---

---

UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

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|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended June 30, 2003

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

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

---

CANADA(Jurisdiction of incorporation)

NOT APPLICABLE(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   ̈

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

The
number of outstanding shares of the Registrant's 
common stock, no par value, at August 13, 2003 was 8,204,666.

---

MDSI Mobile Data Solutions Inc.
INDEX TO THE FORM 10-Q
For the quarterly period ended June 30, 2003

|                             |                                                                                       |                                                      |    | Page No.
|---------------------------- | ------------------------------------------------------------------------------------- | ---------------------------------------------------- | -- | --------
|Part IFINANCIAL INFORMATION |                                                                                       |                                                     
|ITEM 1.                      | FINANCIAL STATEMENTS                                                                  |                                                      |   
|                             |                                                                                       | Condensed Consolidated Balance Sheets                |    | 1       
|                             |                                                                                       | Condensed Consolidated Statements of Operations      |    | 2       
|                             |                                                                                       | Condensed Consolidated Statements of Cash Flows      |    | 3       
|                             |                                                                                       | Notes to Condensed Consolidated Financial Statements |    | 4       
|ITEM 2.                      | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |                                                      | 12
|ITEM 3.                      | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                            |                                                      | 25
|ITEM 4.                      | CONTROLS AND PROCEDURES                                                               |                                                      | 26
|Part IIOTHER INFORMATION    |                                                                                       |                                                     
|ITEM 1.                      | LEGAL PROCEEDINGS                                                                     |                                                      | 27
|ITEM 4.                      | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                   |                                                      | 28
|ITEM 5.                      | OTHER INFORMATION                                                                     |                                                      | 28
|ITEM 6.                      | EXHIBITS AND REPORTS ON FORM 8-K                                                      |                                                      | 29
|SIGNATURES                   |                                                                                       | 31                                                  

---

# Part I  FINANCIAL
INFORMATION
ITEM 1.  FINANCIAL STATEMENTS

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

|                                                                             | As at
|---------------------------------------------------------------------------- | -----
|                                                                             |      
|
|                                                                             |      
|
|                                                                             |      
|ASSETS                                                                       |      
|CURRENT ASSETS                                                               |      
|Cash and cash equivalents                                                    |      
|Accounts receivable, net                                                     |      
|                                                                             |      
|Trade (net of allowance for doubtful accounts $2,483,764; 2002 - $2,506,614) |      
|Unbilled                                                                     |      
|Prepaid expenses and other assets                                            |      
|                                                                             |      
|                                                                             |      
|                                                                             |      
|                                                                             |      
|                                                                             |      
|CAPITAL ASSETS, NET                                                          |      
|                                                                             |      
|LONG TERM RECEIVABLE (note 6(a))                                             |      
|                                                                             |      
|DEFERRED INCOME TAXES                                                        |      
|                                                                             |      
|                                                                             |      
|TOTAL ASSETS                                                                 |      
|                                                                             |      
|LIABILITIES AND STOCKHOLDERS' EQUITY                                         |      
|CURRENT LIABILITIES                                                          |      
|Accounts payable                                                             |      
|Accrued liabilities (note 5)                                                 |      
|Income taxes payable                                                         |      
|Deferred revenue                                                             |      
|Current obligations under capital lease                                      |      
|                                                                             |      
|                                                                             |      
|                                                                             |      
|                                                                             |      
|OBLIGATIONS UNDER CAPITAL LEASES                                             |      
|                                                                             |      
|                                                                             |      
|                                                                             |      
|STOCKHOLDERS' EQUITY                                                         |      
|Common stock                                                                 |      
|Additional paid-up capital                                                   |      
|Deficit                                                                      |      
|Accumulated other comprehensive loss                                         |      
|                                                                             |      
|                                                                             |      
|                                                                             |      
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                   |      
|                                                                             |      

Commitments and Contingencies (note
6)

See Notes to Condensed Consolidated Financial Statements

-1-

---

# 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,
|-------------------------------------------- | --------------------------- | -------------------------
|                                             |                             |                          
|
|                                             |                             |                          
|REVENUE                                      |                             |                          
|Software and services                        |                             | $   8,341,170            
|Maintenance and support                      |                             | 3,268,744                
|Third party products and services            |                             | 611,937                  
|                                             |                             |                          
|                                             |                             | 12,221,851               
|                                            
|DIRECT COSTS                                 |                             | 5,638,356                
|                                             |                             |                          
|GROSS PROFIT                                 |                             | 6,583,495                
|                                             |                             |                          
|OPERATING EXPENSES                           |                            
|Research and development                     |                             | 1,418,925                
|Sales and marketing                          |                             | 2,884,236                
|General and administrative                   |                             | 1,612,857                
|Strategic expenses (note 8)                  |                             | 825,120                  
|                                             |                             |                          
|                                             |                             | 6,741,138                
|                                             |                             |                          
|OPERATING (LOSS) INCOME                      |                             | (157,643                 
|OTHER (EXPENSE) INCOME                       |                             | (208,491                 
|                                             |                             |                          
|LOSS FROM CONTINUING OPERATIONS              |                            
|BEFORE TAX PROVISION                         |                             | (366,134                 
|                                            
|INCOME TAX EXPENSE (RECOVERY) FROM           |                            
|CONTINUING OPERATIONS                        |                             | 137,644                  
|                                             |                             |                          
|NET LOSS FROM CONTINUING OPERATIONS          |                             | (503,778                 
|INCOME FROM DISCONTINUED OPERATIONS (note 2) |                             | --                       
|                                             |                             |                          
|NET LOSS FOR THE PERIOD                      |                             | (503,778                 
|DEFICIT, BEGINNING OF PERIOD                 |                             | (24,984,753              
|                                             |                             |                          
|DEFICIT, END OF PERIOD                       |                             | $(25,488,531             
|                                             |                             |                          
|Loss per common share                        |                            
|Loss from continuing operations              |                            
|Basic                                        |                             | $         (0.06          
|                                             |                             |                          
|Diluted                                      |                             | $         (0.06          
|                                             |                             |                          
|Net Loss                                     |                            
|Basic                                        |                             | $         (0.06          
|                                             |                             |                          
|Diluted                                      |                             | $         (0.06          
|                                             |                             |                          

See Notes to Condensed
Consolidated Financial Statements

-2-

---

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

|                                                      | Three months ended June 30, | Six months ended June 30,
|----------------------------------------------------- | --------------------------- | -------------------------
|                                                      |                             |                          
|
|                                                      |                             |                          
|CASH FLOWS FROM OPERATING ACTIVITIES                  |                             |                          
|Net loss from continuing operations                   |                             | $    (503,778            
|Items not affecting cash:                             |                            
|Depreciation                                          |                             | 771,853                  
|Deferred income taxes                                 |                             | 170,000                  
|Changes in non-cash operating working                 |                            
|capital items (note 7)                                |                             | 1,237,229                
|                                                      |                             |                          
|                                                      |                            
|Net cash provided by (used in) operating activities   |                             | 1,675,304                
|                                                      |                             |                          
|CASH FLOWS FROM FINANCING ACTIVITIES                  |                            
|Issuance of Common Shares                             |                             | 3,966                    
|Repayment of capital leases                           |                             | (318,915                 
|                                                      |                             |                          
|Net cash used by financing activities                 |                             | (314,949                 
|                                                      |                             |                          
|CASH FLOWS FROM INVESTING ACTIVITIES                  |                            
|Acquisition of capital assets                         |                             | (203,983                 
|                                                      |                             |                          
|                                                      |                            
|Net cash used in investing activities                 |                             | (203,983                 
|                                                      |                             |                          
|                                                      |                            
|Net cash provided by (used for) Continuing operations |                             | 1,156,372                
|                                                      |                            
|Net cash used for discontinued operations (note 2)    |                             | --                       
|                                                      |                             |                          
|                                                      |                             |                          
|NET CASH INFLOW (OUTFLOW)                             |                             | 1,156,372                
|                                                      |                             |                          
|                                                      |                            
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD        |                             | 12,549,244               
|                                                      |                             |                          
|                                                      |                            
|CASH AND CASH EQUIVALENTS, END OF PERIOD              |                             | $ 13,705,616             
|                                                      |                             |                          

# SUPPLEMENTAL
DISCLOSURE OF NON CASH INVESTING AND FINANCING ACTIVITIES

During the year ended December 31,
2002 the Company entered into two capital lease arrangements for the gross amount of
$2,922,078 for newly purchased capital assets. As a result of these arrangements the
Company did not incur cash outlays to purchase these assets but will pay lease obligations
with interest accruing at interest rates of up to 9.5% over terms of up to three years.
Since these asset purchases in 2002 are non cash transactions, the gross amount of the
leases have been excluded from both the Acquisition of Capital Assets and Proceeds from
Capital Leases line items for the year ended December 31, 2002, and instead only the
principal portion of repayments are included as repayment of capital leases in the period
in which they are paid.

