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

                                    FORM 10-Q


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

     For the quarterly period ended June 30, 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 June 30, 1998 was 6,502,189.



<PAGE>
                                      - 2 -

                         MDSI MOBILE DATA SOLUTIONS INC.

                             INDEX TO THE FORM 10-Q
                  For the quarterly period ended June 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...............................................19

     ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................19


     SIGNATURES  ............................................................20

     EXHIBIT INDEX ..........................................................21


<PAGE>

                                       -3-

Part I - FINANCIAL INFORMATION

     ITEM 1. FINANCIAL STATEMENTS

                         MDSI MOBILE DATA SOLUTIONS INC.

                           Consolidated Balance Sheets
                         (Expressed in Canadian dollars)

                                                        As at
                                        ----------------------------------------
                                              June 30,            December 31,
                                                1998                  1997
                                        -----------------     -----------------
ASSETS                                       (Unaudited)
CURRENT ASSETS
    Cash and cash equivalents.........        $3,253,251             $ 110,117
    Accounts receivable, net
       Trade..........................        14,361,826            15,256,202
       Unbilled.......................         9,174,010             9,604,060
    Work in progress..................         2,512,525             1,451,662
    Prepaid expenses..................         1,327,930             1,647,748
    Deferred income taxes.............         1,988,923             2,096,544
                                        -----------------     -----------------
                                              32,618,465            30,166,333

CAPITAL ASSETS, NET...................         4,568,216             4,291,755
INTANGIBLE ASSETS, NET................         5,753,698             6,185,926
                                        -----------------     -----------------
TOTAL ASSETS..........................        $42,940,379          $40,644,014
                                        =================    ===================

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
    Accounts payable..................        $5,813,344            $3,936,501
    Accrued liabilities ..............         4,806,932             8,353,417
    Deferred revenue..................         4,856,164             3,985,261
    Current portion of long-term debt.           387,324               215,454
    Current obligations under capital            
    leases.                                      448,639                20,621
                                        -----------------     -----------------
                                              16,312,403            16,511,254

LONG-TERM DEBT .......................                 -               296,324
OBLIGATIONS UNDER CAPITAL LEASES......           939,138                     -
                                        -----------------     -----------------
TOTAL LIABILITIES.....................        17,251,541            16,807,578
                                        -----------------     -----------------
STOCKHOLDERS' EQUITY
    Common stock......................        43,793,804            43,154,039
    Treasury stock....................          (122,743)             (122,743)
    Retained earnings (deficit).......       (17,982,223)          (19,194,860)
                                        -----------------     -----------------
                                              25,688,838            23,836,436
                                        -----------------     -----------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY..................       $42,940,379           $40,644,014
                                        ================    ==================


                 See notes to consolidated financial statements


<PAGE>

                                       -4-


                         MDSI MOBILE DATA SOLUTIONS INC.

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

<TABLE>
<CAPTION>

                                                                    Three months ended                      Six months ended
                                                                         June 30,                               June 30,

                                                         ------------------------------------   ------------------------------------
                                                               1998                1997               1998               1997
                                                         ------------------   ---------------   ------------------  ----------------
REVENUE
<S>                                                         <C>                 <C>                 <C>                 <C>        
    Software and services..........................         $11,023,474         $11,157,235         $19,940,451       $18,274,749
    Terminals and infrastructure...................           1,976,979           4,653,917           4,425,368         6,519,318
    Third party products and services..............           3,058,007           1,993,667           4,096,302        10,205,900
    Maintenance and support........................           1,884,578             659,408           3,561,281         1,496,625
                                                        -----------------   ----------------  ------------------  ----------------
                                                             17,943,038          18,464,227          32,023,402        36,496,592

DIRECT COSTS.......................................           9,197,337           9,446,115          16,257,302        20,897,756
                                                        -----------------   ----------------  ------------------  ----------------
GROSS PROFIT.......................................           8,745,701           9,018,112          15,766,100        15,598,836
                                                        -----------------   ----------------  ------------------  ----------------
OPERATING EXPENSES
    Research and development.......................           2,048,764           1,842,652           3,975,843         3,242,378
    Sales and marketing ...........................           3,267,134           2,896,190           6,406,130         5,021,402
    General and administrative.....................           1,572,668           1,645,524           3,081,104         2,804,393
    Amortization of intangible assets..............             216,114             216,197             432,228           360,961
    Acquired research and development...............                   -         10,002,982                   -        10,002,982
                                                        -----------------   ----------------  ------------------  ----------------
                                                              7,104,680          16,603,545          13,895,305        21,432,116
                                                        -----------------   ----------------  ------------------  ----------------
OPERATING INCOME (LOSS)............................           1,641,021          (7,585,433)          1,870,795        (5,833,280)

OTHER INCOME ......................................              81,213              18,977              53,727           133,552
                                                        -----------------   ----------------  ------------------  ----------------
INCOME (LOSS) BEFORE TAX PROVISION.................           1,722,234          (7,566,456)          1,924,522        (5,699,728)

PROVISION FOR INCOME TAXES.........................            (585,859)           (825,221)           (711,885)       (1,428,669)
                                                         -----------------   ----------------  ------------------  ----------------
NET INCOME (LOSS) FOR THE PERIOD ..................           1,136,375          (8,391,677)          1,212,637        (7,128,397)

RETAINED EARNINGS (DEFICIT), BEGINNING OF
PERIOD.............................................         (19,118,598)         (6,384,544)        (19,194,860)       (7,647,824)
                                                        -----------------   ----------------  ------------------  ----------------

RETAINED EARNINGS (DEFICIT), END OF PERIOD.........        $(17,982,223)       $(14,776,221)       $(17,982,223)     $(14,776,221)
                                                        =================   ================  ==================  ================
Earnings (loss) per common share
     Basic ........................................               $0.18              $(1.34)              $0.19            $(1.17)
     Diluted ......................................               $0.17              $(1.34)              $0.18            $(1.17)

Weighted average shares outstanding
     Basic.........................................           6,479,089           6,271,831           6,472,712         6,104,535
     Diluted.......................................           6,635,811           6,271,831           6,628,682         6,104,535


</TABLE>

                 See notes to consolidated financial statements

<PAGE>

                        MDSI MOBILE DATA SOLUTIONS INC.

