
     Company  determined  that an impairment in the value of Goodwill that arose
     on acquisition of Alliance Systems Inc., had occurred.  As a result of this
     impairment the Company has taken a valuation allowance in its field service
     business  segment of  $1,558,578  which was equal to the remaining net book
     value of the Goodwill as at March 31, 2001.

6.   RESTRUCTURING CHARGE

     On March 30, 2001 the Company, in response to uncertain economic conditions
     and poor financial  performance  announced a restructuring plan approved by
     the Company's  Board of Directors  designed to reduce  operating costs that
     resulted in the  elimination of 34 full time and contractor  positions.  On
     May 11, 2001 the Company  announced  a Board  approved  update to this plan
     which resulted in the  elimination of an additional 115 positions.  As part
     of this  restructuring  the  Company  recorded a charge to earnings of $1.2
     million in the three months ended March 31, 2001,  and further $4.9 million
     charge in the three months ended June 30, 2001.  Both of these charges were
     reflected  in  the  "restructuring  charge"  line  item  of  the  Company's
     Statement of  Operations.  A breakdown of the nature of the charges and the
     costs incurred to date is as follows:

<TABLE>

                                                      Three Months       Three Months             Total
                                                         Ended               Ended             Restructuring
                                                     March 31, 2001      June 30, 2001            Charge
                                                     --------------      -------------         -------------
           <S>                                       <C>                  <C>                   <C>
           Workforce reduction                        $   305,000         $ 3,070,000             $3,375,000
           Provision for excess office space              785,000           1,076,000              1,861,000
           Non cash writedown of capital assets                 -             563,780                563,780
           Other                                          110,000             196,147                306,147
                                                     --------------      -------------         -------------
           Total restructuring charges                $ 1,200,000         $ 4,905,927              6,105,927
           Cumulative draw-downs                                                                  (1,938,780)
                                                                                               -------------
           Restructuring provision balance                                                        $4,167,147
                                                                                               =============
</TABLE>

     For the six months ended June 30, 2001 the Company recorded a total of $6.1
     million in  restructuring  charges,  taken in  connection  with a corporate
     reorganization  designed  to  reduce  the  Company's  operating  costs  and
     increase  efficiency by  rationalizing  staffing levels and modifying staff
     reporting relationships.  The Company expects to use existing cash balances
     and cash flow from operations in order to fund these charges.

     Workforce  reduction  charges  of  $3.4  million  were  taken  relating  to
     severance  and  continued  benefits for the  elimination  of 149  positions
     across all operating  departments and segments of the  organization.  As of
     June 30, 2001 the provision balance has been drawn down by cash payments of
     approximately  $1.2 million.  The  remaining  provision of $2.2 million for
     terminated  employees  receiving  payments over time, or existing employees
     notified of their  termination  to occur at a future date is expected to be
     utilized by the second quarter of 2002.

     The  provision  for excess  office space of $1.9 million for the six months
     ended June 30, 2001,  relates to surplus office space under long term lease
     by the Company at two locations,  one of which the Company has entered into
     fixed cost lease  arrangements  expiring in 2004.  The Company has incurred
     approximately $0.1 million of cash costs relating to this provision leaving
     an accrual of $1.8  million  remaining  as at June 30,  2001.  The  Company
     expects that the charge will be fully drawn down no later than the time the
     lease expires in the fourth quarter of 2004.


                                       8
<PAGE>
                         MDSI MOBILE DATA SOLUTIONS INC.

            Notes to the Condensed Consolidated Financial Statements
                    For the three months ended June 30, 2001
                      (Expressed in United States dollars)
                                   (Unaudited)


6.   RESTRUCTURING CHARGE (continued)

     Due to the elimination of 149 positions certain capital assets belonging to
     the Company  have been  declared  surplus and a charge of $0.6  million has
     been recorded to reflect the difference between the previous carrying value
     and what the Company  estimates  the net  realizable  value of these assets
     will be on sale. As at June 30, 2001 the full amount of the charge has been
     applied  to the  assets to value  them at their  estimated  net  realizable
     value. These assets are expected to be disposed of by the fourth quarter of
     2001.

     The Company has  recorded a $0.3  million  charge for the six months  ended
     June 30, 2001 for other items  including,  costs of outplacement  services,
     and legal and consulting fees. As at June 30, 2001 the Company has incurred
     cash costs of approximately  $0.1 million in connection with these charges,
     leaving a provision of $0.2 million. The Company expects to fully draw down
     this provision by the end of the first quarter of 2002.


7.   INVESTMENTS AND ADVANCES

<TABLE>
                                                      June 30,               December 31,
                                                        2001                     2000
                                                    --------------         ----------------
<S>                                                   <C>                     <C>
Investment in private companies, at cost              $ 2,499,992             $ 2,499,992
Promissory note                                                 -                 331,455
Other advances                                            500,000                 500,000
Valuation Allowance                                    (2,999,992)               (250,000)
                                                    --------------         ----------------
Total Investments                                     $         -             $ 3,081,447
                                                    ==============         ================
</TABLE>

     During the year ended December 31, 2000 the Company made equity investments
     of $2,499,992 and provided advances of $500,000 to three private companies.
     These investments do not represent  significant  influence in the companies
     and are recorded at cost.

     As a result of significant  uncertainty over the future  realization of any
     return on  investment  or capital,  the  Company  has  recorded a valuation
     allowance equal to the full cost of the investments.


8.   CONTINGENCY

     The  Company is  involved  in legal  proceeding  with a  customer  over the
     payment for the license and implementation of a system in accordance with a
     binding  contract.  The Company believes that its position in the matter is
     strong and intends to vigorously pursue  collection.  The Company has filed
     an action seeking  payment of the full contract amount and the customer has
     filed an answer and counterclaim. The Companies have conducted mediation of
     the dispute,  however no settlement  has been reached to date.  The Company
     has included in its operating  results for the year ended December 31, 2000
     a provision for $985,000 with respect to uncertainty over collection of the
     account.


9.   DISCONTINUED OPERATIONS

     As a result of the  Company's  decision  to dispose  of its  Transportation
     Business Unit, the  Transportation  Business Unit has been  classified as a
     discontinued operation and the results of operation, financial position and
     cash flow for this segment have been  segregated  from those of  continuing
     operations.  As of June 30,  2001 the Company has  satisfied  all  existing
     obligations of these  operations,  and realized all remaining  assets.  The
     Company   expects  that  no  further   charges  to  income   regarding  the
     Transportation Business Unit will be necessary.


                                       9
<PAGE>
ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

Forward Looking Statements

     Certain  statements and information  contained in this Quarterly  Report on
Form 10-Q constitute  forward-looking  statements  within the meaning of Section
21E of the  Securities  Exchange Act of 1934.  Such  forward-looking  statements
involve known and unknown risks,  uncertainties and other factors that may cause
the actual results,  performance or achievement of the Company,  or developments
in the Company's  industry,  to differ materially from the anticipated  results,
performance  or  achievements  expressed  or  implied  by  such  forward-looking
statements.  Such factors include, but are not limited to: the Company's limited
operating  history,  history of losses,  lengthy  sales  cycles,  the  Company's
dependence upon large contracts and relative  concentration of customers,  risks
involving  the  management  of growth and  integration  of  acquisitions,  risks
associated   with   performance  of  pre-existing   contracts   assumed  through
acquisitions,  risks  associated  with the provision of hosting and IT services,
competition,  product  development  risks  and  risks of  technological  change,
dependence on selected vertical markets and third-party marketing  relationships
and suppliers,  risks associated with  international  operations,  the Company's
ability to protect  its  intellectual  property  rights and the other  risks and
uncertainties detailed in connection with the forward-looking statements and the
factors listed on Exhibit 99.1 to this Report, which factors are incorporated by
reference in this Report.

     In some cases, you can identify forward-looking statements by the Company's
use of  words  such  as  "may,"  will,"  "should,"  "could,"  "expect,"  "plan,"
"intend,"   "anticipate,"   "believe,"  "estimate,"  "predict,"  "potential"  or
"continue"  or the  negative  or  other  variations  of  these  words,  or other
comparable words or phrases.

