---

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

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FORM 10-Q

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(Mark One)

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

For the quarterly period ended September 30, 2002

OR

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

For the transition period from  to

Commission file Number: 0-28968

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

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CANADA(Jurisdiction of incorporation)

NOT APPLICABLE(I.R.S. Employer Identification No.)


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

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

The
number of outstanding shares of the Registrant's 
common stock, no par value, at November 7, 2002 was 8,189,802

---

MDSI Mobile Data Solutions Inc.
INDEX TO THE FORM 10-Q
For the quarterly period ended September 30, 2002

|                             |                                                                                       |                                                      |    | Page No.
|---------------------------- | ------------------------------------------------------------------------------------- | ---------------------------------------------------- | -- | --------
|Part IFINANCIAL INFORMATION |                                                                                       |                                                     
|ITEM 1.                      | Financial Statements                                                                  |                                                      |   
|                             |                                                                                       | Condensed Consolidated Balance Sheets                |    | 1       
|                             |                                                                                       | Condensed Consolidated Statements of Operations      |    | 2       
|                             |                                                                                       | Condensed Consolidated Statements of Cash Flows      |    | 3       
|                             |                                                                                       | Notes to Condensed Consolidated Financial Statements |    | 4       
|ITEM 2.                      | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |                                                      | 11
|ITEM 3.                      | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                            |                                                      | 24
|ITEM 4.                      | CONTROLS AND PROCEDURES                                                               |                                                      | 24
|PART IIOTHER INFORMATION    |                                                                                       |                                                     
|ITEM 1.                      | LEGAL PROCEEDINGS                                                                     |                                                      | 25
|ITEM 6.                      | EXHIBITS AND REPORTS ON FORM 8-K                                                      |                                                      | 25
|SIGNATURES                   |                                                                                       | 27                                                  
|CERTIFICATIONS               |                                                                                       | 28                                                  

---

# Part I  FINANCIAL
INFORMATION
ITEM 1.  FINANCIAL STATEMENTS

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

|                                                | As at
|----------------------------------------------- | -----
|                                                |      
|
|                                                |      
|ASSETS                                          |      
|CURRENT ASSETS                                  |      
|Cash and cash equivalents                       |      
|Accounts receivable, net                        |      
|Trade (net of allowance for doubtful accounts   |      
|$2,475,420; 2001 - $3,587,303)                  |      
|Unbilled                                        |      
|Income taxes receivable                         |      
|Prepaid expenses and other assets               |      
|                                                |      
|                                                |      
|CAPITAL ASSETS, NET                             |      
|LONG TERM ACCOUNTS RECEIVABLE                   |      
|LONG TERM DEFERRED TAXES                        |      
|                                                |      
|                                                |      
|ASSETS OF DISCONTINUED OPERATIONS (note 2)      |      
|                                                |      
|TOTAL ASSETS                                    |      
|                                                |      
|LIABILITIES AND STOCKHOLDERS' EQUITY            |      
|CURRENT LIABILITIES                             |      
|Accounts payable                                |      
|Accrued liabilities                             |      
|Income Taxes Payable                            |      
|Deferred revenue                                |      
|Current obligations under capital lease         |      
|                                                |      
|                                                |      
|OBLIGATIONS UNDER CAPITAL LEASES                |      
|                                                |      
|                                                |      
|LIABILITIES OF DISCONTINUED OPERATIONS (note 2) |      
|                                                |      
|                                                |      
|STOCKHOLDERS' EQUITY                            |      
|Common stock                                    |      
|Additional paid-up capital                      |      
|Treasury stock                                  |      
|Deficit                                         |      
|Comprehensive Income                            |      
|                                                |      
|                                                |      
|                                                |      
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY      |      
|                                                |      
|                                                |      

Contingency (note 8)

See Notes to Condensed Consolidated Financial Statements

-1-

---

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

|                                                              | Three months ended
        September 30, | Nine months ended
        September 30,
|------------------------------------------------------------- | ---------------------------------------- | ---------------------------------------
|                                                              |                                          |                                        
|
|                                                              |                                          |                                        
|REVENUE                                                       |                                          |                                        
|Software and services                                         |                                          | $   6,614,731                          
|Maintenance and support                                       |                                          | 2,604,604                              
|Third party products and services                             |                                          | 1,608,091                              
|                                                              |                                          |                                        
|                                                              |                                          | 10,827,426                             
|DIRECT COSTS                                                  |                                          | 5,001,027                              
|                                                              |                                          |                                        
|GROSS PROFIT                                                  |                                          | 5,826,399                              
|                                                              |                                          |                                        
|OPERATING EXPENSES                                            |                                         
|Research and development                                      |                                          | 1,277,972                              
|Sales and marketing                                           |                                          | 3,029,914                              
|General and administrative                                    |                                          | 1,485,729                              
|Restructuring Charge (note 6)                                 |                                          | --                                     
|Provision for doubtful accounts,                              |                                         
|net of recoveries                                             |                                          | --                                     
|Amortization and provision for                                |                                         
|valuation of intangible assets (note 5)                       |                                          | --                                     
|                                                              |                                          |                                        
|                                                              |                                          | 5,793,615                              
|                                                              |                                          |                                        
|OPERATING INCOME  (LOSS)                                      |                                          | 32,784                                 
|VALUATION ALLOWANCE ON INVESTMENTS (note 7)                   |                                          | --                                     
|OTHER INCOME (EXPENSE)                                        |                                          | 70,509                                 
|                                                              |                                          |                                        
|INCOME (LOSS)
FROM CONTINUING OPERATIONS BEFORE TAX PROVISION |                                          | 103,293                                
|PROVISION FOR (RECOVERY OF) INCOME TAXES                      |                                          | 39,440                                 
|                                                              |                                          |                                        
|NET INCOME
(LOSS) FOR THE PERIOD FROM CONTINUING OPERATIONS   |                                          | 63,853                                 
|INCOME (LOSS) FROM
DISCONTINUED OPERATIONS (note 2)           |                                          | 12,419                                 
|                                                              |                                          |                                        
|NET INCOME (LOSS) FOR THE PERIOD                              |                                          | 76,272                                 
|DEFICIT, BEGINNING OF PERIOD                                  |                                          | (25,674,881                            
|                                                              |                                          |                                        
|DEFICIT, END OF PERIOD                                        |                                          | $(25,598,609                           
|                                                              |                                          |                                        
|Earnings (Loss) per common share                              |                                         
|Earnings (Loss) from continuing operations                    |                                         
|Basic                                                         |                                          | $            0.01                      
|                                                              |                                          |                                        
|Diluted                                                       |                                          | $            0.01                      
|                                                              |                                          |                                        
|Net Earnings (Loss)                                           |                                         
|Basic                                                         |                                          | $            0.01                      
|                                                              |                                          |                                        
|Diluted                                                       |                                          | $            0.01                      
|                                                              |                                          |                                        
|Weighted average shares outstanding                           |                                         
|Basic                                                         |                                          | 8,170,330                              
|                                                              |                                          |                                        
|Diluted                                                       |                                          | 8,223,309                              
|                                                              |                                          |                                        
|                                                              |                                         