See Notes to
Condensed Consolidated Financial Statements

-3-

---

MDSI MOBILE DATA
SOLUTIONS INC.
Notes to the Condensed Consolidated Financial Statements
(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. Operating results for the three and six month periods
ended June 30, 2003, are not necessarily indicative of the results that may be expected
for the year ending December 31, 2003. 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, 2002.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | 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. Estimates are used for, but not limited to, the accounting for doubtful
accounts, amortization, determination of the net recoverable value of assets, revenue
recognized on long term contracts, taxes and contingencies. Actual results could differ
from those estimates.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c) | Reporting currency and other comprehensive income
| | --- | -------------------------------------------------

| | 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 other comprehensive income (loss). There
was no other comprehensive income (loss) for any of the periods presented in this report.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (d) | Recently issued accounting standards
| | --- | ------------------------------------

| | In
May 2003, the Financial Accounting Standards Board (FASB) issued
Statement of Accounting Standard (SFAS) No. 150 Accounting for Certain Financial Instruments
with Characteristics of both Liabilities and Equity. SFAS 150 establishes standards
for how an issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer classify a
financial instrument that is within its scope as a liability (or an asset in some
circumstances). Many of those instruments were previously classified as equity. This
Statement is effective for financial instruments entered into or modified after May 31,
2003, and otherwise is effective at the beginning of the first interim period beginning
after June 15, 2003. The Company does not anticipate that this will have a material
impact on the Companys financial statements.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

-4-

---

MDSI MOBILE DATA
SOLUTIONS INC.
Notes to the Condensed Consolidated Financial Statements
(Expressed in United States dollars)
(Unaudited)

|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|-- | ------------------------------------------------------

| | (d) | Recently issued accounting standards
| | --- | ------------------------------------

| | In
April 2003 FASB issued Statement No. 149 (SFAS
149), Amendment of SFAS No. 133 on Derivative Instruments and Hedging Activities.
The Statement amends and clarifies accounting for derivative instruments, including
certain derivative instruments embedded in other contracts, and for hedging activities
under SFAS No. 133. In particular, it (1) clarifies under what circumstances a contract
with an initial net investment meets the characteristic of a derivative as discussed in
SFAS No. 133, (2) clarifies when a derivative contains a financing component, (3) amends
the definition of an underlying to conform it to the language used in FASB Interpretation
No. 45, Guarantor Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others and (4) amends certain other existing
pronouncements.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | SFAS
149 is effective for contracts entered into or modified after June 30, 2003, subject to
certain exceptions, for hedging relationships designated after June 30, 2003.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company will adopt the provisions of SFAS 149 for any contracts entered into after June
30, 2003 and is not affected by Implementation Issues that would require earlier
adoption. The Company is currently evaluating the effect that the adoption of SFAS 149
will have on its results of operations and financial condition.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
January 2003, the FASB issued Interpretation No. 46 (FIN 46), Consolidation of
Variable Interest Entities, an Interpretation of ARB No. 51. FIN 46 requires
certain variable interest entities to be consolidated by the primary beneficiary of the
entity if the equity investors in the entity do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the entity to
finance its activities without additional subordinated financial support from other
parties. FIN 46 is effective for all new variable interest entities created or acquired
after January 31, 2003. For variable interest entities created or acquired prior to
February 1, 2003, the provisions of FIN 46 must be applied for the first interim or
annual period beginning after June 15, 2003. The Company does not anticipate that
the adoption of FIN 46 will have an material impact on the results of operations and
financial condition of the Company.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
June 2002, the FASB issued SFAS No. 146 (SFAS 146), Accounting for
Costs Associated with Exit or Disposal Activities. SFAS 146 requires that the
liability for a cost associated with an exit or disposal activity be recognized at its
fair value when the liability is incurred. Under previous guidance, a liability for
certain exit costs was recognized at the date that management committed to an exit plan,
which was generally before the actual liability had been incurred. Adoption of this
statement did not impact the Companys financial statements for the three or six
month period ended June 30, 2003.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
November 2002, the FASB issued FASB Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others (FIN45). FIN 45 requires that upon issuance of a guarantee,
a guarantor must recognize a liability for the fair value of an obligation assumed under
a guarantee. FIN 45 also requires additional disclosures by a guarantor in its interim
and annual financial statements about the obligations associated with guarantees issued.
Although the disclosure provisions of FIN 45 previously were adopted by the Company, the
recognition provisions of FIN 45 became effective as of January 1, 2003. The adoption of
the recognition provisions of FIN 45 did not have a material impact on the Companys
results of operations or financial position.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

-5-

---

MDSI MOBILE DATA
SOLUTIONS INC.
Notes to the Condensed Consolidated Financial Statements
(Expressed in United States dollars)
(Unaudited)

|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|-- | ------------------------------------------------------

| | (e) | Stock-based compensation
| | --- | ------------------------

| | The
Company accounts for stock-based compensation using the intrinsic value based method
whereby compensation cost is recorded for the excess, if any, of the quoted market price
of the common share over the exercise price of the common stock option at the date
granted.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
following pro forma financial information presents the net loss for the quarter and loss
per common share had the Company adopted the fair value method pursuant to Statement of
Financial Accounting Standard No. 123 (SFAS 123) Accounting for Stock-based Compensation.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                 | Three months ended June 30, | Six months ended June 30,
|-------------------------------- | --------------------------- | -------------------------
|                                 |                             |                          
|
|                                 |                             |                          
|Net loss for the period          |                             | $    (727,834            
|                                 |                             |                          
|Basic and fully diluted loss per |                            
|common share                     |                             | $         (0.09          
|                                 |                             |                          

| | Using
the fair value method for stock-based compensation, additional compensation costs of
approximately $224,056 would have been recorded for the three months ended June 30, 2003
(2002  $114,625), and $440,894 would have been recorded for the six months ended
June 30, 2003 (2002  $307,884). This amount is determined using an option pricing
model assuming no dividends are to be paid, an average vesting period of four years,
average life of the option of 5 years, a weighted average annualized volatility of the
Companys share price of 73% and a weighted average annualized risk free interest
rate at 2.7%.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2. | DISCONTINUED OPERATIONS
|-- | -----------------------

| | During
June 2002, MDSI adopted a plan for sale and entered into an agreement to sell its Hosting
and IT Services business segment, Connectria Corporation (Connectria), to former
Connectria shareholders who were both shareholders and employees of the Company. The
transaction closed in July 2002. Pursuant to the terms of the agreement, the Company
received from the former Connectria shareholders 824,700 shares of MDSI that had an
approximate market value of $2.8 million and the cancellation of 103,088 previously
issued stock options of MDSI as consideration for Connectria. In addition to the share
consideration, a wholly-owned subsidiary of MDSI received a warrant allowing it to
purchase up to 50,380 shares of Series A Nonvoting Preferred Stock of Connectria at a
price of $50 per share exercisable for a period of five years. The Series A Nonvoting
Preferred Stock of Connectria has a face value of $100 per share, bears a dividend of
five percent per annum, bears a liquidation preference equal to the face value, may be
redeemed at Connectrias option at any time, and must be redeemed by Connectria upon
a capital infusion of $10 million or greater. In addition MDSI has advanced to Connectria
$500,000, consisting of a loan in the principal amount of $250,000 with a two year term,
bearing interest at 5%, and $250,000 for prepaid hosting services. As at June 30, 2003
the entire amount of the prepaid hosting services has been amortized to income. The
Company recognized a gain of $12,419 on the disposal of Connectria during the quarter
ended June 30, 2002. Connectria represented a significant segment of the Companys
business.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

-6-

---

MDSI MOBILE DATA
SOLUTIONS INC.
Notes to the Condensed Consolidated Financial Statements
(Expressed in United States dollars)
(Unaudited)

|2. | DISCONTINUED OPERATIONS (continued)
|-- | -----------------------------------

| | Summarized
financial information of the discontinued operations is as follows:
| | ------------------------------------------------------------------------------

|Three months ended,                   
|--------------------------------------
|                                      
|                                      
|                                      
|Revenues                              
|Income before income taxes            
|Income tax                            
|                                      
|                                      
|Income on disposal net of income taxes
|                                      
|Income from discontinued operations   
|                                      

|Six months ended,                  
|-----------------------------------
|                                   
|June 30, 2003                      
|                                   
|Revenues                           
|Income before income taxes         
|Income tax                         
|                                   
|                                   
|Income on disposal                 
|net of income taxes                
|                                   
|Income from discontinued operations
|                                   

|Three months ended,                  
|-------------------------------------
|                                     
|June 30, 2003                        
|                                     
|Operating
activities                 
|Investing activities                 
|Financial activities                 
|                                     
|Cash used for discontinued operations

|Six months ended,                    
|-------------------------------------
|                                     
|June 30, 2003                        
|                                     
|Operating
activities                 
|Investing activities                 
|Financial activities                 
|                                     
|Cash used for discontinued operations
|                                     

-7-

---

MDSI MOBILE DATA
SOLUTIONS INC.
Notes to the Condensed Consolidated Financial Statements
(Expressed in United States dollars)
(Unaudited)

|3. | SEGMENTED INFORMATION
|-- | ---------------------

| | As
described in Note 2, the Company has reclassified the results of operations of Connectria
Corporation as discontinued operations. The business was previously disclosed as a
separate operating segment. As a result of discontinuing this business, the Company now
only operates in a single business segment, the Field Service business segment. The
segment data below has been restated to exclude amounts related to the discontinued
operations.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|                               | Three months ended June 30, | Six months ended June 30,
|------------------------------ | --------------------------- | -------------------------
|                               |                             |                          
|
|                               |                             |                          
|Canada                         |                             | $     547,429            
|United States                  |                             | 5,984,580                
|Europe, Middle East and Africa |                             | 5,544,258                
|Asia and other                 |                             | 145,584                  
|                               |                             |                          
|                               |                             | $12,221,851              
|                               |                             |                          

| | Major
customers
| | ---------------

| | During
the three months ended June 30, 2003 revenue from two customers accounted for
approximately 19.8% and 17.5%, respectively, of total revenue. During the six months
ended June 30, 2003 revenue from two customers accounted for approximately 20.1% and
19.6%, respectively, of total revenue. For the three and six months ended June 30, 2002
one customer did not account for greater than 10% of total revenue.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. | 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 is 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 loss per common share
calculations for the periods indicated:
| | ---------------------------------------------------------------------------------------------------------------------------------

|                                            | Three months ended June 30, | Six months ended June 30,
|------------------------------------------- | --------------------------- | -------------------------
|                                            |                             |                          
|
|                                            |                             |                          
|Basic weighted average shares outstanding   |                             | 8,202,814                
|Effect of dilutive securities;              |                            
|Stock options                               |                             | --                       
|                                            |                             |                          
|Diluted weighted average shares outstanding |                             | 8,202,814                
|                                            |                             |                          

