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

                                    FORM 10-Q


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

     For the quarterly period ended March 31, 2003

                                       OR

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

     For the transition period from _______________ to ________________.

                         Commission file number 0-28968


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

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


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


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

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

              The number of outstanding shares of the Registrant's
           common stock, no par value, at May 12, 2003 was 8,202,602.


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

<PAGE>

                         MDSI Mobile Data Solutions Inc.

                             INDEX TO THE FORM 10-Q
                  For the quarterly period ended March 31, 2003


                                                                           Page
                                                                           ----

Part I - FINANCIAL INFORMATION

         ITEM 1. FINANCIAL STATEMENTS

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

                 Condensed Consolidated Statements of Operations...............2

                 Condensed Consolidated Statements of Cash Flows...............3
`
                 Notes to the Condensed Consolidated Financial Statements......4

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

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

         ITEM 4. CONTROLS AND PROCEDURES .....................................22

Part II - OTHER INFORMATION

         ITEM 1.    LEGAL PROCEEDINGS ....................................... 23

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

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

CERTIFICATIONS ...............................................................27




                                       -i-

<PAGE>



Part I - FINANCIAL INFORMATION
         ITEM 1. FINANCIAL STATEMENTS



                         MDSI MOBILE DATA SOLUTIONS INC.

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



<TABLE>
                                                                                       As at
                                                                          March 31,            December 31,
                                                                       --------------------------------------
                                                                             2003                   2002
                                                                       ---------------        ---------------
<S>                                                                    <C>                     <C>
ASSETS
CURRENT ASSETS
   Cash and cash equivalents                                           $   12,549,244          $  11,016,945
   Accounts receivable, net
      Trade (net of allowance for doubtful accounts $2,497,031;
         2002 - $2,506,614)                                                 7,899,974              6,705,088
      Unbilled                                                              3,130,912              5,347,993
   Prepaid expenses and other assets                                        1,126,251              1,552,236
                                                                       ---------------        ---------------
                                                                           24,706,381             24,622,262

CAPITAL ASSETS, NET                                                         9,489,419              9,798,087

LONG TERM RECEIVABLE (note 6)                                               2,749,860              2,749,860

DEFERRED INCOME TAXES                                                         534,640                534,640
                                                                       ---------------        ---------------
TOTAL ASSETS                                                           $   37,480,300          $  37,704,849
                                                                       ===============        ===============

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
   Accounts payable                                                    $    1,255,509              1,777,465
   Accrued liabilities (note 5)                                             3,018,920              3,300,113
   Income taxes payable                                                       605,531                602,717
   Deferred revenue                                                         8,254,604              7,503,613
   Current obligations under capital leases                                 1,901,935              2,073,906
                                                                       ---------------        ---------------
                                                                           15,036,499             15,257,814

OBLIGATIONS UNDER CAPITAL LEASES                                            1,614,952              1,913,538
                                                                       ---------------        ---------------
TOTAL LIABILITIES                                                          16,651,451             17,171,352
STOCKHOLDERS' EQUITY
   Common stock                                                            44,281,578             44,208,511
   Additional paid-up capital                                               2,222,128              2,222,128
   Deficit                                                                (24,984,753)           (25,207,038)
   Accumulated other comprehensive loss                                      (690,104)              (690,104)
                                                                       ---------------        ---------------
                                                                           20,828,849             20,533,497
                                                                       ---------------        ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                             $   37,480,300          $  37,704,849
                                                                       ===============        ===============
</TABLE>


Commitments and Contingencies (note 6)


            See Notes to Condensed Consolidated Financial Statements



                                      -1-
<PAGE>

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


<TABLE>

                                                                          Three months ended March 31,
                                                                       -----------------------------------
                                                                             2003                2002
                                                                       ---------------     ---------------
<S>                                                                     <C>                 <C>
REVENUE

   Software and services                                                $ 7,850,659         $  5,807,093
   Maintenance and support                                                2,602,387            2,557,073
   Third party products and services                                      1,852,745              236,390
                                                                       ---------------     ---------------
                                                                         12,305,791            8,600,556

DIRECT COSTS                                                              5,928,104            3,630,318
                                                                       ---------------     ---------------
GROSS PROFIT                                                              6,377,687            4,970,238
                                                                       ---------------     ---------------
OPERATING EXPENSES
   Research and development                                               1,279,026            1,460,035
   Sales and marketing                                                    2,947,943            2,413,893
   General and administrative                                             1,570,066            1,664,442
                                                                       ---------------     ---------------
                                                                          5,797,035            5,538,370
                                                                       ---------------     ---------------
OPERATING INCOME (LOSS)                                                     580,652             (568,132)

OTHER (EXPENSE) INCOME                                                     (252,619)              76,233
                                                                       ---------------     ---------------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE TAX PROVISION               328,033             (491,899)

INCOME TAX EXPENSE (RECOVERY) FROM CONTINUING OPERATIONS                    105,748             (125,700)
                                                                       ---------------     ---------------
                                                                            222,285             (366,199)

INCOME FROM DISCONTINUED OPERATIONS (note 2)                                      -               86,415
                                                                       ---------------     ---------------
NET INCOME (LOSS) FOR THE PERIOD                                            222,285             (279,784)

DEFICIT, BEGINNING OF PERIOD                                            (25,207,038)         (23,791,781)
                                                                       ---------------     ---------------
DEFICIT, END OF PERIOD                                                 $(24,984,753)        $(24,071,565)
                                                                       ===============     ===============
Earnings (Loss) per common share

Earnings (Loss) from continuing operations
   Basic                                                               $       0.03         $      (0.04)
                                                                       ===============     ===============
   Diluted                                                             $       0.03         $      (0.04)
                                                                       ===============     ===============
Net Earnings (Loss)
   Basic                                                               $       0.03         $      (0.03)
                                                                       ===============     ===============
   Diluted                                                             $       0.03         $      (0.04)
                                                                       ===============     ===============
</TABLE>


            See Notes to Condensed Consolidated Financial Statements



                                      -2-
<PAGE>

                         MDSI MOBILE DATA SOLUTIONS INC.