See Notes to Condensed
Consolidated Financial Statements

-2-

---

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

|                                                    | Nine months ended 
September 30,
|--------------------------------------------------- | --------------------------------
|                                                    |                                 
|
|                                                    |                                 
|CASH FLOWS FROM OPERATING ACTIVITIES                |                                 
|Net loss from continuing operations                 |                                 
|Items not affecting cash:                           |                                 
|Depreciation, amortization and provision for        |                                 
|valuation of intangible assets                      |                                 
|Write down in value of surplus capital assets       |                                 
|Valuation allowance on investments                  |                                 
|Stock based compensation charge                     |                                 
|Deferred income taxes                               |                                 
|Changes in non-cash operating working capital items |                                 
|                                                    |                                 
|Net cash provided by (used in) operating activities |                                 
|                                                    |                                 
|CASH FLOWS FROM FINANCING ACTIVITIES                |                                 
|                                                    |                                 
|Issuance of Common Shares                           |                                 
|Repayment of capital leases                         |                                 
|                                                    |                                 
|Net cash used by financing activities               |                                 
|                                                    |                                 
|CASH FLOWS FROM INVESTING ACTIVITIES                |                                 
|Long Term Lease Receivable                          |                                 
|Proceeds on settlement of investments               |                                 
|Acquisition of capital assets                       |                                 
|                                                    |                                 
|Net cash used in investing activities               |                                 
|                                                    |                                 
|Net cash used for Continuing operations             |                                 
|Net cash used by discontinued operations (note 2)   |                                 
|                                                    |                                 
|NET CASH OUTFLOW                                    |                                 
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD      |                                 
|                                                    |                                 
|CASH AND CASH EQUIVALENTS, END OF PERIOD            |                                 
|                                                    |                                 

See Notes to Condensed Consolidated
Financial Statements

-3-

---

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

1.  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)   
Basis of presentation

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

(b)   Use of estimates

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

(c)   Reporting Currency

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

(d)   Recently issued accounting standards

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

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

-4-

---

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

1.    
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(d)   Recently issued accounting standards (continued)

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

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

2.    
DISCONTINUED OPERATIONS

| | In
June 2002, MDSI adopted a plan for sale and entered into an agreement to sell its Hosting
and IT Services business segment, Connectria Corporation (Connectria) to former
Connectria shareholders who 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 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.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The disposition of the business has been accounted for as a discontinued operation and
accordingly, the results of operations, financial position and cash flow of this business
are segregated from those of continuing operations for the current and prior periods. The
Company has included in the results of discontinued operations, the sale proceeds, the
costs of disposition, and the results of operations from the measurement date to the
disposal date. The Company recognized a gain of $12,419 on the disposal of Connectria.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

-5-

---

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:

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

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

|Financial
position of discontinued operations | As at,
|--------------------------------------------- | ------
|                                              |       
|
|                                              |       
|Current assets                                |       
|Long term assets                              |       
|                                              |       
|Total assets of discontinued operations       |       
|                                              |       
|Current liabilities                           |       
|Long term liabilities                         |       
|                                              |       
|Total liabilities of discontinued operations  |       
|                                              |       

|Changes in
cash flow of discontinued operations | Nine months ended,
|----------------------------------------------- | ------------------
|                                                |                   
|
|                                                |                   
|Operating activities                            |                   
|Investing activities                            |                   
|Financing activities                            |                   
|                                                |                   
|Cash used for discontinued operations           |                   
|                                                |                   

|(1) |  | Cash
generated from operating  activities for the nine months ended September 30, 2001
includes  $418,381  generated by                 the Company's  Transportation Business
Unit, previously disclosed as a discontinued  operation,  and $(198,708) used in
                the operating activities of Connectria.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

-6-

---

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

3.    
SEGMENTED INFORMATION

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

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

|                                | Three months ended
September 30, | Nine months ended
September 30,
|------------------------------- | -------------------------------- | -------------------------------
|                               
|
|                                |                                  |                                
|Canada                          |                                  | $     195,362                  
|United States                   |                                  | 7,419,997                      
|Europe, Middle East, and Africa |                                  | 2,872,927                      
|Asia and other                  |                                  | 339,140                        
|                                |                                  |                                
|                                |                                  | $10,827,426                    
|                                |                                  |                                
|                                |                                 

| | Major customer
| | --------------

| | During
the three months ended September 30, 2002 revenue from one customer accounted for
approximately 15.6% of total revenue. For the nine months ended September 30, 2002, and
for the three and nine months ended September 30, 2001 no one customer accounted for
greater than 10% of total revenue.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

4.     
EARNINGS (LOSS) PER COMMON SHARE

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

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

|                                            | Three months ended
        September 30, | Nine months ended
        September 30,
|------------------------------------------- | ---------------------------------------- | ---------------------------------------
|                                            |                                          |                                        
|
|                                            |                                          |                                        
|Basic weighted average shares outstanding   |                                          | 8,170,330                              
|Effect of dilutive securities;              |                                         
|Stock options                               |                                          | 52,979                                 
|                                            |                                          |                                        
|Diluted weighted average shares outstanding |                                          | 8,223,309                              
|                                            |                                          |                                        
|                                            |                                         

-7-

---

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

5.     
INTANGIBLE ASSETS

|                                                         | September 30,
        2002 | December 31,
2001
|-------------------------------------------------------- | -------------------------- | -----------------
|                                                         |                            |                  
|Goodwill                                                 |                            | $ 2,615,751      
|Commercial web site domain name                          |                            | 220,000          
|Less:  accumulated amortization and impairment provision |                            | (2,835,751       
|                                                         |                            |                  
|                                                         |                            | $    
          -
|                                                         |                            |                  

| | In
connection with the Companys restructuring (note 6), the Company determined that an
impairment in the value of Goodwill that arose on acquisition of Alliance Systems Inc.,
had occurred during the year ended December 31, 2001. The Company determined an
impairment had occurred due to poor current and forecasted performance in the acquired
Companys business. As a result of this impairment the Company recorded a valuation
allowance in its field service business segment of $1,558,578 which was equal to the
remaining net book value of the Goodwill.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