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

                                                     Six months ended
                                                         June 30,
                                           -------------------------------------
                                                  1998                1997
                                          ------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income (loss) for the period......      $1,212,637           $(7,128,397)
  Items not affecting cash:
    Depreciation and amortization.......       1,394,039               884,054
    Deferred income taxes...............         107,621               665,530
    Acquired research development.......               -            10,002,982
    Changes in non-cash operating
       working capital items............        (215,358)           (9,691,389)
                                          ------------------ ------------------
  Net cash provided by (used in)
     operating activities...............       2,498,939            (5,267,220)
                                          ------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES
  Issuance of common shares.............         639,765               901,707
  Repayment of long-term debt...........        (124,454)             (573,545)
  Repayment of loan notes...............               -              (428,424)
  Net proceeds from  (repayment of) 
  capital  leases.......................       1,367,156               (21,963)
                                          ------------------ ------------------
  Net cash provided by (used in) 
  financing activities..................       1,882,467              (122,225)
                                          ------------------ ------------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Acquisition of Alliance...............               -            (1,892,426)
  Acquisition of capital assets.........      (1,238,272)             (945,187)
                                          ------------------ ------------------
  Net cash used in investing activities.      (1,238,272)           (2,837,613)
                                          ------------------ ------------------

NET CASH INFLOW (OUTFLOW)...............       3,143,134            (8,227,058)

CASH AND CASH EQUIVALENTS, 
BEGINNING OF PERIOD.....................         110,117            20,207,019
                                          ------------------ ------------------

CASH AND CASH EQUIVALENTS, END OF PERIOD.     $3,253,251           $11,979,961
                                          ================== ==================


SUPPLEMENTAL DISCLOSURE OF NON CASH INVESTING AND FINANCING ACTIVITIES

During the six months  ended June 30, 1998,  the Company  issued  21,698  common
shares on the exercise of 108,490 share  purchase  warrants and cash proceeds of
$307,100.

During the six months ended June 30, 1997,  the Company  issued  252,000  common
shares and 252,000  common  share  purchase  warrants on the exercise of 252,000
special warrants without additional  consideration.  Also, during the six months
ended June 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 six months ended June 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.



<PAGE>


2.   SEGMENTED INFORMATION

     Segmented information

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

     Geographic information

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

<TABLE>

                                                        Three months ended                    Six months ended
                                                              June 30,                             June 30,
                                                  -----------------------------------  -----------------------------------
                                                         1998               1997               1998              1997
                                                  ----------------   ----------------  -----------------  ----------------
<S>                                               <C>                  <C>             <C>                <C>           
Canada ........................................   $       307,200     $     795,902    $       459,345    $   1,201,236
United States..................................        12,873,666         7,977,608         22,141,915       21,757,112
Europe.........................................         4,245,566         9,384,763          8,160,800       12,933,171
Asia...........................................           261,681           305,954          1,006,417          605,073
South America..................................           254,925            --                254,925             --      
                                                  ----------------   ----------------  -----------------  ----------------

                                                  $    17,943,038      $  18,464,227    $   32,023,402     $  36,496,592  
                                                  ================   ================  =================  ================

</TABLE>


3.   SUBSEQUENT EVENTS

          Subsequent to June 30, 1998,  the Company  issued 34,302 common shares
     on the exercise of 171,510  share  purchase  warrants and cash  proceeds of
     $511,100.



<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  of  the  Company  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
six months  ended June 30,  1997  include  only the  results  of  operations  of
Alliance from April 17, 1997.

     The Company has a limited  history of operations  on a combined  basis with
Alliance. As a result, the financial information presented in this report is not
indicative  of the results  that would have been  obtained  had the  acquisition
occurred  prior to the  commencement  of the periods  covered  herein,  and such
information should not be relied upon as an indication of future performance.


<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:

<TABLE>

                                                          Three months ended                    Six months ended
                                                               June 30,                             June 30,

                                                  -----------------------------------  -----------------------------------
                                                       1998               1997               1998              1997
                                                  ----------------   ----------------  -----------------  ----------------
                                                    (Unaudited)        (Unaudited)       (Unaudited)        (Unaudited)
REVENUE

<S>                                                    <C>                 <C>              <C>               <C>  
     Software and services.....................        61.5%               60.4%            62.3%             50.1%
     Termina1s and infrastructure..............        11.0                25.2             13.8              17.9
     Third party products and services.........        17.0                10.8             12.8              28.0
     Maintenance and support...................        10.5                 3.6             11.1               4.0
                                                  ----------------   ----------------  -----------------  ----------------
                                                      100.0               100.0            100.0             100.0

DIRECT COSTS...................................        51.3                51.2             50.8              57.3
                                                  ----------------   ----------------  -----------------  ----------------
GROSS PROFIT...................................        48.7                48.8             49.2              42.7
                                                  ----------------   ----------------  -----------------  ----------------
OPERATING EXPENSES

     Research and development..................        11.4                10.0             12.4               8.9
     Sales and marketing.......................        18.2                15.7             20.0              13.8
     General and administrative................         8.8                 8.9              9.6               7.7
     Amortization of intangible assets.........         1.2                 1.2              1.3               1.0
     Acquired research and development.........         --                 54.1              --               27.4
                                                  ----------------   ----------------  -----------------  ----------------
                                                       39.6                89.9             43.3              58.8
                                                  ----------------   ----------------  -----------------  ----------------
OPERATING INCOME (LOSS)........................         9.1               (41.1)             5.9             (16.1)

OTHER INCOME ..................................         0.5                 0.1              0.1               0.4
                                                 ----------------   ----------------  -----------------  ----------------
INCOME (LOSS) BEFORE TAX PROVISION.............         9.6               (41.0)             6.0             (15.7)

PROVISION FOR INCOME TAXES.......................      (3.3)               (4.5)            (2.2)             (3.9)
                                                  ----------------   ----------------  -----------------  ----------------
NET INCOME (LOSS) FOR THE PERIOD...............         6.3%               (45.4)%           3.8%            (19.6)%
                                                  ================   ================  =================  ================

==========================================================================================================================
</TABLE>

<PAGE>

Three  Months  Ended June 30, 1998  Compared to the Three  Months Ended June 30,
1997

     Revenue - Revenue  decreased by $521,000  (2.8%) for the three months ended
June 30, 1998 as compared to the three months ended June 30, 1997.

