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

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                   __________________________________________

                                    FORM 10-Q


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

     For the quarterly period ended March 31, 2004

                                       OR

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

     For the transition period from ____________ to ____________.


                         Commission file number 0-28968


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


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


                              10271 Shellbridge Way
                           Richmond, British Columbia,
                                 Canada V6X 2W8
                                 (604) 207-6000
   (Address and telephone number of registrant's principal executive offices)


     Indicate by check mark  whether the  registrant:  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes |X|   No  |_|

     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 May 6, 2004 was 8,265,203.


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

                         MDSI Mobile Data Solutions Inc.

                             INDEX TO THE FORM 10-Q
                  For the quarterly period ended March 31, 2004


                                                                            Page

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 the Condensed Consolidated Financial Statements...4

          ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                   CONDITION AND RESULTS OF OPERATIONS........................11

          ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES
                   ABOUT MARKET RISK..........................................22

          ITEM 4.  CONTROLS AND PROCEDURES .................................. 24

Part II - OTHER INFORMATION

          ITEM 1.  LEGAL PROCEEDINGS .........................................26

          ITEM 5.  OTHER INFORMATION .........................................26

          ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K...........................27


SIGNATURES....................................................................29




                                      -i-
<PAGE>


Part I -  FINANCIAL INFORMATION
          ITEM 1. FINANCIAL STATEMENTS


                         MDSI MOBILE DATA SOLUTIONS INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                      (Expressed in United States dollars)
                                   (Unaudited)


<TABLE>
                                                                                         As at
                                                                            March 31,                December 31,
                                                                        -------------------------------------------
                                                                              2004                       2003
                                                                        ----------------           ----------------
<S>                                                                      <C>                        <C>
ASSETS
CURRENT ASSETS
  Cash and cash equivalents                                              $  16,873,805              $  15,827,043
  Accounts receivable, net
    Trade (net of allowance for doubtful accounts $2,060,844;
      2003 - $2,792,415)                                                     9,151,453                  8,610,846
    Unbilled                                                                 2,231,492                  2,446,271
  Prepaid expenses and other assets                                          1,295,711                  1,838,425
                                                                        ----------------           ----------------
                                                                            29,552,461                 28,722,585

CAPITAL ASSETS, NET                                                          7,736,157                  7,990,457
LONG TERM DEFERRED TAXES                                                       358,640                    357,628
                                                                        ----------------           ----------------
TOTAL ASSETS                                                             $  37,647,258              $  37,070,670
                                                                        ================           ================

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
  Accounts payable                                                       $   2,424,709              $   1,786,665
  Accrued liabilities (note 4)                                               4,679,025                  4,677,980
  Income taxes payable                                                         915,912                    917,183
  Deferred revenue                                                          11,356,876                 11,560,446
  Current obligations under capital lease                                    1,124,753                  1,204,269
                                                                        ----------------           ----------------
                                                                            20,501,275                 20,146,543

OBLIGATIONS UNDER CAPITAL LEASES                                               697,332                    982,016
                                                                        ----------------           ----------------
TOTAL LIABILITIES                                                           21,198,607                 21,128,559
                                                                        ----------------           ----------------
STOCKHOLDERS' EQUITY
  Common stock                                                              44,357,139                 44,329,182
  Additional paid-up capital                                                 2,357,128                  2,222,128
  Deficit                                                                  (29,575,512)               (29,919,095)
  Comprehensive Income                                                        (690,104)                  (690,104)
                                                                        ----------------           ----------------
                                                                            16,448,651                 15,942,111
                                                                        ----------------           ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                               $  37,647,258              $  37,070,670
                                                                        ================           ================
</TABLE>



Commitments and Contingencies (note 5)



            See Notes to Condensed Consolidated Financial Statements



                                      -1-
<PAGE>

                         MDSI MOBILE DATA SOLUTIONS INC.

                 Condensed Consolidated Statements of Operations
                      (Expressed in United States dollars)
                                   (Unaudited)



<TABLE>
                                                                Three months ended March 31,
                                                         -----------------------------------------
                                                               2004                     2003
                                                         -----------------       -----------------
<S>                                                       <C>                     <C>
REVENUE
  Software and services                                   $   7,481,714           $   7,213,433
  Maintenance and support                                     4,302,727               2,817,794
  Third party products and services                             866,257               1,852,745
                                                         -----------------       -----------------
                                                             12,650,698              11,883,972

DIRECT COSTS                                                  6,589,989               5,928,104
                                                         -----------------       -----------------
GROSS PROFIT                                                  6,060,709               5,955,868
                                                         -----------------       -----------------
OPERATING EXPENSES
  Research and development                                    1,535,344               1,279,026
  Sales and marketing                                         2,135,051               2,947,943
  General and administrative                                  1,753,061               1,570,066
  Strategic Expenses                                            350,000                       -
                                                         -----------------       -----------------
                                                              5,773,456               5,797,035
                                                         -----------------       -----------------
OPERATING INCOME                                                287,253                 158,833

OTHER INCOME (EXPENSE)                                          226,118                (252,619)
                                                         -----------------       -----------------
INCOME (LOSS) FROM BEFORE TAX PROVISION                         513,371                 (93,786)

PROVISION FOR INCOME TAXES                                      169,788                  99,262
                                                         -----------------       -----------------
NET INCOME (LOSS) FOR THE PERIOD                                343,583                (193,048)

DEFICIT, BEGINNING OF PERIOD                                (29,919,095)            (26,276,352)
                                                         -----------------       -----------------
DEFICIT, END OF PERIOD                                    $ (29,575,512)          $ (26,469,400)
                                                         =================       =================
Earnings (Loss) per common share

  Basic                                                   $        0.04           $       (0.02)
                                                         =================       =================
  Diluted                                                 $        0.04           $       (0.02)
                                                         =================       =================
</TABLE>



            See Notes to Condensed Consolidated Financial Statements



                                      -2-
<PAGE>

                         MDSI MOBILE DATA SOLUTIONS INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                      (Expressed in United States dollars)
                                   (Unaudited)



<TABLE>
                                                                                Three months ended March 31,
                                                                         -----------------------------------------
                                                                               2004                     2003
                                                                         -----------------       -----------------
<S>                                                                      <C>                     <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income (loss) for the period                                        $      343,583           $    (193,048)
  Items not affecting cash:
      Depreciation                                                               579,061                 730,761
      Deferred income taxes                                                       (1,012)                      -
      Stock based compensation charge                                            135,000                       -
      Changes in non-cash operating working capital items (note 6)               651,134               1,814,169
                                                                         -----------------       -----------------
  Net cash provided by operating activities                                    1,707,766               2,351,882
                                                                         -----------------       -----------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Issuance of Common Shares                                                       27,957                  73,067
  Repayment of capital leases                                                   (364,200)               (470,557)
                                                                         -----------------       -----------------
  Net cash used in financing activities                                         (336,243)               (397,490)
                                                                         -----------------       -----------------
CASH FLOWS FROM INVESTING ACTIVITIES
  Acquisition of capital assets                                                 (324,761)               (422,093)
                                                                         -----------------       -----------------
  Net cash used in investing activities                                         (324,761)               (422,093)
                                                                         -----------------       -----------------
NET CASH INFLOW                                                                1,046,762               1,532,299

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                15,827,043              11,016,945
                                                                         -----------------       -----------------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                  $   16,873,805           $  12,549,244
                                                                         =================       =================
</TABLE>


            See Notes to Condensed Consolidated Financial Statements



                                      -3-
<PAGE>

                         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.  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, 2003.

     (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)  Revenue Recognition

          We recognize  revenue in  accordance  with the  American  Institute of
          Certified  Public  Accountants  Statement  of Position  ("SOP")  97-2,
          "Software Revenue Recognition," as amended by SOP 98-9,  "Modification
          of SOP 97-2,  Software  Revenue  Recognition,  with Respect to Certain
          Transactions,"    SOP   81-1,    "Accounting    for   Performance   of
          Construction-type   and  Certain   Production-type   Contracts,"   the
          Securities and Exchange Commission's Staff Accounting Bulletin ("SAB")
          No. 101, "Revenue  Recognition in Financial  Statements," SAB No. 104,
          "Revenue Recognition," and other authoritative  accounting literature.
          We  derive  revenues  from  the  following   sources:   license  fees,
          professional  services,  maintenance  and support fees and third party
          products and services.