6.     
RESTRUCTURING CHARGE

| | On
March 30, 2001, the Company, in response to uncertain economic conditions and poor
financial performance, announced a restructuring plan approved by the Companys
Board of Directors designed to reduce operating costs that resulted in the elimination of
34 full time and contractor positions. In connection with the March 30, 2001
restructuring the Company recorded a charge of $1.2 million for the three months ended
March 31, 2001. On May 11, 2001, the Company announced a Board approved update to this
plan, that resulted in the elimination of an additional 115 positions. As part of the May
11, 2001 restructuring, the Company recorded a charge of $4.9 million, resulting in a
total charge to earnings for the year ended December 31, 2001 of $6.1 million. These
charges were reflected in the restructuring charge line item of the Companys
Consolidated Statement of Operations. A breakdown of the nature of the charges and the
costs incurred to date is as follows:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                             | Total Restructuring
        Charge
|-------------------------------------------- | ----------------------------------
|                                             |                                   
|Workforce reduction                          |                                   
|Provision for excess office space            |                                   
|Non cash writedown of capital assets         |                                   
|Other                                        |                                   
|                                             |                                   
|Total restructuring charges                  |                                   
|Cumulative draw-downs                        |                                   
|                                             |                                   
|Accrued restructuring charges included       |                                   
|in accrued liabilities at September 30, 2002 |                                   
|                                             |                                   

| | During
the three and nine month periods ended September 30, 2002 the Company made cash payments
of $135,680 and $1,742,545 respectively relating to the restructuring accruals.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

-8-

---

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

6.     
RESTRUCTURING CHARGE (continued)

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

| | The
provision for excess office space of $1.9 million for the year ended December 31, 2001,
relates to surplus office space under long term lease by the Company at two locations,
where the Company has entered into fixed cost lease arrangements with agreements
extending up to 2004. The Company has incurred approximately $0.5 million of cash costs
relating to this provision leaving an accrual of $1.4 million as at September 30, 2002.
The Company expects that the charge will be fully drawn down no later than the time the
lease expires in the fourth quarter of 2004.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Due
to the elimination of 149 positions, certain capital assets belonging to the Company have
been declared surplus and a charge of $0.6 million has been recorded to reflect the
difference between the previous carrying value and the estimated fair market value, net
of disposal costs. As at September 30, 2002, the full amount of the charge has been
applied to the assets to value them at their estimated net realizable value. These assets
are expected to be disposed of by the end of 2002.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company has recorded a $0.3 million charge for the year ended December 31, 2001 for other
items, including costs of outplacement services, and legal and consulting fees. As at
September 30, 2002, the Company has incurred cash costs of approximately $0.3 million
against this provision with no additional amounts expected to be paid out.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7.     
INVESTMENTS AND ADVANCES

|                                         | September 30, 
        2002 | December 31, 
        2001
|---------------------------------------- | --------------------------- | --------------------------
|                                         |                             |                           
|Investment in private companies, at cost |                             | $ 2,499,992               
|Other advances                           |                             | 500,000                   
|Valuation Allowance                      |                             | (2,999,992                
|                                         |                             |                           
|Total Investments                        |                             | $    
            --      
|                                         |                             |                           

| | During
the year ended December 31, 2000 the Company made equity investments of $2,499,992 in two
private companies and made advances to a third company of $500,000. These investments do
not represent significant influence in the companies and at December 31, 2000 were valued
at cost.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | As
a result of significant uncertainty over the future realization of any return on
investment or capital, the Company has recorded a valuation allowance equal to the full
cost of the investments and advances during the year ended December 31, 2001.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

8.     
CONTINGENCY

| | The
Company is involved in a dispute with a customer. The Company has filed suit against the
customer alleging that the customer had breached a series of contracts, and failed to pay
sums due. The customer has filed an answer and counter claim alleging the Company
breached the contracts, entitling the customer to repayment of all sums paid to the
Company of approximately $3.5 million. The Company believes that its position in the
matter is strong and intends to vigorously pursue collection. The Company expects that
collection of monies due from the customer is not likely to occur within one year and as
a result has reclassified the amounts due from the customer of $3,749,860 as a long term
receivable.  Due to the uncertain nature of the receivable
the Company has recorded an allowance of $1,000,000 against the amounts due.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | As part of the disposition agreement with
Connectria Corporation, Connectia is to use its best efforts to terminate, or obtain the
release of MDSI from approximately $0.5 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
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

-9-

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

8.    
CONTINGENCY (continued)

| | Company
does not anticipate having to make payments in connection with these obligations and
accordingly no amounts have been accrued as a liability in the financial statements.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

-10-

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

Forward-Looking Statements

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

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

Overview

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

The
Companys revenue is derived from (i) software and services, consisting of the
licensing of software and provision of related services, including project management,
installation, integration, 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 conditions and general trends
are likely to continue to adversely affect the Companys revenues and
results of operations in future periods.  Such factors may also increase
the amount of doubtful accounts or adversely affect the likelihood of collection
of such accounts.

-11-

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

In
connection with this restructuring, on March 30, 2001, MDSI terminated 34 employee and
contractor positions in Canada and the United States. On May 11, 2001, the Company
continued the restructuring by announcing the elimination of an additional 115 positions,
which in combination with the workforce reductions of March 30, 2001 amounted to
approximately 25% of MDSIs staff as of March 30, 2001. The Company recorded a
one-time charge of $1.2 million in the first quarter of 2001 relating to the workforce
reductions, and leasing of excess office space. The Company also recorded an additional
charge of approximately $4.9 million in the second quarter of 2001 relating to
elimination of 115 positions, leasing of excess office space, and fixed asset write-downs
announced on May 11, 2001. A breakdown of the nature of the charges and the costs
incurred to date is as follows:

|                                             | Total Restructuring
        Charge
|-------------------------------------------- | ----------------------------------
|                                             |                                   
|Workforce reduction                          |                                   
|Provision for excess office space            |                                   
|Non cash writedown of capital assets         |                                   
|Other                                        |                                   
|                                             |                                   
|Total restructuring charges                  |                                   
|Cumulative draw-downs                        |                                   
|                                             |                                   
|Accrued restructuring charges included       |                                   
|in accrued liabilities at September 30, 2002 |                                   
|                                             |                                   

During the three and nine month periods ended September 30, 2002 the Company made
cash payments of $135,680 and $1,742,545, respectively, relating to the restructuring
accruals.