-8-

---

MDSI MOBILE DATA
SOLUTIONS INC.
Notes to the Condensed Consolidated Financial Statements
(Expressed in United States dollars)
(Unaudited)

|5. | RESTRUCTURING CHARGE
|-- | --------------------

| | During
2001, in response to uncertain economic conditions and poor financial performance, the
Company announced a restructuring plan approved by the Companys Board of Directors
designed to reduce operating costs. In connection with the restructuring the Company
recorded a charge of $6.1 million. A breakdown of the nature of the charges and the costs
incurred to date is as follows:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                        | Total Restructuring
        Charge
|--------------------------------------- | ----------------------------------
|                                        |                                   
|Workforce reduction                     |                                   
|Provision for excess office space       |                                   
|Non cash writedown of capital assets    |                                   
|Other                                   |                                   
|                                        |                                   
|Total restructuring charges             |                                   
|Cumulative draw-downs                   |                                   
|                                        |                                   
|Accrued restructuring charges included  |                                   
|in accrued liabilities at June 30, 2003 |                                   
|                                        |                                   

| | Provisions
relating to workforce reductions, write-down of capital assets, and other items have been
fully drawn-down, and no further expenditures relating to these items are expected to be
incurred.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company has recorded a $1.9 million provision relating to surplus office space under long
term lease by the Company at two locations, including one location where the Company has
entered into fixed cost lease arrangements expiring in 2004. The Company has incurred
approximately $0.9 million of cash costs relating to this provision leaving an accrual of
$1.0 million remaining as at June 30, 2003. The Company expects that the provision will
be fully drawn down no later than the time the lease expires in the fourth quarter of
2004.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|6. | COMMITMENTS AND CONTINGENCIES
|-- | -----------------------------

| | (a) | Contingency
| | --- | -----------

| | The
Company is involved in a dispute with a customer. The Company filed suit against the
customer alleging that the customer had breached a series of contracts, and failed to pay
sums due of approximately $3.7 million. The suit sought payment of the contract balance,
plus other damages, interest and attorneys fees. The customer filed an answer and
counterclaim alleging the Company breached the contracts, entitling the customer to
repayment of all sums paid to the Company of approximately $3.5 million. In addition, the
customers counterclaims alleged fraud, negligent misrepresentation, breach of
express warranty and breach of implied warranties. The customer sought all actual,
special, incidental and consequential damages associated with these counterclaims in
addition to punitive damages, interest and attorneys fees.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
March 5, 2003, the court granted the customers motion for summary judgment,
dismissing the Companys claims for lack of sufficient evidence of damages. The
Company filed a motion for reconsideration of this ruling. On March 26, 2003, the court
denied the Companys motion. On March 26, 2003, the court granted the Companys
motion for partial summary judgment, finding that the customer wrongfully terminated the
professional services agreement. On April 8, 2003,
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

-9-

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MDSI MOBILE DATA
SOLUTIONS INC.
Notes to the Condensed Consolidated Financial Statements
(Expressed in United States dollars)
(Unaudited)

|6. | COMMITMENTS AND CONTINGENCIES (continued)
|-- | -----------------------------------------

| | (a) | Contingency (continued)
| | --- | -----------------------

| | the
court granted the Companys motion for summary judgment, dismissing the customers
counterclaims for fraud and negligent misrepresentation.
| | -----------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company tendered defense of the customers counterclaims to its insurance company.
The insurance company accepted defense of the counterclaims under a reservation of
rights. On April 16, 2003, the Company was informed that its insurer reached an agreement
with the customer to settle the customers breach of contract and breach of warranty
counterclaims for $1 million. The Company is not a party to the settlement agreement and
the settlement amount is to be paid by its insurer. The settlement agreement preserved
the Companys right to appeal the courts ruling that dismissed the Companys
claims on summary judgment for lack of sufficient evidence of damages and the customers
right to appeal the courts ruling that dismissed the customers counterclaims
of fraud and negligent misrepresentation. On May 14, 2003, the Company filed its Notice
of Appeal, and on May 28, 2003 the customer appealed the courts motion for summary
judgment that dismissed the customers counterclaims for fraud and negligent
misrepresentation. Both parties are awaiting a court date as to when the appeals will be
heard.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company intends to expense as incurred costs in connection with the appeal and any
subsequent trial, and any amounts which may be payable in respect to counterclaims
asserted by the customer for fraud and negligent misrepresentation. The Company believes
that collection of monies due from the customer is not likely to occur within one year
and as a result has classified the amounts due from the customer of approximately $3.7
million as a long term receivable. Due to the uncertain nature of the receivable the
Company recorded an allowance in a prior period of $1.0 million against the amounts due.
There is currently no provision in the Companys financial statements to address any
payment to the customer if the customer is successful in any appeal and subsequent trial
on its fraud and negligent misrepresentation counterclaims, as the Company, after
consultation with counsel, views this to be an unlikely event. Should the Company not be
successful in its claims against the customer, the Company may be required to take a $2.7
million dollar charge to earnings. If the customer is successful in any fraud or
negligent misrepresentation counterclaims, the Company may be required to take an
additional charge to earnings to the extent of the judgment. Although the amount of any
such judgment against the Company for fraud or negligent misrepresentation cannot be
determined, if the customer is successful in any appeal and subsequent trial, the Companys
financial condition and results of operations would be materially adversely affected.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | From
time to time, the Company is a party to other 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.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | Guarantee
| | --- | ---------

| | As
part of the disposition agreement with Connectria Corporation, Connectria is to use its
best efforts to terminate, or obtain the release of MDSI from approximately $0.2 million
in loan guarantees and equipment leases made by MDSI on behalf of Connectria. To date
termination or release from these obligations has not occurred, and as a result MDSI
could potentially be liable under these obligations should Connectria default on a
payment. Based on managements estimates, the Company does not anticipate having to
make payments in connection with these guarantees and accordingly no amounts have been
accrued as a liability in the financial statements.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

-10-

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MDSI MOBILE DATA
SOLUTIONS INC.
Notes to the Condensed Consolidated Financial Statements
(Expressed in United States dollars)
(Unaudited)

|6. | COMMITMENTS AND CONTINGENCIES (continued)
|-- | -----------------------------------------

| | (c) | Commitment
| | --- | ----------

| | The
Company has entered into a significant customer contract in which the Company has agreed
to utilize a certain amount of local services and create a certain amount of commercial
activity in South Africa. The Company is required to utilize local content or obtain
credits equivalent to approximately $7 million over a seven year period. The Company is
also required to furnish a performance guarantee equal to approximately 5% of such
amount. The Company expects to fulfill its obligation through a number of activities,
including the establishment of a software development center in South Africa, the
provision of technical services, and the provision of training to local systems
integrators who will be able to provide implementation and support services with respect
to the Companys software products. As the Company expects to fulfill its
obligations through the purchase of services in the normal course of business, no
liability has been established for these future spending commitments.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|7. | CHANGES IN NON-CASH OPERATING WORKING CAPITAL ITEMS
|-- | ---------------------------------------------------

|                                         | Three months ended June 30, | Six months ended June 30,
|---------------------------------------- | --------------------------- | -------------------------
|                                         |                             |                          
|
|                                         |                             |                          
|Accounts Receivable                      |                             | $(2,368,345              
|                                         |                             |                          
|Prepaid expenses                         |                             | 112,976                  
|                                         |                             |                          
|Income taxes payable                     |                             | 36,066                   
|                                         |                             |                          
|Accounts payable and accrued liabilities |                             | 1,306,286                
|                                         |                             |                          
|Deferred revenue                         |                             | 2,150,246                
|                                         |                             |                          
|                                         |                             | $ 1,237,229              
|                                         |                             |                          

|8. | STRATEGIC EXPENSES
|-- | ------------------

| | Strategic
expenses consist of professional fees associated with investigating a potential corporate
transaction that the Company considered and then abandoned during the three months ended
June 30, 2003.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

-11-

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# ITEM 2:   
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

# Forward-Looking
Statements

Certain
statements 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, as amended. Such
forward-looking statements involve known and unknown risks, uncertainties and other
factors that may cause the actual results, performance or achievements of MDSI, or
developments in MDSI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: lengthy sales cycles, the Companys
dependence upon large contracts and relative concentration of customers, the failure of
MDSI to effectively control levels of operating expenses, the failure of MDSI to
successfully execute its business strategies, the effect of slow United States and
international economies generally, as well as economic trends and conditions in the
vertical markets that MDSI serves, the effect of the risks associated with technical
difficulties or delays in product introductions and improvements, product development,
product pricing or other initiatives of MDSIs competitors, the possibility that our
potential customers will defer purchasing decisions due to economic or other conditions or
will purchase products offered by our competitors, risks associated with litigation and
the other risks and uncertainties described in the risk factors attached as Exhibit 99.1
hereto and in other Securities and Exchange Commission filings, including the
Companys Annual Report on Form 10-K for the year ended December 31, 2002.

Unless
otherwise noted, all financial information in this report is expressed in the
Companys functional currency, United States dollars. See Item 3, Quantitative
and Qualitative Disclosures About Market Risk.

# 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 and cable/broadband 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.

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, configuration, customization and training; (ii) maintenance and
support, consisting of the provision of after-sale support services as well as hourly,
annual or extended maintenance contracts; and (iii) third party products and services,
consisting of the provision of non-MDSI products and services as part of the total
contract.

Restructuring

The
Company believes that economic conditions 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 telecommunications companies worldwide. In addition, economic conditions
and developments in the energy markets have had an adverse effect 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, have elected to not purchase the
Companys products, or have sought to terminate existing contracts for the
Companys products and services. As a result, the Companys results of
operations have fluctuated in the past and are likely to continue to fluctuate from period
to period depending on a number of factors, particularly the timing and receipt of
significant orders. While the Company believes that economic conditions in certain of its
vertical markets show signs of improvement, the Company believes that

-12-

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economic and political conditions and
general trends are likely to continue to affect demand for the Companys products and
services throughout the remainder of 2003, particularly demand for software and related
services. See the risk factors attached to Exhibit 99.1 hereto and Forward-Looking
Statements. Such factors may also increase the amount of doubtful accounts or
adversely affect the likelihood of collection of such accounts.

In
order to address the uncertainties caused by these economic trends, MDSI announced in 2001
its intention to reduce its operating expenses through workforce reductions and other
measures. These measures have been gradually implemented with incremental reductions in
costs each quarter, and were expected to result in an estimated $2.9 million in cost
reductions per quarter by the end of 2002. A majority of the savings were realized by
reduced salary and payroll costs, and the remaining savings were realized from the
subleasing of excess space, and a reduction in discretionary spending. As a result of the
sale of the public safety operations during the second quarter of 2002, the Company
exceeded the estimated quarterly savings.

