EXHIBIT 99.1


               PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 -
                   SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS

     The Private Securities Litigation Reform Act of 1995 provides a safe harbor
for  forward  looking  statements  made by public  companies.  This safe  harbor
protects  a  company  from   securities   law  liability  in   connection   with
forward-looking  statements if the company complies with the requirements of the
safe harbor.  As a public company,  MDSI has relied and will continue to rely on
the  protection  of the safe  harbor in  connection  with its  written  and oral
forward-looking statements.

     When evaluating MDSI's business, you should consider:

     o    all of the information in this quarterly report on Form 10-Q;

     o    the risk factors described in the Company's Annual report for the year
          ended  December  31,  2001  filed  with the  Securities  and  Exchange
          Commission; and

     o    the risk factors described below.


Risk Factors

The Company's business is subject to the following risks. These risks also could
cause actual results to differ materially from results projected in any
forward-looking statement in this report.


Potential Fluctuations in Quarterly Operating Results

     The  Company's  results of operations  have  fluctuated in the past and are
likely to continue to fluctuate  from period to period  depending on a number of
factors,  including the timing and receipt of significant  orders, the timing of
completion   of  contracts,   increased   competition,   regulatory   and  other
developments in the Company's  vertical  markets,  changes in the demand for the
Company's  products and services,  the cancellation of contracts,  the timing of
new product announcements and introductions,  changes in pricing policies by the
Company  and  its  competitors,  delays  in  the  introduction  of  products  or
enhancements  by the  Company,  expenses  associated  with  the  acquisition  of
products or  technology  from third  parties,  the mix of sales of the Company's
products  and  services  and  third  party  products,  seasonality  of  customer
purchases,  personnel changes,  political and economic  uncertainty,  the mix of
international  and  North  American  revenue,  tax  policies,  foreign  currency
exchange rates and general economic and political conditions.

     The  Company  believes  that the events of  September  11,  2001 and recent
economic  developments  and trends have  adversely  affected and may continue to
affect  levels of capital  spending  by  companies  in a variety of  industries,
including companies in the vertical markets that the Company serves. The current
excess of supply in the  telecommunications  industry has adversely affected the
financial condition of many telecommunications companies worldwide. In addition,
current  economic  conditions and developments in the energy markets have had an
adverse



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affect on the  financial  condition  of energy and utility  companies in certain
geographical  areas of North America.  The Company believes that these and other
factors have adversely  affected demand for products and services offered by the
Company,  as certain prospective and existing customers have delayed or deferred
purchasing  decisions or have sought to  terminate  existing  contracts  for the
Company's  products and services.  The Company  believes that these factors will
continue  to affect  demand for the  Company's  products  and  services in 2002,
particularly  demand for  software and related  services.  Such factors may also
increase the amount of doubtful  accounts or adversely  affect the likelihood of
collection of such accounts.

     The Company  relies  upon its ability to  implement  and  integrate  mobile
workforce  management  solutions  on  schedule  and to the  satisfaction  of its
customers.  The Company from time to time has experienced certain implementation
and other  problems  that have  delayed  the  completion  of  certain  projects,
including  the  failure of third  parties to deliver  products  or services on a
timely basis,  delays caused by customers and  development  delays.  Because the
Company  currently  recognizes  revenue on a percentage  of  completion  method,
delays in completion of certain  contracts  have caused delays in recognition of
revenue and, consequently,  unanticipated  fluctuations in quarterly results. In
light of the  Company's  recent  reduction  in its work  force,  there can be no
assurance  that  the  Company  will be  able to  complete  current  projects  or
implement  future  systems on a timely and cost  effective  basis or that delays
will not result in  cancellations  of contracts or result in the  imposition  of
substantial  penalties.  Any such material delay,  cancellation or penalty could
have a material adverse effect upon the Company's business, financial condition,
operating results and cash flows.

     Because  the Company is unable to forecast  with  certainty  the receipt of
orders for its  products  and  services  and the  Company's  expense  levels are
relatively fixed and are based, in part, upon its expectation of future revenue,
if revenue levels fall below expectations as a result of a delay in completing a
contract, the inability to obtain new contracts, the cancellation of an existing
contract or otherwise, operating results are likely to be adversely affected. As
a result,  net income may be  disproportionately  affected  because a relatively
small amount of the Company's expenses vary with its revenue.

     Based upon all of the  foregoing  factors,  the Company  believes  that its
quarterly  revenue,  direct  expenses and  operating  results are likely to vary
significantly in the future, that period-to-period comparisons of the results of
operations are not necessarily  meaningful and that such comparisons  should not
be relied  upon as an  indication  of future  performance.  The Company may also
choose to reduce prices or increase  spending in response to competition,  or to
pursue  new  market  opportunities.  See  "Forward-Looking  Statements".  If new
competitors, technological advances by existing competitors or other competitive
factors require the Company to reduce its prices or invest significantly greater
resources in research and development  efforts,  the Company's operating results
in the future may be  adversely  affected.  There can be no  assurance  that the
Company  will  be able to  grow  in  future  periods  or that it will be able to
sustain its level of total revenue or achieve  revenue  growth on a quarterly or
annual basis.  In fiscal 2001, the Company's  revenue  declined  compared to the
same period in 2000.  These recent  declines have resulted from an economic slow
down in the vertical industries served by the Company. It is likely that in some
future quarter the Company's operating results will be below the expectations of
public market analysts and investors. See "Forward Looking Statements".  In such
event,  the  market  price  of the  Company's  Common  Shares  would  likely  be
materially adversely affected.