          We generally provide services with our supply agreements, that include
          significant  production,   modification,   and  customisation  of  the
          software.  These  services are not  separable and are essential to the
          functionality  of the  software,  and as a result we account for these
          licence and service  arrangements  under SOP 81-1 using the percentage
          of completion method of contract accounting.

          License Fees and Professional Services

          Our  supply   agreements   generally  include  multiple  products  and
          services,  or  "elements."  We use the  residual  method to  recognize
          revenue when a supply  agreement  includes one or more  elements to be
          delivered at a future date and vendor specific  objective  evidence of
          the fair value of all undelivered  elements exists.  The fair value of
          the  undelivered  elements  is  determined  based  on  the  historical
          evidence of stand-alone  sales,  or renewal terms of these elements to
          customers.   Under  the  residual  method,   the  fair  value  of  the
          undelivered  elements is  deferred  and the  remaining  portion of the
          arrangement  fee,  which  relates to the  license  and  implementation
          services,  is  recognized  as revenue on a  percentage  of  completion
          basis.  If  evidence  of the  fair  value  of one or more  undelivered
          elements does not exist,  the total revenue is deferred and recognized
          when  delivery  of  those  elements  occurs  or  when  fair  value  is
          established.



                                      -4-
<PAGE>

                         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)

     (c)  Revenue recognition (continued)

          We estimate the  percentage of completion on contracts with fixed fees
          on a monthly basis utilizing hours incurred to date as a percentage of
          total estimated man-days to complete the project.  If we do not have a
          sufficient basis to measure progress  towards  completion,  revenue is
          recognized when we receive final  acceptance  from the customer.  When
          the total cost estimate for a project exceeds  revenue,  we accrue for
          the estimated  losses  immediately.  The  complexity of the estimation
          process and issues related to the assumptions, risks and uncertainties
          inherent with the application of the  percentage-of-completion  method
          of  accounting  affect the  amounts of revenue  and  related  expenses
          reported  in  our  consolidated  financial  statements.  A  number  of
          internal  and  external  factors can affect our  estimates,  including
          labor rates,  utilization and efficiency  variances and  specification
          and testing requirement changes.

          We are engaged on a continuous basis in the production and delivery of
          software under contractual agreements. As a result we have developed a
          history of being able to estimate  costs to complete and the extent of
          progress toward completion of contracts, which supports the use of the
          percentage of completion method of contract accounting.

          Professional  services  revenue  primarily  consists of consulting and
          customer  training  revenues,  which are usually charged on a time and
          materials  basis and are  recognized  as the services  are  performed.
          Revenue  from  certain  fixed  price  contracts  is  recognized  on  a
          proportional  performance  basis,  which involves the use of estimates
          related to total expected  man-days of completing the contract derived
          from historical experience with similar contracts. If we do not have a
          sufficient basis to measure the progress towards  completion,  revenue
          is  recognized  when the project is completed or when we receive final
          acceptance from the customer.

          Maintenance Revenue

          Generally,  maintenance  is  initially  sold as an element of a master
          supply arrangement,  with subsequent annual renewals, and is priced as
          a percentage  of new software  license  fees.  Maintenance  revenue is
          recognized  ratably  over the term of the  maintenance  period,  which
          typically  is one  year.  Maintenance  and  support  revenue  includes
          software  license  updates  that  provide  customers  with  rights  to
          unspecified  software  product  upgrades,   maintenance  releases  and
          patches  released  during  the  term of the  support  period.  Product
          support  services  also  include  Internet  and  telephone  access  to
          technical support personnel.

          Historically,  we have  provided  a warranty  phase  during the supply
          agreement.  Services  provided  during  this  warranty  phase  include
          elements of maintenance and support. As a result we defer a portion of
          the supply agreement fee, based on vendor specific  objective evidence
          of the value of these  services,  and recognize the deferred amount as
          revenue pro rata over the warranty period.



                                      -5-
<PAGE>

                         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)

     (c)  Revenue recognition (continued)

          Third party products and services

          Revenue from sales of third party  products and services is recognized
          on  delivery  of  the   products.   Services  are   recognized   on  a
          percentage-complete   basis.   When   software   licenses   are   sold
          incorporating  third-party products or sold with third-party products,
          we  recognize  as  revenue  the gross  amount of sales of  third-party
          product.  The  recognition  of gross  revenue  is in  accordance  with
          criteria  established  in Emerging  Issues Task Force Issue (EITF) No.
          99-19, Reporting Revenue Gross as a Principal versus Net as an Agent.

          On  occasion,   we  utilize  third-party   consultants  to  assist  in
          implementations or installations  originated by the Company.  In these
          cases,  in  accordance  with  criteria  established  in EITF 99-19 (as
          described   above),   the  revenue  for  these   implementations   and
          installations  is  typically  recognized  on a gross  basis.  In these
          cases, we ultimately manage the engagement.

     (d)  Recently issued accounting standards

          In December  2003,  the  Securities  and Exchange  Commission  ("SEC")
          issued  Staff  Accounting  Bulletin  No.  104  ("SAB  104"),  "Revenue
          Recognition", which supercedes Staff Accounting Bulletin No. 101 ("SAB
          101"),  "Revenue  Recognition  in Financial  Statements."  The primary
          purpose of SAB 104 is to rescind accounting  guidance contained in SAB
          101  related  to  multiple  element  revenue  arrangements,  which was
          superceded  as a result of the issuance of Emerging  Issues Task Force
          00-21  ("EITF  00-21"),  "Accounting  for  Revenue  Arrangements  with
          Multiple  Deliverables." SAB 104 also incorporated certain sections of
          the SEC's "Revenue  Recognition in Financial  Statements -- Frequently
          Asked  Questions and Answers"  document.  While the wording of SAB 104
          has  changed  to reflect  the  issuance  of EITF  00-21,  the  revenue
          recognition  principles  of SAB 101 remain  largely  unchanged  by the
          issuance of SAB 104. The adoption of SAB 104 did not have an impact on
          the consolidated financial statements.



                                      -6-
<PAGE>

                         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
          Statement  of  Financial   Accounting  Standard  No.  123  (SFAS  123)
          Accounting for Stock-based Compensation.

<TABLE>
                                                                     Three months ended March 31,
                                                                  -----------------------------------
                                                                       2004                2003
                                                                  ---------------     ---------------
          <S>                                                    <C>                 <C>
            Net income (loss) for the period                       $   103,502         $   (537,504)
                                                                  ---------------     ---------------
            Basic and fully diluted loss per common share          $      0.01         $      (0.07)
                                                                  ===============     ===============
</TABLE>


          Using the fair value method for stock-based  compensation,  additional
          compensation costs of approximately $240,081, would have been recorded
          for the three  months  ended  March 31, 2004 (2003 -  $344,456).  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 47% and a weighted  average
          annualized risk free interest rate of 1.1%.


2.   SEGMENTED INFORMATION

     The  Company  operates  in a single  business  segment,  the Field  Service
     business segment.

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

<TABLE>
                                                              Three months ended
                                                                   March 31,
                                                      ------------------------------------
                                                            2004               2003
                                                      ------------------  ----------------
     <S>                                                <C>                 <C>
      Canada........................................... $     484,167       $    273,437
      United States..................................       6,931,318          5,305,338
      Europe, Middle East and Africa.................       5,055,657          6,023,815
      Asia and Other.................................         179,556            281,382
                                                      ------------------  ----------------
                                                        $  12,650,698       $ 11,883,972
                                                      ==================  ================
</TABLE>


     Major customers

     During the three months  ended March 31, 2004  revenue  from two  customers
     accounted  for  approximately  18.2%  and  13.1%,  respectively,  of  total
     revenue.  For the three  months  ended  March  31,  2003  revenue  from two
     customers  accounted for  approximately  20.6% and 9.6%,  respectively,  of
     total revenue.