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



<TABLE>
                                                                             Three months ended March 31,
                                                                          --------------------------------
                                                                               2003                2002
                                                                          --------------      -------------
<S>                                                                         <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net income (loss) from continuing operations                             $  222,285            (366,199)
   Items not affecting cash:
       Depreciation                                                            730,761             673,591
       Changes in non-cash operating working capital items                   1,398,836             125,285
                                                                          --------------      -------------
   Net cash provided by operating activities                                 2,351,882             432,677
                                                                          --------------      -------------

CASH FLOWS FROM FINANCING ACTIVITIES
   Issuance of common shares                                                    73,067             212,164
   Repayment of capital leases                                                (240,971)           (508,800)
                                                                          --------------      -------------
   Net cash used by financing activities                                      (167,904)           (296,636)
                                                                          --------------      -------------
CASH FLOWS FROM INVESTING ACTIVITIES
   Acquisition of capital assets                                              (651,679)           (210,894)
                                                                          --------------      -------------
   Net cash used in investing activities                                      (651,679)           (210,894)
                                                                          --------------      -------------

   Net cash provided by (used for) continuing operations                     1,532,299             (74,853)

   Net cash used for discontinued operations (note 2)                                -            (253,768)
                                                                          --------------      -------------
NET CASH INFLOW (OUTFLOW)                                                    1,532,299            (328,621)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                              11,016,945          13,176,080
                                                                          --------------      -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                   $12,549,244         $12,847,459
                                                                          ==============      =============
</TABLE>




     SUPPLEMENTAL DISCLOSURE OF NON CASH INVESTING AND FINANCING ACTIVITIES

During the year ended  December  31, 2002 the Company  entered  into two capital
lease  arrangements  for the gross  amount  of  $2,922,078  for newly  purchased
capital assets. As a result of these arrangements the Company did not incur cash
outlays to purchase  these assets but will pay lease  obligations  with interest
accruing at interest rates of up to 9.5% over terms of up to three years.  Since
these asset purchases in 2002 are non cash transactions, the gross amount of the
leases  have been  excluded  from both the  Acquisition  of  Capital  Assets and
Proceeds  from Capital  Leases line items for the year ended  December 31, 2002,
and instead only the principal portion of repayments are included in acquisition
of capital  assets and proceeds from capital  leases in the period in which they
are paid.  During the three months ended March 31, 2003 $229,586  (2002 - $ nil)
of principal repayments have been included in these line items.


            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, 2002.


     (b)  Use of estimates

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


     (c)  Reporting Currency

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


     (d)  Recently issued accounting standards

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

          SFAS 149 is effective  for  contracts  entered into or modified  after
          June 30, 2003,  except as stated  below and for hedging  relationships
          designated after June 30, 2003.



                                      -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

          The provisions of SFAS 149 that relate to SFAS No. 133  Implementation
          Issues that have been  effective for fiscal  quarters that began prior
          to June 15, 2003,  should  continue to be applied in  accordance  with
          their  respective  effective  dates. In addition,  certain  provisions
          relating to forward  purchases or sales of  when-issued  securities or
          other securities that do not yet exist,  should be applied to existing
          contracts as well as new  contracts  entered into after June 30, 2003.
          SFAS 149 should be applied prospectively.

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

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

          In June 2002,  the FASB issued SFAS No. 146 ("SFAS 146"),  "Accounting
          for Costs  Associated  with  Exit or  Disposal  Activities".  SFAS 146
          requires  that the  liability  for a cost  associated  with an exit or
          disposal  activity be  recognized at its fair value when the liability
          is incurred.  Under  previous  guidance,  a liability for certain exit
          costs was recognized at the date that management  committed to an exit
          plan,  which  was  generally  before  the  actual  liability  had been
          incurred.  Adoption  of this  statement  did not impact the  Company's
          financial statements for quarter ended March 31, 2003.

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




                                      -5-
<PAGE>

                         MDSI MOBILE DATA SOLUTIONS INC.

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



1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     (e)  Stock-based compensation

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

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

<TABLE>
                                                                      Three months ended March 31,
                                                                     -------------------------------
                                                                        2003                2002
                                                                     ----------           ----------
            <S>                                                      <C>                <C>
             Net income (loss) for the period                          $5,446             $(473,043)
                                                                     ----------           ----------
             Basic and fully diluted loss per common share             $ 0.00             $   (0.05)
                                                                     ==========           ==========
</TABLE>

          Using the fair value method for stock-based  compensation,  additional
          compensation costs of approximately  $216,839 would have been recorded
          for the three  months  ended  March 31, 2003 (2002 -  $193,259).  This
          amount  is  determined  using an  option  pricing  model  assuming  no
          dividends  are to be paid,  an average  vesting  period of four years,
          average  life of the option of 5 years a weighted  average  annualized
          volatility of the Company's share price of 73% and a weighted  average
          annualized risk free interest rate at 2.7%.


2.   DISCONTINUED OPERATIONS

     During  June  2002,  MDSI  adopted  a plan  for sale  and  entered  into an
     agreement to sell its Hosting and IT Services business segment,  Connectria
     Corporation  (Connectria) to former  Connectria  shareholders who were both
     shareholders and employees of the Company.  The transaction  closed in July
     2002. Pursuant to the terms of the agreement, the Company received from the
     former  Connectria   shareholders  824,700  shares  of  MDSI  that  had  an
     approximate  market value of $2.8 million and the  cancellation  of 103,088
     previously issued stock options of MDSI as consideration for Connectria. In
     addition to the share  consideration,  a  wholly-owned  subsidiary  of MDSI
     received a warrant  allowing it to purchase up to 50,380 shares of Series A
     Nonvoting  Preferred  Stock  of  Connectria  at a price  of $50  per  share
     exercisable  for a period of five years.  The Series A Nonvoting  Preferred
     Stock of Connectria has a face value of $100 per share, bears a dividend of
     five percent per annum,  bears a liquidation  preference  equal to the face
     value,  may be redeemed  at  Connectria's  option at any time,  and must be
     redeemed by Connectria  upon a capital  infusion of $10 million or greater.
     In addition MDSI has advanced to Connectria $500,000,  consisting of a loan
     in the principal amount of $250,000 with a two year term,  bearing interest
     at 5%, and $250,000 for prepaid hosting services.  As at March 31, 2003 the
     entire amount of the prepaid hosting services has been amortized to income.
     The Company  recognized  a gain of $12,419 on the  disposal  of  Connectria
     during  the  quarter  ended  June  30,  2002.   Connectria   represented  a
     significant segment of the Company's business.



