================================================================================
                                  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 September 30, 2001

                                       OR

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

     For the transition period from ___________________ to ____________________.

                         Commission file number 0-28968


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

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


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


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

       The number of outstanding shares of the Registrant's common stock,
               no par value, at November 13, 2001 was 8,626,020.

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


<PAGE>


                         MDSI Mobile Data Solutions Inc.

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


                                                                            Page
                                                                            ----
PART I - FINANCIAL INFORMATION

  ITEM 1. FINANCIAL STATEMENTS

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

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

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

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

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

  ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK..........23

PART II - OTHER INFORMATION

  ITEM 1. LEGAL PROCEEDINGS .................................................24

  ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS..........................24

  ITEM 3. DEFAULTS UPON SENIOR SECURITIES ...................................24

  ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................24

  ITEM 5. OTHER INFORMATION..................................................24

  ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K...................................24

SIGNATURES ..................................................................27


                                       i

<PAGE>
PART I -  FINANCIAL INFORMATION
  ITEM 1. FINANCIAL STATEMENTS

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

                                                                                As at
                                                                   September 30,       December 31,
                                                                   -------------      ---------------
                                                                       2001                 2000
                                                                   -------------      ---------------
<S>                                                                <C>                  <C>
ASSETS
CURRENT ASSETS
  Cash and cash equivalents                                        $ 11,421,440         $13,238,081
  Accounts receivable, net
     Trade (net of allowance for doubtful accounts $1,686,698;
       2000 - $985,000)                                              12,433,430          16,821,925
     Unbilled                                                         7,896,690          12,184,446
  Income taxes receivable                                               247,777                   -
  Prepaid expenses                                                    2,240,920           1,411,200
  Lease receivable                                                            -             133,723
                                                                   -------------      ---------------
                                                                     34,240,257          43,789,375
INVESTMENTS (net of valuation allowance; 2001 - $2,999,992;
   2000 - $250,000 (note 7))                                                  -           3,081,447
CAPITAL ASSETS, NET                                                   9,542,975          11,097,497
DEFERRED INCOME TAXES                                                   708,350             347,350
INTANGIBLE ASSETS, NET (note 5)                                         165,000           1,824,057
                                                                   -------------      ---------------
                                                                     44,656,582          60,139,726
ASSETS OF DISCONTINUED OPERATIONS  (note 9)                                   -             641,405
                                                                   -------------      ---------------
TOTAL ASSETS                                                       $ 44,656,582         $60,781,131
                                                                   =============      ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
  Accounts payable                                                  $ 2,184,725         $ 3,444,457
  Accrued liabilities                                                 5,940,682           3,625,591
  Income taxes payable                                                        -           1,091,164
  Deferred revenue                                                    5,807,900           7,901,837
  Current portion of long-term debt                                      39,041              66,968
  Current obligations under capital lease                             2,317,110           2,094,637
                                                                   -------------      ---------------
                                                                     16,289,458          18,224,654
OBLIGATIONS UNDER CAPITAL LEASES                                      2,191,886           4,156,486
                                                                   -------------      ---------------
                                                                     18,481,344          22,381,140
LIABILITIES OF DISCONTINUED OPERATIONS (note 9)                               -             223,024
                                                                   -------------      ---------------
                                                                     18,481,344          22,604,164
STOCKHOLDERS' EQUITY
  Common stock                                                       48,515,018          48,416,502
  Additional paid-up capital                                            522,621             220,700
  Treasury stock                                                        (85,043)            (85,043)
  Deficit                                                           (22,087,254)         (9,685,088)
  Accumulated other comprehensive income                               (690,104)           (690,104)
                                                                   -------------      ---------------
                                                                     26,175,238          38,176,967

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                         $ 44,656,582         $60,781,131
                                                                   =============      ===============
</TABLE>

Contingency (note 8)

                 See Notes to Consolidated Financial Statements


                                       1
<PAGE>

<TABLE>

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

                                                      Three months ended September 30,        Nine months ended September 30,
                                                     -----------------------------------    -----------------------------------
                                                          2001                2000               2001                2000
                                                     ---------------     ---------------    ---------------     ---------------
<S>                                                     <C>               <C>                <C>                 <C>
REVENUE
  Software and services                               $  7,282,210       $  10,430,718       $  24,399,239       $ 29,608,742
  Hosting and information technology services            2,781,435           1,848,989          10,770,624          4,889,168
  Third party products and services                        295,054             963,729           1,822,168          2,144,865
  Maintenance and support                                2,647,399           2,295,522           7,538,333          6,292,960
                                                     ---------------     ---------------    ---------------     ---------------
                                                        13,006,098          15,538,958          44,530,364         42,935,735
DIRECT COSTS                                             6,716,017           7,631,556          23,983,405         19,478,584
                                                     ---------------     ---------------    ---------------     ---------------
GROSS PROFIT                                             6,290,081           7,907,402          20,546,959         23,457,151

OPERATING EXPENSES
  Research and development                               1,899,098           2,254,015           6,591,400          6,568,237
  Sales and marketing                                    2,654,345           3,059,276           9,840,279          9,250,174
  General and administrative                             1,708,838           1,806,270           5,169,553          5,999,047
  Restructuring charge (note 6)                                  -                   -           6,105,927                  -
  Provision for doubtful accounts                                -                   -           1,202,634                  -
  Costs of merger                                                -                   -                   -          2,076,028
  Amortization and provision for valuation of
    intangible assets (note 5)                              11,000              67,479           1,659,058            204,768
                                                     ---------------     ---------------    ---------------     ---------------
                                                         6,273,281           7,187,040          30,568,851         24,098,254
                                                     ---------------     ---------------    ---------------     ---------------
OPERATING INCOME (LOSS)                                     16,800             720,362         (10,021,892)          (641,103)

VALUATION ALLOWANCE ON INVESTMENTS (note 7)                      -                   -          (2,749,992)                 -

OTHER INCOME (EXPENSE)                                      70,663              88,797            (300,691)          (300,321)
                                                     ---------------     ---------------    ---------------     ---------------
INCOME (LOSS) BEFORE TAX PROVISION                          87,463             809,159         (13,072,575)          (941,424)

PROVISION FOR (RECOVERY OF) INCOME TAXES                    45,293             262,991            (670,409)           381,263
                                                     ---------------     ---------------    ---------------     ---------------
NET INCOME (LOSS)                                           42,170             546,168         (12,402,166)        (1,322,687)