                                      -7-
<PAGE>

                         MDSI MOBILE DATA SOLUTIONS INC.

            Notes to the Condensed Consolidated Financial Statements
                      (Expressed in United States dollars)
                                   (Unaudited)


3.   EARNINGS (LOSS) PER COMMON SHARE

     Basic earnings (loss) per common share is calculated by dividing net income
     (loss) by the weighted average number of common shares  outstanding  during
     the period. Diluted earnings (loss) per share 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:


<TABLE>
                                                           Three months ended
                                                                 March 31,
                                                      --------------------------------
                                                           2004             2003
                                                      ---------------   --------------
     <S>                                              <C>               <C>
      Weighted average shares outstanding.........       8,226,068         8,185,445
      Effect of dilutive securities
       Stock options..............................         143,886                 -
                                                      ---------------   --------------
      Diluted weighted average shares outstanding.       8,369,954         8,185,445
                                                      ===============   ==============
</TABLE>


4.   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:

<TABLE>
                                                                   Total Restructuring
                                                                          Charge
                                                                   -------------------
      <S>                                                          <C>
       Workforce reduction                                           $   3,375,000
       Provision for excess office space                                 1,861,000
       Non cash write-down of capital assets                               563,780
       Other                                                               306,147
                                                                   -------------------
       Total restructuring charges                                       6,105,927
       Cumulative draw-downs                                            (5,283,169)
                                                                   -------------------
       Accrued restructuring charges included in accrued
       liabilities at March 31, 2004                                 $     822,758
                                                                   ====================
</TABLE>


     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 leases by the Company at two  locations.  The
     Company has incurred  approximately  $1.1 million of cash costs relating to
     this provision leaving an accrual of $0.8 million remaining as at March 31,
     2004. The Company expects that the charge will be fully drawn down no later
     than the fourth quarter of 2004.



                                      -8-
<PAGE>

                         MDSI MOBILE DATA SOLUTIONS INC.

            Notes to the Condensed Consolidated Financial Statements
                      (Expressed in United States dollars)
                                   (Unaudited)


5.   COMMITMENTS AND CONTINGENCIES

     (a)  Contingency

          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)  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  $7.1  million  over a seven year period
          ending May 2010.  The Company has  furnished 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
          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.  The  Company's
          obligation may increase as a result of contract expansions.

     (c)  Indemnifications

          The  Company  typically  includes  indemnification  provisions  within
          license and implementation  service  agreements,  which are consistent
          with  those  prevalent  in  the  software  industry.  Such  provisions
          indemnify customers against actions arising from patent  infringements
          that may arise  through  the  normal use or proper  possession  of the
          Company's  software.  To date  the  Company  has not  experienced  any
          significant obligations under customer indemnification  provisions and
          accordingly,   no  amounts  have  been  accrued  for  such   potential
          indemnification obligations.


6.   CHANGES IN NON-CASH OPERATING WORKING CAPITAL ITEMS

<TABLE>
                                                                      Three Months Ended
                                                                           March 31,
                                                               ---------------------------------
                                                                    2004              2003
                                                               --------------    ---------------
      <S>                                                      <C>                <C>
       Accounts receivable                                      $   (325,828)      $  1,140,084
       Prepaid expenses and other assets                             542,714            425,985
       Income taxes payable                                           (1,272)            (3,672)
       Accounts payable and accrued liabilities                      639,090           (803,149)
       Deferred revenue                                             (203,570)         1,054,921
                                                               --------------    ---------------
                                                                $    651,134       $  1,814,169
                                                               ==============    ===============
</TABLE>


                                      -9-
<PAGE>

                         MDSI MOBILE DATA SOLUTIONS INC.

            Notes to the Condensed Consolidated Financial Statements
                      (Expressed in United States dollars)
                                   (Unaudited)


7.   STRATEGIC EXPENSES

     Strategic  expenses  consist of professional  fees and expenses  associated
     with investigating potential corporate transactions.


8.   SUBSEQUENT EVENTS

     On April 12, 2004, as a result of the strategic review process, the Company
     entered into a definitive  agreement to be acquired by At Road,  Inc.  This
     transaction   is  subject  to  certain  terms  and   conditions   including
     shareholder  and  court  approval  and is  expected  to close in the  third
     quarter of 2004.

     The agreement relating to the Company's proposed  transaction with At Road,
     Inc.  provides  that, on the  occurrence of certain  events  leading to the
     termination  of the  agreement,  At Road,  Inc.  will be  entitled  to this
     termination fee of between $3.1 million and $4.0 million from the Company.




                                      -10-
<PAGE>

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,  including
statements  regarding the proposed  transaction  with At Road,  Inc.  ("@Road"),
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 successfully execute its business  strategies,  the effect of
volatile  United States and  international  economies  generally,  the threat or
reality of war,  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,  the failure of MDSI's  security  holders,  the court or regulatory
authorities to approve the @Road transaction, the possibility that customers and
suppliers  will  view the  transaction  unfavourably  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, 2003.

     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.


Strategic Transaction

     During 2003,  the Company  retained  Bear,  Stearns & Co. Inc. as financial
advisor to the Board of Directors,  to assist the Board in evaluating  potential
business  combinations,  financings and other strategic alternatives to help the
Company  offer  enhanced  products  and services to its  customers  and maximize
shareholder  value. As a result of this process,  on April 12, 2004, the Company
signed  a  definitive   combination  agreement  with  @Road  providing  for  the
acquisition  of the  Company  by  @Road.  Under  the  terms  of the  combination
agreement,  Company shareholders will be entitled to receive, at the election of
the holder,  $9.00 cash  (subject to an aggregate  maximum of $19.5  million) or
0.75 shares of @Road  common stock or (in the case of Company  shareholders  who
are also Canadian  residents)  equivalent  exchangeable shares in a new indirect
wholly-owned  British  Columbia  subsidiary  of  @Road  ("Exchangeco")  for each
Company  common share owned.  As a result of the  transaction,  Exchangeco  will



                                      -11-
<PAGE>

become the sole owner of the outstanding  common shares of the Company,  and the
Company will become an indirect wholly-owned subsidiary of @Road.

     The  transaction  is subject to the approval of the Company's  shareholders
and the  Supreme  Court  of  British  Columbia,  as well  as  customary  closing
conditions. The Company anticipates that the transaction will close in the third
quarter of 2004; however, no assurance can be provided that the transaction will
close within this timeframe, or at all. See "Forward-Looking Statements" and the
risk factors in Exhibit 99.1.


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 not to 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
facts,  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  economic and political
conditions  are likely to continue to affect demand for the  Company's  products
and services in 2004, particularly demand for software and related services. See
"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 have been  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.  There can be no assurance  that the
workforce  reductions and other measures will not have a material adverse affect
on the Company's business operations. In connection with this restructuring,  on
March 30, 2001, MDSI  terminated 34 employee and contractor  positions in Canada
and the United States.  On May 11, 2001, the Company continued the restructuring
by  announcing  the  elimination  of  an  additional  115  positions,  which  in
combination  with  the  workforce  reductions  of March  30,  2001  amounted  to
approximately  25% of MDSI's staff as of March 30, 2001. The Company  recorded a
one-time  charge of $1.2  million in the first  quarter of 2001  relating to the
workforce  reductions,  and leasing of excess  office  space.  The Company  also
recorded  an  additional  charge of  approximately  $4.9  million  in the second
quarter of 2001  relating to  elimination  of 115  positions,  leasing of excess
office space, and fixed asset write-downs announced on May 11, 2001. A breakdown
of the nature of the charges and the costs incurred to date is as follows:

