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

                                    FORM 10-Q


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

     For the quarterly period ended September 30, 1998

                                       OR

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

     For the transition period from _______________ to ________________.

                         Commission file number 0-28968


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


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


                        Suite 135 - 10551 Shellbridge Way
                           Richmond, British Columbia,
                                 Canada V6X 2W9
                                 (604) 270-9939

   (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 September 30, 1998 was 6,532,424.


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

<PAGE>


                         MDSI MOBILE DATA SOLUTIONS INC.

                             INDEX TO THE FORM 10-Q
                For the quarterly period ended September 30, 1998


                                                                            Page

Part I - FINANCIAL INFORMATION

     ITEM 1.   FINANCIAL STATEMENTS (UNAUDITED)

               Consolidated Balance Sheets ................................... 3

               Consolidated Statements of Operations
               and Retained Earnings (Deficit)  .............................. 4

               Consolidated Statements of Cash Flows ......................... 5

               Notes to the Consolidated Financial Statements ................ 6

     ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
               CONDITION AND RESULTS OF OPERATIONS ........................... 8


Part II - OTHER INFORMATION

     ITEM 1.    LEGAL PROCEEDINGS............................................ 18

     ITEM 2.    CHANGES IN SECURITIES AND USE OF PROCEEDS.................... 18

     ITEM 3.    DEFAULTS UPON SENIOR SECURITIES ............................. 18

     ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.......... 18

     ITEM 5.    OTHER INFORMATION.............................................18

     ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K............................. 18


SIGNATURES....................................................................19

<PAGE>


Part I - FINANCIAL INFORMATION

     ITEM 1.  FINANCIAL STATEMENTS

                         MDSI MOBILE DATA SOLUTIONS INC.


                           Consolidated Balance Sheets
                         (Expressed in Canadian dollars)



                                                             As at
                                               ---------------------------------
                                               September 30,      December 31,
                                                  1998               1997
                                               -------------      ------------
ASSETS                                         (Unaudited)
CURRENT ASSETS
     Cash and cash equivalents............... $  4,684,911       $    110,117
     Accounts receivable, net
        Trade................................   18,147,816         15,256,202
        Unbilled.............................   10,140,847          9,604,060
     Work in progress........................    2,051,191          1,451,662
     Prepaid expenses........................    1,544,203          1,647,748
     Deferred income taxes...................    1,392,187          2,096,544
                                               -------------      ------------
                                                37,961,155         30,166,333

CAPITAL ASSETS, NET..........................    5,078,410          4,291,755
INTANGIBLE ASSETS, NET.......................    5,537,584          6,185,926
                                               -------------      ------------

TOTAL ASSETS................................. $ 48,577,149       $ 40,644,014
                                             ===============    ==============

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
     Accounts payable........................ $  8,660,584       $  3,936,501
     Accrued liabilities.....................    4,485,255          8,353,417
     Deferred revenue........................    5,617,321          3,985,261
     Current portion of long-term debt.......      369,124            215,454
     Current obligations under capital leases      507,907             20,621
                                               -------------      ------------
                                                19,640,191         16,511,254

LONG-TERM DEBT...............................            -            296,324
OBLIGATIONS UNDER CAPITAL LEASES.............    1,053,967                  -
                                               -------------      ------------
TOTAL LIABILITIES............................   20,694,158         16,807,578
                                               -------------      ------------
STOCKHOLDERS' EQUITY
     Common stock............................   44,223,588         43,154,039
     Treasury stock..........................     (122,743)          (122,743)
     Retained earnings (deficit).............  (16,217,854)       (19,194,860)
                                               -------------      ------------
                                                27,882,991         23,836,436
                                               -------------      ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY... $ 48,577,149       $ 40,644,014
                                             ===============    ==============


See notes to consolidated financial statements

<PAGE>


                         MDSI MOBILE DATA SOLUTIONS INC.

      Consolidated Statements of Operations and Retained Earnings (Deficit)
                         (Expressed in Canadian dollars)
                                   (Unaudited)

                                 Three months ended       Nine months ended
                                    September 30,           September 30,
                             ------------------------- -------------------------
                                 1998         1997         1998        1997
                             ------------ ------------ ------------ ------------
REVENUE
Software and services........$12,371,911  $ 9,175,389  $32,312,362  $27,450,138
Terminals and infrastructure.  1,889,460    1,358,967    6,314,828    7,878,285
Third party products and
 services....................  7,141,164    5,236,191   11,237,466   15,442,091
Maintenance and support......  2,113,260    1,032,661    5,674,541    2,529,286
                             ------------ ------------ ------------ ------------
                              23,515,795   16,803,208   55,539,197   53,299,800

DIRECT COSTS................. 13,086,612   14,425,235   29,343,914   35,322,991
                             ------------ ------------ ------------ ------------
GROSS PROFIT................. 10,429,183    2,377,973   26,195,283   17,976,809
                             ------------ ------------ ------------ ------------
OPERATING EXPENSES
Research and development.....  2,765,312    1,870,392    6,741,155    5,112,770
Sales and marketing .........  3,193,732    3,452,724    9,599,862    8,474,126
General and administrative...  1,696,492    1,795,928    4,777,596    4,600,321
Restructuring costs..........          -    1,145,152            -    1,145,152
Amortization of intangible
 assets......................    216,114      238,101      648,342      599,062
Acquired research and 
 development.................          -            -            -   10,002,982
                             ------------ ------------ ------------ ------------
                               7,871,650    8,502,297   21,766,955   29,934,413
                             ------------ ------------ ------------ ------------
OPERATING INCOME (LOSS)......  2,557,533   (6,124,324)   4,428,328  (11,957,604)

OTHER INCOME ................     54,249      135,421      107,976      268,973
                             ------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE TAX
 PROVISION...................  2,611,782   (5,988,903)   4,536,304  (11,688,631)

(PROVISION FOR) RECOVERY OF
 INCOME TAXES................   (847,413)      43,040   (1,559,298)  (1,385,629)
                             ------------ ------------ ------------ ------------
NET INCOME (LOSS) FOR THE
 PERIOD......................  1,764,369   (5,945,863)   2,977,006  (13,074,260)

RETAINED EARNINGS (DEFICIT),
 BEGINNING OF PERIOD.........(17,982,223) (14,776,221) (19,194,860)  (7,647,824)
                             ------------ ------------ ------------ ------------

RETAINED EARNINGS (DEFICIT),
 END OF PERIOD............. $(16,217,854)$(20,722,084)$(16,217,854)$(20,722,084)
                             ============ ============ ============ ============
Earnings (loss) per common share
 Basic ...................... $     0.27   $   (0.93)  $     0.46     $   (2.11)
 Diluted .................... $     0.26   $   (0.93)  $     0.45     $   (2.11)

Weighted average shares outstanding
 Basic.......................  6,526,990    6,400,345    6,490,805    6,203,139
 Diluted.....................  6,664,467    6,400,345    6,640,610    6,203,139


See notes to consolidated financial statements
<PAGE>


                         MDSI MOBILE DATA SOLUTIONS INC.

                      Consolidated Statements of Cash Flows
                         (Expressed in Canadian dollars)
                                   (Unaudited)

                                                     Nine months ended
                                                       September 30,
                                         ---------------------------------------
                                                1998                 1997
                                         ------------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income (loss) for the period......    $   2,977,006       $   (13,074,260)
  Items not affecting cash:
    Depreciation and amortization.......        2,056,438             1,540,636
    Deferred income taxes...............          704,357              (238,264)
    Acquired research development.......                -            10,002,982
    Changes in non-cash operating 
    working capital items...............       (1,436,404)           (5,703,035)
                                         ------------------- -------------------
    Net cash provided by (used in)
    operating activities................        4,301,397            (7,471,941)
                                         ------------------- -------------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Issuance of common shares.............        1,069,549             1,013,484
  Repayment of long-term debt...........         (142,654)           (3,299,646)
  Repayment of loan notes...............                -              (428,424)
  Net proceeds from (repayment of) 
  capital leases........................        1,541,253               (33,853)
                                         ------------------- -------------------
  Net cash provided by (used in)
  financing activities..................        2,468,148            (2,748,439)
                                         ------------------- -------------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Acquisition of Alliance...............                -            (1,892,426)
  Acquisition of capital assets.........       (2,194,751)           (1,679,994)
                                         ------------------- -------------------
  Net cash used in investing activities        (2,194,751)           (3,572,420)
                                         ------------------- -------------------

NET CASH INFLOW (OUTFLOW)...............        4,574,794           (13,792,800)

CASH AND CASH EQUIVALENTS, BEGINNING
 OF PERIOD..............................          110,117            20,207,019
                                         ------------------- -------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD     $  4,684,911          $  6,414,219
                                         =================== ===================


SUPPLEMENTAL DISCLOSURE OF NON CASH INVESTING AND FINANCING ACTIVITIES

During the nine months ended  September  30,  1998,  the Company  issued  51,600
common shares on the exercise of 258,000 common share purchase warrants and cash
proceeds of $736,440.