     Software and services  revenue  decreased by $134,000  (1.2%) for the three
months ended June 30, 1998 as compared to the three months ended June 30, 1997.

     Terminals and infrastructure  revenue decreased by $2.7 million (57.5%) for
the three  months ended June 30, 1998 as compared to the three months ended June
30,  1997.  This  decrease is due  primarily to changes in estimates to complete
certain  pre-existing  contracts  in the MDSI UK  operations  and the  resulting
delays in delivery of terminals. Terminals and infrastructure revenue is derived
from the MDSI UK operations.

     Third party products and services revenue increased by $1.1 million (53.4%)
for the three  months  ended June 30, 1998 as compared to the three months ended
June 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 $1.9 million for the three months ended
June 30, 1998 as compared to $659,000  for the three months ended June 30, 1997.
Maintenance  and  support  revenue  is  expected  to  increase  as such  revenue
generally corresponds to the level of the Company's installed customer base.

     Direct  Costs - Direct  costs were 51.3% of  revenue  for the three  months
ended June 30,  1998 as compared  to 51.2% for the three  months  ended June 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 included  direct  payroll,  benefits and
overhead charges.

     Gross  Margins.  Gross  margins  were 48.7% of revenue for the three months
ended June 30,  1998 as compared  to 48.8% for the three  months  ended June 30,
1997. The  comparative  gross margins  reflect the similar mix in revenue during
the second quarter of 1998 and compared to the same quarter in 1997.

     Research and Development.  Research and development  expenses were 11.4% of
revenue  for the three  months  ended June 30, 1998 and 10.0% of revenue for the
three months ended June 30, 1997.  Total research and  development  expenditures
for the three months ended June 30, 1998 of $2.0 million  represents an increase
of $206,000  (11.2%) 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 18.2% of revenue for
the three  months  ended June 30, 1998 and 15.7% of revenue for the three months
ended June 30, 1997. This represents an increase of $371,000 (12.8%) 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 8.8%
of revenue for the three  months ended June 30, 1998 and 8.9% of revenue for the
three months ended June 30, 1997. Total general and  administrative  expenses of

<PAGE>

$1.6 million  represents a decrease of $73,000 (4.4%) for the three months ended
June 30, 1998 as compared to the same period in 1997.  The Company  expects that
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 $81,000 for the three months ended June 30,
1998  as  compared  to  $19,000  for the  three  months  ended  June  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 June 30, 1998 at the rate of 30.2%,  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>

Six months ended June 30, 1998 Compared to the Six months ended June 30, 1997

     Revenue - Revenue  decreased  by $4.5  million  (12.3%)  for the six months
ended June 30,  1998 as  compared to the six months  ended June 30,  1997.  This
decrease in revenue is due primarily to a reduction in deliveries of third party
products and services and  terminals  and  infrastructure  during the six months
ended June 30, 1998 relative to the same period in 1997.

     Software and services revenue  increased by $1.7 million (9.1%) for the six
months ended June 30, 1998 as compared to the six months ended June 30, 1997.

     Terminals and infrastructure  revenue decreased by $2.1 million (32.1%) for
the six months  ended June 30, 1998 as compared to the six months ended June 30,
1997. This decrease is due primarily to changes in estimates to complete certain
pre-existing  contracts in the MDSI UK operations  and the  resulting  delays in
delivery of terminals.  Terminals and infrastructure revenue is derived from the
MDSI UK operations.

     Third party products and services revenue decreased by $6.1 million (59.9%)
for the six months ended June 30, 1998 compared to the six months ended June 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 $3.6 million for the six months ended
June 30,  1998 as compared  to $1.5  million  for the six months  ended June 30,
1997.  Maintenance  and support  revenue is expected to increase as such revenue
generally corresponds to the level of the Company's installed customer base.

     Direct  Costs - Direct costs were 50.8% of revenue for the six months ended
June 30, 1998 as compared to 57.3% for the six months ended June 30,  1997.  The
decrease in direct costs as a  percentage  of revenue  relates  primarily to the
decrease in revenue  relating to deliveries of third party products and services
and  terminals  and  infrastructure  which  typically  have a higher direct cost
component that software and services. 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
included direct payroll, benefits and overhead charges.

     Gross Margins. Gross margins were 49.2% of revenue for the six months ended
June 30, 1998 as compared to 42.7% for the six months ended June 30,  1997.  The
increase in gross margin as a percentage of revenue relates to the change in the
mix of revenues  during the six months ended June 30, 1998  relative to the same
period in 1997. During the six months ended June 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   and   terminals   and
infrastructure,  which typically has a lower gross margin,  relative to the same
period in 1997.

     Research and Development.  Research and development  expenses were 12.4% of
revenue  for the six months  ended June 30, 1998 and 8.9% of revenue for the six
months ended June 30, 1997. Total research and development  expenditures for the
six  months  ended June 30,  1998 of $4.0  million  represents  an  increase  of
$733,000  (22.6%)  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 20.0% of revenue for
the six months ended June 30, 1998 and 13.8% of revenue for the six months ended
June 30, 1997.  This  represents an increase of $1.4 million (27.6%) as compared

<PAGE>

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 9.6%
of revenue  for the six months  ended June 30,  1998 and 7.7% of revenue for the
six months ended June 30, 1997.  Total  general and  administrative  expenses of
$3.1 million  represents an increase of $277,000 (9.9%) for the six months ended
June 30, 1998, as compared to the same period in 1997. The Company  expects that
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 six months ended June 30,
1998  as  compared  to  $134,000  for  the  six  months  ended  June  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 six
months  ended  June  30,  1998 at the rate of  30.2%,  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 June 30, 1998, the Company had cash
and cash equivalents of $3.3 million and working capital of $16.3 million.

     Cash provided by operating  activities  was $2.5 million for the six months
ended June 30, 1998 compared to an outflow of $(5.3) million for the same period
in 1997. The net inflow of cash from operating  activities during the six months
ended June 30, 1998 is generated from net income of $1.2 million after adjusting
for depreciation and amortization expenses.