<TABLE>
                                                                   Total Restructuring
                                                                          Charge
                                                                   -------------------
      <S>                                                          <C>
       Workforce reduction                                           $   3,375,000
       Provision for excess office space                                 1,861,000
       Non cash write-down of capital assets                               563,780
       Other                                                               306,147
                                                                   -------------------
       Total restructuring charges                                       6,105,927
       Cumulative draw-downs                                            (5,283,169)
                                                                   -------------------
       Accrued restructuring charges included in accrued
       liabilities at March 31, 2004                                 $     822,758
                                                                   ====================
</TABLE>



                                      -12-
<PAGE>

     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 leases by the Company at two locations. The Company
has incurred approximately $1.1 million of cash costs relating to this provision
leaving an accrual of $0.8 million  remaining as at March 31, 2004.  The Company
expects  that the  provision  will be fully  drawn down no later than 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 users are rolled out
initially,  with the balance implemented over a 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, which historically has included
a warranty  period that is generally  ninety days in length.  These services are
generally  performed  within six to twelve months.  Pricing for these  contracts
includes  license fees as well as a fee for professional  services.  The Company
generally  recognizes total revenue for software and services  associated with a
contract  using a percentage  of  completion  method based on the total man days
incurred over the total estimated man days 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 at delivery, or after expiration of any 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.  Also included in third party revenue are  reimbursements to
the  Company for out of pocket  expenses  incurred  on  implementation  projects
performed by the  Company.  EITF 01-14  "Income  Statement  Characterization  of
Reimbursements Received for Out of Pocket Expenses" requires characterization of
these  expenses  as  revenue.  An equal  and  offsetting  amount of  expense  is
recognized relating to these reimbursements as direct costs.

     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.

     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.



                                      -13-
<PAGE>

Recent Accounting Pronouncements

     In December 2003, the  Securities  and Exchange  Commission  ("SEC") issued
Staff  Accounting  Bulletin No. 104 ("SAB 104"),  "Revenue  Recognition",  which
supercedes Staff Accounting Bulletin No. 101 ("SAB 101"),  "Revenue  Recognition
in  Financial  Statements."  The  primary  purpose  of  SAB  104  is to  rescind
accounting  guidance  contained in SAB 101 related to multiple  element  revenue
arrangements,  which was  superceded  as a result of the  issuance  of  Emerging
Issues Task Force 00-21 ("EITF  00-21"),  "Accounting  for Revenue  Arrangements
with Multiple  Deliverables." SAB 104 also incorporated  certain sections of the
SEC's "Revenue Recognition in Financial Statements -- Frequently Asked Questions
and Answers"  document.  While the wording of SAB 104 has changed to reflect the
issuance of EITF 00-21,  the revenue  recognition  principles  of SAB 101 remain
largely  unchanged  by the  issuance of SAB 104. The adoption of SAB 104 did not
have an impact on the consolidated financial statements.


Critical Accounting Policies and Significant Estimates

     The  significant  accounting  policies  are  outlined  within Note 1 to the
Condensed Consolidated  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:

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  regards  to  the
collection  of a certain  receivable  balance,  an  allowance  and charge to the
income  statement is recorded.  At March 31, 2004,  the  allowance  for doubtful
accounts was $2.1 million.  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

     We recognize revenue in accordance with the American Institute of Certified
Public  Accountants  Statement  of  Position  ("SOP")  97-2,  "Software  Revenue
Recognition,"  as  amended  by SOP 98-9,  "Modification  of SOP  97-2,  Software
Revenue   Recognition,   with  Respect  to  Certain   Transactions,"  SOP  81-1,
"Accounting for  Performance of  Construction-type  and Certain  Production-type
Contracts," the Securities and Exchange  Commission's Staff Accounting  Bulletin
("SAB") No. 101,  "Revenue  Recognition in Financial  Statements,"  SAB No. 104,
"Revenue Recognition," and other authoritative accounting literature.  We derive
revenues  from the  following  sources:  license  fees,  professional  services,
maintenance and support fees and third party products and services.

     We generally  provide  services  with our supply  agreements,  that include
significant production,  modification,  and customisation of the software. These
services  are  not  separable  and are  essential  to the  functionality  of the
software,  and as a result we account for these licence and service arrangements
under SOP 81-1 using the percentage of completion method of contract accounting.


License Fees and Professional Services

     Our supply agreements generally include multiple products and services,  or
"elements."  We use the  residual  method  to  recognize  revenue  when a supply
agreement includes one or more elements to be delivered at a future date



                                      -14-
<PAGE>

and vendor  specific  objective  evidence  of the fair value of all  undelivered
elements exists. The fair value of the undelivered  elements is determined based
on the  historical  evidence of  stand-alone  sales,  or renewal  terms of these
elements  to  customers.  Under  the  residual  method,  the  fair  value of the
undelivered  elements is deferred and the remaining  portion of the  arrangement
fee, which relates to the license and implementation  services, is recognized as
revenue on a percentage  of completion  basis.  If evidence of the fair value of
one or more  undelivered  elements does not exist, the total revenue is deferred
and  recognized  when  delivery of those  elements  occurs or when fair value is
established.

     We estimate the  percentage of completion on contracts with fixed fees on a
monthly  basis  utilizing  man-days  incurred to date as a  percentage  of total
estimated man-days to complete the project. If we do not have a sufficient basis
to measure  progress towards  completion,  revenue is recognized when we receive
final  acceptance from the customer.  When the total cost estimate for a project
exceeds revenue, we accrue for the estimated losses immediately.  The complexity
of the  estimation  process  and issues  related to the  assumptions,  risks and
uncertainties  inherent  with the  application  of the  percentage-of-completion
method of accounting affect the amounts of revenue and related expenses reported
in our  consolidated  financial  statements.  A number of internal  and external
factors  can  affect our  estimates,  including  labor  rates,  utilization  and
efficiency variances and specification and testing requirement changes.

     We are engaged on a  continuous  basis in the  production  and  delivery of
software under contractual  agreements.  As a result we have developed a history
of being able to estimate  costs to complete  and the extent of progress  toward
completion of contracts,  which supports the use of the percentage of completion
method of contract accounting.

     Professional services revenue primarily consists of consulting and customer
training  revenues,  which are usually charged on a time and materials basis and
are recognized as the services are  performed.  Revenue from certain fixed price
contracts is recognized on a proportional  performance basis, which involves the
use of estimates  related to total expected  man-days of completing the contract
derived from historical  experience with similar contracts.  If we do not have a
sufficient  basis  to  measure  the  progress  towards  completion,  revenue  is
recognized  when the project is  completed or when we receive  final  acceptance
from the customer.


Maintenance Revenue

     Generally,  maintenance  is initially sold as an element of a master supply
arrangement,  with subsequent annual renewals,  and is priced as a percentage of
software license fees.  Maintenance  revenue is recognized ratably over the term
of the maintenance period, which typically is one year.  Maintenance and support
revenue includes  software license updates that provide customers with rights to
unspecified software product upgrades, maintenance releases and patches released
during the term of the support  period.  Product  support  services also include
Internet and telephone access to technical support personnel.

     Historically,   we  have  provided  a  warranty  phase  during  the  supply
agreement.  Services  provided  during this warranty  phase include  elements of
maintenance and support. As a result, we defer a portion of the supply agreement
fee, based on vendor specific objective evidence of the value of these services,
and recognize the deferred amount as revenue pro rata over the warranty period.


Third party products and services

     Revenue from sales of third party  products and services is  recognized  on
delivery of the  products.  Services  are  recognized  on a  percentage-complete
basis.

     When software licenses are sold incorporating  third-party products or sold
with third-party products , we recognize as revenue the gross amount of sales of
third-party  product.  The  recognition  of gross revenue is in accordance  with
criteria  established  in Emerging  Issues Task Force  Issue  (EITF) No.  99-19,
Reporting Revenue Gross as a Principal versus Net as an Agent.

     On   occasion,   we   utilize   third-party   consultants   to   assist  in
implementations or installations  originated by the Company.  In these cases, in
accordance  with criteria  established in EITF 99-19 (as described  above),  the
revenue for these implementations and installations is typically recognized on a
gross basis. In these cases we ultimately manage the engagement.