During the nine months ended  September  30, 1997,  the Company  issued  280,000
common  shares and 280,000  common  share  purchase  warrants on the exercise of
280,000 special warrants without additional consideration. Also, during the nine
months  ended  September  30, 1997,  the Company  acquired all of the issued and
outstanding   shares  of  Alliance   Systems,   Incorporated   ("Alliance")  for
$9,116,828.  Consideration consisted of 347,750 common shares of the Company and
payments  of  $2,188,750,   including  cash  of  $1,892,426  (US$1,367,869)  and
unsecured notes in the principal amount of $296,324 (US$214,219).

See notes to consolidated financial statements

<PAGE>


                         MDSI MOBILE DATA SOLUTIONS INC.

                 Notes to the Consolidated Financial Statements
                  For the nine months ended September 30, 1998
                         (Expressed in Canadian 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 Company's Annual Report filed on
          Form 10-K for the year ended December 31, 1997.

     (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.   Actual  results  could  differ  from  those
          estimates.

     (c)  Recent pronouncements

               In June 1998,  the Financial  Accounting  Standards  Board issued
          Statement No. 133 (SFAS 133),  Accounting for  Derivative  Instruments
          and  Hedging   Activities,   which  standardizes  the  accounting  for
          derivative instruments.  SFAS 133 is effective for all fiscal quarters
          of all fiscal years  beginning  after June 15, 1999. The impact on the
          Company's financial statements is not expected to be material.


2.   SEGMENTED INFORMATION

     Segmented information

          The  Company   develops,   markets  and  supports  mobile  work  force
     management  systems  primarily  to the  utility,  telecommunications/cable,
     transportation  (taxi,  courier and roadside  recovery)  and general  field
     service market  sectors.  The Company  considers its business to consist of
     one reportable operating segment.


<PAGE>


                         MDSI MOBILE DATA SOLUTIONS INC.

                 Notes to the Consolidated Financial Statements
                  For the nine months ended September 30, 1998
                         (Expressed in Canadian dollars)
                                   (Unaudited)

2.   SEGMENTED INFORMATION (CONTINUED)

     Geographic information

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

<TABLE>

                         Three months ended              Nine months ended
                            September 30,                  September 30,
                    ----------------------------- ------------------------------
                        1998            1997            1998            1997
                    -----------     -----------     -----------     ------------
<S>                 <C>             <C>             <C>             <C>        
Canada............  $   861,570     $   397,533     $ 1,564,657     $ 1,598,769
United States.....   17,719,353      12,419,843      39,784,394      34,176,955
Europe............    3,814,487       2,522,827      11,808,419      15,455,998
Asia..............    1,058,133         568,322       2,064,550       1,173,395
South America.....       62,252         894,683         317,177         894,683
                     ----------      ----------      ----------      ----------
                    $23,515,795     $16,803,208     $55,539,197     $53,299,800
                     ==========      ==========      ==========      ==========
                                                               
</TABLE>


3.   EARNINGS (LOSS) PER COMMON SHARE

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

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

<TABLE>
                                 Three months ended       Nine months ended
                                    September 30,           September 30,
                             ------------------------- -------------------------
                                 1998         1997         1998        1997
                             ------------ ------------ ------------ ------------
<S>                           <C>            <C>          <C>         <C>

Weighted average shares
outstanding.................   6,526,990     6,400,345    6,490,805   6,203,139
Common stock equivalents
 Stock options..............     137,271             -      142,864           -
 Share purchase warrants....         206             -        6,941           -
                             ------------ ------------ ------------ ------------
Total shares for diluted
earnings (loss) per common
share......................    6,664,467     6,400,345    6,640,610   6,203,139
                             ============ ============ ============ ============
</TABLE>


<PAGE>


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

     Certain  statements  and  information  contained in this report  constitute
forward-looking  statements  within the meaning of Section 21E of the Securities
Exchange Act of 1934. Such forward-looking  statements involve known and unknown
risks,  uncertainties  and other  factors  that may cause  the  actual  results,
performance  or  achievement of the Company,  or  developments  in the Company's
industry,  to differ  materially  from the anticipated  results,  performance or
achievements  expressed  or implied  by such  forward-looking  statements.  Such
factors  include,  but are not  limited  to:  the  Company's  limited  operating
history, lengthy sales cycles, the Company's dependence upon large contracts and
relative  concentration  of customers,  risks involving the management of growth
and integration of  acquisitions,  competition,  product  development  risks and
risks of  technological  change,  dependence  on selected  vertical  markets and
third-party  marketing  relationships  and suppliers,  the Company's  ability to
protect its intellectual  property rights and the other risks and  uncertainties
detailed in the Company's Securities and Exchange Commission filings,  including
the Company's Annual Report on Form 10-K for the year ended December 31, 1997.

     All financial  information in this report is expressed in Canadian  dollars
unless otherwise noted.

Overview

     The Company  develops,  markets,  implements and supports mobile  workforce
management  and wireless  connectivity  software and related  network and mobile
computing equipment for use by a wide variety of companies that have substantial
mobile workforces, such as utility, telecommunications and cable companies, taxi
services,   courier   companies   and  public   safety  and  roadside   recovery
organizations.  The Company'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  provide a  cost-effective  method for companies with mobile workers to
utilize data  communications  to  communicate  with such  workers,  and for such
workers to  interface  on a  real-time  basis with their  corporate  information
systems.

     The Company's revenue is derived from (i) software and services, consisting
of the  licensing  of software  and  provision  of related  services,  including
project management, installation,  integration, customization and training; (ii)
terminal and infrastructure equipment consisting of the sale of mobile computing
devices,  related  in-vehicle  equipment  and wireless  data  network  equipment
manufactured by the Company; (iii) third party products and services, consisting
of the  provision  of  non-MDSI  products  and  services  as part  of the  total
contract;  and (iv)  maintenance  and support,  consisting  of the  provision of
after-sale  support services as well as hourly,  annual or extended  maintenance
contracts.

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

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

     From time to time,  the  Company is  required  to  provide,  through its UK
operations in the taxi, courier and roadside recovery markets,  mobile computing
devices and wireless data communications network equipment.

<PAGE>


     The Company is also called on to provide,  in addition to MDSI products and
services,  certain  third party  products,  such as host  computer  hardware and
operating  system  software,  mobile  computing  devices and radio data  network
infrastructure  equipment,  or sub-contract services,  such as radio data system
design and  implementation.  The  Company  recognizes  revenue for the supply of
third party hardware upon transfer of beneficial ownership to the customer.  The
Company  recognizes  revenue  for 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 often supply some portion of third party
products  and services to customers  where it is  successful  in selling its own
products and services.  There can be no assurance,  however,  that any contracts
entered into by the Company to supply  third party  software and products in the
future will  represent a  substantial  portion of revenue in any future  period.
Since the revenue generated from the supply of third party products and services
may represent a significant  portion of certain  contracts and the  installation
and  rollout of third party  products  is  generally  at the  discretion  of the
customer,  the Company may,  depending on the level of third party  products and
services  provided during a period,  experience large quarterly  fluctuations in
revenue.

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

     The Company'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 or the  introduction  of new  products,  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,  cash flows and financial condition.  Delays in
the  implementation  of contracts may result in delays in the  implementation or
cancellation  of subsequent  contracts.  The  Company's  contracts are generally
cancelable upon notice by the customer. The loss of certain contracts could have
a material adverse effect on the Company's  business,  operating  results,  cash
flows and  financial  condition.  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.


<PAGE>


Effects of Acquisition

     These consolidated financial statements reflect the acquisition of Alliance
Systems,  Incorporated  ("Alliance")  effective April 17, 1997. This acquisition
has been accounted for using the purchase method.

     On April 17,  1997,  the  Company  entered  into an  agreement  to  acquire
Alliance  which was  completed  July 1, 1997.  Alliance  is a supplier of mobile
workforce management solutions to the utility,  public safety and cable markets.
The  acquisition  resulted in the  write-off of $10.0  million  associated  with
acquired  research and development.  The Company's results of operations for the
nine months ended  September  30, 1997 include only the results of operations of
Alliance from April 17, 1997.