Dependence on Third Party Products and Services

     Since 1996, the Company has been, and anticipates that from time to time it
will be, engaged to provide, in addition to its own products and services, third
party hardware,  software and services, which the Company purchases from vendors
and sells to its  customers.  For the years ended  December 31,  2001,  2000 and
1999,  4.5%,  4.6%,  and  14.1%  respectively,  of  the  Company's  revenue  was
attributable to third party products and services.  For the three-month  periods
ended March 31, 2002 and 2001,  3.7% and 6.6%,  respectively,  of the  Company's
revenue was  attributable to third-party  products and services.  As 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.  See "Forward
Looking Statements".  In addition,  because the Company's gross margins on third
party products and services are substantially  below gross margins  historically
achieved  on  revenue   associated  with  MDSI  products  and  services,   large
fluctuations in quarterly revenue from the sale of third party products and



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services will result in significant fluctuations in direct costs, gross profits,
operating  results,  cash flows and other items  expressed  as a  percentage  of
revenue.

Lengthy Sales Cycles for Advantex Products

     The  purchase  of  a  mobile  workforce  management  solution  is  often  a
significant purchase decision for prospective customers and requires the Company
to engage in sales  efforts  over an  extended  period of time and to  provide a
significant  level of education to prospective  customers  regarding the use and
benefits  of such  systems.  Due in  part to the  significant  impact  that  the
application of mobile workforce  management solutions has on the operations of a
business and the  significant  commitment of capital  required by such a system,
potential  customers tend to be cautious in making acquisition  decisions.  As a
result, the Company's products generally have a lengthy sales cycle ranging from
several  months to  several  years.  Consequently,  if sales  forecasted  from a
specific customer for a particular quarter are not realized in that quarter, the
Company may not be able to generate revenue from alternative  sources in time to
compensate for the shortfall. The loss or delay of a large contract could have a
material  adverse  effect  on  the  Company's  quarterly  financial   condition,
operating  results and cash flows,  which may cause such results to be less than
analysts'  expectations.  Moreover, to the extent that significant contracts are
entered  into and  required to be performed  earlier  than  expected,  operating
results for subsequent quarters may be adversely affected. In particular, due to
economic conditions and developments in the Company's core markets,  the Company
has  experienced an increase in the time  necessary to complete the  negotiation
and signing of contracts with some of its customers.


Dependence on Large Contracts and Concentration of Customers

     The Company's revenue is dependent, in large part, on significant contracts
from a limited  number of customers.  During the years ended  December 31, 2001,
2000, and 1999,  approximately  35.8%,  25.8%,  and 31.0%  respectively,  of the
Company's  consolidated  revenue was  attributable  to five or fewer  customers.
During the years ended December 31, 2001, 2000 and 1999, one customer  accounted
for 12.7%, 5.8%, and 10.9% respectively,  of the Company's consolidated revenue.
The  Company  believes  that  revenue  derived  from  current  and future  large
customers will continue to represent a significant portion of its total revenue.
See "Forward  Looking  Statements".  The inability of the Company to continue to
secure and maintain a sufficient number of large contracts would have a material
adverse effect on the Company's business, financial condition, operating results
and cash flows.  Moreover,  the  Company's  success will depend in part upon its
ability to obtain orders from new customers,  as well as the financial condition
and success of its customers and general economic conditions.

     The size of a contract  for a particular  customer  can vary  substantially
depending on whether the Company is providing only its own products and services
or is also  responsible  for supplying  third party  products and services.  The
Company recognizes revenue using the percentage of completion method,  which the
Company  calculates  based on  total  costs  incurred  compared  to total  costs
estimated by the Company for completion.  Therefore, any significant increase in
the costs required to complete a project,  or any significant delay in a project
schedule,  could have a material adverse effect on that contract's profitability
and because of the size of each contract,  on the Company's  overall  results of
operations.  The  Company  from  time  to  time  has  also  experienced  certain
implementation  and other  problems that have delayed the  completion of certain
projects, including the failure of third parties to deliver products or services
on a timely  basis and  delays  caused by  customers.  The  Company's  contracts
generally  provide for  payments  upon the  achievement  of certain  milestones.
Therefore, any significant delay in the achievement of milestones on one or more
contracts  would affect the timing of the Company's  cash flows and could have a
material  adverse  effect  on  the  Company's  business,   financial  condition,
operating  results and cash  flows.  Any  significant  failure by the Company to
accurately  estimate the scope of work  involved,  plan and formulate a contract
proposal,  effectively  negotiate a favorable contract price,  properly manage a
project or efficiently  allocate  resources among several  projects could have a
material  adverse  effect  on  the  Company's  business,   financial  condition,
operating results and cash flows.