                                      -15-
<PAGE>

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.


Warranty

     The  Company  warrants  to its  customers  that  its  software  will  be in
substantial conformance with its specifications.


Indemnification

     The Company typically  includes  indemnification  provisions within license
and implementation service agreements, which are consistent with those prevalent
in the software industry.  Such provisions  indemnify  customers against actions
arising  from  patent  infringements  that may arise  through  the normal use or
proper  possession  of the  Company's  software.  To date  the  Company  has not
experienced  any   significant   obligations   under  customer   indemnification
provisions  and  accordingly,  no amounts have been  accrued for such  potential
indemnification obligations.







                                      -16-
<PAGE>

Results of Operations

     The  Company's net income was $0.3 million for the three months ended March
31, 2004. This compares to a net loss of $0.2 million for the three months ended
March 31, 2003. Income increased primarily due to an increase in maintenance and
support revenue.

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

<TABLE>
                                                              Three months ended March 31,
                                                            -------------------------------
                                                                2004              2003
                                                            -------------     -------------
   <S>                                                      <C>               <C>
   REVENUE
      Software and services                                      59.1%             60.7%
      Maintenance and support                                    34.0%             23.7%
      Third party products and services                           6.9%             15.6%
                                                            -------------     -------------
                                                                100.0%            100.0%

   DIRECT COSTS                                                  52.1%             49.9%
                                                            -------------     -------------
   GROSS PROFIT                                                  47.9%             50.1%
                                                            -------------     -------------
   OPERATING EXPENSES
      Research and development                                   12.1%             10.8%
      Sales and marketing                                        16.9%             24.8%
      General and administrative                                 13.9%             13.2%
      Strategic Expenses                                          2.8%                -%
                                                            -------------     -------------
                                                                 45.7%             48.8%
                                                            -------------     -------------
   OPERATING INCOME                                               2.2%              1.3%

   OTHER INCOME (EXPENSE)                                         1.8%            (2.1)%
                                                            -------------     -------------
   INCOME (LOSS) BEFORE TAX PROVISION                             4.0%            (0.8)%

   INCOME TAX EXPENSE                                             1.3%              0.8%
                                                            -------------     -------------
   NET INCOME (LOSS) FOR THE PERIOD                               2.7%            (1.6)%
                                                            =============     =============
</TABLE>


Three Months  Ended March 31, 2004  Compared to the Three Months Ended March 31,
2003

     Revenue.  Revenue  increased  by $0.8  million or 6.5% for the three months
ended March 31, 2004 as compared to the three months ended March 31, 2003.  This
increase was  primarily  due to an increases  in revenue  from  maintenance  and
support  services,  partially  offset by a decrease in revenue  from third party
products  and  services  during the first  quarter of 2004  relative to the same
period in 2003.

     Software  and  services  revenue  increased by $0.3 million or 3.7% for the
three  months  ended March 31, 2004 as compared to the three  months ended March
31, 2003. The relatively  small increase in revenue was  attributable to several
significant contracts the Company entered into in 2002. These contracts continue
to generate  significant revenue for the Company. The Company expects that these
contracts  will continue to make up a  significant  portion of revenues over the
next  several  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  revenues  were $4.3  million for the three months
ended  March 31, 2004 as compared  to $2.8  million for the three  months  ended
March 31, 2003.  Maintenance and support revenue increased  primarily due to the
initiation of several  large  maintenance  contracts in the past year  resulting
from growth in the Company's  installed  customer base. Such revenue is expected
to fluctuate  as it  corresponds  to the level of services  which the Company is
engaged to provide in support of its installations.



                                      -17-
<PAGE>

Three Months  Ended March 31, 2004  Compared to the Three Months Ended March 31,
2003 (continued)

     Third party products and services revenue decreased by $1.0 million (53.2%)
for the three months  ended March 31,  2004,  compared to the three months ended
March 31, 2003.  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. Not all customers under contract require the
provision  of third party  products  and  services.  As third party  product and
services  historically  have lower margins than the  Company's  other sources of
revenue, 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  which is being
recognized on a gross basis,  in connection  with one particular  contract,  and
therefore  expects that future  revenues from third party  products and services
will  fluctuate  in the near term.  For the three  months  ended  March 31, 2004
approximately $0.3 million of these services were provided,  as compared to $1.1
million  for the  three  months  ended  March 31,  2003.  See  "Forward  Looking
Statements."

     Direct Costs. Direct costs were 52.1% of revenue for the three months ended
March 31,  2004,  compared to 49.9% for the three  months  ended March 31, 2003.
Direct  costs  include  labor  and other  costs  directly  related  to a project
including  those  related to the  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.  Direct costs as a percentage of
revenue has increased over the comparative  period  primarily as a result of the
Company incurring  significant costs to supply  maintenance and support services
under one contract during the period.  The Company has entered into an agreement
whereby it has agreed to supply a large  amount of  third-party  services  at no
margin, in connection with one particular contract. This agreement was in effect
for both the three  months  ended March 31, 2004 and the three  months March 31,
2003. As a result,  direct costs as a percentage of revenue have  increased over
historical levels, and are consistent for the comparative  periods.  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 47.9% of revenue for the three months
ended March 31,  2004,  compared to 50.1% for the three  months  ended March 31,
2003. Gross margins were lower during the current period primarily due to higher
direct costs relating to one specific  maintenance and support  agreement during
the  current  period.  The  Company  has  agreed  to  supply a large  amount  of
third-party  services at no margin.  As a result the Company expects that in the
near term that its gross  margins as a  percentage  of revenue will remain below
historical levels and consistent with the current period. "See  "Forward-Looking
Statements."

     Research and  Development.  Research  and  development  expenses  were $1.5
million,  or 12.1% of  revenue,  for the three  months  ended  March  31,  2004,
compared to $1.3 million, or 10.8% of revenue,  for the three months ended March
31, 2003. The increase in research and  development  expenses is a result of the
Company's  commitment  to enhance and develop  functionality  in its Advantex r7
product. The Company intends to continue committing a significant portion of its
product  revenues to enhance  existing  products and develop new  products.  See
"Forward-Looking Statements".

     Sales and  Marketing.  Sales and marketing  expenses were $2.1 million,  or
16.9% of revenue for the three  months  ended March 31,  2004,  compared to $2.9
million,  or 24.8% of revenue,  for the three months ended March 31, 2003. Sales
and marketing  expenses in the first quarter of 2004 decreased by  approximately
$0.8 million  compared to the same period of 2003. The decrease in  expenditures
in the current period was due to personnel  reductions and reductions to related
expenses in the current year as compared to the prior year. See "Forward-Looking
Statements".  The Company anticipates that 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 $1.8
million,  or 13.9% of  revenue,  for the three  months  ended  March  31,  2004,
compared to $1.6 million, or 13.2% of revenue,  for the three months ended March
31, 2003. 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".



                                      -18-
<PAGE>

Three Months  Ended March 31, 2004  Compared to the Three Months Ended March 31,
2003 (continued)

     Strategic expenses.  Strategic expenses were approximately $0.4 million, or
2.8% of revenue,  for the three months ended March 31, 2004. The Company did not
incur any strategic expenses in the three months ended March 31, 2003. Strategic
expenses   consisted  of   professional   fees  and  expenses   associated  with
investigating potential corporate  transactions.  On April 12, 2004, as a result
of the strategic review process, the Company entered into a definitive agreement
to be acquired by At Road, Inc. This transaction is subject to certain terms and
conditions including  shareholder and court approval and is expected to close in
the third  quarter of 2004;  however,  no  assurance  can be  provided  that the
transaction  will close within this  timeframe  or at all. See  "Forward-Looking
Statements" and the risk factors in Exhibit 99.1.

     Other Income  (Expense).  Other income  (expense)  was $0.2 million for the
three  months  ended March 31, 2004 as compared to $(0.3)  million for the three
months ended March 31, 2003. 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 strengthened during the current period and the Company's foreign
denominated  liabilities decreased in value which when reflected in U.S. dollars
caused an unrealized foreign exchange gain.