     Cash provided by financing activities of $1.9 million during the six months
ended June 30, 1998 relates to proceeds  from common  shares issued for $640,000
pursuant to the exercise of stock options and share  purchase  warrants,  net of
the  repayment of certain  long-term  debt for  $124,000  and the proceeds  from
capital lease financing of equipment for $1.4 million. The capital leases are to
be repaid evenly over periods  expiring  between June, 2001 and September,  2001
and are secured by certain capital assets of the Company.

     Cash used in investing activities was $1.2 million for the six months ended
June 30,  1998 as compared  to $2.8  million for the same period in 1997.  Total
investing  activity  during the six  months  ended June 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 six
months ended June 30, 1997  included  cash payments of $1.9 million on behalf of
the Alliance acquisition.

     Existing sources of liquidity at June 30, 1998 include $3.3 million of cash
and cash  equivalents  and up to $5.0  million  available  under  the  Company's
operating line of credit.  At June 30, 1998,  (sterling  pounds)200,000  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 June 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 AND USE OF PROCEEDS

          None.


     ITEM 3. DEFAULTS UPON SENIOR SECURITIES

          None.

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

          The Company's 1998 Annual General Meeting of Shareholders  was held on
     May 7, 1998. A total of 3,021,964 shares of the Company's common stock were
     represented  in person or by proxy at the Meeting,  consisting of 46.66% of
     the total number of shares of the  Company's  common stock  outstanding  on
     March 27, 1998, the record date for the Meeting.

          At the Meeting,  all of the current  Directors  of the  Company,  were
     re-elected to serve as Directors  until the 1999 Annual General  Meeting or
     until their  earlier  retirement,  resignation,  or removal.  The following
     table sets forth the voting in the election for Directors:

<TABLE>

                                        Votes Cast For          Votes Cast     Votes
       Nominee                            Nominee               Against       Withheld       Abstentions      Not Voted
       -------                            -------               -------       --------       -----------      ---------

        <S>                              <C>                      <C>            <C>          <C>             <C>    
        Erik Dysthe                      2,828,902                 0              100          3,700           189,262
        Kenneth R. Miller                2,828,614                 0              388          3,700           189,262
        John T. McLennan                 2,829,002                 0                0          3,700           189,262
        Terrence P. McGarty              2,825,002                 0            4,000          3,700           189,262
        Robert C. Harris, Jr.            2,827,502                 0            1,500          3,700           189,262
        Gerald F. Chew                   2,824,002                 0            5,000          3,700           189,262
        Bruno Ducharme                   2,825,002                 0            4,000          3,700           189,262
        Marc Rochefort                   2,825,002                 0            4,000          3,700           189,262

</TABLE>

          The  shareholders  approved the proposed  1998 Stock Option Plan.  The
     following  table sets  forth the  information  regarding  the voting on the
     proposal:

            Votes Cast     Votes Cast       Votes
                For         Against       Withheld    Abstentions    Not Voted
                ---         -------       --------    -----------    ---------

             1,708,450      317,750           0          4,150        991,614



<PAGE>


          The  shareholders  approved the proposed 1998 Stock Purchase Plan. The
     following  table sets  forth the  information  regarding  the voting on the
     proposal:

            Votes Cast     Votes Cast       Votes
                For         Against       Withheld    Abstentions    Not Voted
                ---         -------       --------    -----------    ---------

             2,009,374       18,376           0          2,600        991,614

          The  shareholders  approved  the  Company's   consolidated   financial
     statements  and notes thereto  together  with the Auditors'  Report for the
     year  ended  December  31,  1997.  The  following   table  sets  forth  the
     information regarding the voting on the proposal:

            Votes Cast     Votes Cast       Votes
                For         Against       Withheld    Abstentions    Not Voted
                ---         -------       --------    -----------    ---------

            2,829,452        1,500             0         1,750        189,262

          The shareholders  ratified the appointment of Deloitte & Touche as the
     Company's  Auditors  for the  fiscal  year  ending  December  31,  1998 and
     authorization  for the  directors to fix the  remuneration.  The  following
     table sets forth the information regarding the voting on the proposal:

            Votes Cast     Votes Cast       Votes
                For         Against       Withheld    Abstentions    Not Voted
                ---         -------       --------    -----------    ---------

            2,736,382        39,898           0          56,422       189,262


     ITEM 5. OTHER INFORMATION

          None.

     ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

          a)   Exhibits

               Exhibit 11.1 Computation of Earnings (Loss) per Common Share.

          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: August 13, 1998           By:/s/ ERIK DYSTHE
                                   --------------------------------------------
                                   Name:   Erik Dysthe
                                   Title:  Chairman and Chief Executive Officer


Date: August 13, 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>


                         MDSI MOBILE DATA SOLUTIONS INC.

                                  EXHIBIT INDEX

                  For the quarterly period ended June 30, 1998



Exhibit 11.1

Computation of Earnings (Loss) per Common Share..............................22


<PAGE>

<TABLE>

                                                                                                             EXHIBIT 11.1
                         MDSI MOBILE DATA SOLUTIONS INC.

                 COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE
                         (Expressed in Canadian dollars)
                                   (Unaudited)

                                                          Three months ended                    Six months ended
                                                               June 30,                             June 30,

                                                  -----------------------------------  -----------------------------------
                                                         1998               1997               1998              1997
                                                  ----------------   ----------------  -----------------  ----------------


<S>                                               <C>                  <C>             <C>                <C>           
Net earnings (loss) for the period ............   $     1,136,375      $ (8,391,677)   $     1,212,637    $  (7,128,397)
                                                 ================   ================  =================  ================     

Weighted average shares outstanding ...........         6,479,089          6,271,831         6,472,712        6,104,535

Common stock equivalents
     Stock options............................            148,282            --                145,662             --
     Share purchase warrants .................              8,440            --                 10,308             --
                                                  ----------------   ----------------  -----------------  ----------------

Total shares for diluted earnings (loss) per                                                          
common share...................................         6,635,811         6,271,831         6,628,682         6,104,535
                                                  ================   ================  =================  ================ 

Basic earnings (loss) per common share.........   $          0.18      $      (1.34)   $         0.19     $       (1.17)
                                                  
Diluted earnings (loss) per common share ......   $          0.17      $      (1.34)   $         0.18     $       (1.17)
                                                  
==========================================================================================================================
</TABLE>
[{"type": "10-Q", "sequence": "1", "description": "FORM 10-Q", "secsgml_size_bytes": 62130}]
{"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": "98686277"}, "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 June 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 June 30, 1998 was 6,502,189.
- 2 -

                         MDSI MOBILE DATA SOLUTIONS INC.