Potential Fluctuations in Backlog

     The  Company's  backlog  consists  of a  relatively  small  number of large
contracts  relating to sales of its mobile  workforce  management  and  wireless
connectivity software and related equipment and services, and sales of



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third party  products and services.  Due to the long,  complex sales process and
the mix of sales of the Company's products and services and third party products
and  services,   the  Company's   backlog  may  fluctuate   significantly   from
period-to-period.  In addition,  under the terms of the Company's contracts, the
Company's  customers may elect to terminate  their contracts with the Company at
any  time  after  notice  to  the  Company  or  to  delay  certain   aspects  of
installation.  Due to the relative  size of a typical  contract  compared to the
Company's annual and quarterly  revenue,  a termination or installation delay of
one or more  contracts  could have a material  adverse  effect on the  Company's
business,  financial condition,  operating results and cash flows. Contracts for
software  maintenance  and support are  generally  renewable  every year and are
subject  to  renegotiation  upon  renewal.  There can be no  assurance  that the
Company's customers will renew their maintenance contracts or that renewal terms
will be as favorable to the Company as existing terms.

     The Company  believes  that  unfavorable  economic  conditions  and reduced
capital  spending by existing and  prospective  customers may  adversely  affect
demand for the Company's  products and services in 2002. In particular,  service
providers,  utilities  companies and  telecommunications  companies in the North
America  were  impacted  during the latter  half of 2000 and  during  2001.  The
September 11, 2001  terrorist  attacks and the  resulting  slow down in the U.S.
economy  is  expected  to  continue  to  delay  purchasing  and   implementation
decisions.  If the economic conditions in the United States and Canada worsen or
if a wider or global  economic  slowdown  occurs,  the  Company  may  experience
reduced  revenues,   increased  costs,   reduced  margins  and  increased  risks
associated with the collection of customer receivables,  any of which may have a
material  adverse  impact on its  business,  operating  results,  cash flows and
financial condition.


Seasonal Variations in Demand

     Certain of the vertical markets targeted by the Company include  industries
with  implementation  requirements  that vary seasonally.  For example,  utility
companies in North America generally have decreased  implementation  activity in
winter months when such  utilities  face their greatest  consumer  demand.  As a
result,  the Company's results of operations may also vary seasonally,  and such
variation may be significant.


Limited Operating History; History of Losses; Increased Expenses

     The Company commenced  operations in February 1993 and therefore has only a
limited operating history upon which an evaluation of its business and prospects
can be based. As of December 31, 2001, the Company had an accumulated deficit of
$23.8 million.  There can be no assurance that the Company will realize  revenue
growth or be  profitable  on a quarterly or annual  basis.  The Company plans to
continue to contribute  significant  resources to its operating expenses related
to sales and marketing  operations,  to fund significant  levels of research and
development,  to broaden its customer  support  capabilities and to maintain its
administrative resources. A relatively high percentage of the Company's expenses
is fixed in the short term and the Company's  expense levels are based, in part,
on its expectations of future revenue.  To the extent that such expenses precede
or are not subsequently  followed by increased revenue,  the Company's business,
financial  condition,  operating  results  and cash  flows  could be  materially
adversely  affected.  In  addition,  due to the rapidly  evolving  nature of its
business and markets,  the Company's  limited  operating  history and its recent
acquisitions,   the  Company  believes  that  period-to-period   comparisons  of
financial  results are not necessarily  meaningful and should not be relied upon
as an indication of future performance.


Integration of Acquisitions

     The  Company  may,  when  and  if the  opportunity  arises,  acquire  other
products,  technologies or businesses involved in activities,  or having product
lines, that are complementary to the Company's  business.  Acquisitions  involve
numerous risks,  including  difficulties in the  assimilation of the operations,
technologies  and  products  of  the  acquired   companies,   the  diversion  of
management's  attention  from other business  concerns,  risks  associated  with
entering  markets or  conducting  operations  with which the  Company  has no or
limited direct prior experience and the



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potential loss of key employees of the acquired company.  Moreover, there can be
no assurance that any anticipated  benefits of an acquisition  will be realized.
Future  acquisitions  by  the  Company  could  result  in  potentially  dilutive
issuance's  of  equity  securities,   the  incurrence  of  debt  and  contingent
liabilities,  amortization of expenses  related to goodwill and other intangible
assets and write-off of acquired  research and development  costs,  all of which
could materially and adversely affect the Company's financial condition, results
of operations and cash flows.


