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

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

                                    FORM 10-Q


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

     For the quarterly period ended June 30, 2002

                                       OR

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

     For the transition period from  ________________ to  ___________________.

                         Commission file number 0-28968


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

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


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


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

     The number of outstanding  shares of the Registrant's  common stock, no par
value, at August 12, 2002 was 8,189,802.


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


<PAGE>











                         MDSI Mobile Data Solutions Inc.

                             INDEX TO THE FORM 10-Q
                  For the quarterly period ended June 30, 2002

                                                                          Page

PART I -  FINANCIAL INFORMATION*

  ITEM 1. FINANCIAL STATEMENTS

          CONDENSED CONSOLIDATED BALANCE SHEETS..............................1

          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS................... 2

          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS....................3

          NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS...........4

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

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

PART II - OTHER INFORMATION

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

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

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

SIGNATURES..................................................................25



                                      -i-

<PAGE>

Part I -  Financial Information

Item 1. Financial Statements


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


<TABLE>
                                                                                             As at
                                                                                  June 30,        December 31,
                                                                               --------------------------------
                                                                                    2002              2001
                                                                               --------------     -------------
<S>                                                                             <C>               <C>
ASSETS
CURRENT ASSETS
   Cash and cash equivalents                                                    $10,541,566       $ 13,176,080
   Accounts receivable, net
      Trade (net of allowance for doubtful accounts $3,502,273;
        2001 - $3,587,303)                                                        8,385,093          9,229,663
      Unbilled                                                                    4,029,926          4,331,924
   Income taxes receivable                                                          582,570            366,506
   Prepaid expenses and other assets                                              1,534,278          1,866,458
                                                                               --------------     -------------
                                                                                 25,073,433         28,970,631

CAPITAL ASSETS, NET                                                               6,883,454          7,635,248

LONG TERM ACCOUNTS RECEIVABLE                                                     3,749,860          3,749,860

LONG TERM DEFERRED TAXES                                                            534,640            364,640
                                                                               --------------     -------------
                                                                                 36,241,387         40,720,379

ASSETS OF DISCONTINUED OPERATIONS (note 2)                                        3,792,274          3,856,440
                                                                               --------------     -------------
TOTAL ASSETS                                                                   $ 40,033,661       $ 44,576,819
                                                                               ==============     =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
   Accounts payable                                                               1,727,158          1,961,656
   Accrued liabilities                                                            4,480,371          5,421,807
   Deferred revenue                                                               7,422,251          7,685,068
   Current obligations under capital leases                                       1,896,236          1,984,018
                                                                               --------------     -------------
                                                                                 15,526,016         17,052,549

OBLIGATIONS UNDER CAPITAL LEASES                                                    414,882          1,301,996
                                                                               --------------     -------------
                                                                                 15,940,898         18,354,545

LIABILITIES OF DISCONTINUED OPERATIONS (note 2)                                   1,262,034          1,747,521
                                                                               --------------     -------------
                                                                                 17,202,932         20,102,066
STOCKHOLDERS' EQUITY
   Common stock                                                                  48,758,136         48,519,060
   Additional paid-up capital                                                       522,621            522,621
   Treasury stock                                                                   (85,043)           (85,043)
   Deficit                                                                      (25,674,881)       (23,791,781)
   Comprehensive Income                                                            (690,104)          (690,104)
                                                                               --------------     -------------
                                                                                 22,830,729         24,474,753
                                                                               --------------     -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                      $40,033,661       $ 44,576,819
                                                                               ==============     =============
</TABLE>

Contingency (note 8)

            See Notes to Condensed Consolidated Financial Statements


                                      -1-
<PAGE>


<TABLE>

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



                                                             Three months ended June 30,         Six months ended June 30,
                                                          --------------------------------    -------------------------------
                                                                2002            2001               2002              2001
                                                          --------------   ---------------    --------------   ---------------
<S>                                                        <C>              <C>               <C>               <C>
REVENUE
  Software and services                                    $  4,885,062     $  7,713,545      $ 10,692,155      $ 17,451,278
  Maintenance and support                                     2,866,478        2,434,330         5,423,551         4,890,934
  Third party products and services                             279,431          292,479           515,821         1,409,051
                                                          --------------   ---------------    --------------   ---------------
                                                              8,030,971       10,440,354        16,631,527        23,751,263

DIRECT COSTS                                                  3,490,743        4,836,038         7,121,062        11,588,075
                                                          --------------   ---------------    --------------   ---------------
GROSS PROFIT                                                  4,540,228        5,604,316         9,510,465        12,163,188
                                                          --------------   --------------     --------------   --------------
OPERATING EXPENSES
  Research and development                                    1,498,948        1,867,791         2,958,983         4,043,098
  Sales and marketing                                         3,912,177        3,266,139         6,326,070         6,307,466
  General and administrative                                  1,529,565        1,539,483         3,194,007         3,024,590
  Restructuring Charge (note 6)                                       -        4,905,927                 -         6,105,927
  Provision for doubtful accounts                                     -                -                 -         1,202,634
  Amortization and provision for valuation
   of intangible assets (note 5)                                      -           11,000                 -         1,648,058
                                                          --------------   --------------     --------------   --------------
                                                              6,940,690       11,590,340        12,479,060        22,331,773
                                                          --------------   ---------------    --------------   ---------------
OPERATING LOSS
                                                             (2,400,462)      (5,986,024)       (2,968,595)      (10,168,585)
VALUATION ALLOWANCE ON INVESTMENTS (note 7)                           -                -                 -        (2,749,992)

OTHER INCOME (EXPENSE)                                           86,032         (295,154)          162,264          (331,202)
                                                          --------------   ---------------    --------------   ---------------
LOSS FROM CONTINUING OPERATIONS BEFORE TAX PROVISION         (2,314,430)      (6,281,178)       (2,806,331)      (13,249,779)

RECOVERY OF INCOME TAXES                                       (688,919)         (22,538)         (814,619)         (715,702)
                                                          --------------   ---------------    --------------   ---------------
NET LOSS FOR THE PERIOD  FROM CONTINUING OPERATIONS          (1,625,511)      (6,258,640)       (1,991,712)      (12,534,077)

INCOME (LOSS) FROM DISCONTINUED OPERATIONS (note 2)              22,196          (31,611)          108,612            89,741
                                                          --------------   ---------------    --------------   ---------------
NET LOSS FOR THE PERIOD                                      (1,603,315)      (6,290,251)       (1,883,100)      (12,444,336)

DEFICIT, BEGINNING OF PERIOD                                (24,071,566)     (15,839,173)      (23,791,781)       (9,685,088)
                                                          ==============   ===============    ==============   ===============
DEFICIT, END OF PERIOD                                     $(25,674,881)    $(22,129,424)     $(25,674,881)     $(22,129,424)
                                                          ==============   ===============    ==============   ===============
Loss per common share
Loss from continuing operations
  Basic                                                    $      (0.18)    $      (0.73)     $      (0.23)     $      (1.45)
                                                          ==============   ===============    ==============   ===============
  Diluted                                                  $      (0.18)    $      (0.73)     $      (0.23)     $      (1.45)
                                                          ==============   ===============    ==============   ===============
Net loss
  Basic                                                    $      (0.18)    $      (0.73)     $      (0.21)     $      (1.44)
                                                          ==============   ===============    ==============   ===============
  Diluted                                                  $      (0.18)    $      (0.73)     $      (0.21)     $      (1.44)
                                                          ==============   ===============    ==============   ===============
Weighted average shares outstanding
  Basic                                                       8,843,392        8,621,897         8,784,657         8,620,548
                                                          ==============   ===============    ==============   ===============
  Diluted                                                     8,843,392        8,621,897         8,784,657         8,620,548
                                                          ==============   ===============    ==============   ===============

</TABLE>

            See Notes to Condensed Consolidated Financial Statements



                                      -2-
<PAGE>

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




                                                                                      Six months ended June 30,
                                                                                 ------------------------------------
                                                                                       2002                2001
                                                                                 -----------------   ----------------
<S>                                                                                <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss from continuing operations                                             $  (1,991,712)     $ (12,534,077)
   Items not affecting cash:
     Depreciation, amortization and provision for
        valuation of intangible assets                                                 1,437,204          3,177,064
     Write down in value of surplus capital assets                                             -            563,780
     Valuation allowance on investments                                                        -          2,749,992
     Stock based compensation charge                                                           -            301,921
     Deferred income taxes                                                              (170,000)          (361,000)
     Changes in non-cash operating working capital items                                (176,067)         7,601,699
                                                                                 -----------------   ----------------
   Net cash (used in) provided by operating activities                                  (900,575)         1,499,349
                                                                                 -----------------   ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
   Issuance of common shares                                                             239,076             97,032
   Repayment of capital leases                                                          (974,896)        (1,128,986)
                                                                                 -----------------   ----------------
   Net cash used by financing activities                                                (735,820)        (1,031,954)
                                                                                 -----------------   ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
   Long term lease receivable                                                                  -            133,723
   Proceeds on settlement of investments                                                       -            331,458
   Acquisition of capital assets                                                        (685,410)        (1,107,140)
                                                                                 -----------------   ----------------
   Net cash used in investing activities                                                (685,410)          (641,959)
                                                                                 -----------------   ----------------
   Net cash used by continuing operations                                             (2,321,805)          (174,564)