                                      -6-
<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,
     --------------------------------------------------------------------------------------------------------------------
                                                                       March 31, 2003                March 31, 2002
                                                                       --------------                --------------
<S>                                                                     <C>                          <C>
        Revenues                                                        $         -                  $   2,640,211
        Income (loss) before income taxes                                         -                         86,415
        Income tax                                                                -                              -
                                                                       --------------                --------------
                                                                                  -                         86,415
        Income on disposal
           net of income taxes                                                    -                              -
                                                                       --------------                --------------
        Income (loss) from discontinued operations                     $          -                  $      86,415
                                                                       ==============                ==============
</TABLE>


<TABLE>

     Cash flows of discontinued operations
                                                                                    Three months ended,
     --------------------------------------------------------------------------------------------------------------------
                                                                       March 31, 2003                March 31, 2002
                                                                       --------------                --------------
<S>                                                                     <C>                          <C>
        Operating activities                                           $          -                  $     (10,488)
        Investing activities                                                      -                       (114,663)
        Financing activities                                                      -                       (128,617)
                                                                       --------------                --------------
        Cash used for discontinued operations                          $          -                  $    (253,768)
                                                                       ==============                ==============
</TABLE>


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
                                                                    March 31,
                                                       ------------------------------------
                                                             2003                2002
                                                       ------------------  ----------------
      <S>                                               <C>                  <C>
       Canada.........................................   $    278,837         $   251,130
       United States..................................      5,358,483           6,433,789
       Europe Middle East and Africa..................      6,387,089           1,915,637
       Asia and Other.................................        281,382                   -
                                                       ------------------  ----------------
                                                         $ 12,305,791         $ 8,600,556
                                                       ==================  ================
</TABLE>


     Major customers

     During the three months  ended March 31, 2003  revenue  from two  customers
     accounted for approximately 25.0% and 19.3%, respectively of total revenue.
     For the three  months ended March 31, 2002 one customer did not account for
     greater than 10% of total revenue.



                                      -7-
<PAGE>

                         MDSI MOBILE DATA SOLUTIONS INC.

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



4.   EARNINGS (LOSS) PER COMMON SHARE

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

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


                                                        Three months ended
                                                             March 31,
                                                     --------------------------
                                                       2003             2002
                                                     ----------      ----------

      Weighted average shares outstanding.........   8,185,445        8,726,314
      Effect of dilutive securities
      Stock options...............................       3,103                -
                                                     ----------      ----------
      Diluted weighted average shares outstanding.   8,188,548        8,726,314
                                                     ===========     ===========


5.   RESTRUCTURING CHARGE

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

                                                           Total Restructuring
                                                                  Charge
                                                           ---------------------
      Workforce reduction                                    $   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                                     (4,996,153)
                                                           ---------------------
      Accrued restructuring charges included in
      accrued liabilities at March 31, 2003                  $   1,109,774
                                                           =====================


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

     The  Company  has  recorded a $1.9  million  provision  relating to surplus
     office space under long term lease by the Company at two locations,  one of
     which the Company has entered into fixed cost lease  arrangements  expiring
     in 2004. The Company has incurred  approximately $0.8 million of cash costs
     relating to this provision  leaving an accrual of $1.1 million remaining as
     at March 31, 2003. The Company  expects that the charge will be fully drawn
     down no later  than the time the lease  expires  in the  fourth  quarter of
     2004.



                                      -8-
<PAGE>

                         MDSI MOBILE DATA SOLUTIONS INC.

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



6.   COMMITMENTS AND CONTINGENCIES

     (a)  Contingency

          The  Company is involved  in a dispute  with a  customer.  The Company
          filed  suit  against  the  customer  alleging  that the  customer  had
          breached  a  series  of  contracts,  and  failed  to pay  sums  due of
          approximately  $3.7 million.  The suit sought  payment of the contract
          balance,  plus  other  damages,  interest  and  attorneys'  fees.  The
          customer  filed  an  answer  and  counterclaim  alleging  the  Company
          breached  the  contracts,  entitling  the customer to repayment of all
          sums paid to the Company of approximately  $3.5 million.  In addition,
          the    customer's     counterclaims    alleged    fraud,     negligent
          misrepresentation,  breach of express  warranty  and breach of implied
          warranties.  The customer sought all actual,  special,  incidental and
          consequential  damages associated with these counterclaims in addition
          to  punitive  damages,  interest  and  attorneys'  fees.  The  Company
          received  notice that the customer  settled its breach of contract and
          warranty  claims  with the  Company's  insurance  carrier on April 16,
          2003.  This  settlement  will not result in the Company  recording any
          charge to earnings, as discussed below.

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

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

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

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

     (b)  Guarantee

          As part of the  disposition  agreement  with  Connectria  Corporation,
          Connectria  is to use its best  efforts  to  terminate,  or obtain the
          release of MDSI from approximately $0.3 million in loan guarantees and
          equipment  leases  made by  MDSI  on  behalf  of  Connectria.  To date
          termination or release from these obligations has not occurred, and as
          a result MDSI could  potentially  be liable  under  these  obligations
          should  Connectria  default  on  a  payment.   Based  on  management's
          estimates,  the Company does not anticipate having to make payments in
          connection with these  guarantees and accordingly no amounts have been
          accrued as a liability in the financial statements.



                                      -9-
<PAGE>

                         MDSI MOBILE DATA SOLUTIONS INC.

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



6.   COMMITMENTS AND CONTINGENCIES (continued)

     (c)  Committment

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





                                      -10-
<PAGE>


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


     Certain  statements  in  this  Quarterly  Report  on Form  10-Q  constitute
forward-looking  statements  within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended. Such forward-looking  statements involve known
and unknown  risks,  uncertainties  and other  factors that may cause the actual
results,  performance  or  achievements  of  MDSI,  or  developments  in  MDSI's
industry,  to differ  materially  from the anticipated  results,  performance or
achievements  expressed  or implied  by such  forward-looking  statements.  Such
factors  include,  but are not limited to:  lengthy sales cycles,  the Company's
dependence upon large  contracts and relative  concentration  of customers,  the
failure of MDSI to achieve  anticipated levels of cost savings and the risk that
such cost  reduction  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 slow  United  States  and  international  economies
generally,  as well as economic  trends and  conditions in the vertical  markets
that MDSI serves, the effect of the risks associated with technical difficulties
or  delays in  product  introductions  and  improvements,  product  development,
product pricing or other initiatives of MDSI's competitors, the possibility that
our potential customers will defer purchasing decisions due to economic or other
conditions  or  will  purchase  products  offered  by  our  competitors,   risks
associated  with litigation and the other risks and  uncertainties  described in
the risk  factors  attached as Exhibit 99.1 hereto and in other  Securities  and
Exchange Commission filings,  including the Company's Annual Report on Form 10-K
for the year ended December 31, 2002.