     Although  the Company  believes  the  expectations  in its  forward-looking
statements  are  reasonable,  it  cannot  guarantee  future  results,  levels of
activity,  performance or achievements or other future events. Moreover, neither
the  Company  nor  anyone  else  assumes  responsibility  for the  accuracy  and
completeness  of  forward-looking  statements.  The  Company is under no duty to
update any of its forward-looking  statements after the date of this filing. You
should not place undue reliance on forward-looking statements.

     All financial  information in this Quarterly  Report is expressed in United
States dollars unless otherwise noted.

Overview

     MDSI develops, markets, implements and supports mobile workforce management
and wireless  connectivity  software for use by a wide variety of companies that
have  substantial  mobile  workforces,  such  as  utilities,  telecommunications
companies, cable companies and insurance companies.  MDSI's products are used by
such   companies  in   conjunction   with  public  and  private   wireless  data
communications networks to provide comprehensive solutions for the automation of
business processes associated with the scheduling, dispatching and management of
a  mobile  workforce.   The  Company's   products  are  designed  to  provide  a
cost-effective  method  for  companies  with  mobile  workers  to  utilize  data
communications  to  communicate  with  such  workers,  and for such  workers  to
interface on a real-time basis with their corporate  information  systems.  MDSI
also provides hosting and related professional services.

     The Company's revenue is derived from (i) software and services, consisting
of the  licensing  of software  and  provision  of related  services,  including
project management, installation,  integration, customization and training; (ii)
hosting and information  technology services such as the provision of consulting
services, the provision of application services, and provision of online service
management solutions; (iii) third party products and services, consisting of the
provision of non-MDSI  products  and services as part of the total  contract and
(iv) maintenance and support,  consisting of the provision of after-sale support
services as well as hourly, annual or extended maintenance contracts.



                                       10
<PAGE>

Restructuring

     The Company  believes  that recent  economic  developments  and trends have
adversely  affected  and may  continue to affect  levels of capital  spending by
companies  in a variety  of  industries,  including  companies  in the  vertical
markets that the Company  serves.  The current  excess supply of capacity in the
telecommunications  industry has adversely  affected the financial  condition of
many  telcommunications  companies  worldwide.  In  addition,  current  economic
conditions and  developments in the energy markets have had an adverse affect on
the financial  condition of energy and utility  companies in certain  geographic
areas of North America.  The Company  believes that these and other factors have
adversely  affected demand for products and services offered by the Company,  as
certain  prospective and existing customers have delayed or deferred  purchasing
decisions.  The Company  believes  that these  factors  will  continue to effect
demand for the Company's  products and services in 2001,  particularly  software
and services.

     In order to address the uncertainties caused by these economic trends, MDSI
announced  its  intention to reduce its  operating  expenses  through  workforce
reductions  and other  measures.  These measures have been or are expected to be
implemented over the next three quarters,  with incremental  reductions in costs
each  quarter,  and are expected to result in an estimated  $2.9 million in cost
reductions  per quarter by the first  quarter of 2002. A majority of the savings
are expected to be realized by reduced salary and payroll  costs,  and remaining
savings  are  expected  to be realized  from the  leasing of excess  space,  and
reduction  in  discretionary  spending.  There  can  be no  assurance  that  the
reduction  in work force and related  restructuring  efforts  will result in the
anticipated cost reductions or that the workforce  reductions and other measures
will not have a material adverse affect on the Company's business operation.

     In connection with this  restructuring,  on March 30, 2001, MDSI terminated
34 employee and contractor positions in Canada and the United States. On May 11,
2001 the Company continued the restructuring by announcing the elimination of an
additional 115 positions,  which in combination with the workforce reductions of
March 30, 2001  amounted to  approximately  25% of MDSI's  staff as of March 30,
2001.  The Company has  recorded a one-time  charge of $1.2 million in the first
quarter of 2001  relating  to the  workforce  reductions,  and leasing of excess
office  space.  The Company has recorded an additional  charge of  approximately
$4.9  million  in the second  quarter of 2001  relating  to  elimination  of 115
positions  announced  on May 11,  2001. A breakdown of the nature of the charges
and the costs incurred to date is as follows:

<TABLE>
                                                       Three Months       Three Months             Total
                                                          Ended               Ended             Restructuring
                                                      March 31, 2001      June 30, 2001            Charge
                                                      --------------      -------------         -------------
     <S>                                              <C>                 <C>                   <C>
     Workforce reduction                               $   305,000         $ 3,070,000           $ 3,375,000
     Provision for excess office space                     785,000           1,076,000             1,861,000
     Non cash writedown of capital assets                        -             563,780               563,780
     Other                                                 110,000             196,147               306,147
                                                      --------------      -------------         -------------
     Total restructuring charges                       $ 1,200,000         $ 4,905,927             6,105,927
     Cumulative draw-downs                                                                        (1,938,780)
                                                                                                -------------
     Restructuring provision balance                                                             $ 4,167,147
                                                                                                =============
</TABLE>

     For the six months ended June 30, 2001 the Company recorded a total of $6.1
million  in  restructuring   charges,  taken  in  connection  with  a  corporate
reorganization  designed to reduce the  Company's  operating  costs and increase
efficiency  by  rationalizing  staffing  levels and  modifying  staff  reporting
relationships.

     Workforce  reduction  charges  of  $3.4  million  were  taken  relating  to
severance and continued benefits for the elimination of 149 positions across all
operating departments and segments of the organization.  As of June 30, 2001 the
provision  balance has been drawn down by cash  payments of  approximately  $1.2
million.  The  remaining  provision  of $2.2  million for  terminated  employees
receiving   payments  over  time,  or  existing   employees  notified  of  their
termination  to occur at a future  date is expected to be utilized by the second
quarter of 2002.

     The  provision  for excess  office space of $1.9 million for the six months
ended June 30,  2001,  relates to surplus  office space under long term lease by
the Company at two  locations,  one of which the Company has entered  into fixed
cost lease arrangements expiring in 2004. The Company has incurred approximately
$0.1 million of cash costs relating to this provision leaving an accrual of $1.8
million  remaining as at June 30, 2001. The Company expects that the charge will
be fully  drawn  down not later  than the time the lease  expires  in the fourth
quarter of 2004.



                                       11
<PAGE>

     Due to the elimination of 149 positions certain capital assets belonging to
the Company  have been  declared  surplus and a charge of $0.6  million has been
recorded to reflect the difference  between the previous carrying value and what
the Company  estimates the net realizable value of these assets will be on sale.
As at June 30, 2001 the full amount of the charge has been applied to the assets
to value them at their estimated net realizable value. These assets are expected
to be disposed of by the fourth quarter of 2001.

     The Company has  recorded a $0.3  million  charge for the six months  ended
June 30, 2001 for other items  including,  costs of outplacement  services,  and
legal and  consulting  fees.  As at June 30, 2001 the Company has incurred  cash
costs of approximately $0.1 million in connection with these charges,  leaving a
provision of $0.2 million. The Company expects to fully draw down this provision
by the end of the first quarter of 2002.

     The  Company  also  announced  on  May  11,  2001  significant  changes  in
management of its sales, product development,  project implementation,  customer
support and sales organizations.  The changes continue initiatives by MDSI's new
management team to strengthen product development and delivery and improve sales
efforts.

Field Service Business

     The  implementation  of a complete mobile data solution requires a wireless
data communications  network, a land-based data communications  network,  mobile
computing  devices  integrated  with wireless data  communication  modems,  host
computer  equipment,  industry  specific  application  software  such as  MDSI's
Advantex products,  wireless  connectivity software and a variety of services to
manage and  install  these  components,  integrate  them with an  organization's
existing  computer  systems and  configure  or  customize  the  software to meet
customer  requirements.  Frequently,  in the Company's  larger  contracts only a
limited  number of the mobile  computing  devices and  in-vehicle  equipment are
installed initially, with the balance implemented over a rollout period that may
extend up to one year or more. Where increases in mobile work forces require, or
where  additional  departments  of mobile workers are added,  additional  mobile
computing devices may be installed.

     Revenue  for  software  and  services  has  historically  accounted  for  a
substantial portion of the Company's revenue. Typically, the Company enters into
a fixed price  contract with a customer for the  licensing of selected  software
products and the provision of specific  services  that are  generally  performed
within six to twelve months.  Pricing for these contracts  includes license fees
as well as a fee for professional  services.  The Company  generally  recognizes
total  revenue for  software  and services  associated  with a contract  using a
percentage of completion method based on the total costs incurred over the total
estimated costs to complete the contract.