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

The
provision for excess office space of $1.9 million for the year ended December 31, 2001,
relates to surplus office space under long term lease by the Company at two locations,
where the Company has entered into fixed cost lease arrangements, with agreements
extending up to 2004. The Company has incurred approximately $0.5 million of cash costs
relating to this provision leaving an accrual of $1.4 million as at September 30, 2002.
The Company expects that the charge will be fully drawn down no later than the time the
lease expires in the fourth quarter of 2004.

Due
to the elimination of 149 positions, certain capital assets belonging to the Company have
been declared surplus and a charge of $0.6 million has been recorded to reflect the
difference between the previous carrying value and the estimated fair market value, net
of disposal costs. As at September 30, 2002, the full amount of the charge has been
applied to the assets to value them at their estimated net realizable value. These assets
are expected to be disposed of by the end of 2002.

The
Company has recorded a $0.3 million charge for the year ended December 31, 2001 for other
items, including costs of outplacement services and legal and consulting fees. As at
September 30, 2002, the Company has incurred cash costs of approximately $0.3 million
against this provision, with no additional amounts expected to be paid out.

-12-

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Field Service Business

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

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

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

During
2001, MDSI decided not to continue pursuing opportunities in the Public Safety market of
its field service segment. These opportunities consisted of federal, state and local
agencies that provide police, fire, medical and other emergency services. The Company had
installed solutions for a limited number of customers, and the market has not represented
a material portion of MDSIs revenues. 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.

-13-

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

In
June 2002, MDSI adopted a plan for sale and entered into an agreement to sell its Hosting
and IT Services business segment, Connectria Corporation (Connectria) to former
Connectria shareholders who were both shareholders and employees of the Company. Pursuant
to the terms of the agreement, during July 2002, the Company received from the former
Connectria shareholders 824,700 shares and the cancellation of 103,088 previously issued
stock options of MDSI as consideration for Connectria. In addition to the share
consideration, a wholly-owned subsidiary of MDSI 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.

Disposition of Transportation
Business Unit

In
February 1999, the Companys Board of Directors approved a plan to dispose of the
delivery segment of its business (Transportation Business Unit). Effective
June 1, 1999, the Company completed the sale of the Transportation Business Unit to
Digital Dispatch Systems, Inc. (DDS), a supplier of dispatch systems to the
taxi market for proceeds of $3,805,746. The proceeds were comprised of common shares of
DDS, representing an 11% interest in DDS, and a promissory note in the principal amount
of $331,455 ($500,000 CDN), due January 1, 2001, bearing interest at 8% per annum. During
the year ended December 31, 2000, DDS exercised its option to buyback the DDS shares that
MDSI received as compensation on the sale of the Transportation Business Unit. Proceeds
on sale of the DDS shares were $3,273,392. The note, with interest, was paid in the first
quarter of 2001.

Under
the terms of the agreement between the Company and DDS, the Company retained certain
assets and liabilities of the discontinued operations. The Company liquidated all
remaining assets and liabilities relating to the Transportation Business Unit during the
nine months ended September 30, 2001.

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

Recent Accounting Pronouncements

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

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

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

-14-

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

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

Critical Accounting Policies and
Significant Estimates

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

Restructuring Charges

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

Accounts Receivable

The
Company periodically reviews the collectability of its accounts receivable balances.
Where significant doubt exists with regards to the collection of a certain receivable
balance, an allowance and charge to the income statement is recorded. At September 30,
2002, the allowance for doubtful accounts was $2.5 million. The Company intends to
continue vigorously pursuing these accounts. If future events indicate additional
collection issues, the Company may be required to record an additional allowance for
doubtful accounts.

In
addition, the Company has recorded a long term receivable of $3.7 million against which
an allowance for doubtful accounts of approximately $1.0 million has been applied,
related to a dispute with a customer. The Company is currently involved in litigation to
collect the amounts due. If the Company is unsuccessful in collection of amounts due or
if future events indicate that a portion or all of the amounts due may not be collected,
an additional provision against the receivable may be required. See Forward-Looking
Statements.

Revenue Recognition  Percentage
Completion

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

-15-

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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.

As
a result of the international scope of the Companys operations, the Companys
business is carried out under an international corporate structure which has been
designed in part to optimize tax savings to the Company. The effectiveness of this
international corporate structure from a tax perspective, and the corresponding risk of
any negative financial impact on the Company from the imposition of tax liability on the
Company in the event such structure is not effective, depends on the quality of the
Companys internal compliance and implementation procedures, as well as external
regulatory factors such as investigations, audits and decisions by tax officials and
changes in tax laws, regulations and policies. If the Company's international
tax structure is not effective, the Company's tax liability may be materially
different from its current estimate.

-16-

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Results of Operations

The
Companys net income was approximately $76,000 for the three months ended September
30, 2002. This compares to a net income of approximately $42,000 for the three months
ended September 30, 2001. Net income has remained relatively unchanged from the
comparative period as a result of increased revenue being materially offset by increased
costs. The following table sets forth, for the periods indicated, certain components of
the selected financial data of the Company as a percentage of total revenue:

|                                                                  | Three months ended
September 30, | Nine months ended
September 30,
|----------------------------------------------------------------- | -------------------------------- | -------------------------------
|                                                                  |                                 
|
|                                                                  |                                 
|REVENUE                                                           |                                  |                                
|Software and services                                             |                                  | 61                             
|Maintenance and support                                           |                                  | 24                             
|Third party products and                                          |                                 
|services                                                          |                                  | 14                             
|                                                                  |                                 
|                                                                  |                                  | 100                            
|DIRECT COSTS                                                      |                                  | 46                             
|                                                                  |                                 
|GROSS PROFIT                                                      |                                  | 53                             
|                                                                  |                                 
|OPERATING EXPENSES                                                |                                 
|Research and development                                          |                                  | 11                             
|Sales and marketing                                               |                                  | 28                             
|General and administrative                                        |                                  | 13                             
|Restructuring Charge                                              |                                  | --                             
|Provision for doubtful accounts,                                  |                                 
|net of recoveries                                                 |                                  | --                             
|Amortization and provision for                                    |                                 
|valuation of intangible assets                                    |                                  | --                             
|                                                                  |                                 
|                                                                  |                                  | 53                             
|                                                                  |                                 
|OPERATING INCOME (LOSS)                                           |                                  | 0                              
|VALUATION ALLOWANCE ON INVESTMENTS                                |                                  | --                             
|OTHER INCOME (EXPENSE)                                            |                                  | 0                              
|                                                                  |                                 
|NET INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE TAX PROVISION |                                  | 1                              
|                                                                  |                                 
|                                                                  |                                 
|PROVISION FOR INCOME TAXES                                        |                                  | 0                              
|                                                                  |                                 
|NET INCOME (LOSS) FROM CONTINUING
OPERATIONS                      |                                  | 0                              
|                                                                  |                                 
|INCOME (LOSS) FROM DISCONTINUED                                   |                                 
|OPERATIONS                                                        |                                  | 0                              
|                                                                  |                                 
|NET INCOME (LOSS) FOR THE PERIOD                                  |                                  | 0                              
|                                                                  |                                 

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

Revenue.Revenue increased by $0.6 million (6.2%) for the three months ended           September 30, 2002
as compared to the three months ended September 30, 2001.           This increase was
primarily due to increases in revenue from third party           products and services,
partially offset by a decrease in software and services           revenues, during the
third quarter of 2002 relative to the same period in 2001.

Software
and services revenue decreased by $0.7 million (9.2%) for the three months ended
September 30, 2002 as compared to the three months ended September 30, 2001. The Company
believes its software and service revenue was adversely impacted by an increase in time
taken for the decision-making cycle, and reduction of capital expenditures by customers.
This delay in purchasing decisions by customers and reductions in expenditures resulted
in a reduction in the number of contracts worked on by the Company in the three months
ended September 30, 2002 as compared to the three months ended September 30, 2001 and a
corresponding reduction in revenue.

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.

-17-

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Three Months Ended September 30,
2002 Compared to the Three Months Ended September 30, 2001 (Continued)

Maintenance
and support revenues were $2.6 million for both the three months ended September 30, 2002
and 2001. Maintenance and support revenue has remained relatively consistent with the
prior period due to the growth in the Companys installed customer base offset by a
loss of maintenance contracts as a result of the sale of the Companys Public Safety
operations. Such revenue is expected to fluctuate as it corresponds to the level of
software and services that the Company is engaged to provide in support of its
installations.

Third
party products and services revenue increased approximately $1.3 million during the three
months ended September 30, 2002 as compared to the three months ended September 30, 2001.
These third party products typically include host computer equipment and mobile computing
devices, delivered as part of the installation of software and provision of services.
Revenue from deliveries of third party products and services will fluctuate from period
to period given the timing and nature of certain contracts and the rollout schedules
which are established primarily by the customers. In addition, not all customers under
contract require the provision of third party products and services. Accordingly, there
may be large fluctuations in revenue, direct costs, gross profits and income from
operations from one period to another. The Company has recently entered into an agreement
whereby it has agreed to supply a large amount of third party services, and therefore
expects that future revenues from third party products and services will increase in the
near term. See Forward Looking Statements.

Direct
Costs.  Direct costs were 46.2% of revenue for the three months ended September 30,
2002 as compared to 43.6% for the three months ended September 30, 2001. Direct costs
include labor and other costs directly related to a project, including the provision of
services and support, production and costs related to host equipment and mobile devices
on behalf of third party product sales. Labor costs included direct payroll, benefits and
overhead charges. The increase in direct costs as a percentage of revenue occurred as a
result of a relatively large proportion of total revenue derived from lower margin third
party software and services during the quarter. This caused total direct costs as a
percentage of revenue to increase during the three months ended September 30, 2002 as
compared to the three months ended September 30, 2001.  The Company has recently entered
into an agreement whereby it has agreed to supply a large amount of third-party services
at no margin.  As a result, the Company expects that future direct costs will increase
as a percentage of revenue in the near term.  See "Forward-Looking Statements."

Gross
Margins.  Gross margins were 53.8% of revenue for the three months ended September 30,
2002 as compared to 56.4% for the three months ended September 30, 2001. The decrease in
gross margin as a percentage of revenue relates primarily to the increased proportion of
lower margin third party products and services revenue as compared to prior year. This
has caused overall margins to decrease as a percentage of revenue for the three months
ended September 30, 2002 as compared to the three months ended September 30, 2001.
The Company has recently entered into an agreement whereby it has agreed to supply a
large amount of third-party services at no margin.  As a result, the Company expects that
gross margins will decrease in the near term.  See "Forward-Looking Statements."

Research
and Development.  Research and development expenses were 11.8% of revenue for the
three months ended September 30, 2002 and 16.3% of revenue for the three months ended
September 30, 2001. Total research and development expenditures for the three months
ended September 30, 2002 of $1.3 million represents a decrease of $0.4 million (23.1%) as
compared to the same period in 2001. The decrease in research and development expenses
for the three months ended September 30, 2002 is the result of research and development
personnel utilizing their time on revenue producing projects during the quarter, and the
corresponding cost of their salaries being reflected in direct costs instead of research
and development costs. In addition cost reductions in research and development were
achieved as a result of the sale of the Public Safety business in May of 2002 and cost
control initiatives in the three months ended September 30, 2002 as compared to the three
months ended September 30, 2001. The Company intends to continue committing a significant
portion of its product revenues to enhance existing products and develop new products.
See Forward-Looking Statements.

Sales
and Marketing.  Sales and marketing expenses were 28.0% of revenue for the three
months ended September 30, 2002 and 22.3% of revenue for the three months ended September
30, 2001. This represents an increase of $753,000 (33.1%) as compared to the same period
in 2001. The increase was primarily due to an increase in payroll costs resulting from an
increase in number of sales staff as compared to three months ended September 30, 2001
and an increase in commission costs expensed during the period relating to contracts
entered into during the period that are expected to generate significant revenues in
future periods. See Forward-Looking Statements. The Company anticipates that
the dollar amounts of its sales and marketing expenses will continue to be significant as
a result of the Companys commitment to its international marketing efforts and
attempt to penetrate additional markets for its products. See Forward-Looking
Statements.

General
and Administrative.  General and administrative expenses were 13.7% of revenue for the
three months ended September 30, 2002 and 14.8% of revenue for the three months ended
September 30, 2001. Total general and administrative expenses of $1.5 million were
materially unchanged from the same period in 2001. The Company expects that in the near
future, general and administrative expenditures will remain relatively consistent with
current levels. See Forward-Looking Statements.