DEFICIT, BEGINNING OF PERIOD                           (22,129,424)        (10,999,543)         (9,685,088)        (9,130,688)
                                                     ---------------     ---------------    ---------------     ---------------
DEFICIT, END OF PERIOD                                $(22,087,254)      $ (10,453,375)      $ (22,087,254)      $(10,453,375)
                                                     ===============     ================   ===============     ===============
Earnings (loss) per common share
  Basic                                               $       0.00       $        0.06          $    (1.44)      $      (0.16)
                                                     ===============     ================   ===============     ===============
  Diluted                                             $       0.00       $        0.06          $    (1.44)      $      (0.16)
                                                     ===============     ================   ===============     ===============
Weighted average shares outstanding
  Basic                                                  8,622,480           8,570,378            8,621,192         8,501,004
                                                     ===============     ================   ===============     ===============
  Diluted                                                9,002,871           9,486,467            8,621,192         8,501,004
                                                     ===============     ================   ===============     ===============
</TABLE>

                 See Notes to Consolidated Financial Statements



                                       2
<PAGE>

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


                                                                         Nine months ended September 30,
                                                                       -----------------------------------
                                                                             2001                2000
                                                                        --------------      --------------
<S>                                                                      <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES
      Net loss from continuing operations                                (12,402,166)         $(1,322,687)
      Items not affecting cash:
          Depreciation and amortization                                    4,458,078            2,163,121
          Write down in value of surplus capital assets (note 6)             563,780                    -
          Valuation allowance on investments                               2,749,992                    -
          Deferred income taxes                                             (361,000)                   -
          Stock based compensation charge                                    301,921                    -
          Changes in non-cash operating working capital items              5,469,009           (3,047,961)
                                                                        --------------      --------------
      Net cash provided by (used in) operating activities                    779,614           (2,207,527)
                                                                        --------------      --------------
CASH FLOWS FROM FINANCING ACTIVITIES
      Issuance of common shares                                               98,516            3,445,415
      Repayment of long-term debt                                            (27,927)             (45,293)
      (Repayment) issuance of capital leases                              (1,742,127)           1,307,113
                                                                        --------------      --------------
      Net cash (used in) provided by financing activities                 (1,671,538)           4,707,235
                                                                        --------------      --------------
CASH FLOWS FROM INVESTING ACTIVITIES
      Lease receivable                                                       133,723              288,145
      Proceeds on settlement (cost on acquisition) of investments            331,458           (2,642,839)
      Acquisition of intangible assets                                             -             (220,000)
      Acquisition of capital assets                                       (1,808,279)          (4,750,883)
                                                                        --------------      --------------
      Net cash used in investing activities                               (1,343,098)          (7,325,577)
                                                                        --------------      --------------
      Net cash provided by continuing operations                          (2,235,022)          (4,825,869)

      Net cash provided by discontinued operations (note 9)                  418,381               15,039
                                                                        --------------      --------------
NET CASH OUTFLOW                                                          (1,816,641)          (4,810,830)

Effects of foreign exchange fluctuations on cash and cash equivalents              -             (260,667)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                            13,238,081           14,612,923
                                                                        --------------      --------------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                 $11,421,440          $ 9,541,426
                                                                        ==============      ==============
</TABLE>

                 See Notes to 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, 2000.

     (b)  Reporting currency

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

          Comprehensive income for the period can be summarized as follows:

<TABLE>
                                          Three months ended September 30,        Nine months ended September 30,
                                          --------------------------------       ---------------------------------
                                              2001                 2000              2001                 2000
                                          -------------        -------------     -------------        -------------
         <S>                              <C>                 <C>               <C>                   <C>
          Net income (loss)                $ 42,170            $ 546,168         $(12,402,166)         $(1,322,687)
          Other comprehensive income
              - Translation adjustment            -                    -                    -             (260,667)
                                          -------------        -------------     -------------        -------------
          Comprehensive income (loss)      $ 42,170            $ 546,168         $(12,402,166)         $(1,583,354)
          for the period                  =============        =============     =============        =============
</TABLE>


     (c)  Use of estimates

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



                                       4
<PAGE>
                         MDSI MOBILE DATA SOLUTIONS INC.

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


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     (d)  Recently issued accounting standards

          In  July  2001,  the  Financial   Accounting  Standards  Board  issued
          Statement of Financial  Accounting  Standard (SFAS) No. 141, "Business
          Combinations"  and  SFAS  No.  142,  "Goodwill  and  Other  Intangible
          Assets". SFAS No. 141 requires that business combinations be accounted
          for under the purchase  method of accounting and addresses the initial
          recognition and measurement of assets acquired, including goodwill and
          intangibles,  and liabilities assumed in a business combination.  SFAS
          No. 142 bases its guidelines for accounting for goodwill on the notion
          that  acquired  entities are generally  integrated  into the acquiring
          entity and that  goodwill  should be assessed as part of the combined,
          or reporting, unit. Further, SFAS No. 142 specifies that goodwill will
          no longer be  amortized,  but  instead  will be subject to  impairment
          tests at least  annually.  Goodwill  impairment  will be determined by
          applying a two-step process that begins with evaluating the fair value
          of a  reporting  unit  to  identify  possible  impairment  and  then a
          measurement of the magnitude of the impairment.

          As a result of  implementing  SFAS No. 142,  it is  expected  that the
          amortization  of  goodwill  will stop as of  December  31,  2001.  The
          Company  will be  required  to assess  goodwill  and other  intangible
          assets acquired in previous acquisitions as well as their useful lives
          at least annually.

          The Company is required to adopt SFAS No. 141 and 142 on a prospective
          basis as of January 1, 2002; however,  certain provisions of these new
          Standards may also apply to any acquisitions  concluded  subsequent to
          June 30, 2001. The adoption of SFAS No. 141 and 142 is not expected to
          have a material effect on the Company's financial position, results of
          operations and cash flows in 2002 and subsequent years."

2.   SEGMENTED INFORMATION

     Segmented information

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

          During the three months ended June 30, 2001, the Company realigned its
          internal  operating  structure.  As a result of this realignment,  the
          Company now considers its Advantex and Wireless ASP product lines part
          of its Field Service segment,  and has renamed the segment  previously
          know as "e-Business",  "Hosting and IT Services" to better reflect the
          nature of the business  activity in this segment.  Also as a result of
          the realignment,  certain figures previously classified as Hosting and
          IT Services  (e-Business)  have been reclassified to the Field Service
          segment.   For  the  three  months  ended   September  30,  2001,  the
          reclassification  results in operating earnings  increasing in Hosting
          and IT Services  (and a  corresponding  decrease in Field  Service) by
          $312,980 (2000 - $1,015,192) and for the nine months ending  September
          30, 2001 the  reclassification  results in an  increase  in  operating
          earnings  from  Hosting  and  IT  Services  of   $1,127,586   (2000  -
          $2,286,693)  than would have  otherwise been  presented.  There is nil
          effect of the  reclassification  on  revenues  for any of the  periods
          presented.


                                       5
<PAGE>
                         MDSI MOBILE DATA SOLUTIONS INC.