   Net cash used by discontinued operations (note 2)                                    (312,709)          (652,498)
                                                                                 -----------------   ----------------
NET CASH OUTFLOW                                                                      (2,634,514)          (827,062)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                        13,176,080         12,864,981
                                                                                 -----------------   ----------------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                           $  10,541,566      $  12,037,919
                                                                                 =================   ================
</TABLE>


            See Notes to Condensed Consolidated Financial Statements



                                      -3-
<PAGE>

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



1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     (a)  Basis of presentation

          These  financial  statements  have been  prepared in  accordance  with
          accounting  principles  generally  accepted  in the United  States for
          interim  financial  reporting and pursuant to the  instructions of the
          United States Securities and Exchange Commission Form 10-Q and Article
          10 of Regulation  S-X. While these  financial  statements  reflect all
          normal recurring  adjustments which are, in the opinion of management,
          necessary for fair  presentation of the results of the interim period,
          they do not include all of the information  and footnotes  required by
          generally  accepted  accounting   principles  for  complete  financial
          statements. For further information, refer to the financial statements
          and  footnotes  thereto  included in the Annual  Report of MDSI Mobile
          Data  Solutions  Inc. (the "Company" or "MDSI") filed on Form 10-K for
          the year ended December 31, 2001.

     (b)  Use of estimates

          The preparation of financial  statements in conformity with accounting
          principles generally accepted in the United States requires management
          to make estimates and assumptions  that affect the reported amounts of
          assets and liabilities at the date of the financial statements and the
          reported  amounts  of  revenues  and  expenses  during  the  reporting
          periods.  Estimates  are used for, but not limited to, the  accounting
          for  doubtful  accounts,   amortization,   determination  of  the  net
          recoverable  value  of  assets,   revenue   recognized  on  long  term
          contracts,  taxes and contingencies.  Actual results could differ from
          those estimates.

     (c)  Reporting Currency

          The  Company  changed  its  reporting  currency  to  the  U.S.  dollar
          effective  January 1, 2000. The change in reporting  currency was made
          to improve  investors'  ability to compare the Company's  results with
          those of most other publicly traded businesses in the industry.  These
          consolidated   financial   statements  and  those  amounts  previously
          reported  in  Canadian  dollars  have been  translated  from  Canadian
          dollars to U.S.  dollars by translating  assets and liabilities at the
          rate in effect at the  respective  balance sheet date and revenues and
          expenses at the average rate for the reporting  period.  Any resulting
          foreign exchange gains and losses are recorded as a separate component
          of  shareholder  equity and  described  as  accumulated  comprehensive
          income (loss).  There was no effect on comprehensive income for any of
          the periods presented in this report.

     (d)  Recently issued accounting standards

          In July 2001, the Financial Accounting Standards Board ("FASB") issued
          Statement  of Financial  Accounting  Standards  No. 141 ("SFAS  141"),
          "Business  Combinations."  SFAS 141 requires  the  purchase  method of
          accounting for business combinations initiated after June 30, 2001 and
          eliminates the  pooling-of-interests  method. The adoption of SFAS 141
          has  not  had  a  significant   impact  on  the  Company's   financial
          statements.

          In July  2001,  the FASB  issued  Statement  of  Financial  Accounting
          Standards  No.  142  ("SFAS  142"),  "Goodwill  and  Other  Intangible
          Assets", which is effective January 1, 2002. SFAS 142 requires,  among
          other  things,  the  discontinuance  of  goodwill   amortization.   In
          addition, the standard includes provisions for the reclassification of
          certain existing recognized  intangibles as goodwill,  reassessment of
          the useful lives of existing recognized intangibles,  reclassification
          of certain  intangibles  out of previously  reported  goodwill and the
          identification of reporting units for purposes of assessing  potential
          future impairments of goodwill.  SFAS 142 also requires the Company to
          complete a transitional  goodwill  impairment test six months from the
          date of adoption.  The adoption of SFAS 142 has not had a  significant
          impact on the Company's financial statements.



                                      -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 (continued)

          In October  2001,  the FASB issued SFAS No. 144,  "Accounting  for the
          Impairment or Disposal of Long-Lived Assets." This statement addresses
          financial  accounting  and reporting for the impairment or disposal of
          long-lived assets.  This statement  supersedes FASB Statement No. 121,
          "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
          Assets to Be Disposed Of," and the accounting and reporting provisions
          of APB  Opinion  No.  30,  "Reporting  the  Results  of  Operations  -
          Reporting  the Effects of  Disposal  of a Segment of a  Business,  and
          Extraordinary,   Unusual  and   Infrequently   Occurring   Events  and
          Transactions."  This  Statement  also amends ARB No. 7,  "Consolidated
          Financial Statements," to eliminate the exception to consolidation for
          a  subsidiary  for  which  control  is likely  to be  temporary.  This
          Statement  requires that one  accounting  model be used for long-lived
          assets to be disposed of by sale,  whether previously held and used or
          newly  acquired.  This  Statement  also broadens the  presentation  of
          discontinued  operations  to include more disposal  transactions.  The
          provisions  of this  standard have been adopted as at the beginning of
          fiscal  2002 and  have  had no  significant  impact  on the  Company's
          financial statements.

          In June 2002,  the FASB issued SFAS No. 146 ("SFAS 146"),  "Accounting
          for Costs  Associated  with  Exit or  Disposal  Activities".  SFAS 146
          requires  that the  liability  for a cost  associated  with an exit or
          disposal  activity be  recognized at its fair value when the liability
          is incurred.  Under  previous  guidance,  a liability for certain exit
          costs was recognized at the date that management  committed to an exit
          plan,  which  was  generally  before  the  actual  liability  had been
          incurred.  As  SFAS  146  is  effective  only  for  exit  or  disposal
          activities  initiated  after  December 31, 2002,  the Company does not
          expect the adoption of this statement to have a material impact on the
          Company's financial statements.


2.   DISCONTINUED OPERATIONS

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

     The  disposition  of the business has been  accounted for as a discontinued
     operation and accordingly,  the results of operations,  financial  position
     and cash flow of this  business  are  segregated  from those of  continuing
     operations for the current and prior  periods.  The Company has included in
     the results of  discontinued  operations,  the sale proceeds,  the costs of
     disposition,  the results of operations  from the  measurement  date to the
     period  end and does not  expect  to have any  significant  gain or loss on
     disposal. The transaction subsequently closed in July 2002 and as a result,
     the Company will recognize a small gain in the third quarter of 2002.



                                      -5-
<PAGE>

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


2.   DISCONTINUED OPERATIONS (continued)

     Summarized  financial  information  of the  discontinued  operations  is as
     follows:

<TABLE>
     Results of discontinued operations                              Three months ended,          Three months ended,
     ----------------------------------------------------------------------------------------------------------------
                                                                        June 30, 2002                June 30, 2001
                                                                     -------------------          -------------------
        <S>                                                           <C>                          <C>
        Revenues                                                       $     2,417,890              $     3,572,810
        Income (loss) before income taxes                                       22,196                      (31,611)
        Income tax                                                                   -                            -
                                                                     -------------------          -------------------
                                                                                22,196                      (31,611)
        Estimated loss on future operations and disposal
           net of income taxes                                                       -                            -
                                                                     -------------------          -------------------
        Income (loss) from discontinued operations                     $        22,196              $       (31,611)
                                                                     ===================          ===================
</TABLE>

<TABLE>
     Results of discontinued operations                               Six months ended,            Six months ended,
     ----------------------------------------------------------------------------------------------------------------
                                                                        June 30, 2002                June 30, 2001
                                                                     -------------------          -------------------
        <S>                                                           <C>                          <C>
        Revenues                                                       $     5,058,101              $     7,773,002
        Income before income taxes                                             108,612                       89,741
        Income tax                                                                   -                            -
                                                                     -------------------          -------------------
                                                                               108,612                       89,741
        Estimated loss on future operations and disposal
           net of income taxes                                                       -                            -
                                                                     -------------------          -------------------
        Income from discontinued operations                            $       108,612              $        89,741
                                                                     ===================          ====================
</TABLE>

<TABLE>

     Financial position of discontinued operations                         As at,                        As at,
     ----------------------------------------------------------------------------------------------------------------
                                                                        June 30, 2002              December 31, 2001
                                                                     -------------------          -------------------
        <S>                                                           <C>                          <C>
        Current assets                                                 $     2,420,930              $     2,242,633
        Long term assets                                                     1,371,344                    1,613,807
                                                                     -------------------          -------------------
        Total assets of discontinued operations                        $     3,792,274              $     3,856,440
                                                                     ===================          ====================
        Current liabilities                                            $     1,055,370              $     1,426,638
        Long term liabilities                                                  206,664                      320,883
                                                                     -------------------          -------------------
        Total liabilities of discontinued operations                   $     1,262,034              $     1,747,521
                                                                     ===================          ====================
</TABLE>

<TABLE>
     Changes in cash flow of discontinued operations                  Six months ended,            Six months ended,
     ----------------------------------------------------------------------------------------------------------------
                                                                        June 30, 2002                June 30, 2001(1)
                                                                     -------------------          -------------------
        <S>                                                           <C>                          <C>
        Operating activities                                           $       (51,500)             $         3,023
        Investing activities                                                   (43,775)                    (583,819)
        Financing activities                                                  (217,434)                     (71,702)
                                                                     -------------------          -------------------
        Cash used for discontinued operations                          $      (312,709)             $      (652,498)
                                                                     ===================          ====================

     (1)  Cash generated from operating activities for the six months ended June
          30, 2001 includes $118,272  generated by the Company's  Transportation
          Business Unit, previously disclosed as a discontinued  operation,  and
          $(120,329) used in the operating activities of Connectria.