                             INDEX TO THE FORM 10-Q
                  For the quarterly period ended June 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...............................................19

     ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................19

     SIGNATURES  ............................................................20

     EXHIBIT INDEX ..........................................................21
-3-

Part I - FINANCIAL INFORMATION

     ITEM 1. FINANCIAL STATEMENTS

                         MDSI MOBILE DATA SOLUTIONS INC.

                           Consolidated Balance Sheets
                         (Expressed in Canadian dollars)

                                                        As at
                                        ----------------------------------------
                                              June 30,            December 31,
                                                1998                  1997
                                        -----------------     -----------------
ASSETS                                       (Unaudited)
CURRENT ASSETS
    Cash and cash equivalents.........        $3,253,251             $ 110,117
    Accounts receivable, net
       Trade..........................        14,361,826            15,256,202
       Unbilled.......................         9,174,010             9,604,060
    Work in progress..................         2,512,525             1,451,662
    Prepaid expenses..................         1,327,930             1,647,748
    Deferred income taxes.............         1,988,923             2,096,544
                                        -----------------     -----------------
                                              32,618,465            30,166,333

CAPITAL ASSETS, NET...................         4,568,216             4,291,755
INTANGIBLE ASSETS, NET................         5,753,698             6,185,926
                                        -----------------     -----------------
TOTAL ASSETS..........................        $42,940,379          $40,644,014
                                        =================    ===================

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
    Accounts payable..................        $5,813,344            $3,936,501
    Accrued liabilities ..............         4,806,932             8,353,417
    Deferred revenue..................         4,856,164             3,985,261
    Current portion of long-term debt.           387,324               215,454
    Current obligations under capital            
    leases.                                      448,639                20,621
                                        -----------------     -----------------
                                              16,312,403            16,511,254

LONG-TERM DEBT .......................                 -               296,324
OBLIGATIONS UNDER CAPITAL LEASES......           939,138                     -
                                        -----------------     -----------------
TOTAL LIABILITIES.....................        17,251,541            16,807,578
                                        -----------------     -----------------
STOCKHOLDERS' EQUITY
    Common stock......................        43,793,804            43,154,039
    Treasury stock....................          (122,743)             (122,743)
    Retained earnings (deficit).......       (17,982,223)          (19,194,860)
                                        -----------------     -----------------
                                              25,688,838            23,836,436
                                        -----------------     -----------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY..................       $42,940,379           $40,644,014
                                        ================    ==================

                 See notes to consolidated financial statements
-4-

                         MDSI MOBILE DATA SOLUTIONS INC.

      Consolidated Statements of Operations and Retained Earnings (Deficit)
                         (Expressed in Canadian dollars)
                                   (Unaudited)
Three months ended                      Six months ended
                                                                         June 30,                               June 30,

                                                         ------------------------------------   ------------------------------------
                                                               1998                1997               1998               1997
                                                         ------------------   ---------------   ------------------  ----------------
REVENUE
Software and services..........................         $11,023,474         $11,157,235         $19,940,451       $18,274,749
    Terminals and infrastructure...................           1,976,979           4,653,917           4,425,368         6,519,318
    Third party products and services..............           3,058,007           1,993,667           4,096,302        10,205,900
    Maintenance and support........................           1,884,578             659,408           3,561,281         1,496,625
                                                        -----------------   ----------------  ------------------  ----------------
                                                             17,943,038          18,464,227          32,023,402        36,496,592

DIRECT COSTS.......................................           9,197,337           9,446,115          16,257,302        20,897,756
                                                        -----------------   ----------------  ------------------  ----------------
GROSS PROFIT.......................................           8,745,701           9,018,112          15,766,100        15,598,836
                                                        -----------------   ----------------  ------------------  ----------------
OPERATING EXPENSES
    Research and development.......................           2,048,764           1,842,652           3,975,843         3,242,378
    Sales and marketing ...........................           3,267,134           2,896,190           6,406,130         5,021,402
    General and administrative.....................           1,572,668           1,645,524           3,081,104         2,804,393
    Amortization of intangible assets..............             216,114             216,197             432,228           360,961
    Acquired research and development...............                   -         10,002,982                   -        10,002,982
                                                        -----------------   ----------------  ------------------  ----------------
                                                              7,104,680          16,603,545          13,895,305        21,432,116
                                                        -----------------   ----------------  ------------------  ----------------
OPERATING INCOME (LOSS)............................           1,641,021          (7,585,433)          1,870,795        (5,833,280)

OTHER INCOME ......................................              81,213              18,977              53,727           133,552
                                                        -----------------   ----------------  ------------------  ----------------
INCOME (LOSS) BEFORE TAX PROVISION.................           1,722,234          (7,566,456)          1,924,522        (5,699,728)

PROVISION FOR INCOME TAXES.........................            (585,859)           (825,221)           (711,885)       (1,428,669)
                                                         -----------------   ----------------  ------------------  ----------------
NET INCOME (LOSS) FOR THE PERIOD ..................           1,136,375          (8,391,677)          1,212,637        (7,128,397)

RETAINED EARNINGS (DEFICIT), BEGINNING OF
PERIOD.............................................         (19,118,598)         (6,384,544)        (19,194,860)       (7,647,824)
                                                        -----------------   ----------------  ------------------  ----------------

RETAINED EARNINGS (DEFICIT), END OF PERIOD.........        $(17,982,223)       $(14,776,221)       $(17,982,223)     $(14,776,221)
                                                        =================   ================  ==================  ================
Earnings (loss) per common share
     Basic ........................................               $0.18              $(1.34)              $0.19            $(1.17)
     Diluted ......................................               $0.17              $(1.34)              $0.18            $(1.17)

Weighted average shares outstanding
     Basic.........................................           6,479,089           6,271,831           6,472,712         6,104,535
     Diluted.......................................           6,635,811           6,271,831           6,628,682         6,104,535
See notes to consolidated financial statements
MDSI MOBILE DATA SOLUTIONS INC.