In
connection with the restructuring the Company recorded a charge of $6.1 million in 2001.
A breakdown of the nature of the charges and the costs incurred to date is as follows:

|                                        | Total Restructuring
        Charge
|--------------------------------------- | ----------------------------------
|                                        |                                   
|Workforce reduction                     |                                   
|Provision for excess office space       |                                   
|Non cash writedown of capital assets    |                                   
|Other                                   |                                   
|                                        |                                   
|Total restructuring charges             |                                   
|Cumulative draw-downs                   |                                   
|                                        |                                   
|Accrued restructuring charges included  |                                   
|in accrued liabilities at June 30, 2003 |                                   
|                                        |                                   

Provisions
relating to workforce reductions, write-down of capital assets, and other items have been
fully drawn-down, and no further expenditures for these items are expected to be incurred.

The
Companys remaining restructuring accruals relate to surplus office space under long
term lease by the Company at two locations, including one location where the Company has
entered into fixed cost lease arrangements expiring in 2004. The Company has incurred
approximately $0.9 million of cash costs relating to this provision leaving an accrual of
$1.0 million remaining as at June 30, 2003. The Company expects that the provision will be
fully drawn down no later than the time the lease expires in the fourth quarter of 2004.

Field Service Business

The
implementation of a complete mobile data solution requires a wireless 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 workforces
require or where additional departments of mobile workers are added, additional mobile
computing devices may be installed, which may result in additional revenue for the
Company. See Forward-Looking Statements.

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

-13-

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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 one to three
years and are invoiced either annually, quarterly, 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 on the supply of
third party hardware and software upon transfer of title to the customer. The Company
recognizes revenue on the supply of 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 periodically 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 fluctuations in revenue.

During
2001, MDSI decided not to continue pursuing opportunities in the Public Safety market.
These opportunities consisted of federal, state and local agencies that provide police,
fire, medical and other emergency services. The Company had installed solutions for a
limited number of customers, and this market did not represent a material portion of
MDSIs revenues. On May 24, 2002 the Company entered into an agreement with Datamaxx
Applied Technologies Inc. (Datamaxx), granting exclusive license to Datamaxx
for MDSIs Public Safety products in North America, and non exclusive license rights
for these products outside North America. The Company also assigned its existing contracts
in the Public Safety market to Datamaxx. MDSI will receive royalty payments under the
agreement for any license and implementation revenue earned by Datamaxx in relation to the
licensed products, subject to a maximum royalty payout of $1,500,000. As a result of this
licensing agreement, the Company has now exited the Public Safety market, and all
employees related to the Public Safety market were terminated prior to June 30, 2002.

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.

Disposition of Hosting
and Information Technology (IT) Services Business Segment

In
June 2002, MDSI adopted a plan for sale and entered into an agreement to sell its Hosting
and IT Services business segment, Connectria Corporation (Connectria), to former
Connectria shareholders who were both shareholders and employees of the Company. The
transaction closed in July 2002. Pursuant to the terms of the agreement, the Company
received from the former Connectria shareholders 824,700 shares of MDSI that had a market
value of approximately $2.8 million and the cancellation of 103,088 previously issued
stock options of MDSI as consideration for Connectria. In addition to the share
consideration, a wholly-owned subsidiary of MDSI also received a warrant allowing it to
purchase up to 50,380 shares of Series A Nonvoting Preferred Stock of Connectria at a
price of $50 per share exercisable for a period of five years. The Series A Nonvoting
Preferred Stock of Connectria has a face value of $100 per share, bears a dividend of five
percent per annum, bears a liquidation preference equal to the face value, may be redeemed
at Connectrias option at any time, and must be redeemed by Connectria upon a capital
infusion of $10 million or greater. In addition MDSI has advanced Connectria $500,000,
consisting of a loan in the principal amount of $250,000 with a two year term, bearing
interest at 5%, and $250,000 for prepaid hosting services. On closing, the Company
realized a small gain as a result of the disposition of Connectria.

-14-

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As
a result of its decision to dispose of Connectria, MDSI has treated this business segment
as a discontinued operation and the results of operations, financial position and changes
in 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
Connectria from the corresponding prior periods.

# Recent Accounting
Pronouncements

In May 2003, the Financial Accounting Standards Board (FASB) issued Statement of
Accounting Standard (SFAS) No. 150 "Accounting for Certain Financial Instruments
with Characteristics of both Liabilities and Equity".  SFAS 150 establishes
standards for how an issuer classifies and measures certain financial instruments
with characteristics of both liabilities and equity.  It requires that an issuer
classify a financial instrument that is within its scope as a liability (or an
asset in some circumstances).  Many of those instruments were previously classified
as equity.  This Statement is effective for financial instruments entered into or
modified after May 31, 2003, and otherwise is effective at the beginning of the
first interim period beginning after June 15, 2003.  The Company does not
anticipate that this will have a material impact on the Company's financial
statements.

In
April 2003 FASB  issued  Statement  No. 149 ("SFAS  149"),  Amendment  of SFAS No. 133 on
 Derivative            Instruments  and Hedging  Activities.  The Statement  amends and
 clarifies  accounting  for  derivative            instruments,  including  certain
 derivative  instruments  embedded in other contracts,  and for hedging
           activities  under SFAS No. 133. In  particular,  it (1) clarifies  under what
 circumstances  a contract            with an initial net investment  meets the
 characteristic  of a derivative as discussed in SFAS No. 133,            (2)  clarifies
 when a  derivative  contains a  financing  component,  (3) amends the  definition  of an
           underlying to conform it to the language used in FASB  Interpretation  No. 45,
Guarantor  Accounting and            Disclosure  Requirements  for Guarantees,  Including
 Indirect  Guarantees of Indebtedness of Others and            (4) amends certain other
existing pronouncements.

SFAS
149 is effective for contracts entered into or modified after June 30, 2003, subject to
certain exceptions, and for hedging relationships designated after June 30, 2003.

The
Company will adopt the provisions of SFAS 149 for any contracts entered into after June
30, 2003 and is not affected by Implementation Issues that would require earlier adoption.
The Company is currently evaluating the effect that the adoption of SFAS 149 will have on
its results of operations and financial condition.

In
January 2003, the FASB issued Interpretation No. 46 (FIN 46), Consolidation of
Variable Interest Entities, an Interpretation of ARB No. 51. FIN 46 requires certain
variable interest entities to be consolidated by the primary beneficiary of the entity if
the equity investors in the entity do not have the characteristics of a controlling
financial interest or do not have sufficient equity at risk for the entity to finance its
activities without additional subordinated financial support from other parties. FIN 46 is
effective for all new variable interest entities created or acquired after
January 31, 2003. For variable interest entities created or acquired prior to
February 1, 2003, the provisions of FIN 46 must be applied for the first interim or
annual period beginning after June 15, 2003. The Company does not anticipate that the
adoption of FIN 46 will have a material impact on the results of operations and financial
condition of the Company.

In
June 2002, the FASB issued SFAS No. 146 (SFAS 146), Accounting for Costs
Associated with Exit or Disposal Activities. SFAS 146 requires that the liability
for a cost associated with an exit or disposal activity be recognized at its fair value
when the liability is incurred. Under previous guidance, a liability for certain exit
costs was recognized at the date that management committed to an exit plan, which was
generally before the actual liability had been incurred. Adoption of this statement did
not impact the Companys financial statements for the three or six month period ended
June 30, 2003.

In
November 2002, the FASB issued FASB Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others (FIN45). FIN 45 requires that upon issuance of a guarantee, a
guarantor must recognize a liability for the fair value of an obligation assumed under a
guarantee. FIN 45 also requires additional disclosures by a guarantor in its interim and
annual financial statements about the obligations associated with guarantees issued.
Although the disclosure provisions of FIN 45 previously were adopted by the Company, the
recognition provisions of FIN 45 became effective as of January 1, 2003. The adoption of
the recognition provisions of FIN 45 did not have a material impact on the Companys
results of operations or financial position.

Critical Accounting
Policies and Significant Estimates

The
significant accounting policies are outlined within Note 1 to the Financial Statements.
Some of those accounting policies require the Company to make estimates and assumptions
that affect the amounts reported by the Company. The following items require the most
significant judgment and involve complex estimation:

-15-

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# Restructuring Charges

In
calculating the cost to dispose of excess facilities the Company was required to estimate
for each location the amount to be paid in lease termination payments, the future lease
and operating costs to be paid until the lease is terminated, and the amount, if any, of
sublease revenues. This required estimating the timing and costs of each lease to be
terminated, the amount of operating costs, and the timing and rate at which the Company
might be able to sublease the site. From the estimates for these costs the Company
performed an assessment of the affected facilities and considered the current market
conditions for each site. A charge of $1.9 million was recorded for the restructuring of
excess facilities as part of the restructuring plan. The Companys assumptions on
either the lease termination payments, operating costs until terminated, or the offsetting
sublease revenues may be proven incorrect and actual cost may be materially different from
the estimates.

# Accounts Receivable

The
Company periodically reviews the collectability of its accounts receivable balances. Where
significant doubt exists with regard to the collection of a certain receivable balance, an
allowance and charge to the income statement is recorded. At June 30, 2003, the allowance
for doubtful accounts was $3.5 million, composed of $2.5 million relating to current trade
receivables and $1.0 million relating to a long term receivable. The Company intends to
continue vigorously pursuing these accounts. If future events indicate additional
collection issues, the Company may be required to record an additional allowance for
doubtful accounts.

# Revenue Recognition
 Percentage Completion

The
Company uses estimates based on inputs to determine the percentage completion of its
software and service implementation contracts and thus its revenue recognition. Under the
percentage-of-completion method, sales and gross profit are recognized as the work is
performed based on the relationship between costs incurred and the total estimated costs
of completion. These estimates and contracts are reviewed regularly and are adjusted
prospectively to reflect the Companys best estimate at the time. Provision for
estimated losses on contracts are recorded when identifiable. The Companys
assumptions used to form these estimates may be proven to be erroneous and materially
different outcomes may result.