<PAGE>


Results of Operations

     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       Nine months ended
                                    September 30,           September 30,
                             ------------------------- -------------------------
                                 1998         1997         1998         1997
                             ------------ ------------ ------------ ------------
                              (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)
REVENUE
Software and services........    52.6%        54.6%        58.2%        51.5%
Terminals and infrastructure.     8.0          8.1         11.4         14.8
Third party products and  
 services....................    30.4         31.2         20.2         29.0
Maintenance and support......     9.0          6.1         10.2          4.7
                             ------------ ------------ ------------ ------------
                                100.0        100.0        100.0        100.0

DIRECT COSTS.................    55.7         85.8         52.8         66.3
                             ------------ ------------ ------------ ------------
GROSS PROFIT.................    44.3         14.2         47.2         33.7
                             ------------ ------------ ------------ ------------
OPERATING EXPENSES
Research and development.....    11.8         11.1         12.1          9.6
Sales and marketing .........    13.6         20.5         17.3         15.9
General and administrative...     7.2         10.7          8.6          8.6
Restructuring costs..........      -           6.8           -           2.1
Amortization of intangible
 assets......................     0.9          1.4          1.2          1.1
Acquired research and
 development.................      -            -            -          18.8
                             ------------ ------------ ------------ ------------
                                 33.5         50.5         39.2         56.1
                             ------------ ------------ ------------ ------------
OPERATING INCOME (LOSS)......    10.8        (36.3)         8.0        (22.4)

OTHER INCOME.................     0.3          0.6          0.2          0.5
                             ------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE 
 TAX PROVISION...............    11.1        (35.7)         8.2        (21.9)

(PROVISION FOR) RECOVERY
 OF INCOME TAXES.............    (3.6)         0.3         (2.8)        (2.6)
                             ------------ ------------ ------------ ------------
NET INCOME (LOSS) FOR THE
 PERIOD......................     7.5%       (35.4)%        5.4%       (24.5)%
                             ============ ============ ============ ============

<PAGE>


THREE  MONTHS  ENDED  SEPTEMBER  30,  1998  COMPARED TO THE THREE  MONTHS  ENDED
SEPTEMBER 30, 1997

     Revenue.  Revenue  increased by $6.7  million  (39.9%) for the three months
ended  September  30, 1998 as compared to the three months ended  September  30,
1997.

     Software and  services  revenue  increased by $3.2 million  (34.8%) for the
three  months  ended  September  30, 1998 as compared to the three  months ended
September 30, 1997.  This  increase is due primarily to the continued  growth of
the existing business in the utility and telecommunication/cable market sectors.
In  addition,  during the three  months ended  September  30, 1997,  the Company
experienced  delays in the signing and implementation of certain contracts which
resulted in a reduction of revenue for the comparable period in 1997.

     Terminals and infrastructure  revenue increased by $530,000 (39.0%) for the
three  months  ended  September  30, 1998 as compared to the three  months ended
September 30, 1997. Terminals and infrastructure  revenue is derived solely from
the MDSI UK operations.

     Third party products and services revenue increased by $1.9 million (36.4%)
for the three  months ended  September  30, 1998 as compared to the three months
ended September 30, 1997.  Third party products and services  revenue  primarily
represents  revenue earned from certain  customers  pursuant to agreements under
which the Company  provides  third party  products and services,  typically host
computer equipment and mobile computing devices,  as part of the installation of
software  and  provision of services.  Revenue  from  deliveries  of third party
products and services will  fluctuate  from period to period given the timing of
certain contracts and the rollout  schedules which are established  primarily by
the customers.  Accordingly,  this will result in large fluctuations in revenue,
direct  costs,  gross  profits  and income  from  operations  from one period to
another.

     Maintenance and support revenue was $2.1 million for the three months ended
September  30,  1998 as  compared to $1.0  million  for the three  months  ended
September 30, 1997. Maintenance and support revenue generally corresponds to the
level of the Company's installed customer base.


     Direct Costs. Direct costs were 55.7% of revenue for the three months ended
September 30, 1998 as compared to 85.8% for the three months ended September 30,
1997.  During the three months ended  September 30, 1997,  the Company  recorded
direct costs of $5.2 million  relating to estimated  losses due to delays in the
completion  of  certain  pre-existing  contracts  in  the  MDSI  UK  operations.
Excluding these contracts,  the Company's direct costs were 54.7% of revenue for
the three months ended September 30, 1997.

     Direct costs  include labor and other costs  directly  related to a project
including those related to the provision of services and support, production and
inventory costs associated with terminals and infrastructure  equipment provided
by MDSI UK and costs related to host  equipment and mobile  devices on behalf of
third party product  sales.  Labor costs include  direct  payroll,  benefits and
overhead charges.


     GrossMargins.  Gross  margins  were 44.3% of revenue  for the three  months
ended  September  30,  1998 as  compared  to 14.2%  for the three  months  ended
September  30,  1997.  After  adjusting  for  the  margins  on the  pre-existing
contracts in the MDSI UK operations,  the Company's  gross margins were 45.3% of
revenue for the three months ended September 30, 1997. The comparative  adjusted
gross margin for 1997 is similar to the gross margin for the same period in 1998
and is consistent with the similar mix of revenue during these periods.


     Research and Development.  Research and development  expenses were 11.8% of
revenue for the three months ended  September  30, 1998 and 11.1% of revenue for
the three  months  ended  September  30, 1997.  Total  research and  development
expenditures  for the three  months  ended  September  30, 1998 of $2.8  million
represents  an increase  of  $895,000  (47.8%) as compared to the same period in
1997. The increase in research and  development  expenses in 1998 is a result of
the continued  development and enhancement of the Company's  Advantex  products.
The  Company  anticipates  continuing  to commit a  significant  portion  of its
product revenues to enhancement of existing  products and the development of new
products, resulting in an anticipated increase in the dollar amounts of research
and development expenses.

<PAGE>


     Sales and Marketing. Sales and marketing expenses were 13.6% of revenue for
the three  months  ended  September  30, 1998 and 20.5% of revenue for the three
months ended  September 30, 1997.  This represents a decrease of $259,000 (7.5%)
as compared to the same period in 1997. The Company  anticipates that the dollar
amounts of its sales and  marketing  expenses will increase in the future as the
result of the Company's commitment to its international marketing effort.

     General and Administrative.  General and administrative  expenses were 7.2%
of revenue for the three  months ended  September  30, 1998 and 10.7% of revenue
for the three months ended September 30, 1997. Total general and  administrative
expenses of $1.7 million  represents a decrease of $99,000  (5.5%) for the three
months  ended  September  30, 1998 as  compared to the same period in 1997.  The
Company  expects  that the  dollar  amount  of its  general  and  administrative
expenses  will  increase  in the future as the  Company  expands  its  staffing,
information  systems and other  administrative  costs to support  its  expanding
operations.

     Other Income. Other income was $54,000 for the three months ended September
30, 1998 as compared to $135,000 for the three months ended  September 30, 1997.
Substantially  all of other income relates to interest  income on cash and short
term  deposits and  fluctuations  in the  currencies  of the  Company's  foreign
operations.

     Income  Taxes.  The Company  provided  for income taxes on earnings for the
three months ended September 30, 1998 at the rate of 30.0%,  after adjusting for
the amortization of intangible assets. The Company's effective tax rate reflects
the blended  effect of Canadian,  US, UK and other  foreign  jurisdictions'  tax
rates.


<PAGE>


NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER
30, 1997

     Revenue. Revenue increased by $2.2 million (4.2%) for the nine months ended
September 30, 1998 as compared to the nine months ended September 30, 1997.

     Software and  services  revenue  increased by $4.9 million  (17.7%) for the
nine months  ended  September  30,  1998 as  compared  to the nine months  ended
September 30, 1997.  This increase is due  primarily to revenue  contributed  by
Alliance during the period and the continued growth of the existing  business in
the utility and telecommunication/cable market sectors.

     Terminals and infrastructure  revenue decreased by $1.6 million (19.8%) for
the nine months  ended  September  30, 1998 as compared to the nine months ended
September 30, 1997.  This decrease is due primarily to delays in the  completion
of certain  pre-existing  contracts in the MDSI UK operations  and the resulting
delays in  delivery of  terminals  under  subsequent  contracts.  Terminals  and
infrastructure revenue is derived solely from the MDSI UK operations.

     Third party products and services revenue decreased by $4.2 million (27.2%)
for the nine months ended  September  30, 1998 compared to the nine months ended
September  30,  1997.  Third  party  products  and  services  revenue  primarily
represents  revenue earned from certain  customers  pursuant to agreements under
which the Company  provides  third party  products and services,  typically host
computer equipment and mobile computing devices,  as part of the installation of
software  and  provision of services.  Revenue  from  deliveries  of third party
products and services will  fluctuate  from period to period given the timing of
certain contracts and the rollout  schedules which are established  primarily by
the customers.  Accordingly,  this will result in large fluctuations in revenue,
direct  costs,  gross  profits  and income  from  operations  from one period to
another.

     Maintenance  and support revenue was $5.7 million for the nine months ended
September  30,  1998 as  compared  to $2.5  million  for the nine  months  ended
September 30, 1997. Maintenance and support revenue generally corresponds to the
level of the Company's installed customer base.


     Direct Costs.  Direct costs were 52.8% of revenue for the nine months ended
September 30, 1998 as compared to 66.3% for the nine months ended  September 30,
1997.  During the nine months ended  September  30, 1997,  the Company  recorded
direct costs of $5.2 million  relating to estimated  losses due to delays in the
completion  of  certain  pre-existing  contracts  in  the  MDSI  UK  operations.
Excluding these contracts,  the Company's direct costs were 56.5% of revenue for
the nine months ended September 30, 1997.

     Direct costs  include labor and other costs  directly  related to a project
including those related to the provision of services and support, production and
inventory costs associated with terminals and infrastructure  equipment provided
by MDSI UK and costs related to host  equipment and mobile  devices on behalf of
third party product  sales.  Labor costs include  direct  payroll,  benefits and
overhead charges.