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


2.   SEGMENTED INFORMATION (continued)

     Business Segments
<TABLE>
                                     Three months ended September 30, 2001            Three months ended September 30, 2000
                                      Field        Hosting and IT                    Field        Hosting and IT
                                     Service        Services(1)      Total          Service         Services(1)         Total
                                  --------------------------------------------   ----------------------------------------------
<S>                                <C>              <C>           <C>             <C>             <C>            <C>
     Revenue                       $10,195,591      $2,810,507    $13,006,098     $12,978,269     $2,560,689     $15,538,958
     Operating earnings (loss)         426,459        (409,659)        16,800         954,298       (233,936)        720,362
     Depreciation & Amortization       698,675         243,337        942,012         736,179         81,219         817,398

     Long lived assets               7,827,882       1,880,093      9,707,975      14,769,366      3,603,563      18,372,929
     Capital Expenditures              (19,260)        136,579        117,319       1,900,748        435,155       2,335,903
</TABLE>

<TABLE>
                                         Nine months ended September 30, 2001         Nine months ended September 30, 2000
                                       Field        Hosting and IT                   Field       Hosting and IT
                                      Service        Services(1)         Total      Service        Services(1)       Total
                                  -----------------------------------------------   ----------------------------------------
<S>                                <C>             <C>            <C>             <C>             <C>            <C>
     Revenue                       $33,612,605     $10,917,759    $44,530,364     $37,280,067     $5,655,668     $42,935,735
     Operating earnings (loss)      (9,757,190)       (264,702)   (10,021,892)       (420,449)      (220,654)       (641,103)
     Depreciation & Amortization     3,878,739         579,339      4,458,078       2,032,046        131,075       2,163,121

     Long lived assets               7,827,882       1,880,093      9,707,975      14,769,366      3,603,563      18,372,929
     Capital Expenditures            1,087,850         720,429      1,808,279       4,208,336        542,547       4,750,883
</TABLE>

     (1)  The Hosting and IT Services  (formerly  e-Business)  operating segment
          also includes revenues from third-party products and services.

     Geographic information

     The  Company  earned  revenue  from  sales to  customers  in the  following
     geographic locations:
<TABLE>
                                          Three months ended September 30,        Nine months ended September 30,
                                          --------------------------------       ---------------------------------
                                              2001                 2000              2001                 2000
                                          -------------        -------------     -------------        -------------
         <S>                              <C>                 <C>               <C>                   <C>
          Canada...................       $   244,324           $   749,955       $   880,961          $ 1,203,562
          United States............        10,951,485            10,806,024        35,918,956           33,301,336
          Europe...................         1,734,362             2,458,178         6,661,420            6,518,655
          Other....................            75,927             1,524,801         1,069,027            1,912,182
                                          -------------        -------------     -------------        -------------
                                          $13,006,098           $15,538,958       $44,530,364          $42,935,735
                                          =============        =============     =============        =============
</TABLE>


                                       6
<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 was calculated by dividing
     net  income  (loss)  by the sum of the  weighted  average  number of common
     shares  outstanding plus all additional  common shares that would have been
     outstanding  if  potentially  dilutive  common  shares had been issued.  In
     periods  for  which  there is a  reported  net loss,  potentially  dilutive
     securities have been excluded from the calculation as their effect would be
     anti-dilutive.

     The  following  table  reconciles  the  number  of shares  utilized  in the
     earnings (loss) per common share calculations for the periods indicated:
<TABLE>
                                                                 Three months ended                 Nine months ended
                                                                   September 30,                      September 30,
                                                             ---------------------------      ---------------------------
                                                                 2001           2000              2001             2000
                                                             ------------   ------------      ------------   ------------
         <S>                                                 <C>             <C>               <C>             <C>
          Basic weighted average shares outstanding...        8,622,480       8,570,378         8,621,192       8,501,004
          Effect of dilutive securities...............
          Stock options...............................          380,391         916,089                 -               -
                                                             ------------   ------------      ------------   ------------
          Diluted weighted average shares outstanding.        9,002,871       9,486,467         8,621,192       8,501,004
                                                             ============   ============      ============   ============
</TABLE>

4.   ACQUISITIONS

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

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

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


                                       7
<PAGE>

                         MDSI MOBILE DATA SOLUTIONS INC.

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


5.   INTANGIBLE ASSETS
<TABLE>
                                                                 September 30,     December 31,
                                                                     2001              2000
                                                               --------------     --------------
    <S>                                                        <C>                <C>
    Goodwill                                                   $   2,615,751      $   2,615,751
    Commercial web site domain name                                  220,000
                                                                                        220,000
    Less:  accumulated amortization and impairment provision     (2,670,751)        (1,011,694)
                                                               --------------     --------------
                                                                $    165,000      $   1,824,057
                                                               ==============     ==============
</TABLE>

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

6.   RESTRUCTURING CHARGE

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

<TABLE>
                                                      Three Months Ended         Three Months              Total
                                                       March 31, 2001              Ended              Restructuring
                                                                               June 30, 2001             Charge
                                                     --------------------    -------------------    ------------------
<S>                                                            <C>                   <C>                   <C>
           Workforce reduction                                 $ 305,000             $3,070,000            $3,375,000
           Provision for excess office space                     785,000              1,076,000             1,861,000
           Non cash writedown of capital assets                        -                563,780               563,780
           Other                                                 110,000                196,147               306,147
                                                     --------------------    -------------------    ------------------
           Total restructuring charges                       $ 1,200,000             $4,905,927             6,105,927
           Cumulative draw-downs                                                                          (2,689,470)
                                                                                                    ------------------
           Accrued restructuring charges at                                                                $3,416,457
           September 30, 2001                                                                       ==================
</TABLE>

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

     Workforce  reduction  charges  of  $3.4  million  were  taken  relating  to
     severance  and  continued  benefits for the  elimination  of 149  positions
     across all operating  departments and segments of the  organization.  As of
     September  30,  2001,  the  provision  balance  has been drawn down by cash
     payments of  approximately  $1.8 million.  The remaining  provision of $1.6
     million for terminated  employees receiving payments over time, or existing
     employees  notified  of their  termination  to  occur  at a future  date is
     expected to be utilized by the second quarter of 2002.



                                       8
<PAGE>
                         MDSI MOBILE DATA SOLUTIONS INC.

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


6.   RESTRUCTURING CHARGE (continued)

     The  provision  for excess office space of $1.9 million for the nine months
     ended  September 30, 2001,  relates to surplus office space under long term
     lease by the Company at two locations, one of which the Company has entered
     into  fixed cost lease  arrangements  expiring  in 2004.  The  Company  has
     incurred  approximately  $0.3  million  of  cash  costs  relating  to  this
     provision  leaving an accrual of $1.6 million remaining as at September 30,
     2001. The Company expects that the charge will be fully drawn down no later
     than the time the lease expires in the fourth quarter of 2004.