# Income Taxes

The
Company has incurred losses and other costs that can be applied against future taxable
earnings to reduce the tax liability on those earnings. As the Company is uncertain of
realizing the future benefit of those losses and expenditures, the Company has recorded a
valuation allowance against most non-capital loss carry forwards, and other deferred tax
assets arising from differences in tax and accounting bases. Actual results may be
materially different from the current estimate.

# Product Warranties

The
Company generally provides a limited warranty of ninety days on its products and holds
back a portion of revenue as deferred revenue based on its experience. The deferred
revenue is then recognized ratably over the warranty period.

# Contingencies

The
Company is involved in a dispute with Citizens Telcom Services Co., L.L.C. The Company
filed suit against Citizens alleging that Citizens had breached a series of contracts, and
failed to pay sums due. Citizens filed an answer and counterclaim alleging the Company
breached the contracts, entitling Citizens to repayment of all sums paid to the Company of
approximately $3.5 million. In addition, Citizens counterclaims alleged fraud,
negligent misrepresentation, breach of express warranty and breach of implied warranties.
Citizens sought all actual, special,

-16-

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incidental and consequential damages
associated with these counterclaims, in addition to punitive damages, interest and
attorneys fees.

On
March 5, 2003, the court granted Citizens motion for summary judgment, dismissing
the Companys claims for lack of sufficient evidence of damages. The Company filed a
motion for reconsideration of this ruling. On March 26, 2003, the court denied the
Companys motion. On March 26, 2003, the court granted the Companys motion for
partial summary judgment, finding that Citizens wrongfully terminated the professional
services agreement. On April 8, 2003, the court granted the Companys motion for
summary judgment on the Citizens counterclaims for fraud and negligent
misrepresentation.

The
Company tendered defense of the customers counterclaims to its insurance company.
The insurance company accepted defense of the counterclaims under a reservation of rights.
On April 16, 2003, the Company was informed that its insurer reached an agreement with
Citizens to settle Citizens breach of contract and breach of warranty counterclaims
for $1 million. The Company is not a party to the settlement agreement and the settlement
amount is to be paid by its insurer. The settlement agreement preserved the Companys
right to appeal the courts ruling that dismissed the Companys claims on
summary judgment for lack of sufficient evidence of damages and Citizens right to
appeal the courts ruling that dismissed Citizens counterclaims of fraud and
negligent misrepresentation. On May 14, 2003, the Company filed its Notice of Appeal, and
on May 28, 2003 Citizens appealed the courts motion for summary judgment that
dismissed Citizens counterclaims for fraud and negligent misrepresentation. Both
parties are awaiting a court date as to when the appeals will be heard.

The
Company intends to expense as incurred costs in connection with the appeal and any
subsequent trial, and any amounts which may be payable in respect to counterclaims
asserted by Citizens for fraud and negligent misrepresentation. The Company has classified
the $3.7 million receivable from Citizens as a long term receivable on its consolidated
balance sheet as of June 30, 2003, and due to the uncertain nature of the receivable has
recorded an allowance in a prior period of $1.0 million against the amounts due. There is
currently no provision in the Companys financial statements to address any payment
to the customer if Citizens is successful in any appeal and subsequent trial on its fraud
and negligent misrepresentation counterclaims, as the Company, after consultation with
counsel, views this to be an unlikely event. Should the Company not be successful in its
claims against the customer, the Company may be required to take a $2.7 million dollar
charge to earnings. If the customer is successful in any fraud or negligent
misrepresentation counterclaims, the Company may be required to take an additional charge
to earnings to the extent of the judgment. Although the amount of any such judgment
against the Company for fraud or negligent misrepresentation cannot be determined, if the
customer is successful in any appeal and subsequent trial, the Companys financial
condition and results of operations would be materially adversely affected. See the
Litigation risk factor in Exhibit 99.1 hereto and see Forward-Looking
Statements.

-17-

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Results of Operations

The
Companys net loss was $0.5 million for the three months ended June 30, 2003. This
compares to a net loss of $1.6 million for the three months ended June 30, 2002. For the
six months ended June 30, 2003 the Company had a net loss of $0.3 million, compared to a
net loss of $1.9 million for the six months ended June 30, 2002. The reduction in net loss
for both comparative periods is due primarily to increased revenues derived from several
significant contracts, partially offset by increased direct costs relating to the
significant contracts, and strategic expenses incurred in the second quarter of 2003.

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:

|                                              | Three months ended June 30, | Six months ended June 30,
|--------------------------------------------- | --------------------------- | -------------------------
|                                              |                             |                          
|
|                                              |                             |                          
|REVENUE                                       |                             |                          
|Software and services                         |                             | 68.2%                    
|Maintenance and support                       |                             | 26.8%                    
|Third party products and services             |                             | 5.0%                     
|                                              |                             |                          
|                                              |                             | 100%                     
|DIRECT COSTS                                  |                             | 46.1%                    
|                                              |                             |                          
|GROSS PROFIT                                  |                             | 53.9%                    
|                                              |                             |                          
|OPERATING EXPENSES                            |                            
|Research and development                      |                             | 11.6%                    
|Sales and marketing                           |                             | 23.6%                    
|General and administrative                    |                             | 13.2%                    
|Strategic expenses                            |                             | 6.8%                     
|                                              |                             |                          
|                                              |                             | 55.2%                    
|                                              |                             |                          
|OPERATING (LOSS) INCOME                       |                             | (1.3)%                   
|OTHER (EXPENSE) INCOME                        |                             | (1.7)%                   
|                                              |                             |                          
|LOSS FROM CONTINUING OPERATIONS BEFORE TAX    |                             | (3.0)%                   
|PROVISION                                     |                            
|INCOME TAX EXPENSE (RECOVERY) FROM CONTINUING |                            
|OPERATIONS                                    |                             | 1.1%                     
|                                              |                             |                          
|NET LOSS FROM CONTINUING OPERATIONS           |                             | (4.1)%                   
|INCOME FROM DISCONTINUED OPERATIONS           |                             | --                       
|                                              |                             |                          
|NET LOSS FOR THE PERIOD                       |                             | (4.1)%                   
|                                              |                             |                          
|                                              |                            

# Three Months Ended June
30, 2003 Compared to the Three Months Ended June 30, 2002

Revenue.  Revenue
increased by $4.2 million or 52.2% for the three months ended June           30, 2003 as
compared to the three months ended June 30, 2002. This increase was           primarily
due to increases in revenue from software and services and third party           products
and services during the second quarter of 2003 relative to the same           period in
2002.

Software
and services revenue increased by $3.5 million or 70.8% for the three months ended June
30, 2003 as compared to the three months ended June 30, 2002. The increase in revenue is
attributable to several significant contracts the Company has entered into over the last
year, representing increased success in the core

-18-

---

markets the Company serves. These
contracts continue to generate significant revenue for the Company. The Company recognized
only an insignificant amount of revenue from one of these contracts for the three months
ended June 30, 2002 and therefore the Companys Software and Service revenues have
significantly increased for the three months ended June 30, 2003 as compared to the three
months ended June 30, 2002. The Company expects that these contracts will continue to make
up a significant portion of revenues over the next few quarters. See Forward
Looking Statements. While the Company believes that economic conditions in certain
of its vertical markets show signs of improvement, the Company anticipates that economic
conditions and general trends are likely to continue to have an adverse impact on software
and services revenues in future periods. See Forward-Looking Statements.

Maintenance
and support revenue were $3.3 million for the three months ended June 30, 2003 as compared
to $2.9 million for the three months ended June 30, 2002. Maintenance and support revenue
has increased primarily due to an agreement being reached with a customer during the three
months ended June 30, 2003 that resulted in past support revenues deferred due to
uncertainty of collection being recognized during the current period. Maintenance and
support revenue has also increased due to the growth in the Companys installed
customer base. Such revenue is expected to fluctuate as it corresponds to the level of
software support and services which the Company is engaged to provide in support of its
installations.

Third
party products and services revenue increased by $0.3 million for the three months ended
June 30, 2003 compared to the three months ended June 30, 2002. Third party products and
services revenue is primarily earned from certain customers in the utilities market
pursuant to agreements under which the Company provides third party products and services,
typically host computer equipment and mobile computing devices, as part of the
installation of software and provision of services. 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. The Company has agreed to supply a large amount of
third party services at no margin, in connection with one particular contract, and
therefore expects that future revenues from third party products and services will
increase in the near term. For the three months ended June 30, 2003 approximately $0.3
million of these third party services were provided, as compared to $ nil for the three
months ended June 30, 2002. See Forward-Looking Statements.

Direct
Costs. Direct costs were 46.1% of revenue for the three months ended June 30, 2003,
compared to 43.5% for the three months ended June 30, 2002. Direct costs include labor and
other costs directly related to a project including those related to the ongoing provision
of services and support, and costs related to equipment purchased for sale to third
parties. Labor costs include direct payroll, benefits and overhead charges. The increase
in direct costs as a percentage of revenue occurred as the Company has recently agreed to
supply a large amount of third-party services at no margin, in connection with one
particular contract. The relative weakness of the United States dollar also contributed to
the cost increase as the majority of direct costs are incurred in Canadian dollars. As a
result, direct costs as a percentage of revenue have increased. The Company expects that
direct costs as a percentage of revenue will remain relatively consistent with the current
period in the near term. See Forward-Looking Statements.

Gross
Margins. Gross margins were 53.9% of revenue for the three months ended June 30, 2003,
compared to 56.5% for the three months ended June 30, 2002. The decrease in gross margins
as a percentage of revenue relates primarily to a agreement whereby the Company has agreed
to supply a large amount of third-party services at no margin. During the current period
the Company recognized approximately $0.3 million in third party revenues and costs
related to this project and as a result of this work, the Companys gross margins as
a percentage of revenue decreased. The relative weakness of the United States dollar also
contributed to the reduction in gross margin in the period. The Company expects that in
the near term its gross margins as a percentage of revenue will remain consistent with the
current period, subject to the level of third party services actually provided. See
Forward-Looking Statements.