     Gross  Margins.  Gross  margins  were 47.2% of revenue  for the nine months
ended  September  30,  1998 as  compared  to  33.7%  for the nine  months  ended
September  30,  1997.  After  adjusting  for  the  margins  on the  pre-existing
contracts in the MDSI UK operations,  the Company's  gross margins were 43.5% of
revenue for the nine months ended  September  30,  1997.  During the nine months
ended September 30, 1998 there was an increase in software and services revenue,
which  typically  has a higher  gross  margin,  and a  decrease  in third  party
products  and  services  revenue,  which  typically  has a lower  gross  margin,
relative to the same period in 1997.

     Research and Development.  Research and development  expenses were 12.1% of
revenue for the nine months ended September 30, 1998 and 9.6% of revenue for the
nine  months  ended   September  30,  1997.   Total  research  and   development
expenditures  for the nine  months  ended  September  30,  1998 of $6.7  million
represents an increase of $1.6 million (31.8%) as compared to the same period in
1997. The increase in research and  development  expenses in 1998 is a result of
the continued  development and enhancement of the Company's  Advantex  products.
The  Company  anticipates  continuing  to commit a  significant  portion  of its
product revenues to enhancement of existing  products and the development of new
products, resulting in an anticipated increase in the dollar amounts of research
and development expenses.

<PAGE>


     Sales and Marketing. Sales and marketing expenses were 17.3% of revenue for
the nine  months  ended  September  30,  1998 and 15.9% of revenue  for the nine
months ended  September  30, 1997.  This  represents an increase of $1.1 million
(13.3%) as compared to the same period in 1997.  The increase was  primarily due
to an increase in marketing,  sales and technical  support  personnel to support
the Company's increased marketing activities worldwide.  The Company anticipates
that the dollar  amounts of its sales and  marketing  expenses  will continue to
increase  as  the  result  of the  Company's  commitment  to  its  international
marketing effort.

     General and Administrative.  General and administrative  expenses were 8.6%
of revenue for the nine months ended  September 30, 1998 and 8.6% of revenue for
the nine months ended  September  30,  1997.  Total  general and  administrative
expenses of $4.8 million  represents an increase of $177,000 (3.9%) for the nine
months ended  September  30, 1998,  as compared to the same period in 1997.  The
Company  expects  that the  dollar  amount  of its  general  and  administrative
expenses  will  increase  in the future as the  Company  expands  its  staffing,
information  systems and other  administrative  costs to support  its  expanding
operations.

     Other Income. Other income was $108,000 for the nine months ended September
30, 1998 as compared to $269,000 for the nine months ended  September  30, 1997.
Substantially  all of other income relates to interest  income on cash and short
term  deposits and  fluctuations  in the  currencies  of the  Company's  foreign
operations.

     Income  Taxes.  The Company  provided  for income taxes on earnings for the
nine months ended  September 30, 1998 at the rate of 30.1%,  after adjusting for
the amortization of intangible assets. The Company's effective tax rate reflects
the blended  effect of Canadian,  US, UK and other  foreign  jurisdictions'  tax
rates.


<PAGE>


Liquidity and Capital Resources

     The Company finances its operations,  acquisitions and capital expenditures
with cash generated from operations,  loans, capital leases,  private placements
and public  offerings of its securities.  At September 30, 1998, the Company had
cash and cash equivalents of $4.7 million and working capital of $18.3 million.

     Cash provided by operating  activities was $4.3 million for the nine months
ended  September 30, 1998 compared to an outflow of $(7.5)  million for the same
period in 1997. The net inflow of cash from operating activities during the nine
months ended  September  30, 1998 is  generated  from net income of $3.0 million
after adjusting for depreciation and amortization  expenses and the net decrease
in non-cash net operating working capital items.

     Cash  provided by  financing  activities  of $2.5  million  during the nine
months ended  September  30, 1998 relates to proceeds  from common shares issued
for $1.1 million  pursuant to the exercise of stock  options and share  purchase
warrants,  net of the repayment of certain  long-term  debt for $143,000 and the
proceeds from capital lease financing of equipment for $1.5 million. The capital
leases are to be repaid evenly over periods expiring substantially between June,
2001 and  December,  2001 and are  secured  by  certain  capital  assets  of the
Company.

     Cash used in  investing  activities  was $2.2  million  for the nine months
ended  September  30, 1998 as  compared  to $3.6  million for the same period in
1997.  Total investing  activity during the nine months ended September 30, 1998
consisted  of  purchases  of capital  assets,  including  computer  hardware and
software  for use in  research  and  development  activities  and to support the
growth of the Company's corporate  information  systems.  Cash used in investing
activities  during the nine  months  ended  September  30,  1997  included  cash
payments of $1.9 million on behalf of the Alliance acquisition.

     Existing sources of liquidity at September 30, 1998 include $4.7 million of
cash and cash  equivalents and up to $7.0 million  available under the Company's
operating line of credit. At September 30, 1998, 200,000 Sterling pounds of such
amount was committed to securing the  Company's  obligations  under  outstanding
letters of credit.  Under the terms of the agreement,  borrowings and letters of
credit under the line are limited to 60% to 90% of eligible accounts receivable.
Borrowings  accrue interest at the bank's prime rate plus 0.5%. At September 30,
1998, the Company had no borrowings under the line of credit.

     The Company  believes that future cash flows,  in addition to funds on hand
and its borrowing  capacity  under the line of credit,  will provide  sufficient
funds  to  meet  cash   requirements  for  at  least  the  next  twelve  months.
Commensurate with its past and expected future growth, the Company may increase,
from time to time, its borrowing  facility under its operating line of credit to
support its operations.  The Company may use cash to fund other  acquisitions of
businesses  or products  complementary  to the Company's  business  although the
Company  has  no  plans  to do  so.  The  Company  has  no  material  additional
commitments  other than  operating  and capital  leases.  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.



<PAGE>


Year 2000

     The Company is currently in the process of addressing  the Year 2000 issue.
This includes a  comprehensive  project to upgrade its  information  systems and
development  software  that will  consistently  and properly  recognize the Year
2000.  Certain of the  Company's  systems  include  new  hardware  and  packaged
software  purchased from vendors who have  represented that the systems are Year
2000  compliant.  The Company is in the  process of  obtaining  assurances  from
vendors  that  timely  updates  will be made  available  to make  all  remaining
purchased software Year 2000 compliant.

     The Company  believes that it has  identified all  significant  information
systems and software development  applications that will require modification to
ensure Year 2000 compliance.  Internal and external  resources are being used to
make the  required  modifications  and test Year 2000  compliance.  The  Company
intends to  complete  the testing  process of all  significant  applications  by
December 31, 1998.

     The Company is also in the process of initiating formal communications with
all of its significant  suppliers and customers to determine the extent to which
the  Company  may be at risk as a result  of the  failure  of third  parties  to
remediate their own Year 2000 issues. The Company can give no guarantee that the
systems of other companies on which the Company's systems rely will be converted
on time or that a failure to convert by another  company or a conversion that is
incompatible  with the  Company's  systems,  would not have a  material  adverse
effect on the Company.

     The total cost to the Company of these Year 2000 compliance  activities has
not  been and is not  anticipated  to be  material  to its  financial  position,
results of operations or cash flows in any given year. The estimate of costs and
the date on which the Company plans to complete the Year 2000  modification  and
testing processes are based on management's  best estimates,  which were derived
utilizing  numerous   assumptions  of  future  events  including  the  continued
availability  of certain  resources,  third party  modification  plans and other
factors.  However,  there  can be no  guarantee  that  these  estimates  will be
achieved and actual results could differ from those plans.






<PAGE>


Part II -  OTHER INFORMATION

     ITEM 1.   LEGAL PROCEEDINGS

               As of the date hereof,  there is no material  litigation  pending
          against  the  Company.  From time to time,  the  Company is a party to
          litigation  and claims  incident to the  ordinary  course of 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 and results of operations.


     ITEM 2.   CHANGES IN SECURITIES USE OF PROCEEDS

               None.


     ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

               None.


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

               None.


     ITEM 5.   OTHER INFORMATION

               None.


     ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

               a) Exhibits

                  Exhibit 3.1   Articles of Amalgamation

               b) Reports on Form 8-K

                  None.


<PAGE>


Signatures

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



                                            MDSI MOBILE DATA SOLUTIONS INC.