     The Company's customers typically enter into ongoing maintenance agreements
that  provide  for  maintenance  and  technical  support  services  for a period
commencing  after  expiration  of  the  initial  warranty  period.   Maintenance
agreements  typically  have a term of  twelve  months  and are  invoiced  either
annually or monthly.  Revenue for these services is recognized  ratably over the
term of the contract.

     The  Company is  periodically  required  to  provide,  in  addition to MDSI
products and  services,  certain  third party  products,  such as host  computer
hardware and  operating  system  software,  and mobile  computing  devices.  The
Company  recognizes  revenue of the supply on third party hardware upon transfer
of title to the customer.  The Company recognizes revenue on the supply on third
party  services  using a  percentage  of  completion  method  based on the costs
incurred  over the total  estimated  cost to complete  the third party  services
contract.

     The Company  believes  that it will often supply  third party  products and
services to  customers  where it is  successful  in selling its own products and
services. There can be no assurance, however, that any contracts entered into by
the  Company to supply  third  party  software  and  products in the future will
represent  a  substantial  portion of revenue  in any future  period.  Since the
revenue  generated  from the supply of third party  products  and  services  may
represent a significant  portion of certain  contracts and the  installation and
rollout of third party  products is generally at the discretion of the customer,
the Company  may,  depending  on the level of third party  products and services
provided during a period, experience large quarterly fluctuations in revenue.




                                       12
<PAGE>

     The Company's revenue is dependent, in large part, on significant contracts
from a limited number of customers.  As a result,  any substantial  delay in the
Company's  completion of a contract,  the inability of the Company to obtain new
contracts or the cancellation of an existing contract by a customer could have a
material  adverse  effect on the Company's  results of  operations.  Some of the
Company's  contracts are  cancelable  upon notice by the  customer.  The loss of
certain  contracts  could  have a  material  adverse  effect  on  the  Company's
business, financial condition,  operating results and cash flows. As a result of
these and other factors,  the Company's results of operations have fluctuated in
the past and may continue to fluctuate from period-to-period.

     During the second quarter of 2000, the Company  announced version r7 of its
Advantex  product.  To date the Company has installed four customer  accepted r7
systems,  and it is  currently  in the  implementation  phase of its  additional
contracts  using  version  r7.  The  Company  experienced  delays  and  incurred
additional costs in connection with the initial implementation and field testing
of the Advantex r7 product and has also  experienced  delays in  commencement of
additional  installations of the Advantex r7 product. Such delays have increased
the Company's costs of completing  Advantex r7 installations  and have adversely
affected the timing of the Company's recognition of revenue from such contracts.
The Company  believes  that it will continue to expend  additional  resources in
connection with r7 installations for the remainder of 2001. See "Forward-looking
Statements."

Hosting and Information Technology (IT) Services (formerly e-Business)

     During the three  months  ended June 30,  2001 the  Company  realigned  its
internal structure.  As a result of this realignment,  the Company now considers
its Advantex and Wireless ASP product lines part of its Field  Service  segment,
and has renamed the segment previously know as "e-Business",  to "Hosting and IT
Services" to better reflect the nature of the business activity in this segment.

     The  Company's  Hosting  and  IT  Services   operations   provide  advanced
application hosting for many third party solutions including advanced e-commerce
Web sites and the Lotus family of advanced  collaboration  and distance learning
applications.  The  Company's  Hosting  and  IT  Services  operations  can  also
outsource a customer's  networking needs, and provide management of their office
LAN/WAN  and  Internet  connections.  The  Company's  Hosting  and  IT  Services
facilities and staff provide the physical  environment and  engineering  support
necessary to keep these technologies operating  effectively.  In connection with
this business, the Company also provides the following IT consulting services:

     Lotus / Domino  Implementations:  The Company is a Premier  Lotus  Business
Partner  and has been  selected  on  various  occasions  by  Lotus  and IBM as a
subcontractor  to provide  advanced  Lotus hosting,  implementation  and systems
management  services  to their  clients.  Once an  implementation  or upgrade is
complete,  the Company  offers ongoing  support and  maintenance to keep a Lotus
environment running efficiently and cost-effectively.

     Java  Application  Development:  The Company has  expertise  in the design,
development and  implementation  of  object-oriented  and  component-based  Java
applications that are scaleable,  reliable,  and secure. The Company's staff has
extensive   experience  using   client-side  and  server-based  Java  through  a
proprietary methodology called Extend IT.

     Data Center  Management:  While the Company  operates its own Internet Data
Centers  (IDC),  the Company also  provides  data center  management of clients'
facilities both remotely and onsite, including UNIX, Windows 2000/NT, LINUX, and
Novell  servers,  along with numerous  other server or networking  technologies,
including Oracle,  IBM DB2 and Microsoft SQL Server  databases.  The Company has
extensive experience in performing  operational support activities to include 24
x 7 system monitoring,  problem  determination,  problem resolution  management,
operating system/system software version management,  and backup and restoration
services.   The  Company  has  experience  in  implementing   system  management
environments using a combination of both automated agents and polling mechanisms
using major vendor's system  management  platforms,  in order to deliver maximum
application availability.



                                       13
<PAGE>

     As part of its Hosting and IT Services  operations the Company launched its
eService  Manager TM product in the fourth quarter of 2000. The eService Manager
application  enables  consumers  to book  appointments  with  service  providers
online.  It  also  allows  the  service   provider's   call-takers  to  schedule
appointments  in  response  to  orders  by  consumers  via  the  telephone.  The
application performs  algorithm-based  resource allocation to assign each job to
the most  appropriate  mobile  worker.  To date the  Company  has not  generated
material  revenues from fees  associated  with its eService  Manager  scheduling
solution and there can be no assurance  that the product will generate  material
revenues in future periods.

Effects of Acquisitions

     On June 1, 2000,  the Company  acquired  all of the issued and  outstanding
shares of Connectria,  an ASP and provider of information  technology  services.
The Company  issued  845,316  common shares and assumed  583,037  employee stock
options in exchange for all of the outstanding  stock and options of Connectria.
Merger related expenses of $2,076,028 are included in the cost of merger for the
six months  ended June 30, 2000.  The  transaction  is  accounted  for under the
pooling  of  interest   method  of  accounting  and  all  historical   financial
information  contained  herein has been restated to include  combined results of
operations, financial position and cash flows of Connectria.

     The Company has a limited  history of operations  on a combined  basis with
Connectria.  In addition,  since the acquisition of Connectria,  the Company has
restructured  certain  aspects of this  operation.  As a result,  the historical
financial  information  presented in this Quarterly  Report is not indicative of
the results that would have been obtained had the acquisitions occurred prior to
the commencement of the periods covered herein,  and such information should not
be relied upon as an indication of future performance.

Disposition of Transportation Business Unit

     In February  1999,  the  Company's  Board of  Directors  approved a plan to
dispose  of the  delivery  segment  of its  business  ("Transportation  Business
Unit").  Effective  June  1,  1999,  the  Company  completed  the  sale  of  the
Transportation  Business  Unit to Digital  Dispatch  Systems,  Inc.  ("DDS"),  a
supplier of dispatch systems to the taxi market for proceeds of $3,805,746.  The
proceeds comprised of common shares of DDS, representing an 11% interest in DDS,
and a promissory note in the principal amount of $331,455,  due January 1, 2001,
bearing  interest at 8% per annum.  During the year ended December 31, 2000, DDS
exercised   its  option  to  buyback  the  DDS  shares  that  MDSI  received  as
compensation on the sale of the Transportation  Business Unit.  Proceeds on sale
of the DDS shares were  $3,273,392.  The note,  with  interest,  was paid in the
first quarter of 2001.

     Under the terms of the  agreement  between the Company and DDS, the Company
has retained certain assets and liabilities of the discontinued operations.  The
Company has  liquidated  all remaining  assets and  liabilities  relating to the
Transportation Business Unit as of the second quarter of 2001.