-18-

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Three Months Ended September 30,
2002 Compared to the Three Months Ended September 30, 2001 (Continued)

Provision
for doubtful accounts net of recoveries.During the three months ended September 30,
2002 the Company recovered approximately $0.6 million from a previously allowed for
doubtful account. Also during the three months ended September 30, 2002 the Company
determined that an additional allowance of approximately $0.6 million was required due to
significant uncertainty surrounding collection of a specific account. The provision net
of recovery resulted in no additional charges being reflected in the provision for
doubtful accounts for the three months ended September 30, 2002. There was no net change
in doubtful accounts recorded during the three months ended September 30, 2001.

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

Other
Income (Expense).Other income was $71,000 for the three months ended September 30,
2002 as compared to $203,000 for the three months ended September 30, 2001. Substantially all
of other income (expense) relates to fluctuations in the currencies of the Companys
foreign operations, interest income on cash and short-term deposits, and interest expense
on short-term borrowings under the line of credit and capital lease obligations.

Income
Taxes.  The Company provided for income tax recoveries on losses for the three months
ended September 30, 2002 at the rate of 38.2%. The Companys effective tax rate
reflects the blended effect of Canadian, US, and other foreign jurisdictions tax
rates.

Income
(loss) from Discontinued Operations.   During the three months ended June 30, 2002 the
Company announced its intention to divest itself of its Hosting and IT services
subsidiary Connectria Corporation (Connectria). As a result, Connectria results of
operations for the current and comparative periods have been presented as Discontinued
Operations. Income from Discontinued Operations for the three months ended September 30,
2002 was $12,000 compared to a loss of $(402,000) for the three months ended September
30, 2001. The gain in the current period reflects the gain recorded on the disposal of
Connectria completed in July 2002.

Nine Months Ended September 30, 2002
Compared to the Nine Months Ended September 30, 2001

Revenue.
Revenue decreased by $6.5 million (19.1%) for the nine months ended           September 30, 2002
as compared to the nine months ended September 30, 2001. This           decrease was
primarily due to decreases in revenue from software and services           during the
nine months ended September 30, 2002 relative to the same period in           2001.

Software
and services revenue decreased by $7.4 million (30.0%) for the nine months ended
September 30, 2002 as compared to the nine months ended September 30, 2001. The Company
believes its software and service revenue was adversely impacted by an increase in time
taken for the decision-making cycle, and reduction of capital expenditures by customers.
This delay and reduction in expenditure has caused fewer contracts to be worked on by the
Company in the nine months ended September 30, 2002 as compared to the nine months ended
September 30, 2001 and as a result has caused a reduction in revenue. 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 $8.0 million for the nine months ended September 30, 2002 as
compared to $7.5 million for the nine months ended September 30, 2001. Maintenance and
support revenue has increased primarily due to the growth in the Companys installed
customer base. Such revenue is expected to fluctuate as it corresponds to the level of
software and services for which the Company is engaged to provide in support of its
installations.

Third
party products and services revenue increased by $0.4 million during the nine months
ended September 30, 2002 as compared to the nine months ended September 30, 2001. These
third party products typically include host computer equipment and mobile computing
devices, delivered as part of the installation of software and provision of services.
Revenue from deliveries of third party products and services will fluctuate from period
to period given the timing and nature of certain contracts and the rollout schedules
which are established primarily by the customers. In addition, not all customers under
contract require the provision of third party products and services. Accordingly, there
may be large fluctuations in revenue, direct costs, gross profits and income from
operations from one period to another. The Company has recently entered into an agreement
whereby it has agreed to supply a large

-19-

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Nine Months Ended September 30, 2002
Compared to the Nine Months Ended September 30, 2001 (Continued)

amount of third party services, and
therefore expects that future revenues from third party products and services will
increase in the near term. See Forward Looking Statements.

Direct
Costs.   Direct costs were 44.2% of revenue for the nine months ended September 30,
2002 as compared to 47.2% for the nine months ended September 30, 2001. Direct costs
include labor and other costs directly related to a project, including the provision of
services and support, production and costs related to host equipment and mobile devices
on behalf of third party product sales. Labor costs included direct payroll, benefits and
overhead charges. The decrease in direct costs as a percentage of revenue occurred as the
Company increased its efficiency due to its restructuring, and as a result of increased
experience with Advantex r7 installations.  The Company has recently entered
into an agreement whereby it has agreed to supply a large amount of third-party services
at no margin.  As a result, the Company expects that future direct costs will increase
as a percentage of revenue in the near term.  See "Forward-Looking Statements."

Gross
Margins.   Gross margins were 55.8% of revenue for the nine months ended September 30,
2002 as compared to 52.8% for the nine months ended September 30, 2001. The increase in
gross margin as a percentage of revenue relates primarily to the increased efficiencies
for the installations of Advantex r7. The Company expects to maintain, on a relative
basis, stable gross margins in the near future.
The Company has recently entered into an agreement whereby it has agreed to supply a
large amount of third-party services at no margin.  As a result, the Company expects that
gross margins will decresae in the near term.  See "Forward-Looking Statements."

Research
and Development.  Research and development expenses were 15.4% of revenue for the nine
months ended September 30, 2002 and 16.8% of revenue for the nine months ended September
30, 2001. Total research and development expenditures for the nine months ended September
30, 2002 of $4.2 million represents a decrease of $1.5 million (25.7%) as compared to the
same period in 2001. The decrease in research and development expenses in 2002 is a
result of research and development personal being utililized on revenue producing
projects in the current year, and the associated salary costs for these staff being
reflected as direct costs as opposed to research and development. The decrease in
expenditures for the nine months ended September 30, 2002 as compared to the nine months
ended September 30, 2001 is also the result of the Companys restructuring efforts, and the completion of a
major development project in the first quarter of 2001. The Company intends to continue
committing a significant portion of its product revenues to enhance existing products and
develop new products. See Forward-Looking Statements.

Sales
and Marketing.  Sales and marketing expenses were 34.1% of revenue for the nine months
ended September 30, 2002 and 25.3% of revenue for the nine months ended September 30,
2001. Total sales and marketing expenses of $9.4 million represents a increase of
approximately $0.8 million as compared to the same period of 2001. The increase in
expenditures in the current year was due to an increase in commission costs expensed
during the period relating to contracts entered into during the period that are expected
to generate significant revenues in future periods. See Forward-Looking Statements.
The Company anticipates that the dollar amounts of its sales and marketing expenses will
continue to be significant as a result of the Companys commitment to its
international marketing efforts and attempts to penetrate additional markets for its
products. See Forward-Looking Statements.