</TABLE>


                                      -6-
<PAGE>


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



3.   SEGMENTED INFORMATION

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

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

<TABLE>
                                          Three months ended June 30,      Six months ended June 30,
                                        -------------------------------   ----------------------------
                                             2002              2001            2002           2001
                                        --------------    -------------   -------------   ------------
         <S>                            <C>            <C>             <C>             <C>
          Canada....................      $   243,774     $    358,761    $    494,904    $    636,637
          United States.............        5,616,244        8,039,082      12,050,033      17,194,468
          Europe....................        2,001,552        1,884,588       3,917,189       4,927,058
          Asia and other............          169,401          157,923         169,401         993,100
                                        --------------    -------------   -------------   ------------
                                          $ 8,030,971     $ 10,440,354    $ 16,631,527    $ 23,751,263
                                        ==============    =============   =============   =============
</TABLE>


4.   EARNINGS (LOSS) PER COMMON SHARE

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

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


<TABLE>
                                                                 Three months ended                  Six months ended
                                                                      June 30,                           June 30,
                                                             -----------------------------      ------------------------------
                                                                 2002             2001              2002              2001
                                                             ------------     ------------      ------------      ------------
         <S>                                                 <C>              <C>               <C>               <C>
          Basic weighted average shares outstanding...         8,843,392        8,621,897         8,784,657         8,620,548
          Effect of dilutive securities;
          Stock options...............................                 -                -                 -                 -

                                                             ------------     ------------      ------------      ------------
          Diluted weighted average shares outstanding          8,843,392        8,621,897         8,784,657         8,620,548
                                                             ============     ============      ============      ============
</TABLE>


                                      -7-
<PAGE>

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


5.   INTANGIBLE ASSETS

<TABLE>
                                                                          June 30,               December 31,
                                                                            2002                    2001
                                                                      ----------------         ---------------
      <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            (2,835,751)              (2,835,751)
                                                                      ----------------         ---------------
                                                                       $           -             $          -
                                                                      ================         ===============
</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 year ended
     December 31, 2001. The Company determined an impairment had occurred due to
     poor current and forecasted performance in the acquired Company's business.
     As a result of this impairment the Company  recorded 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.

     During the year ended December 31, 2001 the Company announced that it would
     not direct future resources to develop its e-Service  Manager product line.
     As a result the Company has taken a valuation  allowance in its Hosting and
     IT business  segment of $165,000 which was equal to the remaining  value of
     the  commercial  web site domain name  purchased  to support the  e-Service
     Manager product.


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.  In connection with the March 30, 2001 restructuring the Company
     recorded a charge of $1.2  million  for the three  months  ended  March 31,
     2001. On May 11, 2001,  the Company  announced a Board  approved  update to
     this plan, that resulted in the elimination of an additional 115 positions.
     As part of the May 11, 2001 restructuring, the Company recorded a charge of
     $4.9  million,  resulting  in a total charge to earnings for the year ended
     December 31, 2001 of $6.1  million.  These  charges  were  reflected in the
     "restructuring charge" line item of the Company's Consolidated Statement of
     Operations. A breakdown of the nature of the charges and the costs incurred
     to date is as follows:

<TABLE>
                                                                          Total Restructuring
                                                                                 Charge
                                                                          -------------------
           <S>                                                            <C>
            Workforce reduction                                                 $ 3,375,000
            Provision for excess office space                                     1,861,000
            Non cash writedown of capital assets                                    563,780
            Other                                                                   306,147
                                                                          -------------------
            Total restructuring charges                                           6,105,927
            Cumulative draw-downs                                                (4,579,132)
                                                                          -------------------
            Accrued restructuring charges included in accrued
            liabilities at June 30, 2002                                         $1,526,795
                                                                          ===================
</TABLE>


     During the three and six month periods ended June 30, 2002 the Company made
     cash payments of $1,215,705  and  $1,606,865  respectively  relating to the
     restructuring accruals.


                                      -8-
<PAGE>

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


6.   RESTRUCTURING CHARGE (continued)

     Workforce  reduction  charges  of  $3.4  million  were  taken  relating  to
     severance  and  continued  benefits for the  elimination  of 149  positions
     across all operating  departments and segments of the  organization.  As of
     June 30,  2002,  the  provision  balance  has been fully drawn down by cash
     payments with no additional amounts expected to be paid out.

     The  provision  for excess  office space of $1.9 million for the year ended
     December 31, 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 $0.5 million of cash costs relating to this provision leaving
     an accrual of $1.4  million  remaining  as at June 30,  2002.  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 June 30,
     2002, 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 end of 2002.

     The Company has recorded a $0.3 million  charge for the year ended December
     31, 2001 for other items  including,  costs of outplacement  services,  and
     legal and  consulting  fees. As at June 30, 2002,  the Company has incurred
     cash costs of approximately  $0.2 million in connection with these charges,
     leaving a provision of $0.1 million. The Company expects to fully draw down
     this provision by the end of 2002.

7.   INVESTMENTS AND ADVANCES

<TABLE>
                                                                  June 30,              December 31,
                                                                    2002                    2001
                                                               --------------          --------------
          <S>                                                 <C>                      <C>
           Investment in private companies, at cost            $  2,499,992             $  2,499,992
           Other advances                                           500,000                  500,000
           Valuation Allowance                                   (2,999,992)              (2,999,992)
                                                               --------------          --------------
           Total Investments                                   $          -             $          -
                                                               ==============          ===============
</TABLE>


     During the year ended December 31, 2000 the Company made equity investments
     of $2,499,992 in two private companies and made advances to a third Company
     of $500,000.  These investments do not represent  significant  influence in
     the  companies  and at December  31, 2000 were valued at cost which was the
     valuation as at the latest round of financing.

     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 and advances during the
     year ended December 31, 2001.


8.   CONTINGENCY

     The Company is involved in a dispute with a customer. The Company has filed
     suit against the customer  alleging that the customer had breached a series
     of contracts,  and failed to pay sums due. The customer has filed an answer
     and counter claim alleging the Company  breached the  contracts,  entitling
     the customer to repayment of all sums paid to the Company of  approximately
     $3.5  million.  The  Company  believes  that its  position in the matter is
     strong and intends to vigorously  pursue  collection.  The Company  expects
     that  collection  of monies  due from the  customer  is not likely to occur
     within one year and as a result has  reclassified  the amounts due from the
     customer of $3,749,860 as a long term receivable.

     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.



                                      -9-
<PAGE>

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

Forward-Looking Statements

     Certain  statements  in  this  Quarterly  Report  on Form  10-Q  constitute
forward-looking  statements  within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended. Such forward-looking  statements involve known
and unknown  risks,  uncertainties  and other  factors that may cause the actual
results,  performance or  achievements  of MDSI, or  developments  in the MDSI's
industry,  to differ  materially  from the anticipated  results,  performance or
achievements  expressed  or implied  by such  forward-looking  statements.  Such
factors  include,  but are not  limited  to:  the  Company's  limited  operating
history, lengthy sales cycles, the Company's dependence upon large contracts and
relative concentration of customers,  the failure of MDSI to achieve anticipated
levels of cost  savings  and the risk that such cost  reductions  may  adversely
affect the ability of MDSI to achieve its  business  objectives,  the failure of
MDSI to  successfully  execute its  business  strategies,  the effect of slowing
United States and international  economies generally, as well as economic trends
and conditions in the vertical markets that MDSI serves, the effect of the risks
associated with technical  difficulties or delays in product  introductions  and
improvements,  product  development,  product  pricing or other  initiatives  of
MDSI's  competitors,  the  possibility  that our potential  customers will defer
purchasing  decisions  due to  economic  or other  conditions  or will  purchase
products  offered  by our  competitors,  the  effect,  if  any,  of any  sale or
disposition  of assets,  the risks  associated  with the  collection of accounts
receivable,   risks   associated   with  litigation  and  the  other  risks  and
uncertainties  described in the risk factors attached as Exhibit 99.1 hereto and
in other  Securities and Exchange  Commission  filings,  including the Company's
Annual Report on Form 10-K for the year ended December 31, 2001.