     As a result of the  Company's  decision  to dispose  of its  Transportation
Business  Unit,  the  Transportation  Business  Unit  has been  classified  as a
discontinued operation and the results of operation, financial position and cash
flow for this segment have been segregated from those of continuing  operations.
The following  discussion  and analysis of the  Company's  results of operations
excludes  the  Transportation  Business  Unit for the current and  corresponding
prior period.



                                       14
<PAGE>
Results of Operations

     The Company's net loss was $6.3 million for the three months ended June 30,
2001.  This  compares to a net loss of $2.5  million for the three  months ended
June 30, 2000.  The change in operating  results for the period is due primarily
to the restructuring  charge of $4.9 million taken during the three months ended
June 30, 2001  partially  offset by a $2.1 million  cost of merger  charge taken
during the three months ended June 30, 2000.

              The following table sets forth, for the periods indicated, certain
components  of the selected  financial  data of the Company as a  percentage  of
total revenue:

<TABLE>

                                                              Three months ended                 Six months ended
                                                                   June 30,                          June 30,
                                                          ----------------------------     ----------------------------
                                                              2001            2000            2001             2000
                                                          -----------      ----------      ----------       ----------
                                                          (Unaudited)      (Unaudited)     (Unaudited)      (Unaudited)
       Revenue
       <S>                                                            <C>               <C>           <C>              <C>
          Software and services......................        55.0%             69.5%          54.3%            70.0%
          Hosting and information technology                 24.9              11.3           25.3             11.1
          Third-party products and services..........         2.7               4.8            4.8              4.3
          Maintenance and support....................        17.4              14.4           15.6             14.6
                                                          -----------      ----------      ----------       ----------
                                                            100.0             100.0          100.0            100.0

       Direct costs.................................         53.3              46.0           54.8             43.2
                                                          -----------      ----------      ----------       ----------
       Gross profit.................................         46.7              54.0           45.2             56.8
                                                          -----------      ----------      ----------       ----------
       Operating expenses
          Research and development...................        15.3              16.6           14.9             15.8
          Sales and marketing .......................        26.6              24.6           22.8             22.6
          General and administrative.................        12.5              15.2           11.0             15.3
          Restructuring charge.......................        35.0                 -           19.4                -
          Provision for doubtful accounts............           -                 -            3.8                -
          Costs of merger............................           -              15.2              -              7.6
          Amortization of intangible assets..........         0.1               0.5            5.2              0.5
                                                          -----------      ----------      ----------       ----------
                                                             89.5              72.1           77.1             61.8
                                                          -----------      ----------      ----------       ----------
       Operating income (loss)......................        (42.8)            (18.1)         (31.9)            (5.0)

       Valuation allowance on investments...........            -                 -            8.7                -

       Other expense ...............................          2.2               1.3            1.2              1.4
                                                          -----------      ----------      ----------       ----------
       Income (loss) before tax provision...........        (45.0)            (19.4)         (41.8)            (6.4)
       Provision for income taxes...................         (0.1)              1.3           (2.3)            (0.4)
                                                          -----------      ----------      ----------       ----------
       Net loss.....................................        (44.9)%           (18.1)%        (39.5)%           (6.8)%
                                                          ===========      ===========     ==========       ===========
</TABLE>


Three  Months  Ended June 30, 2001  Compared to the Three  Months Ended June 30,
2000

     Revenue.  Revenue  increased  by $0.3  million  (2.4%) for the three months
ended June 30, 2001 as compared to the three months  ended June 30,  2000.  This
increase was  primarily due to increases in revenue from hosting and IT services
and  maintenance  and  support  offset by a decrease in  software  and  services
revenue during the second quarter of 2001 relative to the same period in 2000.

     Software and  services  revenue  decreased by $1.8 million  (18.9%) for the
three  months ended June 30, 2001 as compared to the three months ended June 30,
2000.  The Company  believes  its  software  and service  revenue was  adversely
impacted by decisions of certain  customers to defer purchasing  decisions.  The
Company    anticipates    that   continued    economic    uncertainty   in   the
telecommunications  and utility  markets will continue to have an adverse impact
on software  and  services  revenues in future  periods.  See  "Forward  Looking
Statements".


                                       15
<PAGE>

Three  Months  Ended June 30, 2001  Compared to the Three  Months Ended June 30,
2000 (continued)

     Third party products and services revenue decreased by $0.3 million (41.8%)
for the three  months  ended June 30, 2001 as compared to the three months ended
June 30,  2000.  These third party  products  typically  include  host  computer
equipment and mobile computing devices, delivered as part of the installation of
software  and  provision of services.  Revenue  from  deliveries  of third party
products and services will  fluctuate from period to period given the timing and
nature of certain  contracts  and the rollout  schedules  which are  established
primarily  by the  customers.  In addition,  not all  customers  under  contract
require the provision of third party products and services.  Accordingly,  there
may be large  fluctuations  in revenue,  direct costs,  gross profits and income
from operations from one period to another.

     Maintenance and support revenue was $2.4 million for the three months ended
June 30, 2001 as compared to $2.0  million for the three  months  ended June 30,
2000.  Maintenance  and  support  revenue  has  increased  primarily  due to the
increased  growth in the  Company's  installed  customer  base.  Such revenue is
expected to  fluctuate as it  corresponds  to the level of software and services
revenue the Company is engaged to provide in support of its installations.

     Hosting and IT services (formerly  e-Business)  revenues materially consist
of sales by the Company's subsidiary,  Connectria.  Revenue for the three months
ended June 30, 2001 was $3.5  million as compared to $1.6  million for the three
months ended June 30,  2000.  Connectria's  revenues in both  periods  consisted
primarily of revenues  from  consulting  and hosting  services,  there can be no
assurance that the Company will realize material  revenues from its new eService
Manager  product  offering.  Hosting and IT service  revenues are dependent on a
small number of significant contracts.  One contract in particular accounted for
approximately  47% of the  increase in revenues for the three month period ended
June 30, 2001 compared to the three month period ended June 30, 2000.

     Direct Costs. Direct costs were 53.3% of revenue for the three months ended
June 30,  2001 as compared to 46.0% for the three  months  ended June 30,  2000.
Direct  costs  include  labor and other  costs  directly  related  to a project,
including the provision of services and support, production and costs related to
host equipment and mobile devices on behalf of third party product sales.  Labor
costs included direct payroll,  benefits and overhead  charges.  The increase in
direct  costs as a percentage  of revenue  resulted  from the Company  incurring
additional costs for its first Advantex r7  installations,  and as a result of a
change in the mix of  revenues.  As a result,  the  percentage  of direct  costs
compared to revenues  for the three  months  ended June 30,  2001  increased  as
compared to the three months ended June 30, 2000.  The Company  expects that the
dollar  amount of direct costs  attributable  to labour and rental  charges will
decline upon completion of the restructuring. See "Forward Looking Statements".

     Gross  Margins.  Gross  margins  were 46.7% of revenue for the three months
ended June 30,  2001 as compared  to 54.0% for the three  months  ended June 30,
2000. The decrease in gross margin as a percentage of revenue relates  primarily
to the  change  in the  mix of  revenues  and to  higher  costs  for  the  first
installations  of Advantex r7. During the three months ended June 30, 2001 there
was a decrease in software and services  revenue,  which  typically has a higher
gross margin than the  Company's  other  sources of revenue,  and an increase in
hosting  and IT services  revenues,  which  typically  have lower  margins  than
software and services  revenue.  These  factors  resulted in a decrease in gross
margin for the three  months  ended June 30, 2001  compared to the three  months
ended June 30, 2000.  The Company  expects that the current  restructuring  will
enable the  Company to  maintain  relatively  stable  gross  margins in the near
future. See "Forward Looking Statements".

     Research and Development.  Research and development  expenses were 15.3% of
revenue  for the three  months  ended June 30, 2001 and 16.6% of revenue for the
three months ended June 30, 2000.  Total research and  development  expenditures
for the three months ended June 30, 2001 of $2.1 million  represents an decrease
of $127,000 (5.6%) as compared to the same period in 2000. The minor decrease in
research and  development  expenses in 2001 is a result of the completion of the
Advantex  version r7  development  project during the first quarter of 2001. The
Company  anticipates  continuing to commit a significant  portion of its product
revenues  to  enhancement  of  existing  products  and  the  development  of new
products, resulting in an anticipated increase in the dollar amounts of research
and development expenses.