New Product Development

     The Company  expects that a significant  portion of its future revenue will
be derived from the sale of newly introduced  products,  including  Advantex r7,
and from enhancement of existing products. See "Forward-Looking Statements". The
Company's  success  will  depend in part upon its ability to enhance its current
products on a timely and  cost-effective  basis and to develop new products that
meet  changing  market  conditions,   including  changing  customer  needs,  new
competitive product offerings and enhanced technology. There can be no assurance
that the Company will be successful in developing  and marketing on a timely and
cost-effective basis new products and enhancements that respond to such changing
market conditions.  If the Company is unable to anticipate or adequately respond
on a timely or cost-effective  basis to changing market  conditions,  to develop
new software products and enhancements to existing  products,  to correct errors
on a timely basis or to complete  products  currently under  development,  or if
such  new  products  or  enhancements  do not  achieve  market  acceptance,  the
Company's business, financial condition,  operating results and cash flows could
be  materially  adversely  affected.  In light of the  difficulties  inherent in
software development,  the Company expects that it will experience delays in the
completion and  introduction  of new software  products.  For example,  the time
required  for the initial  implementation  and field  testing of Advantex r7 was
greater  than  expected,  which  resulted in delays in  commencement  of certain
installations of the Advantex r7 product.


e-Business Investments

     As part of  MDSI's  e-Business  strategy,  during  2000  the  Company  made
strategic  investments  in two  private  companies  that have  created  Internet
marketplaces in an aggregate  investment of approximately  $2.5 million and made
advances to a third company of $0.5 million. During 2001, the Company recorded a
valuation  allowance  for the full costs of these  investments.  There can be no
assurance that such entities will be  commercially  successful or that MDSI will
be able to recover or realize a return on its investment in such companies.


System Failures Could Lead to Significant Costs

     The Company must protect its hosting services network  infrastructure,  its
equipment and its  customers'  equipment  (including  data) against  damage from
human error,  security breaches,  power loss and other facility failures,  fire,
earthquake,  flood,  telecommunications  failure,  sabotage,  terrorist attacks,
vandalism and similar  events.  Despite the precautions the Company has taken, a
natural  disaster  or other  unanticipated  problems  at one or more of its data
centers could result in  interruptions  in its hosting  services or  significant
damage  to   customer   equipment.   In   addition,   failure   of  any  of  its
telecommunications  providers to provide consistent data communications capacity
or of other network providers to provide interconnection agreements could result
in service interruptions. Any damage to, or failure of, the Company's systems or
service  providers could result in reductions in, or  terminations  of, services
supplied to the Company's customers,  which could have a material adverse effect
on its business.  If the Company incurs significant financial commitments to its
customers  in  connection  with its  failure to meet  service  level  commitment
obligations  as a result of system  downtime or the loss of customer  data,  its
liability insurance may not be adequate to cover those expenses, and its results
of operations and financial condition may be adversely affected.


Litigation

     The Company is a party to a suit filed against  Citizens  Telecom  Services
Co.,  L.L.C.,  generally  alleging that Citizens  breached a series of contracts
dated October 15, 1998. The suit alleges that Citizens has wrongfully



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terminated  the  contracts  and failed to pay sums due. The suit seeks  damages,
interest  and  attorneys'  fees.  Citizens  filed an answer  and  counter  claim
alleging that MDSI breached the contracts,  justifying Citizens'  termination of
the contracts and entitling  Citizens to repayment of approximately $3.5 million
paid to MDSI in addition to interest and  attorneys'  fees. In its  consolidated
balance  sheet as of  December  31, 2001 and 2000,  the  Company has  classified
approximately  $3.7  million in amounts  due from  Citizens,  which  amounts are
subject to the suit,  as a long term  receivable  as of December 31,  2001.  The
Company has not recorded any amounts due from Citizens as doubtful  accounts and
has not  recorded  any  amounts  claimed by Citizens  as a  contingent  or other
liability  of the  Company as the  Company  believes  that is will  recover  all
amounts  owing  to it.  There  can be no  assurance  that  the  Company  will be
successful  in the  prosecution  of its  claim or in the  defense  of  Citizens'
counter claim.


Management of Growth and Reduction of Workforce

     Since its inception, the Company has experienced periods of rapid growth in
product  sales,  personnel,  research  and  development  activities,  number and
complexity of products, the number and geographic focus of its targeted vertical
markets and product distribution  channels. The total number of employees of the
Company has grown from 9 employees in Canada in February  1993 to 448  employees
located  in Canada,  the United  States  and other  international  locations  at
December 31, 2001. In addition,  the acquisition of Connectria has increased the
number of products the Company  supports  and markets,  as well as the number of
vertical  markets into which it sells  products and  services.  The Company also
recently  expanded  the  geographical  areas in which it  operates  In March and
April, 2001, the Company made several  announcements  regarding its intention to
reduce  the  size of its work  force by  approximately  25% in  anticipation  of
reduced  demand  for its  products  and  services  due to the  general  economic
slowdown.  If the Company resumes its growth in future periods,  such growth may
place  strains on its  management,  administrative,  operational  and  financial
resources, as well as increased demands on its internal systems,  procedures and
controls. There can be no assurance that the Company will be able to effectively
manage its operations or future growth and expansion  into new markets.  Failure
to do so  could  have a  material  adverse  effect  on the  Company's  business,
financial condition, operating results and cash flows.