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


Overview

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

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


Restructuring

     The Company  believes that economic  conditions  and trends have  adversely
affected and may continue to affect levels of capital spending by companies in a
variety of  industries,  including  companies in the  vertical  markets that the
Company serves. The current excess supply of capacity in the  telecommunications
industry   has   adversely   affected   the   financial    condition   of   many
telecommunications  companies  worldwide.  In addition,  economic conditions and
developments  in the energy  markets have had an adverse effect on the financial
condition of energy and utility  companies in certain  geographic areas of North
America.  The  Company  believes  that these and other  factors  have  adversely
affected  demand for products and  services  offered by the Company,  as certain
prospective and existing customers have delayed or deferred purchasing decisions
or have sought to terminate  existing  contracts for the Company's  products and
services.  While the Company believes that economic conditions in certain of its
vertical  markets show signs of improvement,  the Company believes that economic
and  political  conditions  and general  trends are likely to continue to affect
demand for the Company's products and services throughout the remainder of 2003,
particularly  demand for  software and related  services.  Such factors may also
increase the amount of doubtful  accounts or adversely  affect the likelihood of
collection of such accounts.



                                      -11-
<PAGE>

     In order to address the uncertainties caused by these economic trends, MDSI
announced  in 2001 its  intention  to  reduce  its  operating  expenses  through
workforce  reductions  and other  measures.  These  measures have been gradually
implemented with incremental reductions in costs each quarter, and were expected
to result in an estimated $2.9 million in cost reductions per quarter by the end
of 2002.  A majority of the  savings  have been  realized by reduced  salary and
payroll costs, and the remaining  savings have been realized from the subleasing
of excess space, and a reduction in discretionary  spending.  As a result of the
sale of the public  safety  operations  during the second  quarter of 2002,  the
Company exceeded the estimated quarterly savings. There can be no assurance that
the workforce  reductions  and other  measures will not have a material  adverse
affect on the Company's business operations.

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

                                                           Total Restructuring
                                                                  Charge
                                                           ---------------------
      Workforce reduction                                    $   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                                     (4,996,153)
                                                           ---------------------
      Accrued restructuring charges included in
      accrued liabilities at March 31, 2003                  $   1,109,774
                                                           =====================


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

     The Company's  remaining  restructuring  accruals  relate to surplus office
space  under long term lease by the Company at two  locations,  one of which the
Company has entered  into fixed cost lease  arrangements  expiring in 2004.  The
Company has incurred  approximately  $0.8 million of cash costs relating to this
provision leaving an accrual of $1.1 million remaining as at March 31, 2003. 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.


Field Service Business

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

     Revenue  for  software  and  services  has  historically  accounted  for  a
substantial portion of the Company's revenue. Typically, the Company enters into
a fixed price  contract with a customer for the  licensing of selected  software
products and the provision of specific  services  that are  generally  performed
within six to twelve months.  Pricing for these contracts  includes license fees
as well as a fee for professional  services.  The Company  generally  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



                                      -12-
<PAGE>

agreements  typically have a term of one to three years and are invoiced  either
annually,  quarterly,  or  monthly.  Revenue for these  services  is  recognized
ratably over the term of the contract.

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

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

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

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


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

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

     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.



                                      -13-
<PAGE>

Recent Accounting Pronouncements

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

     SFAS 149 is effective for contracts entered into or modified after June 30,
2003, except as stated below and for hedging relationships designated after June
30, 2003.

     The  provisions  of SFAS 149 that  relate  to SFAS No.  133  Implementation
Issues that have been effective for fiscal quarters that began prior to June 15,
2003,  should  continue  to be  applied  in  accordance  with  their  respective
effective dates. In addition,  certain provisions  relating to forward purchases
or sales of when-issued  securities or other  securities  that do not yet exist,
should be applied to existing  contracts as well as new  contracts  entered into
after June 30, 2003. SFAS 149 should be applied prospectively.

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

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

     In June 2002,  the FASB issued SFAS No. 146 ("SFAS 146"),  "Accounting  for
Costs Associated with Exit or Disposal  Activities".  SFAS 146 requires that the
liability for a cost associated with an exit or disposal  activity be recognized
at its fair value when the liability is incurred.  Under  previous  guidance,  a
liability  for certain  exit costs was  recognized  at the date that  management
committed to an exit plan,  which was generally  before the actual liability had
been incurred. Adoption of this statement did not impact the Company's financial
statements for quarter ended March 31, 2003.

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


Critical Accounting Policies and Significant Estimates

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



                                      -14-
<PAGE>

Restructuring Charges

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

Accounts Receivable

     The  Company  periodically  reviews  the  collectability  of  its  accounts
receivable  balances.  Where  significant  doubt  exists  with  regards  to  the
collection  of a certain  receivable  balance,  an  allowance  and charge to the
income  statement is recorded.  At March 31, 2003,  the  allowance  for doubtful
accounts was $3.5  million,  composed of $2.5 million  relating to current trade
receivables  and $1.0 million  relating to a long term  receivable.  The Company
intends  to  continue  vigorously  pursuing  these  accounts.  If future  events
indicate additional  collection issues, the Company may be required to record an
additional allowance for doubtful accounts.

Revenue Recognition - Percentage Completion

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

Income Taxes

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

Contingencies

The Company is involved in a dispute with Citizens  Telcom  Services Co., L.L.C.
The Company  filed suit against  Citizens  alleging that Citizens had breached a
series of contracts,  and failed to pay sums due.  Citizens  filed an answer and
counterclaim alleging the Company breached the contracts,  entitling Citizens to
repayment  of all sums paid to the Company of  approximately  $3.5  million.  In
addition,  Citizens'  counterclaims alleged fraud, negligent  misrepresentation,
breach of express warranty and breach of implied warranties. Citizens sought all
actual,  special,  incidental and  consequential  damages  associated with these
counterclaims,  in addition to punitive  damages,  interest and attorneys' fees.
The Company  received notice on April 16, 2003 that Citizens  settled its breach
of contract,  and warranty  claim with the  Company's  insurance  company.  This
settlement will not result in the Company  recording any charge to earnings,  as
discussed below.

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





                                      -15-
<PAGE>

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

     The  Company  intends to expense the costs of ongoing  attorney's  fees and
costs incurred in connection with the appeal and any subsequent  trial,  and any
counterclaims    asserted   by   the   customer   for   fraud   and    negligent
misrepresentation,  as  incurred.  The Company has  classified  the $3.7 million
receivable from Citizens as a long term receivable on its  consolidated  balance
sheet as of March 31, 2003,  and due to the uncertain  nature of the  receivable
has recorded an allowance in a prior period of $1.0 million  against the amounts
due.  There is currently no provision in the Company's  financial  statements to
address any payment to the customer if the customer is  successful in any appeal
and subsequent trial on its fraud and  misrepresentation  counterclaims,  as the
Company,  after  consultation with counsel,  views this to be an unlikely event.
Should the Company not be  successful in its claims  against the  customer,  the
Company may be required to take a $2.7 million dollar charge to earnings. If the
customer   is   successful   in  any   fraud  or   negligent   misrepresentation
counterclaims,  the  Company may be  required  to take an  additional  charge to
earnings to the extent of the judgment. Although the amount of any such judgment
against  the  Company  for  fraud  or  negligent   misrepresentation  cannot  be
determined,  if the customer is successful in any appeal and  subsequent  trial,
the Company's  financial condition and results of operations would be materially
adversely effected.  See the "Litigation" risk factor in Exhibit 99.1 hereto and
see "Forward-Looking Statements".