                                       16
<PAGE>
Three  Months  Ended June 30, 2001  Compared to the Three  Months Ended June 30,
2000 (continued)

     Sales and Marketing. Sales and marketing expenses were 26.6% of revenue for
the three  months  ended June 30, 2001 and 24.6% of revenue for the three months
ended June 30, 2000. This represents an increase of $356,000 (10.6%) as compared
to the same period in 2000.  The  increase was  primarily  due to an increase in
marketing,  sales and  technical  support  personnel  supporting  the  Company's
increased product  offerings,  including Advantex r7 and hosting and information
technology services initiatives. The Company anticipates that the dollar amounts
of its sales and marketing  expenses will continue to be significant as a result
of the Company's  commitment to its international  marketing efforts and attempt
to penetrate additional markets for existing and new products.

     General and Administrative.  General and administrative expenses were 12.5%
of revenue for the three months ended June 30, 2001 and 15.2% of revenue for the
three months ended June 30, 2000. Total general and  administrative  expenses of
$1.8  million  represents  a decrease of $322,000  (15.5%) for the three  months
ended June 30, 2001 as compared to the same period in 2000.  The decrease is the
result of a cost control effort initiated by the Company in the first quarter of
2001 that was designed to control  discretionary  spending.  The Company expects
that in the  future,  levels of general  and  administrative  expenditures  will
remain  relatively   consistent  with  current  levels.   See  "Forward  Looking
Statements".

     Restructuring  Charge.  During the three months  ended June 30,  2001,  the
Company  announced a  continuation  of its  restructuring,  designed to increase
operational  efficiencies  and reduce costs. As part of the  restructuring,  the
Company recorded a provision of $4.9 million for the three months ended June 30,
2001 relating to severance,  subleasing of excess office space, and writedown of
surplus  capital  assets.  This charge is in addition to a $1.2  million  charge
taken in the first quarter of 2001.  As of June 30, 2001,  the Company had drawn
down $1.9 million of its restructuring provision.

     Amortization of Intangible Assets.  Amortization and impairment charges for
intangible  assets for the three months ended June 30, 2001 decreased $57,000 as
compared to the three months ended June 30, 2000.  The decrease in  amortization
is a result of a determination by the Company that an impairment in the value of
the goodwill  acquired on the acquisition of Alliance  Systems Inc. had occurred
during  the three  months  ended  March 31,  2001.  The  Company  determined  an
impairment had occurred due to poor historical and forecasted performance in the
in the acquired Company's business. As a result of this impairment,  the Company
wrote off the remaining  goodwill of $1.6 million relating to the acquisition of
Alliance Systems Inc., during the three months ended March 31, 2001.  Therefore,
during the three  months  ended June 30,  2001 only  amortization  relating to a
purchased web site domain name was taken,  resulting in the decrease as compared
to the three months ended June 30, 2000.

     Other  Expense.  Other expense was $311,000 for the three months ended June
30,  2001 as  compared to $177,000  for the three  months  ended June 30,  2000.
Substantially  all of other income relates to  fluctuations in the currencies of
the  Company's  foreign  operations,  interest on cash and short term  deposits,
short-term borrowings under the line of credit and capital lease obligations.

     Income Taxes.  The Company provided for income tax recoveries on losses for
the three months ended June 30, 2001 at the rate of 0.4%,  after  adjusting  for
the amortization and impairment of intangible  assets.  The Company's  effective
tax rate  reflects  the  blended  effect of  Canadian,  US,  and  other  foreign
jurisdictions'  tax rates.  Since the  Company  has  incurred a loss  during the
period  and  there is no  certainty  the  Company  will be able to  utilize  the
benefits of these losses,  no recovery was booked for income tax expense  during
the quarter.

Six Months Ended June 30, 2001 Compared to the Six Months Ended June 30, 2000

     Revenue. Revenue increased by $4.1 million (15.1%) for the six months ended
June 30, 2001 as compared to the six months ended June 30, 2000.  This  increase
mainly relates to hosting and IT services  revenue and  maintenance  and support
revenue, partially offset by a decrease in software and service revenue.

     Software and services revenue decreased by $2.1 million (10.7%) for the six
months  ended June 30, 2001 as compared to the six months  ended June 30,  2000.
The Company's  software and service revenue was impacted by decisions of certain
customers to defer purchasing decisions.  The Company anticipates that continued
economic


                                       17
<PAGE>
Six Months  Ended June 30, 2001  Compared to the Six Months  Ended June 30, 2000
(Continued)

uncertainty in the  telecommunications and utility markets will continue to have
an adverse  impact on software  and  services  revenues in future  periods.  See
"forward looking statements".

     Hosting  and IT  services  revenues  materially  consist  of  sales  by the
Company's  subsidiary,  Connectria.  Hosting and IT services revenue for the six
months ended June 30, 2001 was $8.0 million compared to $3.0 million for the six
months ended June 30,  2000.  Connectria's  revenues in both  periods  consisted
primarily of revenues  from  consulting  and hosting  services,  there can be no
assurance that the Company will realize  material  revenues from it new eService
Manager  product  offering.  Hosting and IT service  revenues are dependent on a
small number of significant contracts.  One contract in particular accounted for
approximately  52% of the  increase in revenues  for the six month  period ended
June 30, 2001 compared to the six month period ended June 30, 2000.

     Third-party products and services revenue increased by $0.3 million (29.3%)
for the six months ended June 30, 2001 compared to the six months ended June 30,
2000.  Revenue  from  deliveries  of  third-party  products  and  services  will
fluctuate  from period to period given the timing of certain  contracts  and the
rollout schedules which are established primarily by the customers. Accordingly,
this may result in large  fluctuations in revenue,  direct costs,  gross profits
and income from operations from one period to another.

     Maintenance  and support  revenue was $4.9 million for the six months ended
June 30,  2001 as compared  to $4.0  million  for the six months  ended June 30,
2000.  Maintenance and support  revenue  increased as a result of an increase in
the level of the Company's installed customer base.

     Direct  Costs.  Direct costs were 54.8% of revenue for the six months ended
June 30,  2001 as  compared  to 43.2% for the six months  ended  June 30,  2000.
Direct  costs  include  labor and other  costs  directly  related  to a project,
including the provision of services and support, production and costs related to
host equipment and mobile devices on behalf of third party product sales.  Labor
costs included direct payroll,  benefits and overhead  charges.  The increase in
direct  costs as a percentage  of revenue  resulted  from the Company  incurring
additional costs for its first Advantex r7  installations,  and as a result of a
change in the mix of  revenues.  As a result,  the  percentage  of direct  costs
compared  to  revenues  for the six months  ended  June 30,  2001  increased  as
compared to the six months  ended June 30,  2000.  The Company  expects that the
dollar amount of direct costs should decrease once the restructuring is complete
mainly  due to a  decrease  in labour and rental  charges  being  incurred.  See
"Forward Looking Statements".

     Gross Margins. Gross margins were 45.2% of revenue for the six months ended
June 30, 2001 as compared to 56.8% for the six months ended June 30,  2000.  The
decrease in gross margin as a  percentage  of revenue  relates  primarily to the
change in the mix of revenues and to higher costs for the first installations of
Advantex  r7.  During the six months ended June 30, 2001 there was a decrease in
software and services  revenue,  which  typically has a higher gross margin than
the  Company's  other  sources of  revenue,  and an  increase  in hosting and IT
services (formerly e-Business) revenues, which typically have lower margins than
software and services  revenue.  These  factors  resulted in a decrease in gross
margin for the six months  ended June 30, 2001  compared to the six months ended
June 30, 2000 The Company expects that the current restructuring will enable the
Company to maintain  relatively  stable gross  margins in the near  future.  See
"Forward Looking Statements".

     Research and Development.  Research and development  expenses were 14.9% of
revenue for the six months  ended June 30, 2001 and 15.8% of revenue for the six
months ended June 30, 2000. Total research and development  expenditures for the
six months ended June 30, 2001 of $4.7 million  represents  an increase of $ 0.4
million  (8.8%) as  compared  to the same  period in 2000.  The  increase in the
dollar  amount of research and  development  expenses in 2001 is a result of the
continued  development  and  enhancement  of  the  Company's  Advantex  products
(version  r7,  wireless,  and  ASP  versions),  as well  as  development  of the
Company's  e-Service  offering.  The Company  intends to continue  committing  a
significant  portion of its product  revenues to enhance  existing  products and
develop new products, resulting in an anticipated increase in the dollar amounts
of research and development expenses.