Dependence on Key Personnel

     The Company's  performance and future operating  results are  substantially
dependent on the continued  service and performance of its senior management and
key  technical  and sales  personnel.  Competition  for  qualified  personnel is
intense,  and in light of the Company's recent layoffs there can be no assurance
that the Company can retain its key technical, sales and managerial employees or
that it  will  be able to  attract  or  retain  highly-qualified  technical  and
managerial  personnel  in the future if demand for the  Company's  products  and
services  increase.  The loss of the  services  of any of the  Company's  senior
management  or other key  employees  or the  inability  to retain the  necessary
technical,  sales and managerial  personnel could have a material adverse effect
upon the Company's  business,  financial  condition,  operating results and cash
flows.


Dependence on Selected Vertical Markets

     Prior to 1996,  substantially all of the Company's revenue was derived from
the sale of products and services to  customers in the utility  market.  For the
years ended December 31, 1997 and 1996, the utility market accounted for greater
than 50% of the Company's revenue.  In those years, the Company sought to reduce
its  reliance  on the  utility  market by  developing  or  acquiring  compatible
products for organizations with mobile workforces in other vertical markets.  In
1998,  the  utility  market  accounted  for  greater  than 40% of the  Company's
revenue.  In  1999,  the  telecommunications  market  accounted  for  48% of the
Company's revenue. In 2000 the  telecommunications  and cable/broadband  markets
accounted  for greater than 45% of the  Company's  revenue.  In 2001 the utility
market accounted for 55% of the Company's revenue.  The Company anticipates that
a  significant  portion  of its future  revenue  will be  generated  by sales of
products to the telecommunications, cable/broadband and utility markets and that
recent economic developments and trends have adversely affected and may continue
to  adversely  affect  levels of capital  spending by  companies in a variety of
industries,  including the vertical  markets MDSI serves.  The Company  believes
that these and other factors may cause potential and existing customers to delay
or defer  purchasing  decisions  or seek to  terminate  or delay  payment  under
existing  contracts  for the Company's  products and services.  Such factors may
also increase the amount of doubtful accounts or adversely affect the likelihood
of collection of such accounts.  See "Forward-Looking  Statements." A decline in
demand for the  Company's  products  in these



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markets as a result of economic conditions, competition, technological change or
otherwise,  would  have a material  adverse  effect on the  Company's  business,
financial condition, operating results and cash flows. There can be no assurance
that the Company will be able to continue to diversify its product  offerings or
revenue base by entering into new vertical markets.


Dependence on Marketing Relationships

     The  Company's  products are marketed by the  Company's  direct field sales
force as well as by third  parties that act as lead  generators or with whom the
Company acts together as a  co-marketer  or  co-seller.  The Company's  existing
agreements with such partners are  nonexclusive  and may be terminated by either
party  without  cause.  Such  organizations  are not within  the  control of the
Company,  are not  obligated to purchase  products from the Company and may also
represent  and sell  competing  products.  There  can be no  assurance  that the
Company's  existing  partners will continue to provide the level of services and
technical  support  necessary  to provide a complete  solution to the  Company's
customers or that they will not emphasize  their own or third-party  products to
the detriment of the Company's products. The loss of these partners, the failure
of such parties to perform under agreements with the Company or the inability of
the Company to attract and retain new resellers with the technical, industry and
application  experience  required to market the Company's products  successfully
could  have a  material  adverse  effect on the  Company's  business,  financial
condition,  operating  results and cash flows.  The Company  expects that it may
enter into certain  joint  ventures in order to facilitate  its  expansion  into
other vertical markets and geographic  areas. See "Forward Looking  Statements".
To the extent  that such joint  ventures  are not  successful,  there could be a
material  adverse  effect  on  the  Company's  business,   financial  condition,
operating results and cash flows.


Competition

     The  markets  for  mobile  workforce  management   applications,   wireless
connectivity  software,  mobile  data  network  equipment  and mobile  computing
devices are highly  competitive.  Numerous  factors  affect  MDSI's  competitive
position,   including  price,   product   features,   product   performance  and
reliability, ease of use, product scalability,  product availability on multiple
platforms  (server,  wireless  carrier,  and  mobile  workstation),  ability  to
implement mobile workforce management solutions domestically and internationally
while meeting customer schedules,  integration of products with other enterprise
solutions,  availability  of project  consulting  services  and  timely  ongoing
customer service and support.  Within these markets, there are a small number of
new ventures,  either small companies attempting to establish a business in this
market or large companies attempting to diversify their product offerings.  MDSI
expects such competition to intensify as acceptance and awareness of mobile data
communications and technology  continue.  See "Forward Looking  Statements".  In
addition,  a  small  number  of  MDSI's  potential  customers  develop  software
solutions internally,  thereby eliminating the requirement for suppliers such as
MDSI. Current or potential  competitors may establish  cooperative  arrangements
among themselves or with third parties to increase the ability of their products
to  address   customer   requirements.   Certain  of  MDSI's   competitors  have
substantially greater financial, technical, marketing and distribution resources
than  MDSI.  As a result,  they may be able to  respond  more  quickly to new or
emerging technologies and changing customer  requirements,  or to devote greater
resources to the development and distribution of existing products. There can be
no assurance that MDSI will be able to compete  successfully  against current or
future  competitors  or  alliances  of such  competitors,  or  that  competitive
pressures  faced by MDSI will not  materially  adversely  affect  its  business,
financial condition, operating results and cash flows.