Date:    November 12, 1998          By:     /s/ ERIK DYSTHE                    
                                            ------------------------------------
                                    Name:   Erik Dysthe
                                    Title:  Chairman and Chief Executive Officer




Date:    November 12, 1998          By:      /s/ VERNE D. PECHO                 
                                            ------------------------------------
                                    Name:   Verne D. Pecho
                                    Title:  Vice President Finance & 
                                            Administration and Chief Financial
                                            Officer (Principal Financial and
                                            Accounting Officer)

<PAGE>
                               Index to Exhibits

               Exhibit No.                        Description

               3.1                            Articles of Amalgamation
[{"type": "10-Q", "sequence": "1", "description": "QUARTERLY REPORT", "secsgml_size_bytes": 54421}]
{"company-data": {"conformed-name": "MDSI MOBILE DATA SOLUTIONS INC /CAN/", "cik": "0000935497", "assigned-sic": "7372", "irs-number": "000000000", "state-of-incorporation": "A1", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "10-Q", "act": "34", "file-number": "000-28968", "film-number": "98749340"}, "business-address": {"street1": "10551 SHELLBRIDGE WAY", "street2": "STE 135", "city": "RICHMOND B C", "state": "A1", "zip": "00000", "phone": "6042709939"}, "mail-address": {"street1": "10661 SHELLBRIDGE WAY", "street2": "STE 135", "city": "RICHMOND BC", "state": "A1", "zip": "00000"}}
==============================================================================
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                   ------------------------------------------

                                    FORM 10-Q

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

     For the quarterly period ended September 30, 1998

                                       OR

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

     For the transition period from _______________ to ________________.

                         Commission file number 0-28968

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

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

                        Suite 135 - 10551 Shellbridge Way
                           Richmond, British Columbia,
                                 Canada V6X 2W9
                                 (604) 270-9939

   (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 September 30, 1998 was 6,532,424.

==============================================================================
MDSI MOBILE DATA SOLUTIONS INC.

                             INDEX TO THE FORM 10-Q
                For the quarterly period ended September 30, 1998

                                                                            Page

Part I - FINANCIAL INFORMATION

     ITEM 1.   FINANCIAL STATEMENTS (UNAUDITED)

               Consolidated Balance Sheets ................................... 3

               Consolidated Statements of Operations
               and Retained Earnings (Deficit)  .............................. 4

               Consolidated Statements of Cash Flows ......................... 5

               Notes to the Consolidated Financial Statements ................ 6

     ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
               CONDITION AND RESULTS OF OPERATIONS ........................... 8

Part II - OTHER INFORMATION

     ITEM 1.    LEGAL PROCEEDINGS............................................ 18

     ITEM 2.    CHANGES IN SECURITIES AND USE OF PROCEEDS.................... 18

     ITEM 3.    DEFAULTS UPON SENIOR SECURITIES ............................. 18

     ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.......... 18

     ITEM 5.    OTHER INFORMATION.............................................18

     ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K............................. 18

SIGNATURES....................................................................19
Part I - FINANCIAL INFORMATION

     ITEM 1.  FINANCIAL STATEMENTS

                         MDSI MOBILE DATA SOLUTIONS INC.

                           Consolidated Balance Sheets
                         (Expressed in Canadian dollars)

                                                             As at
                                               ---------------------------------
                                               September 30,      December 31,
                                                  1998               1997
                                               -------------      ------------
ASSETS                                         (Unaudited)
CURRENT ASSETS
     Cash and cash equivalents............... $  4,684,911       $    110,117
     Accounts receivable, net
        Trade................................   18,147,816         15,256,202
        Unbilled.............................   10,140,847          9,604,060
     Work in progress........................    2,051,191          1,451,662
     Prepaid expenses........................    1,544,203          1,647,748
     Deferred income taxes...................    1,392,187          2,096,544
                                               -------------      ------------
                                                37,961,155         30,166,333

CAPITAL ASSETS, NET..........................    5,078,410          4,291,755
INTANGIBLE ASSETS, NET.......................    5,537,584          6,185,926
                                               -------------      ------------

TOTAL ASSETS................................. $ 48,577,149       $ 40,644,014
                                             ===============    ==============

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
     Accounts payable........................ $  8,660,584       $  3,936,501
     Accrued liabilities.....................    4,485,255          8,353,417
     Deferred revenue........................    5,617,321          3,985,261
     Current portion of long-term debt.......      369,124            215,454
     Current obligations under capital leases      507,907             20,621
                                               -------------      ------------
                                                19,640,191         16,511,254

LONG-TERM DEBT...............................            -            296,324
OBLIGATIONS UNDER CAPITAL LEASES.............    1,053,967                  -
                                               -------------      ------------
TOTAL LIABILITIES............................   20,694,158         16,807,578
                                               -------------      ------------
STOCKHOLDERS' EQUITY
     Common stock............................   44,223,588         43,154,039
     Treasury stock..........................     (122,743)          (122,743)
     Retained earnings (deficit).............  (16,217,854)       (19,194,860)
                                               -------------      ------------
                                                27,882,991         23,836,436
                                               -------------      ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY... $ 48,577,149       $ 40,644,014
                                             ===============    ==============

See notes to consolidated financial statements
MDSI MOBILE DATA SOLUTIONS INC.

      Consolidated Statements of Operations and Retained Earnings (Deficit)
                         (Expressed in Canadian dollars)
                                   (Unaudited)

                                 Three months ended       Nine months ended
                                    September 30,           September 30,
                             ------------------------- -------------------------
                                 1998         1997         1998        1997
                             ------------ ------------ ------------ ------------
REVENUE
Software and services........$12,371,911  $ 9,175,389  $32,312,362  $27,450,138
Terminals and infrastructure.  1,889,460    1,358,967    6,314,828    7,878,285
Third party products and
 services....................  7,141,164    5,236,191   11,237,466   15,442,091
Maintenance and support......  2,113,260    1,032,661    5,674,541    2,529,286
                             ------------ ------------ ------------ ------------
                              23,515,795   16,803,208   55,539,197   53,299,800

DIRECT COSTS................. 13,086,612   14,425,235   29,343,914   35,322,991
                             ------------ ------------ ------------ ------------
GROSS PROFIT................. 10,429,183    2,377,973   26,195,283   17,976,809
                             ------------ ------------ ------------ ------------
OPERATING EXPENSES
Research and development.....  2,765,312    1,870,392    6,741,155    5,112,770
Sales and marketing .........  3,193,732    3,452,724    9,599,862    8,474,126
General and administrative...  1,696,492    1,795,928    4,777,596    4,600,321
Restructuring costs..........          -    1,145,152            -    1,145,152
Amortization of intangible
 assets......................    216,114      238,101      648,342      599,062
Acquired research and 
 development.................          -            -            -   10,002,982
                             ------------ ------------ ------------ ------------
                               7,871,650    8,502,297   21,766,955   29,934,413
                             ------------ ------------ ------------ ------------
OPERATING INCOME (LOSS)......  2,557,533   (6,124,324)   4,428,328  (11,957,604)

OTHER INCOME ................     54,249      135,421      107,976      268,973
                             ------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE TAX
 PROVISION...................  2,611,782   (5,988,903)   4,536,304  (11,688,631)

(PROVISION FOR) RECOVERY OF
 INCOME TAXES................   (847,413)      43,040   (1,559,298)  (1,385,629)
                             ------------ ------------ ------------ ------------
NET INCOME (LOSS) FOR THE
 PERIOD......................  1,764,369   (5,945,863)   2,977,006  (13,074,260)

RETAINED EARNINGS (DEFICIT),
 BEGINNING OF PERIOD.........(17,982,223) (14,776,221) (19,194,860)  (7,647,824)
                             ------------ ------------ ------------ ------------

RETAINED EARNINGS (DEFICIT),
 END OF PERIOD............. $(16,217,854)$(20,722,084)$(16,217,854)$(20,722,084)
                             ============ ============ ============ ============
Earnings (loss) per common share
 Basic ...................... $     0.27   $   (0.93)  $     0.46     $   (2.11)
 Diluted .................... $     0.26   $   (0.93)  $     0.45     $   (2.11)

Weighted average shares outstanding
 Basic.......................  6,526,990    6,400,345    6,490,805    6,203,139
 Diluted.....................  6,664,467    6,400,345    6,640,610    6,203,139

See notes to consolidated financial statements
MDSI MOBILE DATA SOLUTIONS INC.

                      Consolidated Statements of Cash Flows
                         (Expressed in Canadian dollars)
                                   (Unaudited)

                                                     Nine months ended
                                                       September 30,
                                         ---------------------------------------
                                                1998                 1997
                                         ------------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income (loss) for the period......    $   2,977,006       $   (13,074,260)
  Items not affecting cash:
    Depreciation and amortization.......        2,056,438             1,540,636
    Deferred income taxes...............          704,357              (238,264)
    Acquired research development.......                -            10,002,982
    Changes in non-cash operating 
    working capital items...............       (1,436,404)           (5,703,035)
                                         ------------------- -------------------
    Net cash provided by (used in)
    operating activities................        4,301,397            (7,471,941)
                                         ------------------- -------------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Issuance of common shares.............        1,069,549             1,013,484
  Repayment of long-term debt...........         (142,654)           (3,299,646)
  Repayment of loan notes...............                -              (428,424)
  Net proceeds from (repayment of) 
  capital leases........................        1,541,253               (33,853)
                                         ------------------- -------------------
  Net cash provided by (used in)
  financing activities..................        2,468,148            (2,748,439)
                                         ------------------- -------------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Acquisition of Alliance...............                -            (1,892,426)
  Acquisition of capital assets.........       (2,194,751)           (1,679,994)
                                         ------------------- -------------------
  Net cash used in investing activities        (2,194,751)           (3,572,420)
                                         ------------------- -------------------

NET CASH INFLOW (OUTFLOW)...............        4,574,794           (13,792,800)

CASH AND CASH EQUIVALENTS, BEGINNING
 OF PERIOD..............................          110,117            20,207,019
                                         ------------------- -------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD     $  4,684,911          $  6,414,219
                                         =================== ===================

SUPPLEMENTAL DISCLOSURE OF NON CASH INVESTING AND FINANCING ACTIVITIES

During the nine months ended  September  30,  1998,  the Company  issued  51,600
common shares on the exercise of 258,000 common share purchase warrants and cash
proceeds of $736,440.