Results of Operations

     The  Company's net income was $0.2 million for the three months ended March
31, 2003. This compares to a net loss of $0.3 million for the three months ended
March 31,  2002.  The  increase  in income  for the period is due  primarily  to
increased revenues derived from several significant contracts during the period.

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

<TABLE>
                                                                            Three months ended March 31,
                                                                            ----------------------------
                                                                                2003            2002
                                                                            ------------     -----------

<S>                                                                               <C>              <C>
    REVENUE
       Software and services                                                      63.8%            67.5%
       Maintenance and support                                                    21.2%            29.7%
       Third party products and services                                          15.0%             2.8%
                                                                            ------------     -----------
                                                                                 100.0%           100.0%

    DIRECT COSTS                                                                  48.2%            42.2%
                                                                            ------------     -----------
    GROSS PROFIT                                                                  51.8%            57.8%
                                                                            ------------     -----------
    OPERATING EXPENSES
       Research and development                                                   10.4%            17.0%
       Sales and marketing                                                        24.0%            28.1%
       General and administrative                                                 12.8%            19.3%
                                                                            ------------     -----------
                                                                                  47.1%            64.4%
                                                                            ------------     -----------
    OPERATING INCOME (LOSS)                                                        4.7%           (6.6)%

    OTHER (EXPENSE) INCOME                                                       (2.0)%             0.9%
                                                                            ------------     -----------
    INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE TAX PROVISION                  2.7%           (5.7)%

    INCOME TAX EXPENSE (RECOVERY) FROM CONTINUING OPERATIONS                       0.9%           (1.4)%
                                                                            ------------     -----------
    NET INCOME (LOSS) FROM CONTINUING OPERATIONS                                   1.8%           (4.3)%

    INCOME FROM DISCONTINUED OPERATIONS                                              -%             1.0%
                                                                            ------------     -----------
    NET INCOME (LOSS) FOR THE PERIOD                                               1.8%           (3.3)%
                                                                           =============   ==============
</TABLE>


Three Months  Ended March 31, 2003  Compared to the Three Months Ended March 31,
2002

     Revenue.  Revenue  increased  by $3.7 million or 43.1% for the three months
ended March 31, 2003 as compared to the three months ended March 31, 2002.  This
increase was  primarily  due to increases in revenue from  software and services
and third party products and services, during the first quarter of 2003 relative
to the same period in 2002.



                                      -16-
<PAGE>

Three Months  Ended March 31, 2003  Compared to the Three Months Ended March 31,
2002 (continued)

     Software  and services  revenue  increased by $2.0 million or 35.2% for the
three  months  ended March 31, 2003 as compared to the three  months ended March
31,  2002.  The  increase  in revenue  is  attributable  to several  significant
contracts  the  Company  has  entered  into  over  the  last  several  quarters,
representing  increased  success in the core markets the Company  serves.  These
contracts continue to generate  significant revenue for the Company. The Company
was not earning  revenue from these  contracts  for the three months ended March
31,  2002 and  therefore  the  Company's  Software  and  Service  revenues  have
significantly increased for the three months ended March 31, 2003 as compared to
the three months ended March 31, 2002. The Company  expects that these contracts
will continue to make up a  significant  portion of revenues over the next year.
"See Forward  Looking  Statements".  While the Company  believes  that  economic
conditions  in certain of its vertical  markets show signs of  improvement,  the
Company  anticipates  that economic  conditions and general trends are likely to
continue to have an adverse  impact on software and services  revenues in future
periods. See "Forward-Looking Statements".

     Maintenance  and support  revenues  were $2.6  million for the three months
ended  March 31, 2003 as compared  to $2.6  million for the three  months  ended
March 31,  2002.  Maintenance  and  support  revenue  has  increased  marginally
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   which  the   Company   is  engaged  to  provide  in  support  of  its
installations.

     Third party products and services revenue increased by $1.6 million for the
three months ended March 31, 2003,  compared to the three months ended March 31,
2002. Third party products and services revenue is primarily earned from certain
customers in the utilities market pursuant to agreements under which the Company
provides  third party products and services,  typically host computer  equipment
and mobile  computing  devices,  as part of the  installation  of  software  and
provision of services. In addition, not all customers under contract require the
provision of third party products and services.  Accordingly, there may be large
fluctuations in revenue,  direct costs, gross profits and income from operations
from one period to another.  The Company has recently  entered into an agreement
whereby it has agreed to supply a large  amount of third  party  services  at no
margin, in connection with one particular  contract,  and therefore expects that
future revenues from third party products and services will increase in the near
term.  For the three months ended March 31, 2003  approximately  $1.1 million of
these third party services were provided. See "Forward Looking Statements."

     Direct Costs. Direct costs were 48.2% of revenue for the three months ended
March 31,  2003,  compared to 42.2% for the three  months  ended March 31, 2002.
Direct  costs  include  labor  and other  costs  directly  related  to a project
including  those  related to the  provision of services  and support,  and costs
related to equipment  purchased for sale to third  parties.  Labor costs include
direct payroll, benefits and overhead charges. The increase in direct costs as a
percentage  of revenue  occurred  as the Company has  recently  entered  into an
agreement whereby it has agreed to supply a large amount of third-party services
at no margin, in connection with one particular  contract.  As a result,  direct
costs as a percentage of revenue have  increased,  and the Company  expects that
direct costs as a percentage of revenue will remain  relatively  consistent with
the current period in the near term. See "Forward-Looking Statements."

     Gross  Margins.  Gross  margins  were 51.8% of revenue for the three months
ended March 31,  2003,  compared to 57.8% for the three  months  ended March 31,
2002. The decrease in gross margin as a percentage of revenue relates  primarily
to a recent agreement whereby the Company has agreed to supply a large amount of
third-party  services  at no margin.  During  the  current  period  the  Company
recognized  approximately $1.1 million in third party revenues and costs related
to this project and as a result of this work,  the Company's  gross margins as a
percentage of revenue decreased.  The Company expects that in the near term that
its gross  margins as a percentage  of revenue will remain  consistent  with the
current period. "See "Forward-Looking Statements."