     The  Company  primarily  competes  in the  utilities  market  with  Utility
Partners,  L.C.  (which recently filed for bankruptcy  protection  under Chapter
11),  M3i  Systems,  Inc.  (which was recently  purchased  by  Cognicase,  Inc.,
Integraph Corporation and iMedeon, Inc. (which has recently merged with ViryaNet
Ltd.).  The  Company  has  several  competitors  in the  telecommunications  and
cable/broadband markets. The Company's primary competitor for telecommunications
customers is Telcordia  Technologies Inc. (formerly  Bellcore),  a company which
has  historical  relationships  with  certain  of the  large  telecommunications
companies,  and more recently  ClickSoftware,  Inc.  (formerly IET) and ViryaNet
Ltd.,  which the Company mostly sees as competition for small  accounts.  In the
cable/broadband   market,  the  Company's  primary  competitors  are  Telcordia,
C-Cor.net Corp. (formerly MobileForce



                                       7
<PAGE>

Technologies,  Inc.),  PointServe Inc.  (through its merger with Brazen Software
Inc.), CSG Systems  International  Inc., and Viryanet Ltd., again only for small
accounts.

     The  Company  believes  that  the  principal  competitive  factors  in  the
commercial  field service market are the ability to improve the customer service
aspects of an  organization's  business and increase the productivity of service
representatives.  In this market, the Company's principal  competitors are Astea
International  Inc., Metrix Inc., and FieldCentrix  Inc., in addition to several
larger  enterprise  software  companies,  such as Amdocs  Limited  who  recently
acquired the assets of Clarify, Oracle Corporation,  PeopleSoft Inc., and Siebel
Systems  Inc.  which,  to the  Company's  knowledge,  offer  less  comprehensive
solutions  and which MDSI  currently  sees as potential  partners for  expanding
their penetration in this market.


Risk of Product Defects

     Software   products,   including   those  offered  by  the  Company,   from
time-to-time  contain  undetected errors or failures.  There can be no assurance
that,  despite  testing by the Company and by current and  potential  customers,
errors will not be found in the Company's products.  Such errors could result in
loss of or delay in market  acceptance  of the Company's  products,  which could
have a material adverse effect on the Company's business,  financial  condition,
operating results and cash flows.


Proprietary Technology

     The  Company's   success  is  dependent  on  its  ability  to  protect  its
intellectual  property rights. The Company relies principally upon a combination
of copyright, trademark, trade secret and patent laws, non-disclosure agreements
and other contractual  provisions to establish and maintain its rights. To date,
the  Company  has been  granted  trademark  registrations  or has  registrations
pending in the United  States,  Canada and the European  Community for the MDSI,
Advantex,  Wireless@work  and  Compose  trademarks.  MDSI has also filed  United
States and  international  patent  applications  covering various aspects of its
technology.  As part of its  confidentiality  procedures,  the Company generally
enters into  nondisclosure and  confidentiality  agreements with each of its key
employees, consultants, distributors, customers and corporate partners, to limit
access to and distribution of its software,  documentation and other proprietary
information. There can be no assurance that the Company's efforts to protect its
intellectual  property rights will be successful.  Despite the Company's efforts
to  protect  its  intellectual  property  rights,  unauthorized  third  parties,
including competitors,  may be able to copy or reverse engineer certain portions
of the Company's  software  products,  and use such copies to create competitive
products.  Policing the unauthorized use of the Company's products is difficult,
and,  while the Company is unable to determine the extent to which piracy of its
software  products  exists,  software  piracy can be  expected to  continue.  In
addition,  the laws of certain countries in which the Company's  products are or
may be licensed do not protect its products and intellectual  property rights to
the same  extent as do the laws of Canada  and the United  States.  As a result,
sales of products by the Company in such  countries may increase the  likelihood
that the  Company's  proprietary  technology is infringed  upon by  unauthorized
third parties. In addition, because third parties may attempt to develop similar
technologies independently, the Company expects that software product developers
will be increasingly  subject to  infringement  claims as the number of products
and competitors in the Company's industry segments grow and the functionality of
products  in  different   industry  segments  overlaps.   See   "Forward-Looking
Statements".  Although the Company believes that its products do not infringe on
the  intellectual  property  rights of third parties,  there can be no assurance
that  third  parties  will  not  bring   infringement   claims  (or  claims  for
indemnification  resulting from  infringement  claims)  against the Company with
respect to copyrights,  trademarks,  patents and other proprietary  rights.  Any
such claims,  whether with or without merit, could be time consuming,  result in
costly  litigation and diversion of resources,  cause product shipment delays or
require the Company to enter into royalty or licensing agreements.  Such royalty
or licensing agreements,  if required,  may not be available on terms acceptable
to the  Company or at all. A claim of product  infringement  against the Company
and failure or  inability  of the Company to license  the  infringed  or similar
technology  could  have a material  adverse  effect on the  Company's  business,
financial condition, operating results and cash flows.