     Sales and Marketing. Sales and marketing expenses were 22.8% of revenue for
the six months ended June 30, 2001 and 22.6% of revenue for the six months ended
June 30, 2000.  This  represents an increase of $1.0 million (16.1%) as compared
to the same period in 2000.  The  increase was  primarily  due to an increase in
marketing,  sales and  technical  support  personnel  supporting  the  Company's
increased product offerings including Advantex r7 and hosting and


                                       18
<PAGE>
Six Months  Ended June 30, 2001  Compared to the Six Months  Ended June 30, 2000
(Continued)

     IT services initiatives. The Company anticipates that the dollar amounts of
its sales and marketing  expenses will continue to be significant as a result of
the Company's  commitment to its international  marketing effort, and attempt to
penetrate additional markets for existing and new products.

     General and Administrative.  General and administrative expenses were 11.0%
of revenue  for the six months  ended June 30, 2001 and 15.3% of revenue for the
six months ended June 30, 2000.  Total  general and  administrative  expenses of
$3.5 million  represents  a decrease of $0.7 million  (17.5%) for the six months
ended June 30, 2001, as compared to the same period in 2000. The decrease is the
result of a cost control effort initiated by the Company in the first quarter of
2001 that was designed to control discretionary spending.

     Restructuring  Charge.  During the six  months  ended  June 30,  2001,  the
Company announced a restructuring, designed to increase operational efficiencies
and reduce costs. As part of the restructuring, the Company recorded a provision
of $6.1  million for the six months ended June 30, 2001  relating to  severance,
subleasing of excess office space,  and the writedown of surplus capital assets.
As of June 30, 2001 the Company had drawn down $1.9 million of its restructuring
provision.

     Provision for doubtful accounts. During the six months ended June 30, 2001,
the Company  recorded a charge of $1.2  million as a provision  against  several
trade accounts receivable balances. Due to significant  uncertainty  surrounding
collection of several specific  accounts the Company has taken a charge to value
the accounts at the most likely amount to be collected. This provision arose due
to the increased  economic  uncertainty  in the vertical  industries the Company
services.

     Costs of merger.  During the six months  ended June 30,  2000,  the Company
completed its  acquisition of  Connectria.  This  transaction  was accounted for
under the  pooling of  interests  method.  During the six months  ended June 30,
2000, the Company  incurred one time  acquisition  costs of  approximately  $2.1
million. This was a charge incurred on acquisition and was not repeated in 2001.

     Amortization of Intangible Assets.  Amortization and impairment charges for
intangible  assets for the six months ended June 30, 2001 increased $1.5 million
over the  amortization  of  intangible  assets for the six months ended June 30,
2000. The increase in amortization is a result of a determination by the Company
that an impairment in the value of the goodwill  acquired on the  acquisition of
Alliance  Systems Inc.  had occurred  during the six months ended June 30, 2001.
The Company  determined an impairment  had occurred due to poor  historical  and
forecasted  performance in the acquired company's business.  As a result of this
impairment,  the  Company  wrote  off the  remaining  goodwill  of $1.6  million
relating to the acquisition of Alliance Systems Inc.

     Valuation Allowance on Investments. As part of its e-Business strategy, the
Company  invested in or advanced funds to three private  companies in 2000. As a
result of significant  uncertainty over the future  realization of any return on
investment or capital, during the six months ended June 30, 2001 the Company has
recorded a valuation allowance equal to the full cost of the investments.

     Other Expense. Other expense was $372,000 for the six months ended June 30,
2001,  as  compared  to  $389,000  for the  six  months  ended  June  30,  2000.
Substantially  all of other income relates to  fluctuations in the currencies of
the Company's foreign operations,  interest income on cash, short-term deposits,
short-term borrowings under the line of credit and capital lease obligations.

     Income Taxes.  The Company  provided for recovery of income taxes on losses
for the six months ended June 30, 2001 at the rate of 6.2%,  after adjusting for
the amortization of intangible assets. The Company's effective tax rate reflects
the blended effect of Canadian,  US and other foreign  jurisdictions' tax rates.
Since  the  Company  has  incurred  a loss  during  the  period  and there is no
certainty the Company will be able to utilize the benefits of these losses,  the
Company did not book a full recovery of income tax expense during the six months
ended June 30, 2001.



                                       19
<PAGE>
Liquidity and Capital Resources

     The Company finances its operations,  acquisitions and capital expenditures
with cash generated from operations,  lines of credit,  capital leases,  private
placements and public offerings of its securities. At June 30, 2001, the Company
had cash and cash  equivalents  of $13.1  million and  working  capital of $17.6
million.

     Cash  provided by (used in) operating  activities  was $1.8 million for the
six months  ended June 30, 2001  compared  to $(2.8)  million for the six months
ended June 30, 2000.  The net inflow of cash from  operating  activities,  after
adding back  depreciation  and  amortization  of $3.5 million and the  valuation
allowance on investments  of $2.8 million,  is due to a net decrease in non-cash
working  capital items of $7.5 million,  a write down in capital  assets of $0.6
million,  a stock based compensation  charge of $0.3 million,  and a net loss of
($12.4)  million for the six months  ending June 30,  2001.  The net decrease in
non-cash  operating  working capital items is due primarily to a net decrease in
unbilled trade  receivables,  a decrease in trade receivables and an increase in
accrued liabilities. The decrease in unbilled trade receivables is due to timing
differences  arising  between  revenue  recognition  and billing  milestones  in
certain  multiphase  implementations,  as well as the Company having met certain
milestones  on  Advantex  version  r7  implementations.  The  decrease  in trade
receivables  is a result of  increased  collections  during the six months ended
June  30,  2001.   The  increase  in  accruals  is  due  to  the  provision  for
restructuring taken for the six months ended June 30, 2001.

     Cash used by financing  activities  of $1.1  million  during the six months
ended June 30, 2001  primarily  relates to $1.2 million in repayments of capital
leases made during the quarter.  The capital leases are to be repaid evenly over
a 36 month period  ending  December 22,  2003,  bear  interest at 7.675% and are
secured by certain computer hardware and software assets of the Company.

     Cash used in investing activities was $1.2 million for the six months ended
June 30,  2001 as compared  to $5.2  million  for the six months  ended June 31,
2000.  Total  investing  activity  during  the six months  ended  June 30,  2001
consisted of $1.7 million in purchases of capital assets,  offset by proceeds on
settlement  of a note  receivable  of  $331,000,  and a $134,000 net decrease in
lease  receivable.  Purchases of capital  assets include  computer  hardware and
software for use in  implementation  activities and to support the growth of the
hosting and IT services  operations.  The  proceeds  on  settlement  of the note
receivable  related  to a note the  Company  received  as payment on sale of its
Transportation  Business  Unit in  1999.  The  note  was due and paid in full on
January 1, 2001.  Investing activities in 2000 related primarily to purchases of
capital assets,  and the investment in preferred  stock of an internet  focussed
Company.

     Existing  sources of liquidity at June 30, 2001  includes  $13.1 million of
cash and  cash  equivalents  and up to CDN  $8.0  million  available  under  the
Company's operating line of credit. Under the terms of the agreement, borrowings
and  letters  of credit  under the line are  limited  to 60% to 90% of  eligible
accounts  receivable.  Borrowings  accrue interest at the bank's prime rate plus
0.5%. At June 30, 2001, the Company had no borrowings under the line of credit.

     The Company  believes that future cash flows,  in addition to funds on hand
and its borrowing  capacity  under the line of credit,  will provide  sufficient
funds  to  meet  cash   requirements  for  at  least  the  next  twelve  months.
Commensurate with its past and expected future growth, the Company may increase,
from time to time, its borrowing  facility under its operating line of credit to
support its operations.  The Company may use cash to fund other  acquisitions of
businesses  or products  complementary  to the Company's  business  although the
Company  has  no  plans  to do  so.  The  Company  has  no  material  additional
commitments  other than  operating and capital  leases.  The Company may look to
obtain  additional  equity  or debt  financing  to fund  future  growth or other
investing activities,  which may or may not be available on attractive terms, or
at all, and may be dilutive to current or future shareholders.