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

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

7.   INVESTMENTS AND ADVANCES

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

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

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

8.   CONTINGENCY

     The  Company is  involved  in legal  proceeding  with a  customer  over the
     payment for the license and implementation of a system in accordance with a
     binding  contract.  The Company believes that its position in the matter is
     strong and intends to vigorously pursue  collection.  The Company has filed
     an action seeking  payment of the full contract amount and the customer has
     filed an answer and counterclaim. The companies have conducted mediation of
     the dispute,  however no settlement  has been reached to date.  The Company
     has made a provision for  estimated  uncollectible  amounts and  collection
     costs associated with this account.


                                       9
<PAGE>

                         MDSI MOBILE DATA SOLUTIONS INC.

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



9.   DISCONTINUED OPERATIONS

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



                                       10
<PAGE>

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

Forward Looking Statements

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

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

     Although  the Company  believes  the  expectations  in its  forward-looking
statements  are  reasonable,  it  cannot  guarantee  future  results,  levels of
activity,  performance or  achievements  or other future events.  The Company is
under no duty to update any of its forward-looking  statements after the date of
this filing. You should not place undue reliance on forward-looking statements.

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

Overview

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

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

Restructuring

     The  Company  believes  that the events of  September  11,  2001 and recent
economic  developments  and trends have  adversely  affected and may continue to
affect  levels of capital  spending  by  companies  in a variety of  industries,
including companies in the vertical markets that the Company serves. The current
excess  supply of  capacity



                                       11
<PAGE>

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

     In order to address the uncertainties caused by these economic trends, MDSI
announced  its  intention to reduce its  operating  expenses  through  workforce
reductions  and other  measures.  These measures have been or are expected to be
implemented  over the next two quarters,  with  incremental  reductions in costs
each  quarter,  and are expected to result in an estimated  $2.9 million in cost
reductions  per quarter by the end of the first  quarter of 2002.  A majority of
the savings are expected to be realized by reduced salary and payroll costs, and
remaining  savings are expected to be realized from the leasing of excess space,
and  reduction in  discretionary  spending.  There can be no assurance  that the
reduction  in work force and related  restructuring  efforts  will result in the
anticipated cost reductions or that the work force 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  announced  on May 11,  2001. A breakdown of the nature of the charges
and the costs incurred to date is as follows:

<TABLE>
                                                  Three Months            Three Months             Total
                                                     Ended                    Ended             Restructuring
                                                 March 31, 2001           June 30, 2001             Charge
                                                ----------------        ----------------       ---------------
     <S>                                         <C>                    <C>                    <C>
     Workforce reduction                         $  305,000               $3,070,000             $3,375,000
     Provision for excess office space              785,000                1,076,000              1,861,000
     Non cash writedown of capital assets                 -                  563,780                563,780
     Other                                          110,000                  196,147                306,147
                                                ----------------        ----------------       ---------------
     Total restructuring charges                 $ 1,200,000               $4,905,927              6,105,927
     Cumulative draw-downs                                                                        (2,689,470)
                                                                                               ---------------
     Accrued restructuring charges as
     September 30, 2001                                                                           $3,416,457
                                                                                               ===============
</TABLE>

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

     Workforce  reduction  charges  of  $3.4  million  were  taken  relating  to
severance and continued benefits for the elimination of 149 positions across all
operating  departments  and segments of the  organization.  As of September  30,
2001,   the  provision   balance  has  been  drawn  down  by  cash  payments  of
approximately  $1.8  million.  The  remaining  provision  of $1.6 million is for
terminated  employees  receiving  payments  over  time,  or  existing  employees
notified of their  termination  to occur at a future date, and is expected to be
utilized by the second quarter of 2002.

     The  provision  for excess office space of $1.9 million for the nine months
ended September 30, 2001,  relates to surplus office space under long term lease
by the Company at two locations, one of which the Company has entered into fixed
cost lease arrangements expiring in 2004. The Company has incurred approximately
$0.3 million of cash costs relating to this provision leaving an accrual of $1.6
million  remaining as at September 30, 2001. The Company expects that the charge
will be fully drawn down not later than the time the lease expires in the fourth
quarter of 2004.



                                       12
<PAGE>

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

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

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

Field Service Business

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

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

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

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

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



                                       13
<PAGE>

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

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


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

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

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

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

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

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



                                       14
<PAGE>

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

Effects of Acquisitions

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

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

Disposition of Transportation Business Unit

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

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

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

Results of Operations

     The Company's  net income was $42,000 for the three months ended  September
30,  2001.  This  compares to a net income of $0.5  million for the three months
ended September 30, 2000. The change in operating  results for the period is due
primarily to a reduction in revenue of approximately  $2.5 million for the three
months ended  September 30, 2001.  The reduction in revenue for the three months
ended September 30, 2001 was partially  offset by a reduction in direct costs of
$0.9  million and a reduction  of operating  costs of $0.9  million,  these cost
reductions were a result of the Company's previously announced restructuring and
cost control efforts.



                                       15
<PAGE>

     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                 Nine months ended
                                                                 September 30,                     September 30,
                                                        --------------------------------  --------------------------------
                                                             2001             2000             2001             2000
                                                        ----------------  --------------  ---------------  ---------------
                                                          (Unaudited)      (Unaudited)     (Unaudited)      (Unaudited)
       <S>                                                <C>               <C>            <C>               <C>
       Revenue
          Software and services......................          56.0%             67.1%         54.8%            68.9%
          Hosting and information technology.........          21.4              11.9          24.2             11.4
          Third-party products and services..........           2.3               6.2           4.1              5.0
          Maintenance and support....................          20.3              14.8          16.9             14.7
                                                        ----------------  --------------  ---------------  ---------------
                                                              100.0              100.0        100.0            100.0

       Direct costs.................................           51.7              49.1          53.9             45.4
                                                        ----------------  --------------  ---------------  ---------------
       Gross profit.................................           48.3              50.9          46.1             54.6
                                                        ----------------  --------------  ---------------  ---------------
       Operating expenses
          Research and development...................          14.6              14.5          14.8             15.3
          Sales and marketing .......................          20.4              19.7          22.1             21.5
          General and administrative.................          13.1              11.6          11.6             14.0
          Restructuring charge.......................           -                 -            13.7              -
          Provision for doubtful accounts............           -                 -             2.7              -
          Costs of merger............................           -                 -             -                4.8
          Amortization of intangible assets..........           0.1               0.4           3.7              0.5
                                                        ----------------  --------------  ---------------  ---------------
                                                               48.2              46.2          68.6             56.1
                                                        ----------------  --------------  ---------------  ---------------
       Operating income (loss)......................            0.1               4.7         (22.5)            (1.5)

       Valuation allowance on investments...........            -                -              6.2                -
       Other income (expense) ......................            0.5               0.6          (0.7)            (0.7)
                                                        ----------------  --------------  ---------------  ---------------
       Income (loss) before tax provision...........            0.6               5.3         (29.4)            (2.2)
       Provision for (recovery of)  income taxes....            0.3               1.7          (1.5)             0.9
                                                        ----------------  --------------  ---------------  ---------------
       Net income (loss)............................            0.3%              3.6%        (27.9)%           (3.1)%
                                                        ================  ==============  ===============  ===============
</TABLE>

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

     Revenue.  Revenue  decreased by $2.5  million  (16.3%) for the three months
ended  September  30, 2001 as compared to the three months ended  September  30,
2000.  This decrease was primarily due to decreases in revenue from software and
services  offset by an increase in hosting and IT services,  and maintenance and
support  revenue during the third quarter of 2001 relative to the same period in
2000.