During the nine months ended  September  30, 1997,  the Company  issued  280,000
common  shares and 280,000  common  share  purchase  warrants on the exercise of
280,000 special warrants without additional consideration. Also, during the nine
months  ended  September  30, 1997,  the Company  acquired all of the issued and
outstanding   shares  of  Alliance   Systems,   Incorporated   ("Alliance")  for
$9,116,828.  Consideration consisted of 347,750 common shares of the Company and
payments  of  $2,188,750,   including  cash  of  $1,892,426  (US$1,367,869)  and
unsecured notes in the principal amount of $296,324 (US$214,219).

See notes to consolidated financial statements
MDSI MOBILE DATA SOLUTIONS INC.

                 Notes to the Consolidated Financial Statements
                  For the nine months ended September 30, 1998
                         (Expressed in Canadian 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 Company's Annual Report filed on
          Form 10-K for the year ended December 31, 1997.

     (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.   Actual  results  could  differ  from  those
          estimates.

     (c)  Recent pronouncements

               In June 1998,  the Financial  Accounting  Standards  Board issued
          Statement No. 133 (SFAS 133),  Accounting for  Derivative  Instruments
          and  Hedging   Activities,   which  standardizes  the  accounting  for
          derivative instruments.  SFAS 133 is effective for all fiscal quarters
          of all fiscal years  beginning  after June 15, 1999. The impact on the
          Company's financial statements is not expected to be material.

2.   SEGMENTED INFORMATION

     Segmented information

          The  Company   develops,   markets  and  supports  mobile  work  force
     management  systems  primarily  to the  utility,  telecommunications/cable,
     transportation  (taxi,  courier and roadside  recovery)  and general  field
     service market  sectors.  The Company  considers its business to consist of
     one reportable operating segment.
MDSI MOBILE DATA SOLUTIONS INC.

                 Notes to the Consolidated Financial Statements
                  For the nine months ended September 30, 1998
                         (Expressed in Canadian dollars)
                                   (Unaudited)

2.   SEGMENTED INFORMATION (CONTINUED)

     Geographic information

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

                         Three months ended              Nine months ended
                            September 30,                  September 30,
                    ----------------------------- ------------------------------
                        1998            1997            1998            1997
                    -----------     -----------     -----------     ------------
Canada............  $   861,570     $   397,533     $ 1,564,657     $ 1,598,769
United States.....   17,719,353      12,419,843      39,784,394      34,176,955
Europe............    3,814,487       2,522,827      11,808,419      15,455,998
Asia..............    1,058,133         568,322       2,064,550       1,173,395
South America.....       62,252         894,683         317,177         894,683
                     ----------      ----------      ----------      ----------
                    $23,515,795     $16,803,208     $55,539,197     $53,299,800
                     ==========      ==========      ==========      ==========
3.   EARNINGS (LOSS) PER COMMON SHARE

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

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

                                 Three months ended       Nine months ended
                                    September 30,           September 30,
                             ------------------------- -------------------------
                                 1998         1997         1998        1997
                             ------------ ------------ ------------ ------------
Weighted average shares
outstanding.................   6,526,990     6,400,345    6,490,805   6,203,139
Common stock equivalents
 Stock options..............     137,271             -      142,864           -
 Share purchase warrants....         206             -        6,941           -
                             ------------ ------------ ------------ ------------
Total shares for diluted
earnings (loss) per common
share......................    6,664,467     6,400,345    6,640,610   6,203,139
                             ============ ============ ============ ============
ITEM 2: MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

     Certain  statements  and  information  contained in this report  constitute
forward-looking  statements  within the meaning of Section 21E of the Securities
Exchange Act of 1934. Such forward-looking  statements involve known and unknown
risks,  uncertainties  and other  factors  that may cause  the  actual  results,
performance  or  achievement of the Company,  or  developments  in the Company's
industry,  to differ  materially  from the anticipated  results,  performance or
achievements  expressed  or implied  by such  forward-looking  statements.  Such
factors  include,  but are not  limited  to:  the  Company's  limited  operating
history, lengthy sales cycles, the Company's dependence upon large contracts and
relative  concentration  of customers,  risks involving the management of growth
and integration of  acquisitions,  competition,  product  development  risks and
risks of  technological  change,  dependence  on selected  vertical  markets and
third-party  marketing  relationships  and suppliers,  the Company's  ability to
protect its intellectual  property rights and the other risks and  uncertainties
detailed in the Company's Securities and Exchange Commission filings,  including
the Company's Annual Report on Form 10-K for the year ended December 31, 1997.

     All financial  information in this report is expressed in Canadian  dollars
unless otherwise noted.

Overview

     The Company  develops,  markets,  implements and supports mobile  workforce
management  and wireless  connectivity  software and related  network and mobile
computing equipment for use by a wide variety of companies that have substantial
mobile workforces, such as utility, telecommunications and cable companies, taxi
services,   courier   companies   and  public   safety  and  roadside   recovery
organizations.  The Company'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  provide a  cost-effective  method for companies with mobile workers to
utilize data  communications  to  communicate  with such  workers,  and for such
workers to  interface  on a  real-time  basis with their  corporate  information
systems.

     The Company's revenue is derived from (i) software and services, consisting
of the  licensing  of software  and  provision  of related  services,  including
project management, installation,  integration, customization and training; (ii)
terminal and infrastructure equipment consisting of the sale of mobile computing
devices,  related  in-vehicle  equipment  and wireless  data  network  equipment
manufactured by the Company; (iii) third party products and services, consisting
of the  provision  of  non-MDSI  products  and  services  as part  of the  total
contract;  and (iv)  maintenance  and support,  consisting  of the  provision of
after-sale  support services as well as hourly,  annual or extended  maintenance
contracts.

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

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

     From time to time,  the  Company is  required  to  provide,  through its UK
operations in the taxi, courier and roadside recovery markets,  mobile computing
devices and wireless data communications network equipment.
The Company is also called on to provide,  in addition to MDSI products and
services,  certain  third party  products,  such as host  computer  hardware and
operating  system  software,  mobile  computing  devices and radio data  network
infrastructure  equipment,  or sub-contract services,  such as radio data system
design and  implementation.  The  Company  recognizes  revenue for the supply of
third party hardware upon transfer of beneficial ownership to the customer.  The
Company  recognizes  revenue  for 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 often supply some portion of third party
products  and services to customers  where it is  successful  in selling its own
products and services.  There can be no assurance,  however,  that any contracts
entered into by the Company to supply  third party  software and products in the
future will  represent a  substantial  portion of revenue in any future  period.
Since the revenue generated from the supply of third party products and services
may represent a significant  portion of certain  contracts and the  installation
and  rollout of third party  products  is  generally  at the  discretion  of the
customer,  the Company may,  depending on the level of third party  products and
services  provided during a period,  experience large quarterly  fluctuations in
revenue.

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

     The Company'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 or the  introduction  of new  products,  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,  cash flows and financial condition.  Delays in
the  implementation  of contracts may result in delays in the  implementation or
cancellation  of subsequent  contracts.  The  Company's  contracts are generally
cancelable upon notice by the customer. The loss of certain contracts could have
a material adverse effect on the Company's  business,  operating  results,  cash
flows and  financial  condition.  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.
Effects of Acquisition

     These consolidated financial statements reflect the acquisition of Alliance
Systems,  Incorporated  ("Alliance")  effective April 17, 1997. This acquisition
has been accounted for using the purchase method.