Research
and Development. Research and development expenses were $1.4 million, or 11.6% of
revenue, for the three months ended June 30, 2003, compared to $1.5 million, or 18.7% of
revenue, for the three months ended June 30, 2002. The decrease in research and
development expenses is a result of research and development personnel being utililized on
revenue producing projects in the current period, and corresponding portions of the
associated salary costs for these staff being reflected as direct costs as opposed to
research and development expenses. The Company intends to continue committing a
significant portion of its revenue to enhance existing products and develop new products.
See Forward-Looking Statements.

-19-

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# Three Months Ended June
30, 2003 Compared to the Three Months Ended June 30, 2002 (continued)

Sales and
Marketing. Sales and marketing expenses were $2.9, million or 23.6% of revenue, for
the three months ended June 30, 2003 compared to $3.9 million, or 48.7% of revenue, for
the three months ended June 30, 2002. The decrease in expenses was a result of a lower
commission expense being incurred by the Company, as several large contract signings that
occurred in the second quarter of 2002 did not reoccur in the current period resulting in
fewer commissions being paid out in the current period. 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
attempts to penetrate additional markets for its products. See Forward-Looking
Statements.

General
and Administrative. General and administrative expenses were $1.6 million, or 13.2% of
revenue, for the three months ended June 30, 2003 compared to $1.5 million, or 19.1% of
revenue, for the three months ended June 30, 2002. General and administrative expenses
remained relatively consistent with the comparative period as a result of cost control
efforts initiated by the Company. The Company expects that in the near future, general and
administrative expenditures will remain relatively consistent with current levels. See
Forward-Looking Statements.

Strategic
expenses. Strategic expenses were approximately $0.8 million, or 6.8% of revenue, for
the three months ended June 30, 2003. The Company did not incur any strategic expenses in
the three months ended June 30, 2002. Strategic expenses consisted of professional fees
associated with investigating a potential corporate transaction that the Company
considered and then abandoned during the quarter. The Company expects it will from time to
time consider strategic opportunities; however, the Company cannot predict the amount or
timing of strategic expenses or whether the Company will be successful in negotiating a
successful transaction. See Forward-Looking Statements. The Company has
received an initial request for reimbursement of expenses from the other party involved in the
transaction. The Company strongly believes that it is not obligated to reimburse these expenses,
and the Company has not provided for any reimbursement of the other partys expenses
in its own financial statements.

Other
(Expense) Income.Other (expense) income was ($0.2) million for the three months ended
June 30, 2003 as compared to approximately $86,000 for the three months ended June 30,
2002. Substantially all of other income (expense) relates to fluctuations in the
currencies of the Companys foreign operations, interest income on cash and short
term deposits, and interest expense on short-term borrowings under the line of credit and
capital lease obligations. In particular, the U.S. dollar weakened during the current
period and the Companys foreign denominated net liabilities increased in value
which, when reflected in U.S. dollars, caused an unrealized foreign exchange loss.

Income
Taxes.The Company provided for income tax expense (recovery) on income (losses) for
the three months ended June 30, 2003 and 2002 at rates of 30.0% and (29.8%) respectively,
after adjusting for strategic expenses incurred in the current period. The Companys
effective tax rate reflects the blended effect of Canadian, U.S., and other foreign
jurisdictions tax rates. No provision has been made for recovery of taxes on the
strategic expenses as the Company has significant tax losses in Canada where there is no
certainty of realization of the benefit.

Income
(loss) from Discontinued Operations.   During the three months ended June
30, 2002 the Company announced its intention to divest its Hosting and IT services
subsidiary Connectria Corporation (Connectria). As a result, the historical results of
operations for Connectria have been presented as Discontinued Operations. Income from
Discontinued Operations for the three months ended June 30, 2002 was $22,000. As the
transaction was completed in July of 2002, all assets and liabilities of Connectria were
liquidated by the end of July 2002 and no income or loss was incurred from Discontinued
Operations during the current period.

-20-

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# Six Months Ended June
30, 2003 Compared to the Six Months Ended June 30, 2002

Revenue.Revenue
increased by $7.9 million or 47.4% for the six months ended June 30,           2003 as
compared to the six months ended June 30, 2002. This increase was           primarily due
to increases in revenue from software and services and third party           products and
services during the first six months of 2003 relative to the same           period in
2002.

Software
and services revenue increased by $5.5 million or 51.4% for the six months ended June 30,
2003 as compared to the six months ended June 30, 2002. The increase in revenue is
attributable to several significant contracts the Company has entered into during the year
ended December 31, 2002 representing increased success in the core markets the Company
serves. These contracts continue to generate significant revenue for the Company. The
Company earned only an insignificant amount of revenue from one of these contracts for the
six months ended June 30, 2002 and therefore the Companys software and service
revenue has significantly increased for the six months ended June 30, 2003 as compared to
the six months ended June 30, 2002. The Company expects that these contracts will continue
to make up a significant portion of revenues over the next few quarters. See
Forward Looking Statements. While the Company believes that economic
conditions in certain of its vertical markets show signs of improvement, the Company
anticipates that economic conditions and general trends are likely to continue to have an
adverse impact on software and services revenue in future periods. See
Forward-Looking Statements.

Maintenance
and support revenues were $5.9 million for the six months ended June 30, 2003 as compared
to $5.4 million for the six months ended June 30, 2002. Maintenance and support revenues
have increased primarily due to growth in the Companys installed customer base.
Maintenance and support revenues have also increased due to an agreement being reached
with a customer during the current period that resulted in past support revenues deferred
due to uncertainty of collection being recognized as revenue during the current period.
Such revenue is expected to fluctuate as it corresponds to the level of software support
and services which the Company is engaged to provide in support of its installations.

Third
party products and services revenue increased by $1.9 million for the six months ended
June 30, 2003 as compared to the six months ended June 30, 2002. Third party products and
services revenue increased primarily due to the Company agreeing to supply a large amount
of third party services at no margin in connection with one particular contract. For the
six months ended June 30, 2003 approximately $1.4 million of these third party services
were provided, as compared to $ nil for the six months ended June 2002. See Forward
Looking Statements.

Direct
Costs. Direct costs were 47.2% of revenue for the six months ended June 30, 2003,
compared to 42.8% for the six months ended June 30, 2002. The increase in direct costs as
a percentage of revenue occurred as the Company has recently agreed to supply a large
amount of third-party services at no margin, in connection with one particular contract.
The relative weakness of the United States dollar also contributed to the cost increase as
the majority of direct costs are incurred in Canadian dollars. As a result, direct costs
as a percentage of revenue have increased, and the Company expects that direct costs as a
percentage of revenue will remain relatively consistent with the current period in the
near term. See Forward-Looking Statements.

Gross
Margins. Gross margins were 52.8% of revenue for the six months ended June 30, 2003,
compared to 57.2% for the six months ended June 30, 2002. The decrease in gross margins as
a percentage of revenue relates primarily to a agreement whereby the Company has agreed to
supply a large amount of third-party services at no margin. During the current period the
Company recognized approximately $1.4 million in third party revenues and costs related to
this project and as a result of this work, the Companys gross margins as a
percentage of revenue decreased. The relative weakness of the United States dollar also
contributed to the reduction in gross margin in the period. The Company expects that in
the near term that its gross margins as a percentage of revenue will remain consistent
with the current period, subject to the level of third party services actually provided.
See Forward-Looking Statements.

-21-

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# Six Months Ended June
30, 2003 Compared to the Six Months Ended June 30, 2002 (continued)

Research
and Development. Research and development expenses were $2.7 million, or 11.0% of
revenue, for the six months ended June 30, 2003, compared to $3.0 million, or 17.8% of
revenue, for the six months ended June 30, 2002. The decrease in research and development
expenses is a result of research and development personnel being utililized on revenue
producing projects in the current period, and corresponding portions of the associated
salary costs for these staff being reflected as direct costs as opposed to research and
development expenses. The Company intends to continue committing a significant portion of
its revenue to enhance existing products and develop new products. See
Forward-Looking Statements.

Sales
and Marketing. Sales and marketing expenses were $5.8 million, or 23.8% of revenue,
for the six months ended June 30, 2003, compared to $6.3 million, or 38.0% of revenue, for
the six months ended June 30, 2002. The decrease in expenditures in the current period was
a result of a lower commission expense being incurred by the Company, as several large
contract signings that occurred in 2002 did not reoccur in the current period resulting in
fewer commissions being paid out in the current period. 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
attempts to penetrate additional markets for its products. See Forward-Looking
Statements.

General
and Administrative. General and administrative expenses were $3.2 million, or 13.0% of
revenue, for the six months ended June 30, 2003, as compared to $3.2 million, or 19.2% of
revenue, for the six months ended June 30, 2002. General and administrative expenses
remained relatively consistent with the comparative period as a result of cost control
efforts initiated by the Company. The Company expects that in the near future, general and
administrative expenditures will remain relatively consistent with current levels. See
Forward-Looking Statements.

Strategic
expenses. Strategic expenses were approximately $0.8 million, or 3.4% of revenue, for
the six months ended June 30, 2003. The Company did not incur any strategic expenses in
the six months ended June 30, 2002. Strategic expenses consisted of professional fees
associated with investigating a potential corporate transaction that the Company
considered and then abandoned during the period. The Company expects it will from time to
time consider strategic opportunities; however, the Company cannot predict the amount or
timing of strategic expenses or whether the Company will be successful in negotiating a
successful transaction. See Forward-Looking Statements. The Company has
received an initial request for reimbursement of expenses from the other party involved in the
transaction. The Company strongly believes that it is not obligated to reimburse these expenses,
and the Company has not provided for any reimbursement of the other partys expenses
in its own financial statements.

Other
(Expense) Income.Other (expense) income was ($0.5) million for the six months ended
June 30, 2003 as compared to approximately $162,000 for the six months ended June 30,
2002. Substantially all of other income (expense) relates to fluctuations in the
currencies of the Companys foreign operations, interest income on cash and short
term deposits, and interest expense on short-term borrowings under the line of credit and
capital lease obligations. In particular, the U.S. dollar weakened during the current
period and the Companys foreign denominated net liabilities increased in value
which, when reflected in U.S. dollars, caused an unrealized foreign exchange loss.