     Software and  services  revenue  decreased by $3.1 million  (30.2%) for the
three  months  ended  September  30, 2001 as compared to the three  months ended
September 30, 2000.  The Company  believes its software and service  revenue was
adversely  impacted by an increase in time taken for the  decision  making cycle
and a reduction of capital expenditures by customers.  Customer delays in making
purchasing  decisions and reductions in expenditures  resulted in fewer customer
contracts and lower than anticipated  revenues from  implementation  of customer
contracts in the three months ended  September 30, 2001 as compared to the three
months ended September 30, 2000. The Company anticipates that continued economic
uncertainty in the  telecommunications and utility markets will continue to have
an adverse  impact on software  and  services  revenues in future  periods.  See
"Forward Looking Statements".



                                       16
<PAGE>

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

     Hosting and IT services (formerly e-Business) revenues primarily consist of
sales by the  Company's  subsidiary,  Connectria.  Revenue for the three  months
ended  September  30, 2001 was $2.8  million as compared to $1.8 million for the
three months ended  September  30, 2000.  Connectria's  revenues in both periods
consisted  primarily of revenues from consulting and hosting  services.  Hosting
and  IT  service  revenues  are  dependent  on a  small  number  of  significant
contracts.  One contract in particular  accounted for approximately 57% of total
hosting and IT services  revenues for the three month period ended September 30,
2001 as compared to approximately  46% of total hosting and IT services revenues
for the three month period ended September 30, 2000.

     Third party products and services revenue decreased by $0.7 million (69.4%)
for the three  months ended  September  30, 2001 as compared to the three months
ended  September 30, 2000.  These third party  products  typically  include host
computer  equipment  and  mobile  computing  devices,  delivered  as part of the
installation  of software and provision of services.  Revenue from deliveries of
third party products and services will fluctuate from period to period given the
timing and nature of  certain  contracts  and the  rollout  schedules  which are
established  primarily by the customers.  In addition,  not all customers  under
contract   require  the   provision  of  third  party   products  and  services.
Accordingly,  there may be large  fluctuations in revenue,  direct costs,  gross
profits and income from operations from one period to another.

     Maintenance and support revenue was $2.6 million for the three months ended
September  30,  2001 as  compared to $2.3  million  for the three  months  ended
September 30, 2000.  Maintenance and support revenue has increased primarily due
to the growth in the Company's installed customer base. Such revenue is expected
to fluctuate as it corresponds to the level of service the Company is engaged to
provide in support of its installations.

     Direct Costs. Direct costs were 51.6% of revenue for the three months ended
September 30, 2001 as compared to 49.1% for the three months ended September 30,
2000.  Direct costs include labor and other costs directly related to a project,
including the provision of services and support, production and costs related to
host equipment and mobile devices on behalf of third party product sales.  Labor
costs included direct payroll,  benefits and overhead  charges.  The increase in
direct  costs as a percentage  of revenue  resulted  from the Company  incurring
additional  costs for its first  Advantex  r7  installations.  As a result,  the
percentage  of direct  costs  compared to revenues  for the three  months  ended
September 30, 2001 increased as compared to the three months ended September 30,
2000. The Company expects that the dollar amount of direct costs attributable to
labour and rental  charges  will decline upon  completion  of the  restructuring
plan. See "Forward Looking Statements".

     Gross  Margins.  Gross  margins  were 48.4% of revenue for the three months
ended  September  30,  2001 as  compared  to 50.9%  for the three  months  ended
September  30, 2000.  The  decrease in gross  margin as a percentage  of revenue
relates  primarily  to the change in the mix of revenues and to higher costs for
the first  installations of Advantex r7. During the three months ended September
30, 2001, there was a decrease in software and services revenue, which typically
has a higher gross margin than the Company's  other  sources of revenue,  and an
increase in hosting and IT services revenues, which typically have lower margins
than  software and services  revenue.  These  factors  resulted in a decrease in
gross margin for the three months ended September 30, 2001 compared to the three
months  ended   September  30,  2000.  The  Company  expects  that  the  current
restructuring will enable the Company to maintain,  on a relative basis,  stable
gross margins in the near future. See "Forward Looking Statements".

     Research and Development.  Research and development  expenses were 14.6% of
revenue for the three months ended  September  30, 2001 and 14.5% of revenue for
the three  months  ended  September  30, 2000.  Total  research and  development
expenditures  for the three  months  ended  September  30, 2001 of $1.9  million
represents  a decrease  of  $355,000  (15.7%) as  compared to the same period in
2000. The decrease in research and  development  expenses in 2001 is a result of
the completion of the Advantex r7  development  project during the first quarter
of 2001. The Company  anticipates  continuing to commit a significant portion of
its product revenues to enhancement of existing  products and the development of
new  products,  resulting in an  anticipated  increase in the dollar  amounts of
research and development expenses.



                                       17
<PAGE>


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


     Sales and Marketing. Sales and marketing expenses were 20.4% of revenue for
the three  months  ended  September  30, 2001 and 19.7% of revenue for the three
months ended September 30, 2000. This represents a decrease of $405,000  (13.2%)
as  compared to the same  period in 2000.  The  decrease  was  primarily  due to
controls on spending  initiated  during 2001 in  conjunction  with the Company's
previously  announced  restructuring  program.  The Company anticipates that the
dollar  amounts  of  its  sales  and  marketing  expenses  will  continue  to be
significant  as a  result  of the  Company's  commitment  to  its  international
marketing efforts and attempt to penetrate additional markets for its products.

     General and Administrative.  General and administrative expenses were 13.1%
of revenue for the three  months ended  September  30, 2001 and 11.6% of revenue
for the three months ended September 30, 2000. Total general and  administrative
expenses of $1.7 million  represents a decrease of $97,000  (5.4%) for the three
months  ended  September  30, 2001 as  compared to the same period in 2000.  The
decrease is the result of a cost control effort  initiated by the Company in the
first and second  quarters of 2001 that was  designed  to control  discretionary
spending.   The  Company   expects  that  in  the  near   future,   general  and
administrative  expenditures  will remain  relatively  consistent  with  current
levels. See "Forward Looking Statements".

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

     Other Income (Expense). Other income was $71,000 for the three months ended
September  30, 2001 as compared to $89,000 for the three months ended  September
30, 2000.  Substantially  all of other  income  relates to  fluctuations  in the
currencies of the Company's foreign operations,  interest on cash and short term
deposits,  short-term  borrowings  under the line of credit  and  capital  lease
obligations.