     On April 17,  1997,  the  Company  entered  into an  agreement  to  acquire
Alliance  which was  completed  July 1, 1997.  Alliance  is a supplier of mobile
workforce management solutions to the utility,  public safety and cable markets.
The  acquisition  resulted in the  write-off of $10.0  million  associated  with
acquired  research and development.  The Company's results of operations for the
nine months ended  September  30, 1997 include only the results of operations of
Alliance from April 17, 1997.
Results of Operations

     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       Nine months ended
                                    September 30,           September 30,
                             ------------------------- -------------------------
                                 1998         1997         1998         1997
                             ------------ ------------ ------------ ------------
                              (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)
REVENUE
Software and services........    52.6%        54.6%        58.2%        51.5%
Terminals and infrastructure.     8.0          8.1         11.4         14.8
Third party products and  
 services....................    30.4         31.2         20.2         29.0
Maintenance and support......     9.0          6.1         10.2          4.7
                             ------------ ------------ ------------ ------------
                                100.0        100.0        100.0        100.0

DIRECT COSTS.................    55.7         85.8         52.8         66.3
                             ------------ ------------ ------------ ------------
GROSS PROFIT.................    44.3         14.2         47.2         33.7
                             ------------ ------------ ------------ ------------
OPERATING EXPENSES
Research and development.....    11.8         11.1         12.1          9.6
Sales and marketing .........    13.6         20.5         17.3         15.9
General and administrative...     7.2         10.7          8.6          8.6
Restructuring costs..........      -           6.8           -           2.1
Amortization of intangible
 assets......................     0.9          1.4          1.2          1.1
Acquired research and
 development.................      -            -            -          18.8
                             ------------ ------------ ------------ ------------
                                 33.5         50.5         39.2         56.1
                             ------------ ------------ ------------ ------------
OPERATING INCOME (LOSS)......    10.8        (36.3)         8.0        (22.4)

OTHER INCOME.................     0.3          0.6          0.2          0.5
                             ------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE 
 TAX PROVISION...............    11.1        (35.7)         8.2        (21.9)

(PROVISION FOR) RECOVERY
 OF INCOME TAXES.............    (3.6)         0.3         (2.8)        (2.6)
                             ------------ ------------ ------------ ------------
NET INCOME (LOSS) FOR THE
 PERIOD......................     7.5%       (35.4)%        5.4%       (24.5)%
                             ============ ============ ============ ============
THREE  MONTHS  ENDED  SEPTEMBER  30,  1998  COMPARED TO THE THREE  MONTHS  ENDED
SEPTEMBER 30, 1997

     Revenue.  Revenue  increased by $6.7  million  (39.9%) for the three months
ended  September  30, 1998 as compared to the three months ended  September  30,
1997.

     Software and  services  revenue  increased by $3.2 million  (34.8%) for the
three  months  ended  September  30, 1998 as compared to the three  months ended
September 30, 1997.  This  increase is due primarily to the continued  growth of
the existing business in the utility and telecommunication/cable market sectors.
In  addition,  during the three  months ended  September  30, 1997,  the Company
experienced  delays in the signing and implementation of certain contracts which
resulted in a reduction of revenue for the comparable period in 1997.

     Terminals and infrastructure  revenue increased by $530,000 (39.0%) for the
three  months  ended  September  30, 1998 as compared to the three  months ended
September 30, 1997. Terminals and infrastructure  revenue is derived solely from
the MDSI UK operations.

     Third party products and services revenue increased by $1.9 million (36.4%)
for the three  months ended  September  30, 1998 as compared to the three months
ended September 30, 1997.  Third party products and services  revenue  primarily
represents  revenue earned from certain  customers  pursuant to agreements under
which the Company  provides  third party  products and services,  typically host
computer equipment and mobile computing devices,  as part of the installation of
software  and  provision of services.  Revenue  from  deliveries  of third party
products and services will  fluctuate  from period to period given the timing of
certain contracts and the rollout  schedules which are established  primarily by
the customers.  Accordingly,  this will result in large fluctuations in revenue,
direct  costs,  gross  profits  and income  from  operations  from one period to
another.

     Maintenance and support revenue was $2.1 million for the three months ended
September  30,  1998 as  compared to $1.0  million  for the three  months  ended
September 30, 1997. Maintenance and support revenue generally corresponds to the
level of the Company's installed customer base.

     Direct Costs. Direct costs were 55.7% of revenue for the three months ended
September 30, 1998 as compared to 85.8% for the three months ended September 30,
1997.  During the three months ended  September 30, 1997,  the Company  recorded
direct costs of $5.2 million  relating to estimated  losses due to delays in the
completion  of  certain  pre-existing  contracts  in  the  MDSI  UK  operations.
Excluding these contracts,  the Company's direct costs were 54.7% of revenue for
the three months ended September 30, 1997.

     Direct costs  include labor and other costs  directly  related to a project
including those related to the provision of services and support, production and
inventory costs associated with terminals and infrastructure  equipment provided
by MDSI UK and costs related to host  equipment and mobile  devices on behalf of
third party product  sales.  Labor costs include  direct  payroll,  benefits and
overhead charges.

     GrossMargins.  Gross  margins  were 44.3% of revenue  for the three  months
ended  September  30,  1998 as  compared  to 14.2%  for the three  months  ended
September  30,  1997.  After  adjusting  for  the  margins  on the  pre-existing
contracts in the MDSI UK operations,  the Company's  gross margins were 45.3% of
revenue for the three months ended September 30, 1997. The comparative  adjusted
gross margin for 1997 is similar to the gross margin for the same period in 1998
and is consistent with the similar mix of revenue during these periods.

     Research and Development.  Research and development  expenses were 11.8% of
revenue for the three months ended  September  30, 1998 and 11.1% of revenue for
the three  months  ended  September  30, 1997.  Total  research and  development
expenditures  for the three  months  ended  September  30, 1998 of $2.8  million
represents  an increase  of  $895,000  (47.8%) as compared to the same period in
1997. The increase in research and  development  expenses in 1998 is a result of
the continued  development and enhancement of the Company's  Advantex  products.
The  Company  anticipates  continuing  to commit a  significant  portion  of its
product revenues to enhancement of existing  products and the development of new
products, resulting in an anticipated increase in the dollar amounts of research
and development expenses.
Sales and Marketing. Sales and marketing expenses were 13.6% of revenue for
the three  months  ended  September  30, 1998 and 20.5% of revenue for the three
months ended  September 30, 1997.  This represents a decrease of $259,000 (7.5%)
as compared to the same period in 1997. The Company  anticipates that the dollar
amounts of its sales and  marketing  expenses will increase in the future as the
result of the Company's commitment to its international marketing effort.

     General and Administrative.  General and administrative  expenses were 7.2%
of revenue for the three  months ended  September  30, 1998 and 10.7% of revenue
for the three months ended September 30, 1997. Total general and  administrative
expenses of $1.7 million  represents a decrease of $99,000  (5.5%) for the three
months  ended  September  30, 1998 as  compared to the same period in 1997.  The
Company  expects  that the  dollar  amount  of its  general  and  administrative
expenses  will  increase  in the future as the  Company  expands  its  staffing,
information  systems and other  administrative  costs to support  its  expanding
operations.

     Other Income. Other income was $54,000 for the three months ended September
30, 1998 as compared to $135,000 for the three months ended  September 30, 1997.
Substantially  all of other income relates to interest  income on cash and short
term  deposits and  fluctuations  in the  currencies  of the  Company's  foreign
operations.

     Income  Taxes.  The Company  provided  for income taxes on earnings for the
three months ended September 30, 1998 at the rate of 30.0%,  after adjusting for
the amortization of intangible assets. The Company's effective tax rate reflects
the blended  effect of Canadian,  US, UK and other  foreign  jurisdictions'  tax
rates.
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER
30, 1997

     Revenue. Revenue increased by $2.2 million (4.2%) for the nine months ended
September 30, 1998 as compared to the nine months ended September 30, 1997.

     Software and  services  revenue  increased by $4.9 million  (17.7%) for the
nine months  ended  September  30,  1998 as  compared  to the nine months  ended
September 30, 1997.  This increase is due  primarily to revenue  contributed  by
Alliance during the period and the continued growth of the existing  business in
the utility and telecommunication/cable market sectors.

     Terminals and infrastructure  revenue decreased by $1.6 million (19.8%) for
the nine months  ended  September  30, 1998 as compared to the nine months ended
September 30, 1997.  This decrease is due primarily to delays in the  completion
of certain  pre-existing  contracts in the MDSI UK operations  and the resulting
delays in  delivery of  terminals  under  subsequent  contracts.  Terminals  and
infrastructure revenue is derived solely from the MDSI UK operations.

     Third party products and services revenue decreased by $4.2 million (27.2%)
for the nine months ended  September  30, 1998 compared to the nine months ended
September  30,  1997.  Third  party  products  and  services  revenue  primarily
represents  revenue earned from certain  customers  pursuant to agreements under
which the Company  provides  third party  products and services,  typically host
computer equipment and mobile computing devices,  as part of the installation of
software  and  provision of services.  Revenue  from  deliveries  of third party
products and services will  fluctuate  from period to period given the timing of
certain contracts and the rollout  schedules which are established  primarily by
the customers.  Accordingly,  this will result in large fluctuations in revenue,
direct  costs,  gross  profits  and income  from  operations  from one period to
another.

     Maintenance  and support revenue was $5.7 million for the nine months ended
September  30,  1998 as  compared  to $2.5  million  for the nine  months  ended
September 30, 1997. Maintenance and support revenue generally corresponds to the
level of the Company's installed customer base.

     Direct Costs.  Direct costs were 52.8% of revenue for the nine months ended
September 30, 1998 as compared to 66.3% for the nine months ended  September 30,
1997.  During the nine months ended  September  30, 1997,  the Company  recorded
direct costs of $5.2 million  relating to estimated  losses due to delays in the
completion  of  certain  pre-existing  contracts  in  the  MDSI  UK  operations.
Excluding these contracts,  the Company's direct costs were 56.5% of revenue for
the nine months ended September 30, 1997.