General
and Administrative.  General and administrative expenses were 17.0% of revenue for the
nine months ended September 30, 2002 and 13.4% of revenue for the nine months ended
September 30, 2001. Total general and administrative expenses of $4.7 million represents
a increase of $0.1 million (3.2%) for the nine months ended September 30, 2002 as
compared to the same period in 2001. General and administrative expenses remained
relatively consistent with the comparative period as a result of a cost control effort
initiated by the Company, offset by one-time severance costs expensed during the period.
The Company expects that in the near future, general and administrative expenditures will
remain relatively consistent with current levels. See Forward-Looking Statements.

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

Provision
for doubtful accounts.  During the nine months ended September 30, 2002 the Company
recovered approximately $0.6 million from a previously allowed for doubtful account. Also
during the nine months ended September 30, 2002 the Company determined that an additional
allowance of approximately $0.6 million was required due to significant uncertainty
surrounding collection of a specific account. The net result is that there was no charge
recorded in the provision for doubtful accounts for the nine months ended September 30,
2002.

-20-

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Nine Months Ended September 30, 2002
Compared to the Nine Months Ended September 30, 2001 (Continued)

Amortization
and provision for valuation of Intangible Assets.   No charges for amortization of
intangible assets were taken during the nine months ended September 30, 2002, as the
Company had taken a full valuation allowance against the remaining value of intangible
assets during the year ended December 31, 2001. Amortization and impairment charges for
intangible assets for the nine months ended September 30, 2001 were $1.7 million. The
charge was a result of a determination by the Company that an impairment in the value of
the Goodwill acquired on the acquisition of Alliance Systems Inc. had occurred during the
nine months ended September 30, 2001 due to poor historical and forecasted performance in
the acquired companys business.

Valuation
Allowance on Investments.   No charge was recorded for valuation allowance on
investments during the nine months ended September 30, 2002, as a valuation allowance
equal to the remaining book value of investments was recorded during the nine months
ended September 30, 2001. As part of its e-Business strategy the Company invested in or
advanced funds to three private companies in 2000. As a result of significant uncertainty
over the future realization of any return on investment or capital, the Company recorded
a valuation allowance equal to the full cost of the investments during the nine months
ended September 30, 2001.

Other
Income (Expense).  Other income was $233,000 for the nine months ended September 30,
2002 as compared to $(128,000) for the nine months ended September 30, 2001.
Substantially all of other income (expense) relates to fluctuations in the currencies of
the Companys foreign operations, interest income on cash and short-term deposits,
and interest expense on short-term borrowings under the line of credit and capital lease
obligations.

Income
Taxes.  The Company provided for income tax recoveries on losses for the nine months
ended September 30, 2002 at the rate of 28.7%. 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 nine months ended September 30, 2002
the Company announced its intention to divest itself of its Hosting and IT services
subsidiary Connectria Corporation (Connectria). As a result Connectria results of
operations for the current and comparative periods have been presented as Discontinued
Operations. Income from Discontinued Operations for the nine months ended September 30,
2002 was $121,000 as compared to a loss of $(313,000) for the nine months ended September
30, 2001. The increase in the income from discontinued operations was due to strict cost
control efforts implemented at Connectria in the current period, and the completion of
the disposal of Connectria during the quarter ended September 30, 2002.

Liquidity and Capital
Resources

The
Company finances its operations, acquisitions and capital expenditures with cash
generated from operations, loans, private placements and public offerings of its
securities. At September 30, 2002, the Company had cash and cash equivalents of $11.3
million and working capital of $10.1 million.

Cash
(used in) provided by operating activities was $1.3 million for the nine months ended
September 30, 2002 compared to $0.7 million for the nine months ended September 30, 2001.
The net inflow of cash from operating activities is due to a loss from continuing
operations of $1.9 million offset by net decreases in non-cash working capital items of
$1.4 million, and depreciation and amortization of $1.9 million. The net decrease in
non-cash operating working capital items is due primarily to a decrease in accounts
receivable, partially offset by a decrease in accounts payable, accruals and deferred
revenue. The decrease in trade receivables is a result of increased collections during
the nine months ended September 30, 2002. The decrease in accounts payable and accruals
resulted from ordinary fluctuations in the Companys business, and from the payments
made on account of certain restructuring accruals recorded during 2001. The decrease in
deferred revenue is a result of the Company performing the work on certain contracts that
had been billed in advance, drawing down the deferred revenue balance as compared to
December 31, 2001.

The
Company maintains as at September 30, 2002 a provision of $2.5 million with respect to
doubtful accounts. The Company intends to vigorously pursue collection of these accounts;
however, due to uncertainty with regards to these customers financial conditions,
the Company determined that it would be prudent to record an allowance to address this
uncertainty.

The
Company is currently involved in a dispute with a customer, and as a result 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. The Company has also
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 Company believes that its position in the matter is strong and intends to
vigorously pursue collection. If the Company is unsuccessful in collection of amounts
due, or is made to refund monies previously collected under the contract, the Companys
liquidity and working capital would be adversely affected.

Cash
used by financing activities of $1.2 million during the nine months ended September 30,
2002 primarily relates to $1.5 million in repayments of capital leases made during the
nine months ended September 30, 2002, partially offset by proceeds of

-21-

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$277,000 from the issuance of shares under the employee share purchase plan and the
exercise of employee stock options. The capital leases are to be repaid evenly over a 36
month period ending December 22, 2003, bear interest at 7.675% and are secured by certain
computer hardware and software assets of the Company.

Cash
used in investing activities was $1.4 million for the nine months ended September 30,
2002 as compared to $0.7 million for the nine months ended September 30, 2001. Total
investing activity during the nine months ended September 30, 2002 consisted of $1.4
million in purchases of capital assets. Purchases of capital assets relate primarily to
computer hardware and software for use in implementation activities. Investing activities
in 2001 related primarily to purchases of capital assets, offset by proceeds on
settlement of the note receivable and proceeds on sale of investments.

Existing sources of
liquidity at September 30, 2002 included $11.3 million of cash and cash equivalents and
funds available under the Companys operating line of credit. As at September 30,
2002, 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 September 30, 2002, the Company had not drawn
upon this line of credit.