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

                                                     Six months ended
                                                         June 30,
                                           -------------------------------------
                                                  1998                1997
                                          ------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income (loss) for the period......      $1,212,637           $(7,128,397)
  Items not affecting cash:
    Depreciation and amortization.......       1,394,039               884,054
    Deferred income taxes...............         107,621               665,530
    Acquired research development.......               -            10,002,982
    Changes in non-cash operating
       working capital items............        (215,358)           (9,691,389)
                                          ------------------ ------------------
  Net cash provided by (used in)
     operating activities...............       2,498,939            (5,267,220)
                                          ------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES
  Issuance of common shares.............         639,765               901,707
  Repayment of long-term debt...........        (124,454)             (573,545)
  Repayment of loan notes...............               -              (428,424)
  Net proceeds from  (repayment of) 
  capital  leases.......................       1,367,156               (21,963)
                                          ------------------ ------------------
  Net cash provided by (used in) 
  financing activities..................       1,882,467              (122,225)
                                          ------------------ ------------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Acquisition of Alliance...............               -            (1,892,426)
  Acquisition of capital assets.........      (1,238,272)             (945,187)
                                          ------------------ ------------------
  Net cash used in investing activities.      (1,238,272)           (2,837,613)
                                          ------------------ ------------------

NET CASH INFLOW (OUTFLOW)...............       3,143,134            (8,227,058)

CASH AND CASH EQUIVALENTS, 
BEGINNING OF PERIOD.....................         110,117            20,207,019
                                          ------------------ ------------------

CASH AND CASH EQUIVALENTS, END OF PERIOD.     $3,253,251           $11,979,961
                                          ================== ==================

SUPPLEMENTAL DISCLOSURE OF NON CASH INVESTING AND FINANCING ACTIVITIES

During the six months  ended June 30, 1998,  the Company  issued  21,698  common
shares on the exercise of 108,490 share  purchase  warrants and cash proceeds of
$307,100.

During the six months ended June 30, 1997,  the Company  issued  252,000  common
shares and 252,000  common  share  purchase  warrants on the exercise of 252,000
special warrants without additional  consideration.  Also, during the six months
ended June 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 six months ended June 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, land
     transport (taxi,  courier and roadside  recovery) and general field service
     market  sectors.  The  Company  considers  its  business  to consist of one
     reportable operating segment.

     Geographic information

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

                                                        Three months ended                    Six months ended
                                                              June 30,                             June 30,
                                                  -----------------------------------  -----------------------------------
                                                         1998               1997               1998              1997
                                                  ----------------   ----------------  -----------------  ----------------
Canada ........................................   $       307,200     $     795,902    $       459,345    $   1,201,236
United States..................................        12,873,666         7,977,608         22,141,915       21,757,112
Europe.........................................         4,245,566         9,384,763          8,160,800       12,933,171
Asia...........................................           261,681           305,954          1,006,417          605,073
South America..................................           254,925            --                254,925             --      
                                                  ----------------   ----------------  -----------------  ----------------

                                                  $    17,943,038      $  18,464,227    $   32,023,402     $  36,496,592  
                                                  ================   ================  =================  ================
3.   SUBSEQUENT EVENTS

          Subsequent to June 30, 1998,  the Company  issued 34,302 common shares
     on the exercise of 171,510  share  purchase  warrants and cash  proceeds of
     $511,100.
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  of  the  Company  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
six months  ended June 30,  1997  include  only the  results  of  operations  of
Alliance from April 17, 1997.

     The Company has a limited  history of operations  on a combined  basis with
Alliance. As a result, the financial information presented in this report is not
indicative  of the results  that would have been  obtained  had the  acquisition
occurred  prior to the  commencement  of the periods  covered  herein,  and such
information should not be relied upon as an indication of future performance.
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                    Six months ended
                                                               June 30,                             June 30,

                                                  -----------------------------------  -----------------------------------
                                                       1998               1997               1998              1997
                                                  ----------------   ----------------  -----------------  ----------------
                                                    (Unaudited)        (Unaudited)       (Unaudited)        (Unaudited)
REVENUE
Software and services.....................        61.5%               60.4%            62.3%             50.1%
     Termina1s and infrastructure..............        11.0                25.2             13.8              17.9
     Third party products and services.........        17.0                10.8             12.8              28.0
     Maintenance and support...................        10.5                 3.6             11.1               4.0
                                                  ----------------   ----------------  -----------------  ----------------
                                                      100.0               100.0            100.0             100.0

DIRECT COSTS...................................        51.3                51.2             50.8              57.3
                                                  ----------------   ----------------  -----------------  ----------------
GROSS PROFIT...................................        48.7                48.8             49.2              42.7
                                                  ----------------   ----------------  -----------------  ----------------
OPERATING EXPENSES

     Research and development..................        11.4                10.0             12.4               8.9
     Sales and marketing.......................        18.2                15.7             20.0              13.8
     General and administrative................         8.8                 8.9              9.6               7.7
     Amortization of intangible assets.........         1.2                 1.2              1.3               1.0
     Acquired research and development.........         --                 54.1              --               27.4
                                                  ----------------   ----------------  -----------------  ----------------
                                                       39.6                89.9             43.3              58.8
                                                  ----------------   ----------------  -----------------  ----------------
OPERATING INCOME (LOSS)........................         9.1               (41.1)             5.9             (16.1)

OTHER INCOME ..................................         0.5                 0.1              0.1               0.4
                                                 ----------------   ----------------  -----------------  ----------------
INCOME (LOSS) BEFORE TAX PROVISION.............         9.6               (41.0)             6.0             (15.7)

PROVISION FOR INCOME TAXES.......................      (3.3)               (4.5)            (2.2)             (3.9)
                                                  ----------------   ----------------  -----------------  ----------------
NET INCOME (LOSS) FOR THE PERIOD...............         6.3%               (45.4)%           3.8%            (19.6)%
                                                  ================   ================  =================  ================

==========================================================================================================================
Three  Months  Ended June 30, 1998  Compared to the Three  Months Ended June 30,
1997

     Revenue - Revenue  decreased by $521,000  (2.8%) for the three months ended
June 30, 1998 as compared to the three months ended June 30, 1997.