     Direct costs  include labor and other costs  directly  related to a project
including those related to the provision of services and support, production and
inventory costs associated with terminals and infrastructure  equipment provided
by MDSI UK and costs related to host  equipment and mobile  devices on behalf of
third party product  sales.  Labor costs include  direct  payroll,  benefits and
overhead charges.

     Gross  Margins.  Gross  margins  were 47.2% of revenue  for the nine months
ended  September  30,  1998 as  compared  to  33.7%  for the nine  months  ended
September  30,  1997.  After  adjusting  for  the  margins  on the  pre-existing
contracts in the MDSI UK operations,  the Company's  gross margins were 43.5% of
revenue for the nine months ended  September  30,  1997.  During the nine months
ended September 30, 1998 there was an increase in software and services revenue,
which  typically  has a higher  gross  margin,  and a  decrease  in third  party
products  and  services  revenue,  which  typically  has a lower  gross  margin,
relative to the same period in 1997.

     Research and Development.  Research and development  expenses were 12.1% of
revenue for the nine months ended September 30, 1998 and 9.6% of revenue for the
nine  months  ended   September  30,  1997.   Total  research  and   development
expenditures  for the nine  months  ended  September  30,  1998 of $6.7  million
represents an increase of $1.6 million (31.8%) as compared to the same period in
1997. The increase in research and  development  expenses in 1998 is a result of
the continued  development and enhancement of the Company's  Advantex  products.
The  Company  anticipates  continuing  to commit a  significant  portion  of its
product revenues to enhancement of existing  products and the development of new
products, resulting in an anticipated increase in the dollar amounts of research
and development expenses.
Sales and Marketing. Sales and marketing expenses were 17.3% of revenue for
the nine  months  ended  September  30,  1998 and 15.9% of revenue  for the nine
months ended  September  30, 1997.  This  represents an increase of $1.1 million
(13.3%) as compared to the same period in 1997.  The increase was  primarily due
to an increase in marketing,  sales and technical  support  personnel to support
the Company's increased marketing activities worldwide.  The Company anticipates
that the dollar  amounts of its sales and  marketing  expenses  will continue to
increase  as  the  result  of the  Company's  commitment  to  its  international
marketing effort.

     General and Administrative.  General and administrative  expenses were 8.6%
of revenue for the nine months ended  September 30, 1998 and 8.6% of revenue for
the nine months ended  September  30,  1997.  Total  general and  administrative
expenses of $4.8 million  represents an increase of $177,000 (3.9%) for the nine
months ended  September  30, 1998,  as compared to the same period in 1997.  The
Company  expects  that the  dollar  amount  of its  general  and  administrative
expenses  will  increase  in the future as the  Company  expands  its  staffing,
information  systems and other  administrative  costs to support  its  expanding
operations.

     Other Income. Other income was $108,000 for the nine months ended September
30, 1998 as compared to $269,000 for the nine months ended  September  30, 1997.
Substantially  all of other income relates to interest  income on cash and short
term  deposits and  fluctuations  in the  currencies  of the  Company's  foreign
operations.

     Income  Taxes.  The Company  provided  for income taxes on earnings for the
nine months ended  September 30, 1998 at the rate of 30.1%,  after adjusting for
the amortization of intangible assets. The Company's effective tax rate reflects
the blended  effect of Canadian,  US, UK and other  foreign  jurisdictions'  tax
rates.
Liquidity and Capital Resources

     The Company finances its operations,  acquisitions and capital expenditures
with cash generated from operations,  loans, capital leases,  private placements
and public  offerings of its securities.  At September 30, 1998, the Company had
cash and cash equivalents of $4.7 million and working capital of $18.3 million.

     Cash provided by operating  activities was $4.3 million for the nine months
ended  September 30, 1998 compared to an outflow of $(7.5)  million for the same
period in 1997. The net inflow of cash from operating activities during the nine
months ended  September  30, 1998 is  generated  from net income of $3.0 million
after adjusting for depreciation and amortization  expenses and the net decrease
in non-cash net operating working capital items.

     Cash  provided by  financing  activities  of $2.5  million  during the nine
months ended  September  30, 1998 relates to proceeds  from common shares issued
for $1.1 million  pursuant to the exercise of stock  options and share  purchase
warrants,  net of the repayment of certain  long-term  debt for $143,000 and the
proceeds from capital lease financing of equipment for $1.5 million. The capital
leases are to be repaid evenly over periods expiring substantially between June,
2001 and  December,  2001 and are  secured  by  certain  capital  assets  of the
Company.

     Cash used in  investing  activities  was $2.2  million  for the nine months
ended  September  30, 1998 as  compared  to $3.6  million for the same period in
1997.  Total investing  activity during the nine months ended September 30, 1998
consisted  of  purchases  of capital  assets,  including  computer  hardware and
software  for use in  research  and  development  activities  and to support the
growth of the Company's corporate  information  systems.  Cash used in investing
activities  during the nine  months  ended  September  30,  1997  included  cash
payments of $1.9 million on behalf of the Alliance acquisition.

     Existing sources of liquidity at September 30, 1998 include $4.7 million of
cash and cash  equivalents and up to $7.0 million  available under the Company's
operating line of credit. At September 30, 1998, 200,000 Sterling pounds of such
amount was committed to securing the  Company's  obligations  under  outstanding
letters of credit.  Under the terms of the agreement,  borrowings and letters of
credit under the line are limited to 60% to 90% of eligible accounts receivable.
Borrowings  accrue interest at the bank's prime rate plus 0.5%. At September 30,
1998, the Company had no borrowings under the line of credit.

     The Company  believes that future cash flows,  in addition to funds on hand
and its borrowing  capacity  under the line of credit,  will provide  sufficient
funds  to  meet  cash   requirements  for  at  least  the  next  twelve  months.
Commensurate with its past and expected future growth, the Company may increase,
from time to time, its borrowing  facility under its operating line of credit to
support its operations.  The Company may use cash to fund other  acquisitions of
businesses  or products  complementary  to the Company's  business  although the
Company  has  no  plans  to do  so.  The  Company  has  no  material  additional
commitments  other than  operating  and capital  leases.  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.
Year 2000

     The Company is currently in the process of addressing  the Year 2000 issue.
This includes a  comprehensive  project to upgrade its  information  systems and
development  software  that will  consistently  and properly  recognize the Year
2000.  Certain of the  Company's  systems  include  new  hardware  and  packaged
software  purchased from vendors who have  represented that the systems are Year
2000  compliant.  The Company is in the  process of  obtaining  assurances  from
vendors  that  timely  updates  will be made  available  to make  all  remaining
purchased software Year 2000 compliant.

     The Company  believes that it has  identified all  significant  information
systems and software development  applications that will require modification to
ensure Year 2000 compliance.  Internal and external  resources are being used to
make the  required  modifications  and test Year 2000  compliance.  The  Company
intends to  complete  the testing  process of all  significant  applications  by
December 31, 1998.

     The Company is also in the process of initiating formal communications with
all of its significant  suppliers and customers to determine the extent to which
the  Company  may be at risk as a result  of the  failure  of third  parties  to
remediate their own Year 2000 issues. The Company can give no guarantee that the
systems of other companies on which the Company's systems rely will be converted
on time or that a failure to convert by another  company or a conversion that is
incompatible  with the  Company's  systems,  would not have a  material  adverse
effect on the Company.

     The total cost to the Company of these Year 2000 compliance  activities has
not  been and is not  anticipated  to be  material  to its  financial  position,
results of operations or cash flows in any given year. The estimate of costs and
the date on which the Company plans to complete the Year 2000  modification  and
testing processes are based on management's  best estimates,  which were derived
utilizing  numerous   assumptions  of  future  events  including  the  continued
availability  of certain  resources,  third party  modification  plans and other
factors.  However,  there  can be no  guarantee  that  these  estimates  will be
achieved and actual results could differ from those plans.
Part II -  OTHER INFORMATION

     ITEM 1.   LEGAL PROCEEDINGS

               As of the date hereof,  there is no material  litigation  pending
          against  the  Company.  From time to time,  the  Company is a party to
          litigation  and claims  incident to the  ordinary  course of 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 and results of operations.

     ITEM 2.   CHANGES IN SECURITIES USE OF PROCEEDS

               None.

     ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

               None.

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

               None.

     ITEM 5.   OTHER INFORMATION

               None.

     ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

               a) Exhibits

                  Exhibit 3.1   Articles of Amalgamation

               b) Reports on Form 8-K

                  None.
Signatures

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

                                            MDSI MOBILE DATA SOLUTIONS INC.

Date:    November 12, 1998          By:     /s/ ERIK DYSTHE                    
                                            ------------------------------------
                                    Name:   Erik Dysthe
                                    Title:  Chairman and Chief Executive Officer

Date:    November 12, 1998          By:      /s/ VERNE D. PECHO                 
                                            ------------------------------------
                                    Name:   Verne D. Pecho
                                    Title:  Vice President Finance & 
                                            Administration and Chief Financial
                                            Officer (Principal Financial and
                                            Accounting Officer)
Index to Exhibits

               Exhibit No.                        Description

               3.1                            Articles of Amalgamation