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

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

As at September 30,
2002 the Company had the following contractual obligations and commercial commitments:

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

Subsequent to the end of the current period the Company has entered into an additional capital lease
agreement for approximately $2.2 million, with a term of 36 months and an effective rate
of interest of approximately 9.5%.

In
addition to these commercial commitments the Company has also provided, as performance
bonds, an irrevocable revolving letter of credit in the amount of EUR 751,623 ($665,801)
expiring May 31, 2003, a letter of credit in the amount of EUR 75,855 ($66,752) expiring
February 28, 2003, and a letter of credit in the amount of $397,760 expiring May 1,
2003.. The Company has pledged an amount equal to the letters of credit and guarantee
against its operating line of credit as security.

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 $0.5 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.

-22-

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Derivative Financial
Instruments

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

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

-23-

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ITEM 3:
  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

As
of September 30, 2002, the potential reduction in future earnings from a hypothetical
instantaneous 10% change in quoted foreign currency exchange rates applied to the foreign
currency sensitive contracts and assets would be approximately $3.4 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.

ITEM 4:    CONTROLS AND PROCEDURES

Evaluation of Disclosure
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 us (or our consolidated
subsidiaries) required to be included in our periodic SEC filings and Form 8-K reports.

Changes in
Internal Controls

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.

-24-

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### Part II  
OTHER INFORMATION

# ITEM 1.  LEGAL PROCEEDINGS

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

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

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

For
ITEMS 2, 3, 4 and 5 there was no reportable information for the three months ended
September 30, 2002.

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

|(a) | Exhibits
|--- | --------

| | ExhibitNumber | Description
| | ------------- | -----------

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

| | 3.1(1) | Articles of Incorporation of the Company
| | ------ | ----------------------------------------

| | 3.2(1) | Articles of Amendments of the Company
| | ------ | -------------------------------------

| | 3.3(1) | By-laws of the Company
| | ------ | ----------------------

| | 4.1(1) | Form of Common Share Certificate
| | ------ | --------------------------------

| | 10.1(1)(2) | 1996 Stock Option Plan
| | ---------- | ----------------------

| | 10.2(2)(4) | 1997 Stock Option Plan
| | ---------- | ----------------------

| | 10.3(2)(4) | 1998 Stock Option Plan
| | ---------- | ----------------------

| | 10.4(2)(5) | 2000 Stock Purchase Plan
| | ---------- | ------------------------

| | 10.5(2)(5) | 1999 Stock Option Plan
| | ---------- | ----------------------

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

| | 10.7(2)(7) | 2000 Stock Option Plan
| | ---------- | ----------------------

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

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

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

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

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

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

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

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

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

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

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

-25-

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| | ExhibitNumber | Description
| | ------------- | -----------

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

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

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

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

| | 10.23(2)(12) | Employment  Agreement  dated  January  2, 2002  between  the
Company and Verne Pecho
| | ------------ | ------------------------------------------------------------------------------------

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

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

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

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

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

| | 10.29(13) | 2002 Stock Purchase Plan
| | --------- | ------------------------

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

---

| | (1) | Previously filed
as exhibits with the same  corresponding  number with the Registrants' Registration
Statement on Form F-1 (Registration No. J33-5872)  and  amendments  numbers 1 and
2  thereto,  filed  with the Securities and Exchange  Commission on October 28, 1996,
November 13, 1996 and November 25, 1996, respectively.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | This  document  has
been  identified  as  a  management  contract  or compensatory plan or arrangement.
| | --- | -------------------------------------------------------------------------------------------------------

| | (3) | Previously filed
as an exhibit to Registrant's  Registration Statement on Form F-4.
| | --- | -----------------------------------------------------------------------------------

| | (4) | Previously filed
as exhibits with the same  corresponding  number with the Registrant's Form 10-K
for the year ended December 31, 1998.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------

| | (5) | Previously filed as
exhibits with the same  corresponding  number with the Registrant's Form 10-K
for the year ended December 31, 1999.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------

| | (6) | Previously  filed
as  exhibits  with  the  Registrant's  Registration Statement on Form S-8 filed
on July 12, 2000.
| | --- | -------------------------------------------------------------------------------------------------------------------

| | (7) | Previously  filed
as  exhibits  with  the  Registrant's  Registration Statement on Form S-8 filed
on November 22, 2000.
| | --- | -----------------------------------------------------------------------------------------------------------------------

| | (8) | Previously filed
as exhibits with the  Registrant's  Current Report on Form 8-K filed on June 15, 2000.
| | --- | -------------------------------------------------------------------------------------------------------

| | (9) | Previously filed
as exhibits with the  Registrant's  Form 10-Q for the quarterly period ended
September 30, 2001.
| | --- | -----------------------------------------------------------------------------------------------------------------

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

| | (11) | Previously filed
as exhibits with the  Registrant's  Form 8-K filed on August 14, 2002.
| | ---- | ---------------------------------------------------------------------------------------

| | (12) | Previously filed
as exhibits with the  Registrant's  Form 10-Q for the quarterly period ended
March 31, 2002.
| | ---- | -------------------------------------------------------------------------------------------------------------

| | (13) | Previously filed
as exhibits with the  Registrant's  Form 10-Q for the quarterly period ended
June 30, 2002.
| | ---- | ------------------------------------------------------------------------------------------------------------

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

(b)       
          Reports on Form 8-K

During the three month
period ended September 30, 2002, the Company filed three Form 8-Ks relating to the
Companys sale of Connectria Corporation, on July 1, 2002, July 12, 2002 and August
14, 2002. The Company also filed a Form 8-K on July 12, 2002 relating to its annual
general meeting of shareholders held on May 16, 2002 and furnished a Form 8-K on August 14, 2002
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 August 14, 2002.
The information in a Form 8-K furnished pursuant to Item 9 shall not be deemed to
be filed under the Exchange Act.

-26-

---

# SIGNATURES

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

| | MDSI MOBILE DATA SOLUTIONS, INC.
| | --------------------------------

Dated:  November 14, 2002

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

Dated:  November 14, 2002

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

-27-

---

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:  November 14, 2002

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

-28-

---

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:  November 14, 2002

| | /s/ Verne D. Pecho
Verne D. Pecho
Vice President Finance & Administration
and Chief Financial Officer
Chairman of the Board and Director
| | ----------------------------------------------------------------------------------------------------------------------------------------

-29-

---