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

Overview

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

     The Company's revenue is derived from (i) software and services, consisting
of the  licensing  of software  and  provision  of related  services,  including
project management, installation,  integration, customization and training; (ii)
third party  products  and  services,  consisting  of the  provision of non-MDSI
products and services as part of the total  contract and (iii)  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 economic  conditions  and trends have  adversely
affected and may continue to affect levels of capital spending by companies in a
variety of  industries,  including  companies in the  vertical  markets that the
Company serves. The current excess supply of capacity in the  telecommunications
industry   has   adversely   affected   the   financial    condition   of   many
telecommunications  companies  worldwide.  In addition,  economic conditions and
developments  in the energy  markets have had an adverse effect on the financial
condition of energy and utility  companies in certain  geographic areas of North
America.  The  Company  believes  that these and other  factors  have  adversely
affected  demand for products and  services  offered by the Company,  as certain
prospective and existing customers have delayed or deferred purchasing decisions
or have sought to terminate  existing  contracts for the Company's  products and
services. The Company believes that these factors will continue to affect demand
for the Company's  products and services in 2002,  particularly  in software and
services.  Such  factors may also  increase  the amount of doubtful  accounts or
adversely  affect the  likelihood of collection  of such  accounts.  The Company
believes  that these  trends  are likely to  continue  to  adversely  affect the
Company's revenues and results of operations in future periods.


                                      -10-
<PAGE>

     In order to address the uncertainties caused by these economic trends, MDSI
announced in March 2001 its intention to reduce its operating  expenses  through
workforce  reductions  and other  measures.  These  measures have been gradually
implemented with incremental reductions in costs each quarter, and were expected
to result in an estimated $2.9 million in cost reductions per quarter by the end
of 2002.  A majority of the  savings  have been  realized by reduced  salary and
payroll  costs,  and the remaining  savings are expected to be realized from the
subleasing  of excess space,  and a reduction in  discretionary  spending.  As a
result of the sale of the public safety  operations during the second quarter of
2002, the Company has exceeded the estimated quarterly savings.  There can be no
assurance  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, leasing of excess office space, and fixed asset write-downs announced
on May 11, 2001. A breakdown of the nature of the charges and the costs incurred
to date is as follows:

                                                          Total Restructuring
                                                                Charge
                                                          --------------------
    Workforce reduction                                       $3,375,000
    Provision for excess office space                          1,861,000
    Non cash writedown of capital assets                         563,780
    Other                                                        306,147
                                                          --------------------
    Total restructuring charges                                6,105,927
    Cumulative draw-downs                                    (4,579,132)
                                                          --------------------
    Accrued restructuring charges as at June 30, 2002         $1,526,795
                                                          ====================

     During the three and six month periods ended June 30, 2002 the Company made
cash  payments  of  $1,215,705  and  $1,606,865  respectively  relating  to  the
restructuring accruals.

     Workforce  reduction  charges  of  $3.4  million  were  taken  relating  to
severance and continued benefits for the elimination of 149 positions across all
operating departments and segments of the organization. As of June 30, 2002, the
provision  balance has been fully drawn down by cash payments with no additional
amounts expected to be paid out.

     The  provision  for excess  office space of $1.9 million for the year ended
December 31, 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 $0.5
million  of cash costs  relating  to this  provision  leaving an accrual of $1.4
million  remaining as at June 30, 2002. 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 June 30, 2002, 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 end of 2002.

     The Company has recorded a $0.3 million  charge for the year ended December
31, 2001 for other items including,  costs of outplacement  services,  and legal
and consulting fees. As at June 30, 2002, the Company has incurred cash costs of
approximately $0.2 million in connection with these charges, leaving a provision
of $0.1 million.  The Company  expects to fully draw down this  provision by the
end of 2002.



                                      -11-
<PAGE>

Field Service Business

     The  implementation  of a complete mobile data solution requires a wireless
data communications  network,  mobile computing devices integrated with wireless
data  communication   modems,   host  computer   equipment,   industry  specific
application  software such as MDSI's Advantex  products,  wireless  connectivity
software  and a variety of  services  to manage and  install  these  components,
integrate them with an organization's existing computer systems and configure or
customize  the  software  to  meet  customer  requirements.  Frequently,  in the
Company's larger contracts only a limited number of the mobile computing devices
and in-vehicle equipment are installed  initially,  with the balance implemented
over a rollout period that may extend up to one year or more. Where increases in
mobile 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 one to three years 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 on the supply of third party hardware upon transfer
of title to the customer.  The Company recognizes revenue on the supply of third
party  services  using a  percentage  of  completion  method  based on the costs
incurred  over the total  estimated  cost to complete  the third party  services
contract.

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

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

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



                                      -12-
<PAGE>

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

     In June 2002, MDSI adopted a plan for sale and entered into an agreement to
sell its  Hosting  and IT  Services  business  segment,  Connectria  Corporation
(Connectria) to former  Connectria  shareholders who were both  shareholders and
employees of the Company. Pursuant to the terms of the agreement, on closing the
Company will receive from the former Connectria  shareholders 824,700 shares and
the  cancellation  of  103,088  previously  issued  stock  options  of  MDSI  as
consideration  for  Connectria.  In  addition  to  the  share  consideration,  a
wholly-owned  subsidiary  of MDSI will also  receive  a warrant  allowing  it to
purchase up to 50,380 shares of Series A Nonvoting Preferred Stock of Connectria
at a price of $50 per share exercisable for a period of five years. The Series A
Nonvoting  Preferred  Stock of  Connectria  will  have a face  value of $100 per
share, bear a dividend of five percent per annum, bear a liquidation  preference
equal to the face value, may be redeemed at Connectria's option at any time, and
must be  redeemed  by  Connectria  upon a capital  infusion  of $10  million  or
greater.  In  addition  MDSI has  agreed  to  advance  to  Connectria  $500,000,
consisting of a loan in the  principal  amount of $250,000 with a two year term,
bearing  interest  at  5%,  and  $250,000  for  prepaid  hosting  services.  The
transaction subsequently closed on July 25, 2002 resulting in a small gain being
recorded by the Company.

     As a result of its decision to dispose of Connectria, MDSI has treated this
business  segment as a  discontinued  operation  and the results of  operations,
financial  position  and  changes  in cash  flow  for  this  segment  have  been
segregated  from those of continuing  operations.  The following  discussion and
analysis of the Company's  results of  operations  excludes  Connectria  for the
current and corresponding prior periods.


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 were comprised of common shares of DDS, representing an 11% interest in
DDS, and a promissory note in the principal  amount of $331,455  ($500,000 CDN),
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
retained  certain assets and  liabilities of the  discontinued  operations.  The
Company  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 disposal 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 periods.

Recent Accounting Pronouncements

     In July 2001, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial  Accounting  Standards  No. 141 ("SFAS  141"),  "Business
Combinations."  SFAS 141 requires the purchase method of accounting for business
combinations    initiated    after   June   30,   2001   and    eliminates   the
pooling-of-interests method. The adoption of SFAS 141 did not have a significant
impact on its financial statements.

     In July 2001, the FASB issued Statement of Financial  Accounting  Standards
No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets", which is effective
January 1, 2002. SFAS 142 requires,  among other things,  the  discontinuance of
goodwill  amortization.  In addition,  the standard includes  provisions for the
reclassification  of  certain  existing  recognized   intangibles  as  goodwill,
reassessment   of  the  useful   lives  of  existing   recognized   intangibles,
reclassification  of certain intangibles out of previously reported goodwill and
the identification of reporting units for purposes of assessing potential future
impairments  of  goodwill.  SFAS 142 also  requires  the  Company to  complete a
transitional goodwill impairment test six months from the date of adoption.  The
adoption of SFAS 142 has not had a significant impact on the Company's financial
statements.

     In  October  2001,  the FASB  issued  SFAS  No.  144,  "Accounting  for the
Impairment or Disposal of Long-Lived Assets." This statement addresses financial
accounting  and reporting for the  impairment or disposal of long-lived  assets.
This statement supersedes FASB Statement No. 121, "Accounting for the Impairment
of  Long-Lived  Assets and for  Long-Lived  Assets to Be  Disposed  Of," and the
accounting  and  reporting  provisions  of APB  Opinion No. 30,  "Reporting  the
Results of  Operations  -  Reporting  the  Effects of Disposal of a Segment of a
Business,  and  Extraordinary,  Unusual and  Infrequently  Occurring  Events and
Transactions."  This  Statement also amends ARB No. 7,  "Consolidated  Financial
Statements,"  to eliminate the exception to  consolidation  for a subsidiary for
which  control  is likely to be  temporary.  This  Statement  requires  that one
accounting model be used for long-lived assets to be



                                      -13-
<PAGE>

disposed of by sale,  whether  previously held and used or newly acquired.  This
Statement also broadens the  presentation of discontinued  operations to include
more disposal transactions. The provisions of this standard have been adopted as
at the  beginning  of  fiscal  2002 and have had no  significant  impact  on the
Company's financial statements.