     Income Taxes.  The Company provided for income tax recoveries on losses for
the three months ended September 30, 2001 at the rate of 46.0%,  after adjusting
for  the  amortization  and  impairment  of  intangible  assets.  The  Company's
effective  tax rate  reflects  the  blended  effect of  Canadian,  US, and other
foreign jurisdictions' tax rates.


Nine Months Ended September 30, 2001 Compared to the Nine Months Ended September
30, 2000

     Revenue. Revenue increased by $1.6 million (3.7%) for the nine months ended
September 30, 2001 as compared to the nine months ended September 30, 2000. This
increase  mainly relates to hosting and IT services  revenue and maintenance and
support revenue, partially offset by a decrease in software and service revenue.

     Software and  services  revenue  decreased by $5.2 million  (17.6%) for the
nine months  ended  September  30,  2001 as  compared  to the nine months  ended
September 30, 2000. The Company's  software and service  revenue was impacted by
an increase in time taken for the decision making cycle and reduction of capital
expenditures by customers.  Customer delays in making  purchasing  decisions and
reductions in expenditures  resulted in fewer customer  contracts and lower than
anticipated  revenues from  implementation of customer contracts for the Company
in the nine months ended September 30, 2001 as compared to the nine months ended
September  30,  2000 and as a result  the  reduction  in  revenue.  The  Company
anticipates that continued economic  uncertainty in the  telecommunications  and
utility markets will continue to have an adverse impact on software and services
revenues in future periods. See "Forward looking statements".



                                       18
<PAGE>


Nine Months Ended September 30, 2001 Compared to the Nine Months Ended September
30, 2000 (Continued)


     Hosting  and  IT  services  revenues  primarily  consist  of  sales  by the
Company's subsidiary,  Connectria.  Hosting and IT services revenue for the nine
months ended  September 30, 2001 was $10.8 million  compared to $4.9 million for
the nine months ended September 30, 2000.  Connectria's revenues in both periods
consisted  primarily of revenues from consulting and hosting  services.  Hosting
and  IT  service  revenues  are  dependent  on a  small  number  of  significant
contracts.  One contract in particular  accounted for approximately 52% of total
hosting and IT services  revenues in the nine months ended September 30, 2001 as
compared to approximately  42% of total hosting and IT services revenues for the
nine months ended September 30, 2000.

     Third-party products and services revenue decreased by $0.3 million (15.0%)
for the nine months ended  September  30, 2001 compared to the nine months ended
September 30, 2000. Revenue from deliveries of third-party products and services
will fluctuate  from period to period given the timing of certain  contracts and
the  rollout  schedules  which  are  established  primarily  by  the  customers.
Accordingly,  this may result in large  fluctuations  in revenue,  direct costs,
gross profits and income from operations from one period to another.

     Maintenance  and support revenue was $7.5 million for the nine months ended
September  30,  2001 as  compared  to $6.3  million  for the nine  months  ended
September 30, 2000.  Maintenance  and support  revenue  increased as a result of
growth in the Company's installed customer base.

     Direct Costs.  Direct costs were 53.9% of revenue for the nine months ended
September 30, 2001 as compared to 45.4% for the nine months ended  September 30,
2000.  Direct costs include labor and other costs directly related to a project,
including the provision of services and support, production and costs related to
host equipment and mobile devices on behalf of third party product sales.  Labor
costs included direct payroll,  benefits and overhead  charges.  The increase in
direct  costs as a percentage  of revenue  resulted  from the Company  incurring
additional  costs for its first  Advantex  r7  installations.  As a result,  the
percentage  of direct  costs  compared  to revenues  for the nine  months  ended
September 30, 2001 increased as compared to the nine months ended  September 30,
2000. The Company expects that the dollar amount of direct costs should decrease
once the restructuring is complete mainly due to a decrease in labour and rental
charges being incurred. See "Forward Looking Statements".

     Gross  Margins.  Gross  margins  were 46.1% of revenue  for the nine months
ended  September  30,  2001 as  compared  to  54.6%  for the nine  months  ended
September  30, 2000.  The  decrease in gross  margin as a percentage  of revenue
relates  primarily  to the change in the mix of revenues and to higher costs for
the first  installations  of Advantex r7. During the nine months ended September
30, 2001 there was a decrease in software and services revenue,  which typically
has a higher gross margin than the Company's  other  sources of revenue,  and an
increase  in hosting  and IT  services  (formerly  e-Business)  revenues,  which
typically have lower margins than software and services  revenue.  These factors
resulted in a decrease in gross margin for the nine months ended  September  30,
2001 compared to the nine months ended  September 30, 2000. The Company  expects
that the current  restructuring  will enable the Company to maintain  relatively
stable gross  margins in the near  future.  See  "Forward  Looking  Statements".

     Research and Development.  Research and development  expenses were 14.8% of
revenue for the nine months  ended  September  30, 2001 and 15.3% of revenue for
the nine months  ended  September  30,  2000.  Total  research  and  development
expenditures  for the nine  months  ended  September  30,  2001 of $6.6  million
represents an increase of $23,000 (0.4%) as compared to the same period in 2000.
The modest increase in the dollar amount of research and development expenses in
2001 is a result of the continued  development  and enhancement of the Company's
Advantex  products,  as well as development of the Company's  eService offering.
The Company intends to continue  committing a significant portion of its product
revenues to enhance existing products and develop new products,  resulting in an
anticipated increase in the dollar amounts of research and development expenses.



                                       19
<PAGE>

Nine Months Ended September 30, 2001 Compared to the Nine Months Ended September
30, 2000 (Continued)


     Sales and Marketing. Sales and marketing expenses were 22.1% of revenue for
the nine  months  ended  September  30,  2001 and 21.5% of revenue  for the nine
months ended  September  30, 2000.  This  represents an increase of $0.6 million
(6.4%) as compared to the same period in 2000. The increase was primarily due to
an increase in marketing,  sales and technical support personnel  supporting the
Company's  increased product offerings  including Advantex r7 and hosting and IT
services  initiatives  in the current  year.  This increase more than offset the
cost savings due to controls on spending  initiated  during the third quarter of
the current year. The Company  anticipates  that the dollar amounts of its sales
and  marketing  expenses  will  continue  to be  significant  as a result of the
Company's commitment to its international  marketing efforts, and initiatives to
penetrate additional markets for its products.

     General and Administrative.  General and administrative expenses were 11.6%
of revenue for the nine months ended September 30, 2001 and 14.0% of revenue for
the nine months ended  September  30,  2000.  Total  general and  administrative
expenses of $5.2 million  represents a decrease of $0.8 million  (13.8%) for the
nine months ended  September  30, 2001,  as compared to the same period in 2000.
The decrease is the result of a cost control effort  initiated by the Company in
the first quarter of 2001 that was designed to control discretionary spending.