     Software and services  revenue  decreased by $134,000  (1.2%) for the three
months ended June 30, 1998 as compared to the three months ended June 30, 1997.

     Terminals and infrastructure  revenue decreased by $2.7 million (57.5%) for
the three  months ended June 30, 1998 as compared to the three months ended June
30,  1997.  This  decrease is due  primarily to changes in estimates to complete
certain  pre-existing  contracts  in the MDSI UK  operations  and the  resulting
delays in delivery of terminals. Terminals and infrastructure revenue is derived
from the MDSI UK operations.

     Third party products and services revenue increased by $1.1 million (53.4%)
for the three  months  ended June 30, 1998 as compared to the three months ended
June 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 $1.9 million for the three months ended
June 30, 1998 as compared to $659,000  for the three months ended June 30, 1997.
Maintenance  and  support  revenue  is  expected  to  increase  as such  revenue
generally corresponds to the level of the Company's installed customer base.

     Direct  Costs - Direct  costs were 51.3% of  revenue  for the three  months
ended June 30,  1998 as compared  to 51.2% for the three  months  ended June 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 included  direct  payroll,  benefits and
overhead charges.

     Gross  Margins.  Gross  margins  were 48.7% of revenue for the three months
ended June 30,  1998 as compared  to 48.8% for the three  months  ended June 30,
1997. The  comparative  gross margins  reflect the similar mix in revenue during
the second quarter of 1998 and compared to the same quarter in 1997.

     Research and Development.  Research and development  expenses were 11.4% of
revenue  for the three  months  ended June 30, 1998 and 10.0% of revenue for the
three months ended June 30, 1997.  Total research and  development  expenditures
for the three months ended June 30, 1998 of $2.0 million  represents an increase
of $206,000  (11.2%) 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 18.2% of revenue for
the three  months  ended June 30, 1998 and 15.7% of revenue for the three months
ended June 30, 1997. This represents an increase of $371,000 (12.8%) 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 8.8%
of revenue for the three  months ended June 30, 1998 and 8.9% of revenue for the
three months ended June 30, 1997. Total general and  administrative  expenses of
$1.6 million  represents a decrease of $73,000 (4.4%) for the three months ended
June 30, 1998 as compared to the same period in 1997.  The Company  expects that
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 $81,000 for the three months ended June 30,
1998  as  compared  to  $19,000  for the  three  months  ended  June  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 June 30, 1998 at the rate of 30.2%,  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.
Six months ended June 30, 1998 Compared to the Six months ended June 30, 1997

     Revenue - Revenue  decreased  by $4.5  million  (12.3%)  for the six months
ended June 30,  1998 as  compared to the six months  ended June 30,  1997.  This
decrease in revenue is due primarily to a reduction in deliveries of third party
products and services and  terminals  and  infrastructure  during the six months
ended June 30, 1998 relative to the same period in 1997.

     Software and services revenue  increased by $1.7 million (9.1%) for the six
months ended June 30, 1998 as compared to the six months ended June 30, 1997.

     Terminals and infrastructure  revenue decreased by $2.1 million (32.1%) for
the six months  ended June 30, 1998 as compared to the six months ended June 30,
1997. This decrease is due primarily to changes in estimates to complete certain
pre-existing  contracts in the MDSI UK operations  and the  resulting  delays in
delivery of terminals.  Terminals and infrastructure revenue is derived from the
MDSI UK operations.

     Third party products and services revenue decreased by $6.1 million (59.9%)
for the six months ended June 30, 1998 compared to the six months ended June 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 $3.6 million for the six months ended
June 30,  1998 as compared  to $1.5  million  for the six months  ended June 30,
1997.  Maintenance  and support  revenue is expected to increase as such revenue
generally corresponds to the level of the Company's installed customer base.

     Direct  Costs - Direct costs were 50.8% of revenue for the six months ended
June 30, 1998 as compared to 57.3% for the six months ended June 30,  1997.  The
decrease in direct costs as a  percentage  of revenue  relates  primarily to the
decrease in revenue  relating to deliveries of third party products and services
and  terminals  and  infrastructure  which  typically  have a higher direct cost
component that software and services. 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
included direct payroll, benefits and overhead charges.

     Gross Margins. Gross margins were 49.2% of revenue for the six months ended
June 30, 1998 as compared to 42.7% for the six months ended June 30,  1997.  The
increase in gross margin as a percentage of revenue relates to the change in the
mix of revenues  during the six months ended June 30, 1998  relative to the same
period in 1997. During the six months ended June 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   and   terminals   and
infrastructure,  which typically has a lower gross margin,  relative to the same
period in 1997.

     Research and Development.  Research and development  expenses were 12.4% of
revenue  for the six months  ended June 30, 1998 and 8.9% of revenue for the six
months ended June 30, 1997. Total research and development  expenditures for the
six  months  ended June 30,  1998 of $4.0  million  represents  an  increase  of
$733,000  (22.6%)  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 20.0% of revenue for
the six months ended June 30, 1998 and 13.8% of revenue for the six months ended
June 30, 1997.  This  represents an increase of $1.4 million (27.6%) 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 9.6%
of revenue  for the six months  ended June 30,  1998 and 7.7% of revenue for the
six months ended June 30, 1997.  Total  general and  administrative  expenses of
$3.1 million  represents an increase of $277,000 (9.9%) for the six months ended
June 30, 1998, as compared to the same period in 1997. The Company  expects that
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 six months ended June 30,
1998  as  compared  to  $134,000  for  the  six  months  ended  June  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 six
months  ended  June  30,  1998 at the rate of  30.2%,  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 June 30, 1998, the Company had cash
and cash equivalents of $3.3 million and working capital of $16.3 million.

     Cash provided by operating  activities  was $2.5 million for the six months
ended June 30, 1998 compared to an outflow of $(5.3) million for the same period
in 1997. The net inflow of cash from operating  activities during the six months
ended June 30, 1998 is generated from net income of $1.2 million after adjusting
for depreciation and amortization expenses.