     In June 2002,  the FASB issued SFAS No. 146 ("SFAS 146"),  "Accounting  for
Costs Associated with Exit or Disposal  Activities".  SFAS 146 requires that the
liability for a cost associated with an exit or disposal  activity be recognized
at its fair value when the liability is incurred.  Under  previous  guidance,  a
liability  for certain  exit costs was  recognized  at the date that  management
committed to an exit plan,  which was generally  before the actual liability had
been  incurred.  As SFAS 146 is effective  only for exit or disposal  activities
initiated  after  December 31, 2002, the Company does not expect the adoption of
this statement to have a material impact on the Company's financial statements.


Critical Accounting Policies and Significant Estimates

     The  significant  accounting  policies  are  outlined  within Note 1 to the
financial  statements  included in the Company's  Annual Report on Form 10-K for
the fiscal year ended  December  31,  2001.  Some of those  accounting  policies
require the Company to make  estimates and  assumptions  that affect the amounts
reported by the Company. For the quarter ended June 30, 2002 the following items
require the most significant judgment and involve complex estimation:

Restructuring Charges

     In  calculating  the cost to dispose of excess  facilities  the Company was
required  to  estimate  for  each  location  the  amount  to be  paid  in  lease
termination payments,  the future lease and operating costs to be paid until the
lease is terminated, and the amount, if any, of sublease revenues. This required
estimating  the timing and costs of each lease to be  terminated,  the amount of
operating  costs,  and the timing and rate at which the Company might be able to
sublease the site.  From the estimates for these costs the Company  performed an
assessment  of  the  affected  facilities  and  considered  the  current  market
conditions  for each  site.  A  charge  of $1.9  million  was  recorded  for the
restructuring  of excess  facilities as part of the  restructuring  plan, and at
June 30, 2002 the remaining provision is $1.4 million. The Company's assumptions
on either the lease termination payments,  operating costs until terminated,  or
the offsetting  sublease revenues may be proven incorrect and actual cost may be
materially different from the estimates.

Accounts Receivable

     The  Company  periodically  reviews  the  collectability  of  its  accounts
receivable  balances.  Where  significant  doubt  exists  with  regards  to  the
collection  of a certain  receivable  balance,  an  allowance  and charge to the
income  statement is  recorded.  At June 30, 2002,  the  allowance  for doubtful
accounts was $3.5 million.  The Company intends to continue  vigorously pursuing
these accounts.  If future events indicate  additional  collection  issues,  the
Company may be required to record an additional allowance for doubtful accounts.

     In  addition,  the Company has  recorded  as long term  receivable  of $3.7
million related to a dispute with a customer.  The Company is currently involved
in  litigation  to collect the amounts  due. If the Company is  unsuccessful  in
collection of amounts due or if future events  indicate that a portion or all of
the amounts due may not be collected,  a provision against the receivable may be
required. See "Forward-Looking Statements."

Revenue Recognition - Percentage Completion

     The Company  uses  estimates  based on inputs to determine  the  percentage
completion of its contracts and thus its revenue  recognition.  These  estimates
and contracts are reviewed regularly and are adjusted to meet the Company's best
estimate at the time. The Company's assumptions used to form these estimates may
be proven to be erroneous and materially different outcomes may result.

Income Taxes

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



                                      -14-
<PAGE>

Results of Operations

     The Company's net loss was $1.6 million for the three months ended June 30,
2002.  This  compares to a net loss of $6.3  million for the three  months ended
June 30,  2001.  The change in income for the period is due  primarily  to a one
time  restructuring  charges of $4.9  million  incurred  during the three months
ended June 30, 2001  relating to staff  reductions  and leasing of excess office
space.  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 June 30,      Six months ended June 30,
                                                           -----------------------------   ----------------------------
                                                               2002          2001              2002         2001
                                                           -----------------------------   ----------------------------
<S>                                                           <C>            <C>              <C>           <C>
  REVENUE
     Software and services                                     60.8%          73.9%            64.3%         73.5%
     Maintenance and support                                   35.7%          23.3%            32.6%         20.6%
     Third party products and services                          3.5%           2.8%             3.1%          5.9%
                                                           -----------------------------   ----------------------------
                                                              100.0%         100.0%           100.0%        100.0%

  DIRECT COSTS                                                 43.5%          46.3%            42.8%         48.8%
                                                           -----------------------------   ----------------------------
  GROSS PROFIT                                                 56.5%          53.7%            57.2%         51.2%
                                                           -----------------------------   ----------------------------
  OPERATING EXPENSES
     Research and development                                  18.7%          17.9%            17.8%         17.0%
     Sales and marketing                                       48.7%          31.3%            38.0%         26.6%
     General and administrative                                19.0%          14.7%            19.2%         12.7%
     Restructuring Charge                                          -          47.0%               -          25.7%
     Provision for doubtful accounts                               -              -               -           5.1%
     Amortization and provision for valuation
     of intangible assets                                          -           0.1%               -           6.9%
                                                           -----------------------------   ----------------------------
                                                               86.4%         111.0%            75.0%         94.0%
                                                           -----------------------------   ----------------------------
  OPERATING LOSS                                              (29.9%)        (57.3%)          (17.9%)       (42.8%)

  VALUATION ALLOWANCE ON INVESTMENTS                              -              -                -         (11.6%)
  OTHER INCOME (EXPENSE)                                        1.1%          (2.8%)            1.0%         (1.4%)
                                                           -----------------------------   ----------------------------
  NET LOSS FROM CONTINUING OPERATIONS                         (28.8%)        (60.1%)          (16.9%)       (55.8%)
  BEFORE TAX PROVISION

  RECOVERY OF INCOME TAXES                                      8.6%           0.2%            (4.9%)         3.0%
                                                           -----------------------------   ----------------------------
  NET LOSS FROM CONTINUING OPERATIONS                         (20.2%)        (59.9%)          (12.0%)       (52.8%)

  INCOME (LOSS) FROM DISCONTINUED OPERATIONS                    0.2%          (0.3%)            0.7%          0.4%
                                                           -----------------------------   ----------------------------
  NET LOSS FOR THE PERIOD                                     (20.0%)        (60.2%)          (11.3%)       (52.4%)
                                                           =============================   ============================
</TABLE>


Three  Months  Ended June 30, 2002  Compared to the Three  Months Ended June 30,
2001

     Revenue.  Revenue  decreased by $2.4  million  (23.1%) for the three months
ended June 30, 2002 as compared to the three months  ended June 30,  2001.  This
decrease was  primarily  due to decreases in revenue from  software and services
revenue,  partially  offset by an increase in maintenance and support  revenues,
during the first quarter of 2002 relative to the same period in 2001.



                                      -15-
<PAGE>

Three  Months  Ended June 30, 2002  Compared to the Three  Months Ended June 30,
2001 (continued)

     Software and  services  revenue  decreased by $2.8 million  (36.7%) for the
three  months ended June 30, 2002 as compared to the three months ended June 30,
2001.  The Company  believes  its  software  and service  revenue was  adversely
impacted  by an  increase  in time  taken  for the  decision-making  cycle,  and
reduction  of  capital  expenditures  by  customers.  This  delay in  purchasing
decisions by customers and reductions in expenditures resulted in a reduction in
the number of contracts  worked on by the Company in the three months ended June
30, 2002 as compared to the three months ended June 30, 2001 and a corresponding
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"

     Maintenance  and support  revenues  were $2.9  million for the three months
ended June 30, 2002 as compared to $2.4  million for the three months ended June
30, 2001.  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 software  and  services  that the
Company is engaged to provide in support of its installations.

     Third party products and services  revenue was materially  unchanged during
the three  months ended June 30, 2002 as compared to the three months ended June
30, 2001. 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.  The Company has recently  entered into an agreement
whereby  it has agreed to supply a large  amount of third  party  services,  and
therefore  expects that future  revenues from third party  products and services
will increase in the near term. See "forward looking statements."

     Direct Costs. Direct costs were 43.5% of revenue for the three months ended
June 30,  2002 as compared to 46.3% for the three  months  ended June 30,  2001.
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 decrease in
direct costs as a percentage  of revenue  occurred as the Company  increased its
efficiency  due to its  restructuring,  and as a result of increased  experience
with Advantex r7 installations.