     Restructuring  Charge. During the nine months ended September 30, 2001, the
Company announced a restructuring, designed to increase operational efficiencies
and reduce costs. As part of the restructuring, the Company recorded a provision
of $6.1  million  for the nine  months  ended  September  30,  2001  relating to
severance,  subleasing  of excess  office  space,  and the  writedown of surplus
capital  assets.  As of  September  30,  2001,  the  Company had drawn down $2.7
million of its restructuring provision.

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

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

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

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

     Other  Income  (Expense).  Other  expense was  $301,000 for the nine months
ended  September  30,  2001,  as compared to $300,000  for the nine months ended
September 30, 2000. Substantially all of other income relates to fluctuations in
the currencies of the Company's  foreign  operations,  interest  income on cash,
short-term deposits,  short-term borrowings under the line of credit and capital
lease obligations.



                                       20
<PAGE>

Nine Months Ended September 30, 2001 Compared to the Nine Months Ended September
30, 2000 (Continued)

     Income Taxes.  The Company  provided for recovery of income taxes on losses
for the  nine  months  ended  September  30,  2001 at the  rate of  5.9%,  after
adjusting for the amortization of intangible assets. The Company's effective tax
rate   reflects  the  blended   effect  of  Canadian,   US  and  other   foreign
jurisdictions'  tax rates.  Since the  Company  has  incurred a loss  during the
period  and  there is no  certainty  the  Company  will be able to  utilize  the
benefits of these  losses,  the Company did not record a full recovery of income
tax expense during the nine months ended September 30, 2001.


Recently Issued Accounting Pronouncements

     In July 2001, the Financial  Accounting Standards Board issued Statement of
Financial  Accounting Standard (SFAS) No. 141, "Business  Combinations" and SFAS
No. 142,  "Goodwill  and Other  Intangible  Assets".  SFAS No. 141 requires that
business  combinations  be accounted for under the purchase method of accounting
and  addresses  the initial  recognition  and  measurement  of assets  acquired,
including  goodwill  and  intangibles,  and  liabilities  assumed  in a business
combination.  SFAS No. 142 bases its  guidelines  for accounting for goodwill on
the notion that acquired  entities are generally  integrated  into the acquiring
entity  and  that  goodwill  should  be  assessed  as part of the  combined,  or
reporting, unit. Further, SFAS No. 142 specifies that goodwill will no longer be
amortized,  but instead will be subject to impairment  tests at least  annually.
Goodwill  impairment  will be  determined  by applying a two-step  process  that
begins with  evaluating the fair value of a reporting unit to identify  possible
impairment and then a measurement of the magnitude of the impairment.

     As a  result  of  implementing  SFAS  No.  142,  it is  expected  that  the
amortization  of goodwill will stop as of December 31, 2001. The Company will be
required to assess  goodwill and other  intangible  assets  acquired in previous
acquisitions as well as their useful lives at least annually.

     The  Company is  required  to adopt  SFAS No. 141 and 142 on a  prospective
basis as of January 1, 2002; however,  certain provisions of these new Standards
may also apply to any  acquisitions  concluded  subsequent to June 30, 2001. The
adoption of SFAS No. 141 and 142 is not  expected  to have a material  effect on
the Company's financial  position,  results of operations and cash flows in 2002
and subsequent years."


Liquidity and Capital Resources

     The Company finances its operations,  acquisitions and capital expenditures
with cash generated from operations,  lines of credit,  capital leases,  private
placements and public  offerings of its  securities.  At September 30, 2001, the
Company had cash and cash  equivalents  of $11.4 million and working  capital of
$18.0 million.

     Cash  provided by (used in) operating  activities  was $0.8 million for the
nine months ended  September  30, 2001  compared to $(2.2)  million for the nine
months  ended  September  30,  2000.  The  net  inflow  of cash  from  operating
activities,  after adding back depreciation and amortization of $4.5 million and
the valuation allowance on investments of $2.8 million, is due to a net decrease
in  non-cash  working  capital  items of $5.5  million,  a write down in capital
assets of $0.6 million, a stock based compensation charge of $0.3 million, and a
net loss of ($12.4)  million for the nine months ending  September 30, 2001. The
net decrease in non-cash  operating  working capital items is due primarily to a
net decrease in unbilled trade receivables,  a decrease in trade receivables and
an increase in accrued  liabilities.  The decrease in unbilled trade receivables
is due to timing  differences  arising between  revenue  recognition and billing
milestones in certain multiphase implementations,  as well as the Company having
met  certain  milestones  on  Advantex  implementations.  The  decrease in trade
receivables  is a result of increased  collections  during the nine months ended
September  30,  2001.  The  increase  in accruals  is due to the  provision  for
restructuring taken during the nine months ended September 30, 2001.

     Cash used in financing  activities  of $1.7 million  during the nine months
ended  September  30, 2001  primarily  relates to $1.7 million in  repayments of
capital  leases made  during the  quarter.  The capital  leases are to be



                                       21
<PAGE>

repaid evenly over a 36 month period ending  December 22, 2003, bear interest at
7.675% and are secured by certain  computer  hardware and software assets of the
Company.

     Cash used in  investing  activities  was $1.3  million  for the nine months
ended  September  30, 2001 as compared to $7.3 million for the nine months ended
September  30,  2000.  Total  investing  activity  during the nine months  ended
September  30, 2001  consisted of $1.8  million in purchases of capital  assets,
offset by  proceeds  on  settlement  of a note  receivable  of  $331,000,  and a
$134,000 net decrease in lease  receivable.  Purchases of capital assets include
computer  hardware  and  software for use in  implementation  activities  and to
support the growth of the hosting and IT services  operations.  The  proceeds on
settlement  of the note  receivable  related to a note the  Company  received as
partial  payment on sale of its  Transportation  Business Unit in 1999. The note
was due and  paid in full on  January  1,  2001.  Investing  activities  in 2000
related  primarily  to  purchases  of  capital  assets,  and the  investment  in
preferred stock of two internet based Companies.

     Existing  sources of liquidity at September  30, 2001 include $11.4 million
of cash and cash  equivalents  and up to CDN $8.0  million  available  under the
Company's operating line of credit. Under the terms of the agreement, borrowings
and  letters  of credit  under the line are  limited  to 60% to 90% of  eligible
accounts  receivable.  Borrowings  accrue interest at the bank's prime rate plus
0.5%.  At September 30, 2001,  the Company had no  borrowings  under the line of
credit.