     Income  Taxes.  The  Company  provided  for income tax  recovery  on income
(losses)  for the three  months  ended March 31, 2004 and 2003 at rates of 33.1%
and (105.8%) respectively. The Company's effective tax rate reflects the blended
effect of Canadian, U.S., and other foreign jurisdictions' tax rates.


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 March 31, 2004, the Company had cash and
cash equivalents of $16.9 million and working capital of $9.1 million.

     Cash provided by operating activities was $1.7 million for the three months
ended March 31, 2004  compared to $2.4  million for the three months ended March
31, 2003.  The net inflow of cash from operating  activities,  after adding back
depreciation  and  amortization of $0.6 million and stock based  compensation of
$0.1 million, is due to a net decrease in non-cash working capital items of $0.7
million and net income of $0.3  million for the three  months  ending  March 31,
2004.  The net  decrease  in non-cash  operating  working  capital  items is due
primarily to a net decrease in unbilled trade  receivables,  partially offset by
an increase in trade accounts receivable and a decrease in deferred revenue. The
decrease in unbilled trade  receivables  and 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 three months ended March 31, 2004.

     The Company maintains as at March 31, 2004 a provision of $2.1 million with
respect  to  doubtful  accounts.   The  Company  intends  to  vigorously  pursue
collection  of these  accounts;  however,  due to  uncertainty  with  regards to
ultimate collection, the Company determined that it would be prudent to maintain
an allowance  to address this  uncertainty.  In May 2004,  the Company  received
notice  from  a  customer   seeking  to  terminate  a  contract  and  requesting
reimbursement  of certain  costs and expenses of  approximately  $900,000.  MDSI
believes that the customer is not entitled to reimbursement  and does not intend
to make provision for these amounts.

     Cash used by financing activities of $336,000 during the three months ended
March 31, 2004  primarily  relates to $364,000 in repayments  of capital  leases
made  during the  quarter,  partially  offset by  proceeds  of $28,000  from the
issuance of shares under the employee  share  purchase  plan. The capital leases
are to be repaid over a 36 month period ending  December 22, 2006, 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 $0.3  million for the three months
ended  March 31, 2004 as compared  to $0.4  million for the three  months  ended
March 31, 2003. Total investing activity during the three months ended March 31,
2004  consisted of $0.3 million in  purchases  of capital  assets.  Purchases of
capital assets include computer  hardware and software for use in implementation
activities.  Investing  activities  in 2003 also related to purchases of capital
assets.



                                      -19-
<PAGE>

     Existing  sources of liquidity at March 31, 2004 include  $16.9  million of
cash and cash  equivalents  and additional  funds  available under the Company's
operating line of credit.  At March 31, 2004, 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 March 31, 2004,  the Company was not using this line of
credit, other than to secure performance guarantees.

     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 Forward "Looking  Statements"
and the risk factors in Exhibit 99.1.

     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 March 31, 2004 the Company had the following contractual  obligations
and commercial commitments:

<TABLE>
   --------------------------------------------------------------------------------------------------
      Contractual                                   Payments Due by Period
      Obligations
   --------------------------------------------------------------------------------------------------
                              Total        Less Than One      1-3 Years     4-5 Years      After 5
                                                Year                                        Years
   --------------------------------------------------------------------------------------------------
<S>                        <C>               <C>              <C>          <C>            <C>
     Capital Lease         $1,856,595        $1,100,701       $755,894          -             -
      Obligations
   --------------------------------------------------------------------------------------------------
    Operating Leases       $6,272,003        $1,800,730      $2,438,876     $2,032,397        -
   --------------------------------------------------------------------------------------------------
   Total Contractual       $8,128,599        $2,901,432      $3,194,770     $2,032,397        -
      Obligations
   --------------------------------------------------------------------------------------------------
</TABLE>


     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  $7.1
million over a seven year period  ending May 2010.  The Company has  furnished 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  implementations  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.  The  Company's
obligation may increase as a result of contract expansions.

     In addition to these  commercial  commitments the Company has also provided
letters of credit in the amounts of CAD $810,000 (USD  $625,644)  expiring April
4, 2004,  and CAD  $1,864,568  (USD  $1,440,192)  expiring  October 1, 2004. The
Company  has  pledged an amount  equal to the  letters  of credit as  guarantees
against its operating line of credit as security.


Strategic Transaction Termination Fee

     On April 12, 2004,  the Company  entered into a definitive  agreement to be
acquired by @Road. This transaction is subject to shareholder and court approval
and is expected to close in the third quarter of 2004; however, no assurance can
be provided that the transaction  will close within this  timeframe,  or at all.
See "Forward-Looking Statements" and the risk factors in Exhibit 99.1.



                                      -20-
<PAGE>

     The agreement  relating to the Company's  proposed  transaction  with @Road
provides that, on the occurrence of certain events leading to the termination of
the agreement,  @Road will be entitled to a termination fee of $4.0 million from
the Company. These events include circumstances where (i) the Company's Board of
Directors has  withdrawn,  modified or changed in a manner  adverse to @Road its
recommendation   to  the  Company's   shareholders  in  favor  of  the  proposed
transaction,   or  (ii)  the  Board  of  Directors  has  supported  a  competing
transaction,  or (iii) the  Company  enters  into a letter of intent or  similar
document  regarding a competing  transaction,  or (iv) the Company  breaches its
agreement not to solicit  competing  transactions,  or (v) a competing tender or
exchange  offer is made and the Board of  Directors  fails to  timely  recommend
rejection of the offer.  The Company will be required to pay @Road a termination
fee of $3.1  million  if the  Company's  security  holders  do not  approve  the
transaction,  and prior to  termination  of the agreement with @Road a competing
offer is  announced,  and  within 12 months  following  the  termination  of the
agreement with @Road, the Company consummates a competing  transaction or enters
into an agreement  for a competing  transaction.  In no event will more than one
termination  fee be  payable.  If  the  Company  becomes  obligated  to pay  the
termination fee, it must pay the termination fee in immediately  available funds
and, generally, within one business day of demand by @Road.

     Any  requirement  to pay the $4.0 million or $3.1 million  termination  fee
would adversely impact the Company's cash and cash equivalents and the Company's
financial  position and could impact the  Company's  ability to fund its current
level of  operations.  Although the Company  believes its existing cash and cash
equivalents  will be sufficient  to pay the  termination  fee, if required,  the
Company may be required to or may elect to borrow  against its existing  line of
credit,  raise additional capital through debt or equity  financings,  or reduce
operating  expenditures in order to pay the termination fee or to strengthen the
Company's cash position after such payment.


Derivative Financial Instruments

     The Company  generates a  significant  portion of its sales from  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 or Euros. 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  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 March 31,  2004 and March 31,  2003,  the  Company  had no  foreign  currency
forward contracts outstanding.


Off-Balance Sheet Transactions

     The Company does not have any off-balance  sheet  arrangements that have or
are  reasonably  likely to have a current or future  effect on the  registrant's
financial  condition,  changes in  financial  condition,  revenues or  expenses,
results of operations, liquidity, capital expenditures or capital resources that
is material to investors.



                                      -21-
<PAGE>

ITEM 3.  QUANTITIATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Market  risk  represents  the risk of loss that may  impact  our  financial
position due to adverse changes in financial market prices and rates. Our market
risk exposure is primarily a result of fluctuations in foreign currency exchange
rates and interest  rates.  We do not hold or issue  financial  instruments  for
trading purposes.


Foreign Currency Risk

     We conduct business on a global basis in international currencies. As such,
we are exposed to adverse or beneficial movements in foreign exchange rates. The
majority of our sales are denominated in U.S. dollars,  the functional  currency
of our domestic  operations  and the  currency in which we report our  financial
statements.  We also conduct a portion of our sales in currencies other than the
U.S. dollar, including the British pound and Euro.