                                       8
<PAGE>

Dependence on Third Parties

     Certain  contracts  require the Company to supply,  coordinate  and install
third party products and services.  The Company believes that there are a number
of acceptable vendors and subcontractors for most of its required products,  but
in many cases,  despite the  availability of multiple  sources,  the Company may
select a single  source in order to  maintain  quality  control and to develop a
strategic relationship with the supplier or may be directed by a customer to use
a  particular  product.  The  failure  of a third  party  supplier  to provide a
sufficient  supply of parts and  components or products and services in a timely
manner  could  have a  material  adverse  effect  on the  Company's  results  of
operations.  In  addition,  any  increase  in the  price of one or more of these
products,  components or services  could have a material  adverse  effect on the
Company's  business,  financial  condition,  operating  results  and cash flows.
Additionally,  under certain  circumstances,  the Company supplies  products and
services  to a  customer  through  a  larger  company  with a  more  established
reputation  acting  as  a  project  manager  or  systems  integrator.   In  such
circumstances,  the  Company  has a  sub-contract  to supply  its  products  and
services to the customer through the prime contractor.  In these  circumstances,
the Company is at risk that  situations  may arise  outside of its control  that
could lead to a delay, cost over-run or cancellation of the prime contract which
could also result in a delay,  cost  over-run or  cancellation  of the Company's
sub-contract.  The  failure of a prime  contractor  to supply its  products  and
services  or perform its  contractual  obligations  to the  customer in a timely
manner  could  have  a  material  adverse  effect  on  the  Company's  financial
condition, results of operations and cash flows.


Exchange Rate Fluctuations

     Because  the  Company's  reporting  and  functional  currency is the United
States dollar,  its operations  outside the United States face additional risks,
including   fluctuating  currency  values  and  exchange  rates,  hard  currency
shortages and controls on currency exchange.  The Company has operations outside
the United States and is hedged,  to some extent,  from foreign  exchange  risks
because of its ability to  purchase,  develop and sell in the local  currency of
those jurisdictions.  In addition,  the Company does enter into foreign currency
contracts  under  certain  circumstances  to reduce the  Company's  exposure  to
foreign exchange risks. There can be no assurance,  however,  that the attempted
matching of foreign currency receipts with  disbursements or hedging  activities
will  adequately  moderate  the risk of currency or exchange  rate  fluctuations
which could have a material adverse effect on the Company's business,  financial
condition,  operating  results and cash flows.  In  addition,  to the extent the
Company has operations  outside the United States, the Company is subject to the
impact of  foreign  currency  fluctuations  and  exchange  rate  charges  on the
Company's  reporting  in its  financial  statements  of the  results  from  such
operations outside the United States.


Risks Associated with International Operations

     In the years ended December 31, 2001,  2000, and 1999 revenue  derived from
sales outside of North America  accounted for  approximately  18.3%,  20.0%, and
22.1%,  respectively,  of the  Company's  total  revenue.  Because the Company's
revenue is dependent,  in large part, on  significant  contracts  with a limited
number of customers,  the  percentage of the Company's  revenues that is derived
from  sales  outside  of North  America  has  fluctuated,  and may  continue  to
fluctuate, from period-to-period.  The Company believes that its ability to grow
and be  profitable  will  require  additional  expansion of its sales in foreign
markets,  and that revenue derived from  international  sales will account for a
significant percentage of the Company's revenue for the foreseeable future. This
expansion  has  required  and will  continue to require  significant  management
attention  and  financial  resources.  The  inability  of the  Company to expand
international sales in a timely and cost-effective  manner could have a material
adverse effect on the Company's business, financial condition, operating results
and  cash  flows.  There  are a  number  of  risks  inherent  in  the  Company's
international business activities, including changes in regulatory requirements,
tariffs and other trade  barriers,  costs and risks of  localizing  products for
foreign  markets,  longer accounts  receivable  payment cycles,  difficulties in
collecting payments,  reduced protection for intellectual property,  potentially
adverse tax  consequences,  limits on repatriation  of earnings,  the burdens of
complying   with  a  wide  variety  of  foreign  laws,   nationalization,   war,
insurrection,  terrorism  and other  political  risks  and  factors  beyond  the
Company's  control.  Fluctuations  in currency  exchange  rates could  adversely
affect sales denominated in foreign



                                       9
<PAGE>

currencies  and cause a reduction in revenue  derived from sales in a particular
country.  In addition,  revenue of the Company  earned  abroad may be subject to
taxation  by  more  than  one  jurisdiction,  thereby  adversely  affecting  the
Company's  earnings.  There  can be no  assurance  that  such  factors  will not
materially  adversely  affect  the  Company's  future  international  sales and,
consequently, the Company's business, financial condition, operating results and
cash flows.