                                       20
<PAGE>
ITEM 3:  QUANTITIATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

     The Company's  primary market risk is foreign currency  exchange rates. The
Company's foreign currency exposure is primarily with Canada and Western Europe.
Foreign  exchange  risk  arises  when  the  Company  enters  into   transactions
denominated in local currencies and not the Company's functional  currency,  the
U.S. dollar.

     The Company has  established  procedures to manage  sensitivity  to foreign
currency  exchange rate market risk. These procedures  include the monitoring of
the  Company's  net  exposure to each  foreign  currency  and the use of foreign
currency forward  contracts to hedge firm exposures to currencies other than the
Canadian dollar, the Euro and the Great Britain pound sterling.  The Company has
operations  in Canada,  Great  Britain  and the  Netherlands  in addition to its
operations  in the United  States  and did not hedge  these  exposures  in 2001.
However,  the  Company  may from  time-to-time  hedge  any net  exposure  to the
Canadian dollar, the Great Britain pound sterling, and the Euro.

     As of June 30, 2001,  the  potential  reduction in future  earnings  from a
hypothetical  instantaneous 10% change in quoted foreign currency exchange rates
applied to the foreign currency sensitive contracts would be approximately $3.9`
million.  The  majority of the  Company's  foreign  exchange  exposure is to the
Canadian  dollar.  The  foreign  currency  sensitivity  model is  limited by the
assumption that all foreign currencies,  to which the Company is exposed,  would
simultaneously  change by 10%. Such synchronized  changes are unlikely to occur.
The  sensitivity  model does not  include the  inherent  risks  associated  with
anticipated  future  transactions  denominated  in foreign  currencies or future
forward contracts entered into for hedging purposes.

     The  Company  believes  that it does  not  have any  material  exposure  to
interest or commodity  risks.  The Company is exposed to economic and  political
changes in  international  markets where the Company  competes such as inflation
rates, recession, foreign ownership restrictions and other external factors over
which the  Company  has no control,  such as  domestic  and  foreign  government
spending, and budgetary and trade policies.




                                       21
<PAGE>
PART II -  OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

MDSI Mobile Data Solutions Inc. v. Citizens  Telecom  Services Co. L.L.C. - U.S.
District  Court,  Texas  District  Court Collin  County - 366 Judicial  District
(Docket No. 366-01914-00).

     On November 22, 2000, MDSI filed suit in Texas District Court Collin County
against Citizens Telecom Services Co. L.L.C.,  generally  alleging that Citizens
breached a series of contracts dated October 15, 1998. The contract related to a
license and MDSI's  installation  of one of its systems for  Citizens.  The suit
alleges that Citizens has wrongfully  terminated the contracts and failed to pay
sums due. The suit seeks damages, interest and attorneys' fees. In late February
2001, Citizens filed an answer and counter claim alleging that MDSI breached the
contracts,  justifying  Citizens'  termination  of  the  contracts  and  seeking
repayment of all sums paid to MDSI in addition to interest and attorneys'  fees.
Citizens requested and MDSI agreed to mediate the dispute.  Mediation took place
on April 3, 2001,  with no settlement  being  reached.  MDSI disputes  Citizens'
claims and intends to pursue the lawsuit vigorously.

     From time to time, the Company is a party to litigation and claims incident
to the ordinary  course of its  business.  While the results of  litigation  and
claims cannot be predicted with certainty,  the Company  believes that the final
outcome of such matters will not have a material adverse effect on the Company's
business, financial condition, operating results and cash flows.


ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

     (a)  Sales of Unregistered Securities

          None.

     (b)  Use of Proceeds from Sales of Registered Securities

          None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     None.

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

     The Company's 2001 Annual General Meeting of Shareholders  was held on June
28, 2001. A total of 5,308,068  common shares of the Company were represented in
person or by proxy at the meeting,  consisting  of 61.56% of the total number of
common shares of the Company  outstanding  on May 15, 2001,  the record date for
the meeting.

     At the meeting, all of the current directors of the Company were re-elected
to serve as  directors  until the 2002  Annual  General  Meeting or until  their
earlier retirement,  resignation,  or removal. In addition to the re-election of
directors, two new directors,  Peter Ciceri and David Van Valkenburg,  were also
elected.  The  following  table  sets  forth  the  voting  in the  election  for
directors:


                                       22
<PAGE>
<TABLE>
         Nominee                         Votes Cast          Votes Cast      Votes
                                             For              Against       Withheld     Abstentions         Not Voted
         -----------------------         ----------          ----------     --------     -----------         ----------
<S>                                       <C>                 <C>          <C>           <C>                 <C>
         Erik Dysthe                      5,268,391              0           20,991         18,686               0
         Terrence P. McGarty              5,267,150              0           22,232         18,686               0
         Robert C. Harris, Jr.            5,221,185              0           68,197         18,686               0
         Marc Rochefort                   5,264,967              0           24,415         18,686               0
         Peter Ciceri                     5,266,108              0           23,274         18,686               0
         David Van Valkenberg             5,268,391              0           20,991         18,686               0
</TABLE>

     The  shareholders  ratified the appointment of Deloitte & Touche LLP as the
Company's   auditors   for  the  fiscal  year  ending   December  31,  2001  and
authorization  for the directors to fix the  remuneration  of the auditors.  The
following table sets forth the information regarding the voting on the proposal:

<TABLE>
            Votes Cast         Votes Cast Against    Votes Withheld
               For                                                         Abstentions          Not Voted
          --------------       -------------------   ---------------       ------------         ---------
             <S>                 <C>                 <C>                   <C>                   <C>
             5,302,534                 4,500              151                 833                    0
</TABLE>

ITEM 5. OTHER INFORMATION

     None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits

 Exhibit
 Number       Description
 ------       -----------
 2.1(3)       Agreement  and Plan of Merger dated April 17, 1997 among the
              Company, MDSI Acquisition Corp., Alliance, Geoffrey Engerman
              and Doug Engerman (previously filed as Exhibit 2.2)

 3.1(1)       Articles of Incorporation of the Company

 3.2(1)       Articles of Amendments of the Company

 3.3(1)       By-laws of the Company

 4.1(1)       Form of Common Share Certificate 1996 Stock Option Plan

10.1(1)(2)    1997 Stock Option Plan

10.2(2)(4)    1998 Stock Option Plan

10.3(2)(4)    Stock Purchase Plan

10.4(2)(6)    Stock Purchase Plan

10.5(2)(6)    1999 Stock Option Plan

10.6(2)(7)    1998 Stock Option Plan for Connectria Corporation (formerly,
              Catalyst Solutions Group, Inc.)

10.7(2)(8)    2000 Stock Option Plan


                                       23
<PAGE>

 Exhibit
 Number       Description
 ------       -----------
10.8(1)       Form of  Indemnification  Agreement  between the Company and
              certain officers of the Company (previously filed as Exhibit
              10.4)

10.9(1)       Promissory Note dated January 2, 1996 granted by the Company
              and TelSoft in favor of Killean Consulting Inc.  (previously
              filed as Exhibit 10.8)

10.10(1)      Promissory Note dated January 2, 1996 granted by the Company
              and TelSoft in favor of 382904 B.C. Ltd.  (previously  filed
              as Exhibit 10.8)

10.11(1)      Employment Agreement dated April 1, 1996 between the Company
              and Erik Dysthe (previously filed as Exhibit 10.18)

10.12(1)      Lease dated  September  25, 1997 between Sun Life  Assurance
              Company  of  Canada  and the  Company  (previously  filed as
              Exhibit 10.20)

10.13(1)      Lease dated June 2, 1989 between  Corporate Woods Associates
              and Service  Systems  International  Limited and  subsequent
              amendments (previously filed as Exhibit 10.23)

10.14(1)      Lease dated April 8, 1993 between Cambridge Scanning Company
              Limited and Spectronics  Micro Systems  Limited  (previously
              filed as Exhibit 10.25)

10.15(3)(2)   Employment  Agreement  dated  February  1, 1999  between the
              Company and Robert G. Cruickshank

10.16(3)(2)   Employment  Agreement  dated  February  1, 1999  between the
              Company and Kenneth R. Miller

10.17(6)      Master  Purchase  and  Sale  Agreement  dated  June 1,  1999
              between  Digital  Dispatch  Systems  Inc.  and  the  Company
              (without schedules or exhibits)*

10.18(9)      Agreement  and  Plan of  Reorganization,  dated as of May 9,
              2000, among MDSI, MDSI Acquisition  Corporation,  Connectria
              and Certain Principal Shareholders.*

10.19(9)      Form of Voting,  Lockup and  Registration  Rights  Agreement
              among MDSI,  MDSI  Acquisition  Corporation,  Connectria and
              Certain Principal Shareholders.