Income
Taxes.The Company provided for income tax expense (recovery) on income (losses) for
the six months ended June 30, 2003 and 2002 at rates of 30.9% and (29.0%) respectively,
after adjusting for strategic expenses incurred in the current period. The Companys
effective tax rate reflects the blended effect of Canadian, U.S., and other foreign
jurisdictions tax rates. No provision has been made for recovery of taxes on the
strategic expenses as the Company has significant tax losses in Canada where there is no
certainty of realization of the benefit.

Income
(loss) from Discontinued Operations.   During the six months ended June 30,
2002 the Company announced its intention to divest its Hosting and IT services subsidiary
Connectria Corporation (Connectria). As a result, the historical results of operations for
Connectria have been presented as Discontinued Operations. Income from Discontinued
Operations for the six months ended June 30, 2002 was $109,000. As the transaction was
completed in July of 2002, all assets and liabilities of Connectria were liquidated by the
end of July 2002 and no income or loss was incurred from Discontinued Operations during
the current period.

-22-

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# Liquidity and Capital
Resources

The
Company has financed its operations, acquisitions and capital expenditures with cash
generated from operations, loans, private placements and public offerings of its
securities. At June 30, 2003, the Company had cash and cash equivalents of $13.7 million
and working capital of $9.6 million.

Cash
provided by operating activities was $4.0 million for the six months ended June 30, 2003
compared to $(0.9) million for the six months ended June 30, 2002. The net inflow of cash
from operating activities, after adding back depreciation and amortization of $1.5
million, is due to a net decrease in non-cash working capital items of $2.6 million and a
decrease in deferred income tax receivable of $0.2 million offset by a net loss for the
six months ended June 30, 2003 of $0.3 million. The net decrease in non-cash operating
working capital items is due primarily to a net decrease in unbilled trade receivables,
and an increase in deferred revenue, partially offset by an increase in trade accounts
receivable. The decrease in unbilled trade receivables and increase in deferred revenue
are due to timing differences arising between revenue recognition and billing milestones
in multiphase projects. The increase in trade receivables is a result of increased
billings during the six months ended June 30, 2003.

The
Company maintains as at June 30, 2003 a provision of $3.5 million with respect to doubtful
accounts, including $1.0 million classified as non-current. The Company intends to
vigorously pursue collection of these accounts; however, due to uncertainty with regard to
ultimate collection, the Company determined that it would be prudent to maintain an
allowance to address this uncertainty.

The
Company is currently involved in a dispute with a customer, and as the Company had
determined it is not likely to collect the amounts within one year, it had previously
reclassified $3.7 million in accounts receivable as long term. As part of its total $3.5
million dollar doubtful accounts provision, the Company has, in a prior period, recorded
an allowance of $1.0 million, against this receivable given the uncertain nature of
collection. The Company is currently involved in litigation to collect the amounts due.
The nature and amount of the Companys claims, the customers counterclaims and
recent developments in the litigation are described more fully under Part II, Item 1 of
this Quarterly Report. The Company intends to expense the costs incurred in connection
with the appeal and any subsequent trial, and any counterclaims asserted by the customer
for fraud and negligent misrepresentation, as incurred. Should the Company not be
successful in its claims against the customer, the Company may be required to take a $2.7
million dollar charge to earnings. If the customer is successful in any fraud or negligent
misrepresentation counterclaims, the Company may be required to take an additional charge
to earnings to the extent of the judgment. Although the amount of any such judgment
against the Company for fraud or negligent misrepresentation cannot be determined, if the
customer is successful in any appeal and subsequent trial, the Companys financial
condition and results of operations could be materially adversely affected. There is
currently no provision in the Companys financial statements to address any payment
to the customer with respect to these counterclaims as the Company, after consultation
with counsel, views this to be an unlikely event. The Company believes that its position
in the matter is strong and intends to vigorously pursue collection. If the Company is not
successful in the litigation, the Companys financial position, results of
operations, and liquidity would be materially adversely affected. See the
Litigation risk factor in Exhibit 99.l hereto and see Forward-Looking
Statements.

Cash
used by financing activities of $712,000 during the six months ended June 30, 2003
primarily relates to $789,000 in repayments of capital leases made during the six months,
partially offset by proceeds of $77,000 from the issuance of shares under the employee
share purchase plan and exercise of employee stock options. The capital leases are to be
repaid over a 36 month period ending June 2005, bear interest at various interest rates to
a maximum of approximately 9% and are secured by certain computer hardware and software
assets of the Company.

Cash
used in investing activities was $0.6 million for the six months ended June 30, 2003 as
compared to $0.7 million for the six months ended June 30, 2002. Total investing activity
during the six months ended June 30, 2003 consisted of $0.6 million in purchases of
capital assets. Purchases of capital assets include computer hardware and software for use
in implementation activities. Investing activities in 2002 also related to purchases of
capital assets.

Existing
sources of liquidity at June 30, 2003 included $13.7 million of cash and cash equivalents
and additional funds available under the Companys operating line of credit. At June
30, 2003, the Companys borrowing capacity under the line of credit was up to $10 CDN
million. Under the terms of the agreement, borrowings and letters of credit under the line
are limited to 75% to 90% of eligible accounts receivable. Borrowings accrue interest at
the banks prime rate plus 0.5%. At June 30, 2003, the Company was not using this
line of credit, other than to secure performance guarantees.

-23-

---

The
Company believes that the principal source of its liquidity is operating cash flow.
Certain circumstances including a reduction in the demand for the Companys products,
an increase in the length of the sales cycle for the Companys products, an increase
in operating costs, unfavorable results of litigation, or general economic slowdowns could
have a material impact on the Companys operating cash flow and liquidity. See the
risk factors in Exhibit 99.1 hereto and see Forward Looking Statements.

The
Company believes that future cash flows from operations and its borrowing capacity under
the operating line of credit combined with current cash balances 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. Future
growth or other investing activities may require the Company to obtain additional equity
or debt financing, which may or may not be available on attractive terms, or at all, or
may be dilutive to current or future shareholders. See Forward Looking
Statements.

As
at June 30, 2003 the Company had the following contractual obligations and commercial
commitments:

|Contractual
Obligations       | Payments Due by Period
|----------------------------- | ----------------------
|                             
|
|                              |                       
|Capital Lease                 |                       
|Obligations                   |                       
|Operating Leases              |                       
|                              |                       
|Total Contractual Obligations |                       
|                              |                       

In
addition to these commercial commitments the Company has provided, as performance bonds,
an irrevocable revolving letter of credit in the amount of, $1,381,161 (CDN $1,864,568)
expiring October 1, 2003. The Company has pledged an amount equal to the letter of credit
as guarantees against its operating line of credit as security.

The
Company has entered into a significant customer contract in which the Company has agreed
to utilize a certain amount of local services and create a certain amount of commercial
activity in South Africa. The Company will be required to utilize local content or obtain
credits equivalent to approximately $7 million over a seven year period. The Company is
required to furnish a performance guarantee equal to approximately 5% of such amounts. The
Company expects to fulfill its obligation through a number of activities, including the
establishment of a software development center in South Africa, the provision of technical
services, and the provision of training to local systems integrators who will be able to
provide implementation and support services with respect to the Companys software
products. As the Company expects to fulfill its obligations through the purchase of
services in the normal course of business, no liability has been established for these
future spending commitments.

# Derivative Financial
Instruments

The
Company generates a significant portion of sales from sales to customers located outside
the United States, principally in Canada and Europe. Canadian sales are made mostly by the
Company and on occasion are denominated in Canadian dollars. International sales are made
mostly from a foreign subsidiary and are typically denominated in either U.S. dollars,
Euros or British pounds. The Company also incurs a significant portion of expenses outside
the United States, principally in Canada and Europe, which are typically denominated in
Canadian dollars, Euros or British pounds. The Companys international business is
subject to risks typical of an international business including, but not limited to:
differing economic conditions, changes in political climate, differing tax structures,
other regulations and restrictions, and foreign exchange rate volatility. Accordingly, the
Companys future results could be materially adversely impacted by changes in these
or other factors. The Company may enter into foreign exchange forward contracts to offset
the impact of currency fluctuations on certain nonfunctional currency assets and
liabilities, primarily denominated in the Canadian dollar, Euro and British pound. The
foreign exchange

-24-

---

forward contracts the Company enters
into generally have original maturities ranging from three to eighteen months. The Company
does not enter into foreign exchange forward contracts for trading purposes, and does not
expect gains or losses on these contracts to have a material impact on the Companys
financial results.

The
Companys foreign currency forward contracts are executed with credit worthy banks
and are denominated in currencies of major industrial countries. As at June 30, 2003, the
Company had no foreign currency forward contracts outstanding.

# ITEM 3: QUANTITIATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The
Companys primary market risk is foreign currency exchange rates. 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 United States dollars. The Company has operations in Canada and
Europe in addition to its United States operations and did not hedge these exposures as at
June 30, 2003. However, the Company may from time-to-time hedge any net exposure to
currencies other than the United States dollar.

As
of June 30, 2003, the potential reduction in future earnings from a hypothetical
instantaneous 10% change in quoted foreign currency exchange rates applied to the
Companys foreign currency sensitive contracts and assets would be approximately $3.9
million. 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 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, domestic and
foreign government spending, budgetary and trade policies and other external factors over
which the Company has no control.

-25-

---

# ITEM
4:    CONTROLS AND PROCEDURES

The
Companys management, with the participation of the Companys Chief Executive
Officer and Chief Financial Officer, evaluated the effectiveness of the Companys
disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act)
as of the end of the period covered by this report (the Evaluation Date).
Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that, as of the Evaluation Date, the Companys disclosure controls and
procedures were effective in timely alerting them to the material information relating to
the Company (or its consolidated subsidiaries) required to be included in reports that the
Company files or submits under the Exchange Act.

There
were no changes made in the Companys internal control over financial reporting
during the period covered by this report that have materially affected, or are reasonably
likely to materially affect, the Companys internal control over financial reporting.