     We are exposed to foreign exchange fluctuations as the financial results of
our foreign subsidiaries are translated into U.S. dollars on consolidation.  All
translation  gains and losses are  included in the  determination  of net income
(loss).  As exchange  rates vary,  these results when  translated may impact our
overall expected  financial  results.  We also have exposure to foreign currency
rate  fluctuations when we translate cash from one currency into another to fund
operational  requirements.  In addition, we have exposure to the change in rates
as the result of timing differences between expenses being incurred and paid. As
exchange rates vary, we may experience a negative impact on financial results.

     We have evaluated our exposure to foreign currency risk and have determined
that while we have a degree of exposure to the Euro and British pound,  our most
significant  operating  exposure  to foreign  currencies  at this time is to the
Canadian  dollar.  In  certain  historical  periods,  the  strengthening  of the
Canadian dollar has negatively affected our operating results.

     As of March 31, 2004,  the  potential  reduction in future  earnings from a
hypothetical  instantaneous 10% change in quoted foreign currency exchange rates
applied  to our  foreign  currency  sensitive  contracts  and  assets  would  be
approximately $3.5 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.

     To  minimize  the risk  associated  with the  effects  of  certain  foreign
currency  exposures,  we  occasionally  use foreign  currency  forward  exchange
contracts.  We do not use forward contracts for trading or speculative purposes.
From time to time we may also purchase  Canadian  dollars in the open market and
hold these  funds in order to satisfy  forecasted  operating  needs in  Canadian
dollars

     At March 31,  2004 and  March  31,  2003,  we had no  outstanding  currency
forward exchange contracts, and during the three months ended March 31, 2004 and
March 31,  2003,  we did not  enter  into any  forward  exchange  contracts.  We
therefore did not record any gain or loss as a result of these contracts for the
three months ended March 31, 2004 or March 31, 2003.


Interest Rate Risk

     Our  exposure to market rate risk for  changes in  interest  rates  relates
primarily to our  investment  portfolio.  The investment of cash is regulated by
our  investment  policy  of which  the  primary  objective  is the  security  of
principal. Among other selection criteria, the investment policy states that the
term to maturity of investments  cannot exceed one year in length. We invest our
cash in a variety of  short-term  financial  instruments,  including  government
bonds,  commercial  paper  and  money  market  instruments.   Our  portfolio  is
diversified and consists  primarily of investment  grade  securities to minimize
credit risk. These investments are typically  denominated in U.S. dollars.  Cash
balances in foreign  currencies are operating  balances and are only invested in
demand  or  short-term  deposits  of the  local  operating  bank.  We do not use
derivative financial instruments in our investment portfolio.



                                      -22-
<PAGE>

     Investments  in  both  fixed  rate  and  floating  rate  interest   earning
instruments carry a degree of interest rate risk. Fixed rate securities may have
their fair market value adversely  impacted because of a rise in interest rates,
while floating rate securities may produce less income than expected if interest
rates fall. Due in part to these factors,  our future investment income may fall
short of  expectations  because of changes  in  interest  rates or we may suffer
losses in  principal  if forced to sell  securities  that have seen a decline in
market value because of changes in interest rates.

     While  interest  income  on our  cash,  cash  equivalents,  and  short-term
investments is subject to interest rate fluctuations, we believe that the impact
of these  fluctuations does not have a material effect on our financial position
due to the short-term nature of these financial instruments. Our interest income
and interest  expense are most  sensitive to the general level of interest rates
in Canada and the United  States.  Sensitivity  analysis  is used to measure our
interest  rate risk.  Based on analysis of our  balances as of March 31, 2004, a
100  basis-point  adverse  change in  interest  rates  would not have a material
effect on our consolidated  financial  position,  results of operation,  or cash
flows.

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



                                      -23-
<PAGE>

ITEM 4.  CONTROLS AND PROCEDURES

Changes in Internal Control Over Financial Reporting

     While  preparing the Company's Form 10-Q for the third quarter of 2003, the
Company,  in  consultation  with its independent  auditors,  determined that the
Company had  inappropriately  allocated  contracted  fees  between  software and
implementation  services and  maintenance  and support  services with respect to
certain of its software and implementation  contracts.  The Company announced on
November 17, 2003 its intention to restate certain of its financial  statements.
Senior members of the Company's  accounting group then reviewed and analyzed the
Company's active and completed software and implementation contracts in order to
determine  the  appropriate  revenue  recognition  treatment  for each  existing
contract.  As a result  of this  extensive  review,  the  Company  announced  on
February  26, 2004 its  intention  to restate  the  Company's  annual  financial
statements  for the fiscal  years  ended  December  31, 1998 to 2002 and for the
first three quarters of fiscal 2003.

     On March 30,  2004,  the  Company  filed an amended  annual  report on Form
10-K/A for the fiscal year ended December 31, 2002 containing  restated  audited
consolidated  financial  statements and amended quarterly reports on Form 10-Q/A
for the quarters  ended March 31,  2003,  June 30, 2003 and  September  30, 2003
containing restated unaudited condensed consolidated  financial statements.  The
Company did not file amended  annual reports for the fiscal years ended December
31, 2001, 2000, 1999 or 1998.

     In  connection  with the  contract  review and  restatements,  the Company,
together with its independent  auditors,  identified  certain areas in which the
Company could improve its internal control over financial reporting. The Company
had implemented internal control over financial reporting to review and evaluate
its software and implementation  contracts to determine the appropriate  revenue
recognition  accounting  treatment for such  contracts in  accordance  with U.S.
generally accepted accounting principles.  Notwithstanding this internal control
over financial  reporting,  the Company,  in  consultation  with its independent
auditors,  determined  that its analysis of the terms  included in the Company's
software and  implementation  contracts  had resulted in the  Company's  revenue
recognition for such contracts being inappropriate under U.S. generally accepted
accounting principles.

     As a result of the  contract  review  and  restatements,  the  Company  has
undertaken  certain steps to  strengthen  the  Company's  internal  control over
financial reporting in order to prevent future recurrences.  These steps include
implementing  a formal  contract  review  checklist  for each  new  contract,  a
thorough  review and analysis of new software  and  implementation  contracts by
senior  members  of the  Company's  accounting  group,  a  determination  of the
appropriate  revenue  recognition  treatment  for each new  contract  by  senior
members of the accounting group, revisions to the Company's standard contractual
wording,  improving  communication  between the various functional groups within
the Company  (namely  sales,  implementation,  accounting and legal) at both the
contract  negotiation  and  execution  level  and at the  implementation  level,
requiring any  exceptions to the Company's  standard  contractual  wording to be
approved at a senior  management  level and review by  management of any unusual
terms which may impact its historical  practice of accounting  for revenue.  The
Company's  management  plans to undertake a further review and assessment of the
Company's internal control over financial reporting in light of the requirements
of Section 404 of the  Sarbanes-Oxley  Act of 2002 and the rules  adopted by the
SEC  thereunder,  which the SEC  currently  plans to implement  for  accelerated
filers  for  fiscal  years  ending  on  or  after  November  15,  2004  and  for
non-accelerated  filers for fiscal years ending on or after July 15, 2005. As of
the  date  of  this  report,  the  Company  is not  an  accelerated  filer  and,
accordingly,  the Company expects these additional  requirements to apply to the
Company for its fiscal year ended  December 31, 2005.  The Company's  management
may recommend and the Company may implement  additional changes in the Company's
internal control over financial  reporting  pursuant to this review. In light of
these additional SEC requirements and the Company's current level of activities,
the Company is evaluating the level of staffing of its finance group.

     Except as described in the  foregoing  paragraphs,  no changes were 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.



                                      -24-
<PAGE>

Evaluation of Disclosure Controls and Procedures

     In connection  with the filing of this  quarterly  report on Form 10-Q, 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 the evaluation  described above, the Chief Executive Officer and
Chief Financial Officer concluded that as of the Evaluation Date, subject to the
matters  discussed  above  under  "Changes in Internal  Control  Over  Financial
Reporting",  with respect to the Company's  internal  accounting  controls,  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.