                                      -17-
<PAGE>

Three Months  Ended March 31, 2003  Compared to the Three Months Ended March 31,
2002 (continued)

     Research and  Development.  Research  and  development  expenses  were $1.3
million,  or 10.4% of  revenue,  for the three  months  ended  March  31,  2003,
compared to $1.5 million, or 17.0% of revenue,  for the three months ended March
31,  2002.  The  decrease in research  and  development  expenses is a result of
research  and  development  personnel  being  utililized  on  revenue  producing
projects in the current  period,  and  corresponding  portions of the associated
salary  costs for these  staff  being  reflected  as direct  costs as opposed to
research and development expenses.  The Company intends to continue committing a
significant  portion of its product  revenues to enhance  existing  products and
develop new products. See "Forward-Looking Statements".

     Sales and  Marketing.  Sales and  marketing  expenses  were $2.9 million or
24.0% of revenue for the three  months  ended March 31, 2003 and $2.4 million or
28.1% of revenue  for the three  months  ended March 31,  2002.  Total sales and
marketing  expenses  represents  an increase of  approximately  $0.5  million as
compared to the same period of 2002. The increase in expenditures in the current
period was due to an increase in commission costs 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 $1.6
million, or 12.8% of revenue, for the three months ended March 31, 2003 and $1.7
million, or 19.3% of revenue, for the three months ended March 31, 2002. General
and administrative  expenses remained relatively consistent with the comparative
period as a result of cost control efforts initiated by the Company. The Company
expects that in the near future,  general and  administrative  expenditures will
remain  relatively   consistent  with  current  levels.   See   "Forward-Looking
Statements".

     Other (Expense)  Income.  Other (expense) income was ($0.3) million for the
three months ended March 31, 2003 as compared to  approximately  $80,000 for the
three months ended March 31, 2002.  Substantially  all of other income (expense)
relates to fluctuations in the currencies of the Company's  foreign  operations,
interest  income  on cash and short  term  deposits,  and  interest  expense  on
short-term borrowings under the line of credit and capital lease obligations. In
particular the U.S.  dollar weakened during the current period and the Company's
foreign denominated  liabilities increased in value which when reflected in U.S.
dollars caused an unrealized foreign exchange loss.

     Income  Taxes.  The Company  provided for income tax expense  (recovery) on
income  (losses)  for the three months ended March 31, 2003 and 2002 at rates of
32.2% and (26%)  respectively.  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 its Hosting and IT
services  subsidiary  Connectria  Corporation  (Connectria).  As a  result,  the
historical   results  of  operations  for  Connectria  have  been  presented  as
Discontinued  Operations.  Income  from  Discontinued  Operations  for the three
months ended March 31, 2002 was $86,000.  As the  transaction  was  completed in
July of 2002 all assets and liabilities of Connectria were liquidated by the end
of July 2002 and no income or loss was  incurred  from  discontinued  operations
during  the  current  period.  Going  forward,  the  Company  expects no further
financial   statement  impact  from  this  disposition.   See   "Forward-Looking
Statements".


Liquidity and Capital Resources

     The  Company  has  financed  its  operations,   acquisitions   and  capital
expenditures with cash generated from operations,  loans, private placements and
public offerings of its securities.  At March 31, 2003, the Company had cash and
cash equivalents of $12.5 million and working capital of $9.7 million.

     Cash provided by operating activities was $2.4 million for the three months
ended March 31, 2003  compared to $0.4  million for the three months ended March
31, 2002.  The net inflow of cash from operating  activities,  after adding back
depreciation  and  amortization  of $0.7  million  is due to a net  decrease  in
non-cash  working  capital  items of $1.4 million and net income of $0.2 for the
three  months  ending March 31,  2003.  The net  decrease in non-cash  operating
working  capital  items is due  primarily  to a net  decrease in unbilled  trade
receivables,  and an  increase  in  deferred  revenue,  partially  offset  by an
increase  in  trade  accounts   receivable.   The  decrease  in  unbilled  trade
receivables  and  increase  in deferred  revenue  are due to timing  differences
arising between revenue recognition and



                                      -18-
<PAGE>

billing milestones in multiphase projects.  The increase in trade receivables is
a result of increased billings during the three months ended March 31, 2003.

     The Company maintains as at March 31, 2003 a provision of $3.5 million with
respect to doubtful accounts  including $1.0 million  classified as non current.
The Company intends to vigorously pursue collection of these accounts;  however,
due to uncertainty with regards to ultimate  collection,  the Company determined
that it would be prudent to maintain an allowance to address this uncertainty.

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

     Cash used by financing activities of $168,000 during the three months ended
March 31, 2003  primarily  relates to $241,000 in repayments  of capital  leases
made  during the  quarter,  partially  offset by  proceeds  of $73,000  from the
issuance of shares under the employee  share  purchase  plan. The capital leases
are to be repaid over a 36 month period ending  December 22, 2006, bear interest
at various  interest rates to a maximum of  approximately  9% and are secured by
certain computer hardware and software assets of the Company.

     Cash used in  investing  activities  was $0.7  million for the three months
ended  March 31, 2003 as compared  to $0.2  million for the three  months  ended
March 31, 2002. Total investing activity during the three months ended March 31,
2003  consisted of $0.7 million in  purchases  of capital  assets.  Purchases of
capital assets include computer  hardware and software for use in implementation
activities.  Investing  activities  in 2002 also related to purchases of capital
assets.

     Existing  sources of liquidity at March 31, 2003 include  $12.5  million of
cash and cash  equivalents  and additional  funds  available under the Company's
operating line of credit.  At March 31, 2003, the Company's  borrowing  capacity
under  the line of  credit  was up to $10 CDN  million.  Under  the terms of the
agreement, borrowings and letters of credit under the line are limited to 75% to
90% of eligible  accounts  receivable.  Borrowings accrue interest at the bank's
prime rate plus 0.5%. At March 31, 2003,  the Company was not using this line of
credit, other than to secure performance guarantees.

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

     The  Company  believes  that  future  cash  flows from  operations  and its
borrowing capacity under the operating line of credit combined with current cash
balances will provide  sufficient  funds to meet cash  requirements for at least
the next twelve months.  Commensurate  with its past and expected future growth,
the Company may increase,  from time to time,  its borrowing  facility under its
operating  line of credit to  support  its  operations.  Future  growth or other
investing activities may require the Company to obtain additional equity or debt
financing,  which may or may not be available on attractive terms, or at all, or
may be  dilutive  to  current  or  future  shareholders.  See  "Forward  Looking
Statements".