The
Companys management, including the Chief Executive Officer and Chief Financial
Officer, does not expect that its disclosure controls and procedures or internal control
over financial reporting will prevent all error and all fraud. A control system, no matter
how well conceived and operated, can provide only reasonable, not absolute, assurance that
the objectives of the control system are met. Further, the design of a control system must
reflect the fact that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within the Company have been detected. These inherent
limitations include the realities that judgments in decision-making can be faulty, and
that breakdowns can occur because of simple error or mistake. Additionally, controls can
be circumvented by the individual acts of some persons, by collusion of two or more
people, or by management override of the control. The design of any system of controls
also is based in part upon certain assumptions about the likelihood of future events, and
there can be no assurance that any design will succeed in achieving its stated goals under
all potential future conditions; over time, control may become inadequate because of
changes in conditions, or the degree of compliance with the policies or procedures may
deteriorate. Because of the inherent limitations in a cost-effective control system,
misstatements due to error or fraud may occur and not be detected.

-26-

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# Part II  OTHER
INFORMATION

# ITEM 1.   LEGAL
PROCEEDINGS

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 suit alleged that Citizens has wrongfully terminated
the contracts and failed to pay sums due of approximately $3.7 million. The suit sought
payment of the contract balance, plus other damages, interest and attorneys fees. In
late February 2001, Citizens filed an answer and counterclaim alleging that MDSI breached
the contracts, justifying Citizens termination of the contracts and entitling
Citizens to repayment of all sums paid to MDSI of approximately $3.5 million in addition
to interest and attorneys fees. At Citizens request, the parties held a
mediation on April 2, 2001. Mediation was not successful and both parties began discovery.
In October 2002, Citizens filed amended counterclaims alleging fraud, negligent
misrepresentation, breach of express warranty and breach of implied warranties. Citizens
sought all actual, special, incidental and consequential damages associated with these
counterclaims, in addition to punitive damages, interest and attorneys fees. In
March 2003, Citizens submitted an expert report estimating that Citizens had incurred
approximately $6.1 million in damages due to lost productivity and direct costs, and that
Citizens may be entitled to additional contractual penalties from MDSI of approximately
$1.1 million. MDSI disputed these counterclaims and believes them to be without merit.

On
March 5, 2003, the court granted Citizens motion for summary judgment, dismissing
MDSIs claims for lack of sufficient evidence of damages. MDSI filed a motion for
reconsideration of this ruling. On March 26, 2003, the court denied MDSIs motion.

On
March 26, 2003, the court granted MDSIs motion for partial summary judgment, finding
that Citizens wrongfully terminated the professional services agreement. On April 8 2003,
the court granted MDSIs motion for summary judgment, dismissing Citizens fraud
and negligent misrepresentation counterclaims.

MDSI
tendered the prosecution of its claim and the defense of Citizens counterclaims to
its insurance company. The insurance company accepted the claims under a reservation of
rights. The trial started on April 7, 2003 in Texas District Court Collin County. On April
16, 2003, during the trial, the Company was informed that its insurer, reached an
agreement with Citizens to settle Citizens breach of contract and breach of warranty
counterclaims for $1 million. The Company is not a party to the settlement agreement and
the settlement amount is to be paid by the insurance company. The settlement agreement
preserved the Companys right to appeal the courts ruling that dismissed the
Companys claims on summary judgment for lack of sufficient evidence of damages and
Citizens right to appeal the courts ruling that dismissed Citizens
counterclaims of fraud and negligent misrepresentation. On May 14, 2003, the Company filed
its Notice of Appeal, and on May 29, 2003 Citizens appealed the courts motion for
summary judgment, that dismissed Citizens counterclaims for fraud and negligent
misrepresentation. Both parties are awaiting a court date as to when the appeals will be
heard.

The
Company intends to expense as incurred costs in connection with the appeal and any
subsequent trial, and any amounts which may be payable in respect to counterclaims
asserted by the customer for fraud and negligent misrepresentation.

MDSI
believes that its claims against Citizens are strong and it intends to vigorously pursue
its claims for damages on appeal. If, contrary to MDSIs expectations, MDSI is not
successful in its claims against Citizens, the Company may be required to take a $2.7
million dollar charge to earnings. If Citizens is successful in any fraud or negligent
misrepresentation counterclaims, the Company may be required to take an additional charge
to earnings to the extent of the judgment. Although the amount of any such judgment
against the Company for fraud or negligent misrepresentation cannot be determined, if
Citizens is successful in any appeal and subsequent trial, the Companys financial
condition and results of operations could be materially adversely affected. See the
Litigation risk factor in Exhibit 99.1 and see Forward-Looking
Statements.

-27-

---

From
time to time, the Company is a party to other 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, results of operations,
financial condition or liquidity.

For Items 2 and 3 there was no
reportable information for the three months ended June 30, 2003.

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

The
Companys 2002 Annual General Meeting of Shareholders was held on June 5, 2003. A
total of 4,240,780 common shares of the Company were represented in person or by proxy at
the meeting, consisting of 51.7% of the total number of common shares of the Company
outstanding on April 22, 2003, the record date for the meeting.

At
the meeting, the following directors of the Company were re-elected to serve as directors
until the 2003 Annual General Meeting or until their earlier retirement, resignation, or
removal. The following table sets forth the voting in the election for directors:

|Nominee              | Votes Cast For | Votes Cast
Against | Votes Withheld | Abstentions | Not Voted
|-------------------- | -------------- | ------------------ | -------------- | ----------- | ---------
|                     |                |                    |                |             |          
|Erik Dysthe          |                | 4,235,397          |                | 1,133       |          
|Terrence P. McGarty  |                | 4,235,345          |                | 1,033       |          
|Robert C. Harris, Jr |                | 4,234,395          |                | 1,933       |          
|Mark Rochefort       |                | 4,234,395          |                | 1,933       |          
|Peter Ciceri         |                | 4,233,895          |                | 2,433       |          
|David Van Valkenberg |                | 4,234,395          |                | 1,933       |          

The
shareholders also ratified the appointment of Deloitte & Touche LLP as the
Companys auditors. The following table sets forth information regarding the voting
on the proposal:

|Proposal                  | Votes Cast For | Votes Cast
Against | Votes Withheld | Abstentions | Not Voted
|------------------------- | -------------- | ------------------ | -------------- | ----------- | ---------
|                          |                |                    |                |             |          
|Appointment of Deloitte & |                | 4,234,024          |                | 1,233       |          
|Touche LLP                |               

# ITEM 5.   OTHER INFORMATION

Subsequent
to June 30, 2003, Terrence P. McGarty resigned as a director of the Company.

-28-

---

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

(a) Exhibits

|Exhibit
Number | Description
|-------------- | -----------
|
|2              | .1(3)      
|
|3              | .1(1)      
|
|3              | .2(1)      
|
|3              | .3(1)      
|
|4              | .1(1)      
|
|10             | .1(2)(3)   
|
|10             | .2(1)      
|
|10             | .3(1)      
|
|10             | .4(2)(4)   
|
|10             | .5(2)(4)   
|
|10             | .6(5)      
|
|10             | .7(5)      
|
|10             | .8(5)      
|
|10             | .9(2)(6)   
|
|10             | .10(2)(7)  
|
|10             | .11(8)     
|
|10             | .12(8)     
|
|10             | .13(8)     
|
|10             | .14(8)     
|
|10             | .15(8)     
|
|10             | .16(2)(9)  
|
|10             | .17(2)(9)  
|
|10             | .18(2)(9)  
|
|10             | .19(2)     
|
|31             | .1         
|
|31             | .2         
|
|32             | .1         
|
|32             | .2         
|
|99             | .1         

_________________

|(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 exhibits with the Registrant's Registration Statement on Form
S-8 filed on November 22, 2000.
|--- | -----------------------------------------------------------------------------------------------------------------

|(4) | Previously filed as exhibits with the Registrant's Form 10-Q for the quarterly
period ended June 30, 2001.
|--- | ----------------------------------------------------------------------------------------------------------

|(5) | Previously filed as exhibits with the Registrant's Form 10-K for the year ended
December 31, 2001.
|--- | --------------------------------------------------------------------------------------------------

|(6) | Previously filed as exhibits with the Registrant's Form 10-Q for the quarterly
period ended March 31, 2002.
|--- | -----------------------------------------------------------------------------------------------------------

|(7) | Previously filed as exhibits with the Registrant's Form 10-Q for the quarterly
period ended June 30, 2002.
|--- | ----------------------------------------------------------------------------------------------------------

|(8) | Previously filed as exhibits with the Registrant's Form 8-K filed on August 14, 2002.
|--- | -------------------------------------------------------------------------------------

|(9) | Previously filed as exhibits with the Registrant's Form 10-K for the year ended
December 31, 2002.
|--- | --------------------------------------------------------------------------------------------------

|* | Confidential  portions  of this  exhibit  have been  omitted and filed  separately
 with the  Commission  pursuant to an      application  for  Confidential  Treatment
 under Rule 24b-2  promulgated  under the Securities  Exchange act of 1934, as
     amended.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

-29-

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(b)       
          Reports on Form 8-K

The Company filed a Form 8-K on April
15, 2003 pursuant to Item 7 attaching a press release regarding the Citizens litigation.

The Company furnished a Form 8-K on
April 30, 2003 pursuant to Items 9 and 12 attaching a press release regarding the
Companys operating results in the first quarter of 2003, a contract signing and
settlement of certain claims in the Citizens litigation. The information in a Form 8-K
furnished pursuant to Items 9 and 12 shall not be deemed to be filed under the Exchange
Act.

-30-

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# 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.
| | --------------------------------

Dated:  August 14, 2003

| | /s/ Erik Dysthe
Name:    Erik Dysthe
Title:     President, Chief Executive Officer
              Chairman of the Board and Director
| | -----------------------------------------------------------------------------------------------------------------------------------

Dated:  August 14, 2003

| | /s/ Verne D. Pecho
Name:  Verne D. Pecho
Title:     Vice President Finance & Administration:
and 
              Chief Financial Officer
              (Principal Financial and Accounting Officer)
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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