Product Liability

     The  license  and support of products by the Company may entail the risk of
exposure to product  liability claims. A product liability claim brought against
the Company or a third party that the Company is required to indemnify,  whether
with or without  merit,  could have a material  adverse  effect on the Company's
business,  financial  condition,  operating  results and cash flows. The Company
carries insurance  coverage for product liability claims which it believes to be
adequate for its operations.


Concentration of Stock Ownership; Anti-Takeover Effects; Investment Canada Act

     The Company's directors,  officers and their respective affiliates,  in the
aggregate,  beneficially  own  approximately  25.8%  of the  outstanding  Common
Shares.  As a result,  these  shareholders,  if acting together,  may be able to
exercise  significant  influence  over the  Company and many  matters  requiring
shareholder  approval,  including  the  election of  directors  and  approval of
significant  corporate  transactions.  Such concentration of ownership may under
certain circumstances also have the effect of delaying,  deferring or preventing
a change in control of the Company.

     An investment in the Common Shares of the Company which results in a change
of control of the Company may, under certain circumstances, be subject to review
and approval under the Investment  Canada Act if the party or parties  acquiring
control is not a Canadian person (as defined therein).  Therefore,  the Canadian
regulatory environment may have the effect of delaying,  deferring or preventing
a change in control of the Company.

     The  Company is  organized  under the laws of Canada and,  accordingly,  is
governed by the Canada  Business  Corporations  Act "CBCA".  The CBCA differs in
certain  material  respects  from laws  generally  applicable  to United  States
corporations and shareholders,  including the provisions  relating to interested
directors,  mergers and similar  arrangements,  takeovers,  shareholders' suits,
indemnification of directors and inspection of corporate records.

     In December 1998, the Company implemented a stock rights plan (the "Plan").
Pursuant to the Plan,  shareholders  of record on December  17, 1998  received a
dividend of one right to purchase, for CDN$140, one Common Share of the Company.
The rights are  attached  to the  Company's  Common  Shares and will also become
attached to Common  Shares  issued in the future.  The rights will not be traded
separately and will not become  exercisable until the occurrence of a triggering
event,  defined as an accumulation by a single person or group of 20% or more of
the Company's  Common Shares.  After a triggering  event, the rights will detach
from the Common  Shares.  If the Company is then merged into, or is acquired by,
another corporation, the Company may either (i) redeem the rights or (ii) permit
the rights  holder to receive in the merger  Common  Shares of the Company or of
the acquiring  company equal to two times the exercise price of the right (i.e.,
CDN $280). In the latter  instance,  the rights attached to the acquirer's stock
become  null and void.  The effect of the rights  program is to make a potential
acquisition of the Company more expensive for the acquirer if, in the opinion of
the Company's Board of Directors, the offer is inadequate.  While the Company is
not  aware  of any  circumstance  that  might  result  in the  acquisition  of a
sufficient   number  of  shares  of  the  Company's  Common  Shares  to  trigger
distribution of the Rights,  existence of the Rights could discourage offers for
the Company's  stock that may exceed the current market price of the stock,  but
that the Board of Directors deems inadequate.

     As a result of being a reporting issuer in certain provinces of Canada, the
Company is required to file certain  reports in such  jurisdictions.  As part of
such reports, the Company is required to file consolidated  financial statements
prepared in accordance with generally accepted accounting  principles as applied
in Canada  ("Canadian  GAAP").  Canadian and US GAAP differ in certain respects,
including the treatment of certain  reorganization  costs, acquired research and
development  costs,  and treatment of business  combinations.  As a result,  the
Company's  Consolidated Financial Statements included in this report will differ
materially from the financial statements filed by the Company in Canada.



                                       10
<PAGE>

Market for the Common Shares; Potential Volatility of Stock Price

     The  trading  prices  of the  Common  Shares  have  been  subject  to  wide
fluctuations  since trading of the Company's  shares commenced in December 1995.
There can be no assurance  that the market  price of the Common  Shares will not
significantly  fluctuate from its current level.  The market price of the Common
Shares may be subject to wide  fluctuations in response to quarterly  variations
in operating results, announcements of technological innovations or new products
by the Company or its competitors,  changes in financial estimates by securities
analysts,  or other events or factors.  In addition,  the financial markets have
experienced  significant price and volume  fluctuations for a number of reasons,
including  the failure of the  operating  results of certain  companies  to meet
market expectations that have particularly  affected the market prices of equity
securities of many  high-technology  companies that have often been unrelated to
the operating performance of such companies. These broad market fluctuations, or
any industry-specific market fluctuations, may adversely affect the market price
of the Common Shares. In the past, following periods of volatility in the market
price of a company's  securities,  securities class action  litigation has often
been instituted against such a company. Such litigation, whether with or without
merit,  could  result  in  substantial  costs  and a  diversion  of  management'
attention  and  resources,  which  would have a material  adverse  effect on the
Company's business, financial condition, operating results and cash flows.







                                       11