                                      -19-
<PAGE>

     As at March 31, 2003 the Company had the following contractual  obligations
and commercial commitments:

<TABLE>
    --------------------------------------------------------------------------------------------------
       Contractual                                   Payments Due by Period
       Obligations
    --------------------------------------------------------------------------------------------------
                               Total        Less Than One      1-3 Years     4-5 Years      After 5
                                                 Year                                        Years
    --------------------------------------------------------------------------------------------------
    <S>                     <C>               <C>             <C>            <C>           <C>
      Capital Lease        $ 3,768,555        $2,116,635      $1,651,920         -             -
       Obligations
    --------------------------------------------------------------------------------------------------
     Operating Leases      $ 7,279,126        $1,539,678      $2,801,583     $2,203,399     $734,466
    --------------------------------------------------------------------------------------------------
    Total Contractual      $11,047,681        $3,656,313      $4,453,503     $2,203,399     $734,466
       Obligations
    --------------------------------------------------------------------------------------------------
</TABLE>

     In addition to these  commercial  commitments the Company has provided,  as
performance  bonds, an irrevocable  revolving  letter of credit in the amount of
$516,114 (EUR 501,082) expiring May 31, 2003, $397,760 expiring May 1, 2003, and
$1,187,623 (CAD $1,864,568) expiring October 1, 2003. The Company has pledged an
amount equal to the letters of credit as guarantees  against its operating  line
of credit as security.

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


Derivative Financial Instruments

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

     The Company's  foreign currency forward  contracts are executed with credit
worthy banks and are denominated in currencies of major industrial countries. As
at March 31,  2003,  the  Company  had no  foreign  currency  forward  contracts
outstanding.



                                      -20-
<PAGE>

ITEM 3: QUANTITIATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company's  primary market risk is foreign currency  exchange rates. The
Company has  established  procedures to manage  sensitivity to foreign  currency
exchange  rate market  risk.  These  procedures  include the  monitoring  of the
Company's net exposure to each foreign  currency and the use of foreign currency
forward contracts to hedge firm exposures to currencies other than United States
dollars.  The  Company  has  operations  in Canada and Europe in addition to its
United States operations and did not hedge these exposures as at March 31, 2003.
However,  the Company may from time-to-time hedge any net exposure to currencies
other than the United States dollar.

     As of March 31, 2003,  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 $2.5 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.

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




                                      -21-
<PAGE>

ITEM 4: CONTROLS AND PROCEDURES

     Under  the  supervision  and  with  the   participation  of  the  Company's
management,  including its Chief Executive Officer and Chief Financial  Officer,
the Company  evaluated  the  effectiveness  of the design and  operation  of its
disclosure  controls  and  procedures  (as defined in Rule  13a-14(c)  under the
Exchange Act as of a date (the  "Evaluation  Date")  within 90 days prior to the
filing date of this  report.  Based upon that  evaluation,  the Chief  Executive
Officer and Chief Financial  Officer  concluded that, as of the Evaluation Date,
the  Company's  disclosure  controls  and  procedures  were  effective in timely
alerting  them to the  material  information  relating  to the  Company  (or its
consolidated subsidiaries) required to be included in the Company's periodic SEC
filings and Form 8-K reports.

     There were no significant  changes made in the Company's  internal controls
during the period  covered by this  report or, to the  Company's  knowledge,  in
other factors that could  significantly  affect these controls subsequent to the
date of their execution.

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



                                      -22-
<PAGE>

Part II -  OTHER INFORMATION

          ITEM 1. Legal Proceedings

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

     On November 22, 2000, MDSI filed suit in Texas District Court Collin County
against Citizens Telecom Services Co., L.L.C.,  generally alleging that Citizens
breached a series of contracts  dated  October 15,  1998.  The suit alleged that
Citizens has  wrongfully  terminated the contracts and failed to pay sums due of
approximately  $3.7 million.  The suit sought  payment of the contract  balance,
plus other  damages,  interest  and  attorneys'  fees.  In late  February  2001,
Citizens  filed an answer  and  counterclaim  alleging  that MDSI  breached  the
contracts,  justifying  Citizens'  termination  of the  contracts  and entitling
Citizens to repayment of all sums paid to MDSI of approximately  $3.5 million in
addition to interest and attorneys' fees. At Citizens' request, the parties held
a mediation  on April 2, 2001.  Mediation  was not  successful  and both parties
began discovery.  In October 2002, Citizens filed amended counterclaims alleging
fraud,  negligent  misrepresentation,  breach of express  warranty and breach of
implied  warranties.   Citizens  sought  all  actual,  special,  incidental  and
consequential  damages  associated  with these  counterclaims,  in  addition  to
punitive  damages,  interest  and  attorneys'  fees.  In  March  2003,  Citizens
submitted an expert report  estimating that Citizens had incurred  approximately
$6.1  million in damages due to lost  productivity  and direct  costs,  and that
Citizens  may be  entitled  to  additional  contractual  penalties  from MDSI of
approximately $1.1 million.  MDSI disputed these counterclaims and believes them
to be without merit. On April 16, 2003 the Company received notice that Citizens
reached a settlement  on its breach of contract and warranty  claims with MDSI's
insurer as discussed below,  which settles Citizens claims for refunds under the
contract and any contractual or consequential  damages. This settlement will not
result in the Company recording any charge to earnings, as discussed below.

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

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

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

     The  Company  intends to expense the costs of ongoing  attorney's  fees and
costs incurred in connection with the appeal and any subsequent  trial,  and any
counterclaims    asserted   by   the   customer   for   fraud   and    negligent
misrepresentation, as incurred.

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

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

For Items 2, 3, 4 and 5 there was no reportable information for the three months
ended March 31, 2003.