     Gross  Margins.  Gross  margins  were 56.5% of revenue for the three months
ended June 30,  2002 as compared  to 53.7% for the three  months  ended June 30,
2001. The increase in gross margin as a percentage of revenue relates  primarily
to the increased efficiency in the installation of Advantex r7. The Company does
not believe that its gross  margins  will  fluctuate  significantly  in the near
future. See "Forward-Looking Statements".

     Research and Development.  Research and development  expenses were 18.7% of
revenue  for the three  months  ended June 30, 2002 and 17.9% of revenue for the
three months ended June 30, 2001.  Total research and  development  expenditures
for the three months  ended June 30, 2002 of $1.5 million  represents a decrease
of $0.4 million  (19.7%) as compared to the same period in 2001. The decrease in
research  and  development  expenses  in  2002  is a  result  of  the  Company's
restructuring  efforts,  and cost control  initiatives.  The Company  intends to
continue  committing a  significant  portion of its product  revenues to enhance
existing products and develop new products. See "Forward-Looking Statements".

     Sales and Marketing. Sales and marketing expenses were 48.7% of revenue for
the three  months  ended June 30, 2002 and 31.3% of revenue for the three months
ended June 30, 2001. This represents an increase of $646,000 (19.8%) as compared
to the same period in 2001.  The increase was primarily due to commission  costs
expensed during the period relating to contracts  entered into during the period
that are  expected  to generate  significant  revenues  in future  periods.  See
"Forward-Looking Statements". 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. See "Forward-Looking Statements".

     General and Administrative.  General and administrative expenses were 19.0%
of revenue for the three months ended June 30, 2002 and 14.7% of revenue for the
three months ended June 30, 2001. Total general and  administrative  expenses of
$1.5 million were materially unchanged from the same period in 2001. The Company
expects that in the near future,  general and  administrative  expenditures will
remain  relatively   consistent  with  current  levels.   See   "Forward-Looking
Statements".



                                      -16-
<PAGE>

Three  Months  Ended June 30, 2002  Compared to the Three  Months Ended June 30,
2001 (continued)

     Restructuring  Charge. No charges for  restructuring  were taken during the
three months  ended June 30,  2002.  During the three months ended June 30, 2001
the  Company  announced  a  restructuring,   designed  to  increase  operational
efficiencies  and  reduce  costs.  As part  of the  restructuring,  the  Company
recorded a provision  of $4.9  million for the three  months ended June 30, 2001
relating to staff reductions and leasing of excess space.

     Amortization and provision for valuation of Intangible  Assets.  No charges
for  amortization of intangible  assets were taken during the three months ended
June 30, 2002, as the Company has taken a provision  for valuation  equal to the
remaining  value of intangible  assets during the year ended  December 31, 2001.
Amortization and impairment  charges for intangible  assets for the three months
ended June 30, 2001 were $11,000  relating to  amortization  of a purchased  web
site domain name.

     Other Income (Expense). Other income was $86,000 for the three months ended
June 30, 2002 as compared to a loss of  $(295,000)  for the three  months  ended
June  30,  2001.   Substantially  all  of  other  income  (expense)  relates  to
fluctuations  in the currencies of the Company's  foreign  operations,  interest
income on cash and  short-term  deposits,  and  interest  expense on  short-term
borrowings under the line of credit and capital lease obligations.

     Income Taxes.  The Company provided for income tax recoveries on losses for
the  three  months  ended  June 30,  2002 at the rate of  30.0%.  The  Company's
effective  tax rate  reflects  the  blended  effect of  Canadian,  US, and other
foreign jurisdictions' tax rates.

     Income (loss) from Discontinued  Operations.  During the three months ended
June 30,  2002 the  Company  announced  its  intention  to divest  itself of its
Hosting and IT services subsidiary  Connectria  Corporation  (Connectria).  As a
result, Connectria results of operations for the current and comparative periods
have  been  presented  as  Discontinued  Operations.  Income  from  Discontinued
Operations  for the three months  ended June 30, 2002 was $22,000  compared to a
loss of $(31,000) for the three months ended June 30, 2001.  The increase in the
income from discontinued  operations was due to cost control efforts implemented
at Connectria in the current period.


Six Months Ended June 30, 2002 Compared to the Six Months Ended June 30, 2001

     Revenue. Revenue decreased by $7.1 million (30.0%) for the six months ended
June 30, 2002 as compared to the six months ended June 30, 2001.  This  decrease
was  primarily  due to decreases in revenue from software and services and third
party products and services,  during the six months ended June 30, 2002 relative
to the same period in 2001.

     Software and services revenue decreased by $6.8 million (38.7%) for the six
months  ended June 30, 2002 as compared to the six months  ended June 30,  2001.
The Company believes its software and service revenue was adversely  impacted by
an  increase  in time taken for the  decision-making  cycle,  and  reduction  of
capital  expenditures by customers.  This delay and reduction in expenditure has
caused  fewer  contracts  to be worked on by the Company in the six months ended
June 30, 2002 as compared to the six months  ended June 30, 2001 and as a result
has caused a  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".

     Maintenance and support revenues were $5.4 million for the six months ended
June 30,  2002 as compared  to $4.9  million  for the six months  ended June 30,
2001.  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 software and services for which the Company is
engaged to provide in support of its installations.

     Third party products and services revenue  decreased by $0.9 million during
the six months  ended June 30, 2002 as compared to the six months ended June 30,
2001. 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.

     Direct  Costs.  Direct costs were 42.8% of revenue for the six months ended
June 30,  2002 as  compared  to 48.8% for the six months  ended  June 30,  2001.
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 decrease in
direct costs as a percentage  of revenue  occurred as the Company  increased its
efficiency  due to its  restructuring,  and as a result of increased  experience
with Advantex r7 installations.



                                      -17-
<PAGE>

Six Months  Ended June 30, 2002  Compared to the Six Months  Ended June 30, 2001
(continued)

     Gross Margins. Gross margins were 57.2% of revenue for the six months ended
June 30, 2002 as compared to 51.2% for the six months ended June 30,  2001.  The
increase in gross margin as a  percentage  of revenue  relates  primarily to the
increased efficiencies for the installations of Advantex r7. 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 17.8% of
revenue for the six months  ended June 30, 2002 and 17.0% of revenue for the six
months ended June 30, 2001. Total research and development  expenditures for the
six months  ended June 30, 2002 of $3.0  million  represents  a decrease of $1.1
million (26.8%) as compared to the same period in 2001. The decrease in research
and  development  expenses  in 2002 is a result of the  Company's  restructuring
efforts,  and the completion of a major development project in the first quarter
of 2001. As a result,  the Company did not expend as many  resources on research
and development in 2002 as in 2001. The Company intends to continue committing a
significant  portion of its product  revenues to enhance  existing  products and
develop new products. See "Forward-Looking Statements".

     Sales and Marketing. Sales and marketing expenses were 38.0% of revenue for
the six months ended June 30, 2002 and 26.6% of revenue for the six months ended
June  30,  2001.  Total  sales  and  marketing  expenses  of $6.3  million  were
materially  unchanged from the same period in 2001. The decrease in expenditures
in the current year due to the Company's  restructuring  program  implemented in
2001 was offset by an increase in commission  costs  expensed  during the period
relating  to  contracts  entered  into  during the period  that are  expected to
generate   significant   revenues  in  future  periods.   See   "Forward-Looking
Statements".  The Company  anticipates  that the dollar amounts of its sales and
marketing  expenses will continue to be significant as a result of the Company's
commitment  to its  international  marketing  efforts and  attempts to penetrate
additional markets for its products. See "Forward-Looking Statements".

     General and Administrative.  General and administrative expenses were 19.2%
of revenue  for the six months  ended June 30, 2002 and 12.7% of revenue for the
six months ended June 30, 2001.  Total  general and  administrative  expenses of
$3.2 million  represents  a increase of $0.2  million  (5.6%) for the six months
ended  June 30,  2002 as  compared  to the same  period  in  2001.  General  and
administrative  expenses  remained  relatively  consistent  with the comparative
period as a result of a cost control effort initiated by the Company,  offset by
one-time severance costs expensed during the period. The Company expects that in
the near future, general and administrative  expenditures will remain relatively
consistent with current levels. See "Forward-Looking Statements".

     Restructuring  Charge. No charges for  restructuring  were taken during the
six months  ended June 30,  2002.  During the six months ended June 30, 2001 the
Company announced a restructuring, designed to increase operational efficiencies
and reduce costs. As part of the restructuring, the Company recorded a provision
of $6.1  million  for the six  months  ended  June 30,  2001  relating  to staff
reductions and leasing of excess space.

     Provision  for doubtful  accounts.  No charges for doubtful  accounts  were
taken  during the six months  ended June 30,  2002.  During the six months ended
June 30,  2001 the  Company  recorded a charge of $1.2  million  as a  provision
against  several  trade  accounts  receivable   balances.   Due  to  significant
uncertainty surrounding collection of several specific accounts the Company took
a charge to value the accounts at the most likely amount to be  collected.  This
provision  arose  due to the  increased  economic  uncertainty  in the  vertical
industries the Company services.