     Cash provided by financing activities of $1.9 million during the six months
ended June 30, 1998 relates to proceeds  from common  shares issued for $640,000
pursuant to the exercise of stock options and share  purchase  warrants,  net of
the  repayment of certain  long-term  debt for  $124,000  and the proceeds  from
capital lease financing of equipment for $1.4 million. The capital leases are to
be repaid evenly over periods  expiring  between June, 2001 and September,  2001
and are secured by certain capital assets of the Company.

     Cash used in investing activities was $1.2 million for the six months ended
June 30,  1998 as compared  to $2.8  million for the same period in 1997.  Total
investing  activity  during the six  months  ended June 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 six
months ended June 30, 1997  included  cash payments of $1.9 million on behalf of
the Alliance acquisition.

     Existing sources of liquidity at June 30, 1998 include $3.3 million of cash
and cash  equivalents  and up to $5.0  million  available  under  the  Company's
operating line of credit.  At June 30, 1998,  (sterling  pounds)200,000  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 June 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 AND USE OF PROCEEDS

          None.

     ITEM 3. DEFAULTS UPON SENIOR SECURITIES

          None.

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

          The Company's 1998 Annual General Meeting of Shareholders  was held on
     May 7, 1998. A total of 3,021,964 shares of the Company's common stock were
     represented  in person or by proxy at the Meeting,  consisting of 46.66% of
     the total number of shares of the  Company's  common stock  outstanding  on
     March 27, 1998, the record date for the Meeting.

          At the Meeting,  all of the current  Directors  of the  Company,  were
     re-elected to serve as Directors  until the 1999 Annual General  Meeting or
     until their  earlier  retirement,  resignation,  or removal.  The following
     table sets forth the voting in the election for Directors:

                                        Votes Cast For          Votes Cast     Votes
       Nominee                            Nominee               Against       Withheld       Abstentions      Not Voted
       -------                            -------               -------       --------       -----------      ---------
Erik Dysthe                      2,828,902                 0              100          3,700           189,262
        Kenneth R. Miller                2,828,614                 0              388          3,700           189,262
        John T. McLennan                 2,829,002                 0                0          3,700           189,262
        Terrence P. McGarty              2,825,002                 0            4,000          3,700           189,262
        Robert C. Harris, Jr.            2,827,502                 0            1,500          3,700           189,262
        Gerald F. Chew                   2,824,002                 0            5,000          3,700           189,262
        Bruno Ducharme                   2,825,002                 0            4,000          3,700           189,262
        Marc Rochefort                   2,825,002                 0            4,000          3,700           189,262
The  shareholders  approved the proposed  1998 Stock Option Plan.  The
     following  table sets  forth the  information  regarding  the voting on the
     proposal:

            Votes Cast     Votes Cast       Votes
                For         Against       Withheld    Abstentions    Not Voted
                ---         -------       --------    -----------    ---------

             1,708,450      317,750           0          4,150        991,614
The  shareholders  approved the proposed 1998 Stock Purchase Plan. The
     following  table sets  forth the  information  regarding  the voting on the
     proposal:

            Votes Cast     Votes Cast       Votes
                For         Against       Withheld    Abstentions    Not Voted
                ---         -------       --------    -----------    ---------

             2,009,374       18,376           0          2,600        991,614

          The  shareholders  approved  the  Company's   consolidated   financial
     statements  and notes thereto  together  with the Auditors'  Report for the
     year  ended  December  31,  1997.  The  following   table  sets  forth  the
     information regarding the voting on the proposal:

            Votes Cast     Votes Cast       Votes
                For         Against       Withheld    Abstentions    Not Voted
                ---         -------       --------    -----------    ---------

            2,829,452        1,500             0         1,750        189,262

          The shareholders  ratified the appointment of Deloitte & Touche as the
     Company's  Auditors  for the  fiscal  year  ending  December  31,  1998 and
     authorization  for the  directors to fix the  remuneration.  The  following
     table sets forth the information regarding the voting on the proposal:

            Votes Cast     Votes Cast       Votes
                For         Against       Withheld    Abstentions    Not Voted
                ---         -------       --------    -----------    ---------

            2,736,382        39,898           0          56,422       189,262

     ITEM 5. OTHER INFORMATION

          None.

     ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

          a)   Exhibits

               Exhibit 11.1 Computation of Earnings (Loss) per Common Share.

          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: August 13, 1998           By:/s/ ERIK DYSTHE
                                   --------------------------------------------
                                   Name:   Erik Dysthe
                                   Title:  Chairman and Chief Executive Officer

Date: August 13, 1998           By:/s/ VERNE D. PECHO
                                   --------------------------------------------
                                   Name:   Verne D. Pecho
                                   Title:  Vice President Finance & 
                                           Administration and Chief Financial 
                                           Officer (Principal Financial and
                                           Accounting Officer)
MDSI MOBILE DATA SOLUTIONS INC.

                                  EXHIBIT INDEX

                  For the quarterly period ended June 30, 1998

Exhibit 11.1

Computation of Earnings (Loss) per Common Share..............................22
EXHIBIT 11.1
                         MDSI MOBILE DATA SOLUTIONS INC.

                 COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE
                         (Expressed in Canadian dollars)
                                   (Unaudited)

                                                          Three months ended                    Six months ended
                                                               June 30,                             June 30,

                                                  -----------------------------------  -----------------------------------
                                                         1998               1997               1998              1997
                                                  ----------------   ----------------  -----------------  ----------------
Net earnings (loss) for the period ............   $     1,136,375      $ (8,391,677)   $     1,212,637    $  (7,128,397)
                                                 ================   ================  =================  ================     

Weighted average shares outstanding ...........         6,479,089          6,271,831         6,472,712        6,104,535

Common stock equivalents
     Stock options............................            148,282            --                145,662             --
     Share purchase warrants .................              8,440            --                 10,308             --
                                                  ----------------   ----------------  -----------------  ----------------

Total shares for diluted earnings (loss) per                                                          
common share...................................         6,635,811         6,271,831         6,628,682         6,104,535
                                                  ================   ================  =================  ================ 

Basic earnings (loss) per common share.........   $          0.18      $      (1.34)   $         0.19     $       (1.17)
                                                  
Diluted earnings (loss) per common share ......   $          0.17      $      (1.34)   $         0.18     $       (1.17)
                                                  
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