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



                                       22
<PAGE>

ITEM 3: QUANTITIATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

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

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

     As of September 30, 2001, the potential reduction in future earnings from a
hypothetical  instantaneous 10% change in quoted foreign currency exchange rates
applied to the foreign  currency  sensitive  contracts,  assets and  liabilities
would be  approximately  $3.6  million.  The majority of the  Company's  foreign
exchange  exposure is to the Canadian dollar.  The foreign currency  sensitivity
model is limited by the  assumption  that all foreign  currencies,  to which the
Company  is  exposed,  would  simultaneously  change by 10%.  Such  synchronized
changes  are  unlikely  to occur.  The  sensitivity  model does not  include the
inherent risks associated with anticipated  future  transactions  denominated in
foreign  currencies  or  future  forward  contracts  entered  into  for  hedging
purposes.

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





                                       23
<PAGE>

PART II -  OTHER INFORMATION

     ITEM 1. LEGAL PROCEEDINGS

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

     On November 22, 2000, MDSI filed suit in Texas District Court Collin County
against Citizens Telecom Services Co. L.L.C.,  generally  alleging that Citizens
breached a series of contracts dated October 15, 1998. The contract related to a
license and MDSI's  installation  of one of its systems for  Citizens.  The suit
alleges that Citizens has wrongfully  terminated the contracts and failed to pay
sums due. The suit seeks damages, interest and attorneys' fees. In late February
2001, Citizens filed an answer and counter claim alleging that MDSI breached the
contracts,  justifying  Citizens'  termination  of  the  contracts  and  seeking
repayment of all sums paid to MDSI in addition to interest and attorneys'  fees.
Citizens requested and MDSI agreed to mediate the dispute.  Mediation took place
on April 3, 2001,  with no settlement  being reached.  The parties  subsequently
agreed to postpone the litigation  proceedings  in order to continue  settlement
discussions. If a satisfactory settlement is not reached, MDSI intends to pursue
the lawsuit vigorously.

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

     ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

          (a)  Sales of Unregistered Securities

               None.

          (b)  Use of Proceeds from Sales of Registered Securities

               None.

     ITEM 3. DEFAULTS UPON SENIOR SECURITIES

               None.

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

               None.

     ITEM 5. OTHER INFORMATION

               None.

     ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits

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



                                       24
<PAGE>
Exhibit
Number         Description
-------        -----------
 3.1(1)        Articles of Incorporation of the Company

 3.2(1)        Articles of Amendments of the Company

 3.3(1)        By-laws of the Company

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

10.1(1)(2)     1997 Stock Option Plan

10.2(2)(4)     1998 Stock Option Plan

10.3(2)(4)     Stock Purchase Plan

10.4(2)(6)     Stock Purchase Plan

10.5(2)(6)     1999 Stock Option Plan

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

10.7(2)(8)     2000 Stock Option Plan

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

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

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

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

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

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

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

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

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

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



                                       25
<PAGE>
Exhibit
Number         Description
-------        -----------
10.18(9)       Agreement  and Plan of  Reorganization,  dated as of May 9, 2000,
               among MDSI, MDSI Acquisition Corporation,  Connectria and Certain
               Principal Shareholders.*

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

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

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

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

21.1(10)       List of the Company's Subsidiaries.

23.1(10)       Consent of Deloitte & Touche LLP.

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

(1)  Previously  filed as exhibits with the same  corresponding  number with the
     Registrants' Registration Statement on Form F-1 (Registration No. J33-5872)
     and  amendments  numbers 1 and 2  thereto,  filed with the  Securities  and
     Exchange Commission on October 28, 1996, November 13, 1996 and November 25,
     1996, respectively.
(2)  This document has been identified as a management  contract or Compensatory
     plan or arrangement.
(3)  Previously  filed as an exhibit to Registrant's  Registration  Statement On
     Form F-4.
(4)  Previously  filed as exhibits with the same  corresponding  number with The
     Registrant's Form 10-K for the year ended December 31, 1998.
(5)  Previously  filed as exhibits with the same  corresponding  number with The
     Registrant's Form 10-Q for the quarterly period ended September 30, 1999.
(6)  Previously  filed as exhibits with the same  corresponding  number with The
     Registrant's Form 10-K for the year ended December 31, 1999.
(7)  Previously filed as exhibits with the Registrant's  Registration  Statement
     on Form S-8 filed on July 12, 2000.
(8)  Previously filed as exhibits with the Registrant's  Registration  Statement
     on Form S-8 filed on November 22, 2000.
(9)  Previously filed as exhibits with the  Registrant's  Current Report on Form
     8-K filed on June 15, 2000.
(10) Previously  filed as exhibits with the  Registrant's  Annual Report on Form
     10-K on April 2, 2001.

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

     (b)  Reports on Form 8-K

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

               Form 8-K filed on July 7, 2001



                                       26
<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:  November 14, 2001               By: /s/ Erik Dysthe
                                           ----------------------------------
                                           Name:    Erik Dysthe
                                           Title:   Chief Executive Officer




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





                                       27
<PAGE>


                                  EXHIBIT INDEX

Exhibit
Number         Description
-------        -----------

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

 3.1(1)        Articles of Incorporation of the Company

 3.2(1)        Articles of Amendments of the Company

 3.3(1)        By-laws of the Company

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

10.1(1)(2)     1997 Stock Option Plan

10.2(2)(4)     1998 Stock Option Plan

10.3(2)(4)     Stock Purchase Plan

10.4(2)(6)     Stock Purchase Plan

10.5(2)(6)     1999 Stock Option Plan

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

10.7(2)(8)     2000 Stock Option Plan

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

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

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

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


<PAGE>

Exhibit
Number             Description

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

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

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

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

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

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

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

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

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

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

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

21.1(10)       List of the Company's Subsidiaries.

23.1(10)       Consent of Deloitte & Touche LLP.

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

(1)  Previously  filed as exhibits with the same  corresponding  number with the
     Registrants' Registration Statement on Form F-1 (Registration No. J33-5872)
     and  amendments  numbers 1 and 2  thereto,  filed with the  Securities  and
     Exchange Commission on October 28, 1996, November 13, 1996 and November 25,
     1996, respectively.
(2)  This document has been identified as a management  contract or Compensatory
     plan or arrangement.
(3)  Previously  filed as an exhibit to Registrant's  Registration  Statement On
     Form F-4.
(4)  Previously  filed as exhibits with the same  corresponding  number with The
     Registrant's Form 10-K for the year ended December 31, 1998.
(5)  Previously  filed as exhibits with the same  corresponding  number with The
     Registrant's Form 10-Q for the quarterly period ended September 30, 1999.
(6)  Previously  filed as exhibits with the same  corresponding  number with The
     Registrant's Form 10-K for the year ended December 31, 1999.
(7)  Previously filed as exhibits with the Registrant's  Registration  Statement
     on Form S-8 filed on July 12, 2000.
(8)  Previously filed as exhibits with the Registrant's  Registration  Statement
     on Form S-8 filed on November 22, 2000.
(9)  Previously filed as exhibits with the  Registrant's  Current Report on Form
     8-K filed on June 15, 2000.
(10) Previously  filed as exhibits with the  Registrant's  Annual Report on Form
     10-K on April 2, 2001.