10.20         Employment Agreement dated March 26, 2001 between the Company and
              Erik Dysthe

10.21         Employment Agreement dated April 24, 2001 between the Company and
              Gerald F. Chew

10.22         Employment Agreement dated May 7, 2001 between the Company and
              Peter Hill Rankin

99.1          Risk Factors
----------

(1)  Previously  filed as exhibits with the same  corresponding  number with the
     Registrants' Registration Statement on Form F-1 (Registration No. J33-5872)
     and  amendments  numbers 1 and 2  thereto,  filed with the  Securities  and
     Exchange Commission on October 28, 1996, November 13, 1996 and November 25,
     1996, respectively.
(2)  This document has been identified as a management  contract or compensatory
     plan or arrangement.
(3)  Previously  filed as an exhibit to Registrant's  Registration  Statement on
     Form F-4.
(4)  Previously  filed as exhibits with the same  corresponding  number with the
     Registrant's Form 10-K for the year ended December 31, 1998.


                                       24
<PAGE>

(5)  Previously  filed as exhibits with the same  corresponding  number with the
     Registrant's Form 10-Q for the quarterly period ended September 30, 1999.
(6)  Previously  filed as exhibits with the same  corresponding  number with the
     Registrant's Form 10-K for the year ended December 31, 1999.
(7)  Previously filed as exhibits with the Registrant's  Registration  Statement
     on Form S-8 filed on July 12, 2000.
(8)  Previously filed as exhibits with the Registrant's  Registration  Statement
     on Form S-8 filed on November 22, 2000.
(9)  Previously filed as exhibits with the  Registrant's  Current Report on Form
     8-K filed on June 15, 2000.

*    The Company agrees to supplementally furnish a copy of any omitted schedule
     or exhibit to the Securities and Exchange Commission upon request.

     (b)  Reports on Form 8-K

          During the three month period ended  June 30, 2001, the Registrant
     filed the following reports on Form 8-K;

          On July 11, 2001,  the  Registrant  filed its notice of annual meeting
          and related materials, including the Registrant's annual report, which
          was  mailed  to  its  shareholders  on  May  18,  2001  regarding  the
          Registrant's annual meeting that was held on June 28, 2001.





                                       25
<PAGE>
                                   SIGNATURES


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



                                   MDSI MOBILE DATA SOLUTIONS INC.


Date:  August 14, 2001             By:      /s/ Erik Dysthe
                                            -----------------------------------
                                   Name:    Erik Dysthe
                                   Title:   Chief Executive Officer




Date:  August 14, 2001             By:      /s/ Verne D. Pecho
                                            -----------------------------------
                                   Name:    Verne D. Pecho
                                   Title:   Vice President Finance &
                                             Administration and Chief Financial
                                             Officer
                                            (Principal Financial and Accounting
                                             Officer)








                                       26
<PAGE>

                                 EXHIBIT INDEX
                                 -------------

 Exhibit
 Number       Description
 ------       -----------
 2.1(3)       Agreement  and Plan of Merger dated April 17, 1997 among the
              Company, MDSI Acquisition Corp., Alliance, Geoffrey Engerman
              and Doug Engerman (previously filed as Exhibit 2.2)

 3.1(1)       Articles of Incorporation of the Company

 3.2(1)       Articles of Amendments of the Company

 3.3(1)       By-laws of the Company

 4.1(1)       Form of Common Share Certificate 1996 Stock Option Plan

10.1(1)(2)    1997 Stock Option Plan

10.2(2)(4)    1998 Stock Option Plan

10.3(2)(4)    Stock Purchase Plan

10.4(2)(6)    Stock Purchase Plan

10.5(2)(6)    1999 Stock Option Plan

10.6(2)(7)    1998 Stock Option Plan for Connectria Corporation (formerly,
              Catalyst Solutions Group, Inc.)

10.7(2)(8)    2000 Stock Option Plan

10.8(1)       Form of  Indemnification  Agreement  between the Company and
              certain officers of the Company (previously filed as Exhibit
              10.4)

10.9(1)       Promissory Note dated January 2, 1996 granted by the Company
              and TelSoft in favor of Killean Consulting Inc.  (previously
              filed as Exhibit 10.8)

10.10(1)      Promissory Note dated January 2, 1996 granted by the Company
              and TelSoft in favor of 382904 B.C. Ltd.  (previously  filed
              as Exhibit 10.8)

10.11(1)      Employment Agreement dated April 1, 1996 between the Company
              and Erik Dysthe (previously filed as Exhibit 10.18)

10.12(1)      Lease dated  September  25, 1997 between Sun Life  Assurance
              Company  of  Canada  and the  Company  (previously  filed as
              Exhibit 10.20)

10.13(1)      Lease dated June 2, 1989 between  Corporate Woods Associates
              and Service  Systems  International  Limited and  subsequent
              amendments (previously filed as Exhibit 10.23)

10.14(1)      Lease dated April 8, 1993 between Cambridge Scanning Company
              Limited and Spectronics  Micro Systems  Limited  (previously
              filed as Exhibit 10.25)

10.15(3)(2)   Employment  Agreement  dated  February  1, 1999  between the
              Company and Robert G. Cruickshank


<PAGE>

 Exhibit
 Number       Description
 ------       -----------
10.16(3)(2)   Employment  Agreement  dated  February  1, 1999  between the
              Company and Kenneth R. Miller


10.17(6)      Master  Purchase  and  Sale  Agreement  dated  June 1,  1999
              between  Digital  Dispatch  Systems  Inc.  and  the  Company
              (without schedules or exhibits)*

10.18(9)      Agreement  and  Plan of  Reorganization,  dated as of May 9,
              2000, among MDSI, MDSI Acquisition  Corporation,  Connectria
              and Certain Principal Shareholders.*

10.19(9)      Form of Voting,  Lockup and  Registration  Rights  Agreement
              among MDSI,  MDSI  Acquisition  Corporation,  Connectria and
              Certain Principal Shareholders.

10.20         Employment Agreement dated March 26, 2001 between the Company and
              Erik Dysthe

10.21         Employment Agreement dated April 24, 2001 between the Company and
              Gerald F. Chew

10.22         Employment Agreement dated May 7, 2001 between the Company and
              Peter Hill Rankin

99.1          Risk Factors
----------

(1)  Previously  filed as exhibits with the same  corresponding  number with the
     Registrants' Registration Statement on Form F-1 (Registration No. J33-5872)
     and  amendments  numbers 1 and 2  thereto,  filed with the  Securities  and
     Exchange Commission on October 28, 1996, November 13, 1996 and November 25,
     1996, respectively.
(2)  This document has been identified as a management  contract or compensatory
     plan or arrangement.
(3)  Previously  filed as an exhibit to Registrant's  Registration  Statement on
     Form F-4.
(4)  Previously  filed as exhibits with the same  corresponding  number with the
     Registrant's Form 10-K for the year ended December 31, 1998.
(5)  Previously  filed as exhibits with the same  corresponding  number with the
     Registrant's Form 10-Q for the quarterly period ended September 30, 1999.
(6)  Previously  filed as exhibits with the same  corresponding  number with the
     Registrant's Form 10-K for the year ended December 31, 1999.
(7)  Previously filed as exhibits with the Registrant's  Registration  Statement
     on Form S-8 filed on July 12, 2000.
(8)  Previously filed as exhibits with the Registrant's  Registration  Statement
     on Form S-8 filed on November 22, 2000.
(9)  Previously filed as exhibits with the  Registrant's  Current Report on Form
     8-K filed on June 15, 2000.

*    The Company agrees to supplementally furnish a copy of any omitted schedule
     or exhibit to the Securities and Exchange Commission upon request.