                                      -23-
<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(2)(3)     2000 Stock Option Plan
     10.2(1)        Form of  Indemnification  Agreement  between the Company and
                    certain officers of the Company
     10.3(1)        Lease dated  September  25, 1997 between Sun Life  Assurance
                    Company of Canada and the Company
     10.4(2)(4)     Employment  Agreement  dated  March  26,  2001  between  the
                    Company and Erik Dysthe
     10.5(2)(4)     Employment  Agreement  dated  April  24,  2001  between  the
                    Company and Gerald F. Chew
     10.6(2)(4)     Employment  Agreement  dated May 7, 2001 between the Company
                    and Peter H. Rankin
     10.7(5)        Lease  dated  October  12, 2001  between  Crown  Diversified
                    Industries   Corporation   and   Connectria   Corporation  a
                    subsidiary of the Company
     10.8(5)        Lease  dated  May  14,  1999   between   California   Public
                    Employees'  Retirement System and Mobile Data Solutions Inc.
                    a subsidiary of the Company
     10.9(5)        Amending  Agreement  dated December 1, 1998 between Sun Life
                    Assurance Company of Canada and the Company
     10.10(2)(5)    Employment  Agreement  dated May 9, 2001 between the Company
                    and Richard S. Waidmann
     10.11(2)(5)    Employment  Agreement  dated May 9, 2001 between the Company
                    and Eric Y. Miller
     10.12(2)(6)    Employment  Agreement  dated  January  2, 2002  between  the
                    Company and Verne Pecho
     10.13(2)(7)    2002 Stock Purchase Plan
     10.14(8)       Exchange  Agreement  dated as of June  26,  2002  among  the
                    Company,  Connectria  Corporation,  Richard S.  Waidmann and
                    Eric Y. Miller
     10.15(8)       Amendment  to Exchange  Agreement  dated as of June 30, 2002
                    among  the  Company,  Connectria  Corporation,   Richard  S.
                    Waidmann and Eric Y. Miller
     10.16(8)       Warrant dated as of June 29, 2002 to purchase  50,380 shares
                    of  Series  A  Nonvoting   Preferred   Stock  of  Connectria
                    Corporation
     10.17(8)       $250,000  Promissory  Note dated as of June 30, 2002 made by
                    Connectria Corporation in favor of the Company
     10.18(8)       Security  Agreement  dated  as  of  June  30,  2002  between
                    Connectria Connectria and the Company
     10.19(2)(9)    Employment  Agreement  dated  January  1, 1999  between  the
                    Company and Glenn Y. Kumoi
     10.20(2)(9)    Settlement  Agreement  dated  March  15,  2002  between  the
                    Company and Gerald F. Chew
     10.21(2)(9)    Settlement  Agreement dated May 31, 2002 between the Company
                    and Gene Mastro*
     10.22(2)       Employment  Agreement  dated  September 12, 2001 between the
                    Company and Walter J. Beisheim
     99.1           Risk Factors
     99.2           Certification of Chief Executive  Officer in connection with
                    the Company's  Quarterly Report on Form 10-Q for the quarter
                    ended March 31, 2003
     99.3           Certification of Chief Financial  Officer in connection with
                    the Company's  Quarterly Report on Form 10-Q for the quarter
                    ended March 31, 2003
-------------------

(1)  Previously  filed as exhibits with the same  corresponding  number with the
     Registrants' Registration Statement on Form F-1 (Registration No. J33-5872)
     and  amendments  numbers 1 and 2  thereto,  filed with the  Securities  and
     Exchange Commission on October 28, 1996, November 13, 1996 and November 25,
     1996, respectively.
(2)  This document has been identified as a management  contract or compensatory
     plan or arrangement.
(3)  Previously filed as exhibits with the Registrant's  Registration  Statement
     on Form S-8 filed on November 22, 2000.
(4)  Previously  filed as  exhibits  with  the  Registrant's  Form  10-Q for the
     quarterly period ended June 30, 2001.
(5)  Previously filed as exhibits with the  Registrant's  Form 10-K for the year
     ended December 31, 2001.
(6)  Previously  filed as  exhibits  with  the  Registrant's  Form  10-Q for the
     quarterly period ended March 31, 2002.
(7)  Previously  filed as  exhibits  with  the  Registrant's  Form  10-Q for the
     quarterly period ended June 30, 2002.
(8)  Previously filed as exhibits with the Registrant's Form 8-K filed on August
     14, 2002.
(9)  Previously filed as exhibits with the  Registrant's  Form 10-K for the year
     ended December 31, 2002.
*    Confidential   portions  of  this  exhibit  have  been  omitted  and  filed
     separately with the Commission  pursuant to an application for Confidential
     Treatment under Rule 24b-2 promulgated under the Securities Exchange act of
     1934, as amended.


                                      -24-
<PAGE>

     (b)  Reports on Form 8-K

     The  Company  furnished  a Form 8-K on March 31,  2003  pursuant  to Item 9
attaching the  certifications of the Company's Chief Executive Officer and Chief
Financial Officer made pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
in connection  with the Company's  Quarterly  Report on Form 10-Q filed on March
31, 2003. The  information in a Form 8-K furnished  pursuant to Item 9 shall not
be deemed to be filed under the Exchange Act.








                                      -25-
<PAGE>


                                   SIGNATURES


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



                                  MDSI MOBILE DATA SOLUTIONS INC.


Date:  May 15, 2003          By:  /s/ Erik Dysthe
                                  ---------------------------------------
                                  Name:    Erik Dysthe
                                  Title:   President, Chief Executive Officer,
                                           Chairman of the Board and Director




Date:  May 15, 2003          By:  /s/ Verne D. Pecho
                                  ---------------------------------------
                                  Name:    Verne D. Pecho
                                  Title:   Vice President Finance &
                                           Administration and Chief Financial
                                           Officer
                                           (Principal Financial and Accounting
                                           Officer)




                                      -26-
<PAGE>


                                       CERTIFICATIONS


     I, Erik Dysthe,  President,  Chief Executive Officer, Chairman of the Board
and Director of MDSI Mobile Data Solutions Inc., certify that:

     1. I have reviewed this  quarterly  report on Form 10-Q of MDSI Mobile Data
Solutions Inc.;

     2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

     3. Based on my knowledge,  the financial  statements,  and other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

     4. The  registrant's  other  certifying  officers and I are responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     (a)  designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during  the  period in which  this  quarterly
          report is being prepared;

     (b)  evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     (c)  presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

     5. The registrant's other certifying  officers and I have disclosed,  based
on our most  recent  evaluation,  to the  registrant's  auditors  and the  audit
committee  of  registrant's  board  of  directors  (or  persons  performing  the
equivalent function):

     (a)  all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     (b)  any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

     6. The registrant's other certifying  officers and I have indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

     Date: May 15, 2003


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



                                      -27-
<PAGE>

     I,  Verne D.  Pecho,  Vice  President  Finance &  Administration  and Chief
Financial Officer of MDSI Mobile Data Solutions Inc., certify that:

     1. I have reviewed this  quarterly  report on Form 10-Q of MDSI Mobile Data
Solutions Inc.;

     2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

     3. Based on my knowledge,  the financial  statements,  and other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

     4. The  registrant's  other  certifying  officers and I are responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     (a)  designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during  the  period in which  this  quarterly
          report is being prepared;

     (b)  evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     (c)  presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

     5. The registrant's other certifying  officers and I have disclosed,  based
on our most  recent  evaluation,  to the  registrant's  auditors  and the  audit
committee  of  registrant's  board  of  directors  (or  persons  performing  the
equivalent function):

     (a)  all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     (b)  any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

     6. The registrant's other certifying  officers and I have indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

     Date: May 15, 2003


                                            /s/ Verne D. Pecho
                                            ------------------------------------
                                            Verne D. Pecho
                                            Vice President Finance &
                                            Administration and Chief Financial
                                            Officer






                                      -28-
<PAGE>