     Amortization and provision for valuation of Intangible  Assets.  No charges
for  amortization  of  intangible  assets were taken during the six months ended
June 30, 2002, as the Company has taken a provision  for valuation  equal to the
remaining  value of intangible  assets during the year ended  December 31, 2001.
Amortization  and impairment  charges for  intangible  assets for the six months
ended  June  30,  2001  were  $1.6  million.  The  charge  was  a  result  of  a
determination  by the Company  that an  impairment  in the value of the Goodwill
acquired on the acquisition of Alliance Systems Inc. had occurred during the six
months ended June 30, 2001.  The Company  determined an impairment  had occurred
due to poor  historical  and forecasted  performance  in the acquired  company's
business,  and as a result the Company wrote off the remaining  Goodwill of $1.6
million  relating to the  acquisition  of Alliance  Systems Inc.  during the six
months ended June 30, 2001.

     Valuation  Allowance on  Investments.  No charge was recorded for valuation
allowance  on  investments  during the six  months  ended  June 30,  2002,  as a
valuation  allowance  equal  to the  remaining  book  value of  investments  was
recorded  during the six months ended June 30, 2001.  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  recorded a valuation  allowance
equal to the full cost of the  investments  during the six months ended June 30,
2001.


                                      -18-
<PAGE>

Six Months  Ended June 30, 2002  Compared to the Six Months  Ended June 30, 2001
(continued)

     Other Income (Expense).  Other income was $162,000 for the six months ended
June 30, 2002 as compared to $(331,000)  for the six months ended June 30, 2001.
Substantially  all of other  income  (expense)  relates to  fluctuations  in the
currencies  of the Company's  foreign  operations,  interest  income on cash and
short-term  deposits,  and interest  expense on short-term  borrowings under the
line of credit and capital lease obligations.

     Income Taxes.  The Company provided for income tax recoveries on losses for
the six months ended June 30, 2002 at the rate of 29.0%. The Company's effective
tax rate  reflects  the  blended  effect of  Canadian,  US,  and  other  foreign
jurisdictions' tax rates.

     Income  (loss) from  Discontinued  Operations.  During the six months ended
June 30,  2002 the  Company  announced  its  intention  to divest  itself of its
Hosting and IT services subsidiary  Connectria  Corporation  (Connectria).  As a
result Connectria results of operations for the current and comparative  periods
have  been  presented  as  Discontinued  Operations.  Income  from  Discontinued
Operations  for the six months  ended June 30, 2002 was  $109,000 as compared to
income of $90,000 for the six months  ended June 30,  2001.  The increase in the
income  from  discontinued  operations  was due to strict cost  control  efforts
implemented at Connectria in the current period.


Liquidity and Capital Resources

     The Company finances its operations,  acquisitions and capital expenditures
with cash  generated  from  operations,  loans,  private  placements  and public
offerings of its  securities.  At June 30,  2002,  the Company had cash and cash
equivalents of $10.5 million and working capital of $9.5 million.

     Cash (used in) provided by operating  activities was $(0.9) million for the
six months ended June 30, 2002 compared to $1.5 million for the six months ended
June 30, 2001.  The net outflow of cash from  operating  activities  is due to a
loss from  continuing  operations of $2.0 million and a net increase in non-cash
working  capital items of $0.3 million,  partially  offset by  depreciation  and
amortization  of $1.4 million.  The net increase in non-cash  operating  working
capital items is due  primarily to a decrease in accounts  payable and accruals,
partially  offset by a decrease in accounts  receivable.  The  decrease in trade
receivables  is a result of  increased  collections  during the six months ended
June 30, 2002.  The  decrease in accounts  payable and  accruals  resulted  from
ordinary  fluctuations in the Company's business,  and from the payments made on
account of certain restructuring accruals recorded during 2001.

     The Company  maintains as at June 30, 2002 a provision of $3.5 million with
respect  to  doubtful  accounts.   The  Company  intends  to  vigorously  pursue
collection of these accounts;  however, due to uncertainty with regards to these
customers' financial conditions, the Company determined that it would be prudent
to record an allowance to address this uncertainty.

     The Company is currently  involved in a dispute  with a customer,  and as a
result has reclassified $3.7 million in accounts  receivable as long term as the
Company  determined it is not likely to collect the amounts within one year. The
Company is  currently  involved in  litigation  to collect the amounts  due. The
Company  believes  that its  position  in the  matter is strong  and  intends to
vigorously  pursue  collection,  but  due to  uncertainty  regarding  timing  of
collection  has elected to classify the  receivable as long term. If the Company
is  unsuccessful  in  collection  of amounts  due,  or is made to refund  monies
previously  collected  under the contract,  the Company's  liquidity and working
capital would be adversely affected.

     Cash used by financing  activities of $736,000  during the six months ended
June 30, 2002 primarily relates to $975,000 in repayments of capital leases made
during the six months  ended June 30,  2002,  partially  offset by  proceeds  of
$239,000 from the issuance of shares under the employee share purchase plan. The
capital  leases are to be repaid evenly over a 36 month period  ending  December
22, 2003, bear interest at 7.675% and are secured by certain  computer  hardware
and software assets of the Company.

     Cash used in investing activities was $0.7 million for the six months ended
June 30,  2002 as compared  to $0.6  million  for the six months  ended June 30,
2001.  Total  investing  activity  during  the six months  ended  June 30,  2002
consisted of, $0.7 million in purchases of capital assets.  Purchases of capital
assets  relate   primarily  to  computer   hardware  and  software  for  use  in
implementation  activities.  Investing  activities in 2001 related  primarily to
purchases  of capital  assets,  offset by  proceeds  on  settlement  of the note
receivable and proceeds on sale of investments.

     Existing  sources of liquidity at June 30, 2002  included  $10.5 million of
cash and cash equivalents and funds available under the Company's operating line
of credit. As at June 30, 2002, the Company's  borrowing capacity under the line
of credit was $10 CDN million. Under the terms of the agreement,  borrowings and
letters of credit under the line are limited to 75% to 90% of eligible



                                      -19-
<PAGE>

accounts  receivable.  Borrowings  accrue interest at the bank's prime rate plus
0.5%. At June 30, 2002, the Company had not drawn upon this line of credit.

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

     The  Company  believes  that  future  cash  flows from  operations  and its
borrowing capacity under the operating line of credit combined with current cash
balances will provide  sufficient  funds to meet cash  requirements for at least
the next twelve months.  Commensurate  with its past and expected future growth,
the Company may increase,  from time to time,  its borrowing  facility under its
operating line of credit to support its operations.  The Company has no material
additional commitments other than capital and operating leases. Future growth or
other investing  activities may require the Company to obtain  additional equity
or debt financing,  which may or may not be available on attractive terms, or at
all, or may be dilutive to current or future shareholders.

     In addition to these commercial  commitments the Company has also provided,
as performance bonds, an irrevocable revolving letter of credit in the amount of
EUR 751,623 ($665,801) expiring May 31, 2003, and an additional letter of credit
in the amount of EUR 75,855  ($66,752)  expiring  February 28, 2003. The Company
has pledged an amount equal to the letters of credit and  guarantee  against its
operating line of credit as security.

Derivative Financial Instruments

     The  Company  generates  a  significant  portion  of  sales  from  sales to
customers  located outside the United States,  principally in Canada and Europe.
Canadian sales made by the Company are usually  denominated in Canadian dollars.
International  sales are made from a foreign  wholly  owned  subsidiary  and are
typically   denominated  in  either  U.S.   dollars  or  Euros.   The  Company's
international  business is subject to risks typical of an international business
including,  but not  limited  to:  differing  economic  conditions,  changes  in
political climate, differing tax structures, other regulations and restrictions,
and foreign exchange rate volatility.  Accordingly, the Company's future results
could be materially adversely impacted by changes in these or other factors. The
Company may enter into foreign exchange  forward  contracts to offset the impact
of  currency  fluctuations  on  certain   non-functional   currency  assets  and
liabilities,  primarily  denominated  in the Canadian  dollar,  Euro and British
pound. The foreign exchange forward  contracts the Company enters into generally
have original maturities ranging from three to eighteen months. The Company does
not enter into foreign exchange forward contracts for trading purposes, and does
not expect gains or losses on these  contracts to have a material  impact on the
Company's financial results.

     The Company's  foreign currency forward  contracts are executed with credit
worthy banks and are denominated in currencies of major industrial countries. As
at  June  30,  2002  the  Company  had no  foreign  currency  forward  contracts
outstanding.



                                      -20-
<PAGE>

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company's  primary market risk is foreign currency  exchange rates. The
Company has  established  procedures to manage  sensitivity to foreign  currency
exchange  rate market  risk.  These  procedures  include the  monitoring  of the
Company's net exposure to each foreign  currency and the use of foreign currency
forward contracts to hedge firm exposures to currencies other than United States
dollars.  The  Company  has  operations  in Canada and Europe in addition to its
United States  operations and did not hedge these exposures during the quarterly
period ended June 30, 2002. However, the Company may from time-to-time hedge any
net exposure to currencies other than the United States dollar.