Note Regarding Control Limitations

     The Company's  management,  including the Chief Executive Officer and Chief
Financial Officer,  does not expect that the Company's  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,  such as the error  that led to the  Company's  restatements.
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.



                                      -25-
<PAGE>

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 February 2, 2004, MDSI and Citizens settled this
lawsuit.  Under the settlement agreement,  each company has fully discharged the
other from all outstanding legal claims without further financial compensation.

     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, 3 and 4 there was no  reportable  information  for the three months
ended March 31, 2004.


     ITEM 5. OTHER INFORMATION

     On April 12, 2004,  the Company  entered into a definitive  agreement to be
acquired by @Road. This transaction is subject to shareholder and court approval
and is expected to close in the third quarter of 2004; however, no assurance can
be provided that the transaction  will close within this  timeframe,  or at all.
The  Company  filed a Form 8-K on April 27,  2004  including  a  summary  of the
definitive agreement and a copy of the definitive agreement, without exhibits. A
copy of the definitive agreement,  including exhibits, is being filed as Exhibit
10.23 to this  report.  For  certain  risks  relating  to the  transaction,  see
"Forward-Looking  Statements",  the  section  entitled  "Liquidity  and  Capital
Resources" in Part I, Item 2, Management's  Discussion and Analysis of Financial
Condition  and  Results of  Operations  included  in this  report,  and the risk
factors included in Exhibit 99.1 to this report.



                                      -26-
<PAGE>


     ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

          (a)  Exhibits

     Exhibit
      Number        Description
      ------        -----------
      2.1(3)        Agreement  and Plan of Merger dated April 17, 1997 among the
                    Company, MDSI Acquisition Corp., Alliance, Geoffrey Engerman
                    and Doug Engerman
      3.1(1)        Articles of Incorporation of the Company
      3.2(1)        Articles of Amendments of the Company
      3.3(1)        By-laws of the Company
      4.1(1)        Form of Common Share Certificate
      4.2(10)       Shareholder  Rights Plan  Agreement  made as of December 17,
                    2003 between the Company and Computershare  Trust Company of
                    Canada
     10.1(2)(3)     2000 Stock Option Plan
     10.2(1)        Form of  Indemnification  Agreement  between the Company and
                    certain officers of the Company
     10.3(1)        Lease dated  September  25, 1997 between Sun Life  Assurance
                    Company of Canada and the Company
     10.4(4)        Lease  dated  October  12, 2001  between  Crown  Diversified
                    Industries   Corporation   and   Connectria   Corporation  a
                    subsidiary of the Company
     10.5(4)        Amending  Agreement  dated December 1, 1998 between Sun Life
                    Assurance Company of Canada and the Company
     10.6(2)(5)     Employment  Agreement  dated  January  2, 2002  between  the
                    Company and Verne Pecho
     10.7(2)(6)     2002 Stock Purchase Plan
     10.8(7)        Exchange  Agreement  dated as of June  26,  2002  among  the
                    Company,  Connectria  Corporation,  Richard S.  Waidmann and
                    Eric Y. Miller
     10.9(7)        Amendment  to Exchange  Agreement  dated as of June 30, 2002
                    among  the  Company,  Connectria  Corporation,   Richard  S.
                    Waidmann and Eric Y. Miller
     10.10(7)       Warrant dated as of June 29, 2002 to purchase  50,380 shares
                    of  Series  A  Nonvoting   Preferred   Stock  of  Connectria
                    Corporation
     10.11(7)       $250,000  Promissory  Note dated as of June 30, 2002 made by
                    Connectria Corporation in favor of the Company
     10.12(7)       Security  Agreement  dated  as  of  June  30,  2002  between
                    Connectria Connectria and the Company
     10.13(2)(8)    Employment  Agreement  dated  January  1, 1999  between  the
                    Company and Glenn Y. Kumoi
     10.14(2)(8)    Settlement  Agreement dated May 31, 2002 between the Company
                    and Gene Mastro*
     10.15(2)(9)    Employment  Agreement  dated  August  1,  2003  between  the
                    Company and Peter Hill Rankin
     10.16(2)(9)    Employment  Agreement  dated  September  3, 2003 between the
                    Company and Glenn Kumoi
     10.17(2)(9)    Employment  Agreement  dated  September  4, 2003 between the
                    Company and Erik Dysthe
     10.18(2)(9)    Employment  Agreement  dated  August 20,  2003  between  the
                    Company and Joo-Hyung (Tommy) Lee
     10.19(2)(11)   Settlement  Agreement  dated  January  7, 2004  between  the
                    Company and Walter J. Beisheim
     10.20(2)(11)   Employment  Agreement  dated  August 18,  1997  between  the
                    Company and Poul Kvist
     10.21(2)(11)   Employment  Agreement  dated  October 21,  2002  between the
                    Company and Rob Owen
     10.22(2)(11)   Settlement  Agreement  dated  October 30,  2003  between the
                    Company and Rob Owen
     10.23          Combination  Agreement  dated as of April 12,  2004 among At
                    Road, Inc., Orion Exchange Co. Ltd. and the Company
     14.1(11)       Code of Ethics
     31.1           Section 302 Certification of Chief Executive Officer
     31.2           Section 302 Certification of Chief Financial Officer
     32.1           Section 906 Certification of Chief Executive Officer
     32.2           Section 906 Certification of Chief Financial Officer
     99.1           Risk Factors
-------------------

(1)  Previously  filed as exhibits with the same  corresponding  number with the
     Registrants' Registration Statement on Form F-1 (Registration No. J33-5872)
     and  amendments  numbers 1 and 2  thereto,  filed with the  Securities  and
     Exchange Commission on October 28, 1996, November 13, 1996 and November 25,
     1996, respectively.
(2)  This document has been identified as a management  contract or compensatory
     plan or arrangement.
(3)  Previously filed as 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-K for the year
     ended December 31, 2001.
(5)  Previously  filed as  exhibits  with  the  Registrant's  Form  10-Q for the
     quarterly period ended March 31, 2002.
(6)  Previously  filed as  exhibits  with  the  Registrant's  Form  10-Q for the
     quarterly period ended June 30, 2002.
(7)  Previously filed as exhibits with the Registrant's Form 8-K filed on August
     14, 2002.


                                      -27-
<PAGE>


(8)  Previously filed as exhibits with the  Registrant's  Form 10-K for the year
     ended December 31, 2002.
(9)  Previously  filed as  exhibits  with  the  Registrant's  Form  10-Q for the
     quarterly period ended September 30, 2003.
(10) Previously  filed as  exhibits  with  the  Registrant's  Form 8-K  filed on
     December 18, 2003.
(11) Previously filed as exhibits with the  Registrant's  Form 10-K for the year
     ended December 31, 2003.

*    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.


          (b)  Reports on Form 8-K

     The Company  furnished  a Form 8-K on  February 3, 2004  pursuant to Item 9
regarding the  settlement of the Citizens  litigation.  The Company  furnished a
Form 8-K on  February  27,  2004  pursuant  to Item 9  attaching  the  Company's
earnings  release  for the 2003 fiscal year and a press  release  regarding  the
restatement of the Company's  financial  statements as further described in Part
II,  Item  4,  Controls  and  Procedures,  within  this  quarterly  report.  The
information  furnished by the Company in a Form 8-K pursuant to Item 9 shall not
be deemed to be filed pursuant to the Exchange Act.




                                      -28-
<PAGE>


                                   SIGNATURES


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



                            MDSI MOBILE DATA SOLUTIONS INC.


Date:  May 12, 2004          By:  /s/  Erik Dysthe
                                  -------------------------------------------
                                  Name:  Erik Dysthe
                                  Title: President, Chief Executive Officer,
                                         Chairman of the Board and Director




Date:  May 12, 2004          By:  /s/  Verne D. Pecho
                                  -------------------------------------------
                                  Name:  Verne D. Pecho
                                  Title: Vice President Finance & Administration
                                         and Chief Financial Officer
                                         (Principal Financial and Accounting
                                         Officer)







                                      -29-