     As of June 30, 2002,  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  and  assets  would  be
approximately $3.5 million. The foreign currency sensitivity model is limited by
the  assumption  that all foreign  currencies,  to which the Company is exposed,
would  simultaneously  change by 10%. Such synchronized  changes are unlikely to
occur. The sensitivity model does not include the inherent risks associated with
anticipated  future  transactions  denominated  in foreign  currencies or future
forward contracts entered into for hedging purposes.



                                      -21-
<PAGE>

PART II - OTHER INFORMATION

     ITEM 1. LEGAL PROCEEDINGS

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

     On November 22, 2000, MDSI filed suit in Texas District Court Collin County
against Citizens Telecom Services Co., L.L.C.,  generally alleging that Citizens
breached a series of contracts  dated  October 15,  1998.  The suit alleges that
Citizens has  wrongfully  terminated the contracts and failed to pay sums due of
approximately  $3.7 million.  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  entitling  Citizens  to  repayment  of all sums  paid to MDSI of
approximately  $3.5  million in addition to interest  and  attorneys'  fees.  At
Citizens  request the parties held a mediation on April 2, 2001.  Mediation  was
not successful and both parties have begun discovery, in preparation for a court
trial in April 2003.  MDSI disputes  Citizens'  claims and intends to pursue the
lawsuit vigorously.

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

     For ITEMS 2 and 3 there was no reportable  information for the three months
ended June 30, 2002.

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

     The Company's 2002 Annual General Meeting of Shareholders  was held on June
27, 2002. A total of 5,292,321  common shares of the Company were represented in
person or by proxy at the  meeting,  consisting  of 59.5% of the total number of
common shares of the Company  outstanding  on May 16, 2002,  the record date for
the meeting.

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

<TABLE>
Nominee                  Votes Cast For    Votes Cast Against   Votes Withheld    Abstentions    Not Voted
-------                  --------------    ------------------   --------------    -----------    ---------
<S>                        <C>             <C>                   <C>               <C>
Erik Dysthe                4,992,659               -               284,414          15,248           -
Terrence P. McGarty        5,065,073               -               212,000          15,248           -
Robert C. Harris, Jr.      4,993,473               -               283,600          15,248           -
Mark Rochefort             4,983,473               -               293,600          15,248           -
Peter Ciceri               5,064,873               -               212,200          15,248           -
David Van Valkenberg       5,065,173               -               211,900          15,248           -
</TABLE>

     The shareholders  also ratified the appointment of Deloitte & Touche LLP as
the  Company's  auditors,  and  approved  the  establishment  of the 2002  Stock
Purchase Plan, which provides for the purchase of up to 100,000 common shares of
the  Company  by  the  Company's  employees.  The  following  table  sets  forth
information regarding the voting on the proposals:


<TABLE>
Proposal                     Votes Cast For   Votes Cast Against   Votes Withheld    Abstentions   Not Voted
--------                     --------------   ------------------   --------------    -----------   ---------
<S>                            <C>                    <C>               <C>              <C>
Appointment of Deloitte &      5,281,022              1,967             3,529            5,803         -
Touche LLP
Approval of 2002 Stock         4,273,455            316,860                 -           36,425         -
Purchase Plan
</TABLE>


     For ITEM 5, there was no reportable  information for the three months ended
June 30, 2002.



                                      -22-
<PAGE>

     ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits

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

       3.1(1)       Articles of Incorporation of the Company

       3.2(1)       Articles of Amendments of the Company

       3.3(1)       By-laws of the Company

       4.1(1)       Form of Common Share Certificate

      10.1(1)(2)    1996 Stock Option Plan

      10.2(2)(4)    1997 Stock Option Plan

      10.3(2)(4)    1998 Stock Option Plan

      10.4(2)(5)    2000 Stock Purchase Plan

      10.5(2)(5)    1999 Stock Option Plan

      10.6(2)(6)    1998 Stock Option Plan for Connectria Corporation (formerly,
                    Catalyst Solutions Group, Inc.)

      10.7(2)(7)    2000 Stock Option Plan

      10.8(1)       Form of  Indemnification  Agreement  between the Company and
                    certain officers of the Company

      10.9(1)(2)    Employment Agreement dated April 1, 1996 between the Company
                    and Erik Dysthe

      10.10(1)      Lease dated  September  25, 1997 between Sun Life  Assurance
                    Company of Canada and the Company

      10.11(1)      Lease dated April 8, 1993 between Cambridge Scanning Company
                    Limited and Spectronics Micro Systems Limited

      10.12(5)      Master  Purchase  and  Sale  Agreement  dated  June 1,  1999
                    between  Digital  Dispatch  Systems  Inc.  and  the  Company
                    (without schedules or exhibits)*

      10.13(8)      Agreement  and  Plan of  Reorganization,  dated as of May 9,
                    2000, among MDSI, MDSI Acquisition  Corporation,  Connectria
                    and Certain Principal Shareholders*

      10.14(8)      Form of Voting,  Lockup and  Registration  Rights  Agreement
                    among MDSI,  MDSI  Acquisition  Corporation,  Connectria and
                    Certain Principal Shareholders

      10.15(2)(9)   Employment  Agreement  dated  March  26,  2001  between  the
                    Company and Erik Dysthe

      10.16(2)(9)   Employment  Agreement  dated  April  24,  2001  between  the
                    Company and Gerald F. Chew

      10.17(2)(9)   Employment  Agreement  dated May 7, 2001 between the Company
                    and Peter H. Rankin

      10.18(10)     Lease  dated  October  12, 2001  between  Crown  Diversified
                    Industries   Corporation   and   Connectria   Corporation  a
                    subsidiary of the Company

      10.19(10)     Lease  dated  May  14,  1999   between   California   Public
                    Employees'  Retirement System and Mobile Data Solutions Inc.
                    a subsidiary of the Company

      10.20(10)     Amending  Agreement  dated December 1, 1998 between Sun Life
                    Assurance Company of Canada and the Company

      10.21(2)(10)  Employment  Agreement  dated May 9, 2001 between the Company
                    and Richard S. Waidmann

      10.22(2)(10)  Employment  Agreement  dated May 9, 2001 between the Company
                    and Eric Y. Miller

      10.23(2)      Employment  Agreement  dated  January  2, 2002  between  the
                    Company and Verne Pecho

      10.24(11)     Exchange  Agreement  dated as of June  26,  2002  among  the
                    Company,  Connectria  Corporation,  Richard S.  Waidmann and
                    Eric Y. Miller

      10.25(11)     Amendment  to Exchange  Agreement  dated as of June 30, 2002
                    among  the  Company,  Connectria  Corporation,   Richard  S.
                    Waidmann and Eric Y. Miller

      10.26(11)     Warrant dated as of June 29, 2002 to purchase  50,380 shares
                    of  Series  A  Nonvoting   Preferred   Stock  of  Connectria
                    Corporation

      10.27(11)     $250,000  Promissory  Note dated as of June 30, 2002 made by
                    Connectria Corporation in favor of the Company

      10.28(11)     Security  Agreement  dated  as  of  June  30,  2002  between
                    Connectria Connectria and the Company

      10.29         2002 Stock Purchase Plan

      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.



                                      -23-
<PAGE>

     (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-K for the year ended December 31, 1999.
     (6)  Previously  filed  as  exhibits  with  the  Registrant's  Registration
          Statement on Form S-8 filed on July 12, 2000.
     (7)  Previously  filed  as  exhibits  with  the  Registrant's  Registration
          Statement on Form S-8 filed on November 22, 2000.
     (8)  Previously filed as exhibits with the  Registrant's  Current Report on
          Form 8-K filed on June 15, 2000.
     (9)  Previously filed as exhibits with the  Registrant's  Form 10-Q for the
          quarterly period ended September 30, 2001.
     (10) Previously filed as exhibits with the  Registrant's  Form 10-K for the
          year ended December 31, 2001.
     (11) Previously filed as exhibits with the  Registrant's  Form 8-K filed on
          August 14, 2002.

     *    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

     No reports on Form 8-K were filed during the three month period ended June
30, 2002.





                                      -24-
<PAGE>


                                   SIGNATURES


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



                                    MDSI MOBILE DATA SOLUTIONS INC.


Date:  August 14, 2002        By: /s/ Erik Dysthe
                                  ---------------------------------------------
                                  Name:  Erik Dysthe
                                  Title: President, Chief Executive Officer,
                                         Chairman of the Board and Director




Date:  August 14, 2002        By: /s/ Verne D. Pecho
                                  ---------------------------------------------
                                  Name:  Verne D. Pecho
                                  Title: Vice President Finance & Administration
                                         and Chief Financial Officer
                                         (Principal Financial and Accounting
                                         Officer)






                                      -25-