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,  2002  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 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  cost  in  the  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,  difficulties in collection of receivables,  the
timing of new product announcements and introductions,  difficulties encountered
in the protection of intellectual  property rights,  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 economic and political  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 effect 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.  While the Company  believes that economic and political
conditions  in certain of its vertical  markets show signs of  improvement,  the
Company  believes  that  economic  conditions  and general  trends are likely to
continue  to affect  demand for the  Company's  products  and  services in 2003,
particularly  demand for  software and related  services.  Such factors may also
increase the amount of doubtful  accounts or adversely  affect the likelihood of
collection of such accounts.


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<PAGE>

     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.  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,  2002,  2001 and
2000,  6.5%,  5.5%,  and  3.4%  respectively,   of  the  Company's  revenue  was
attributable  to third party  products and services.  For the three months ended
September  30,  2003 and 2002,  12.0% and 15.3%  respectively  of the  Company's
revenue was attributable to third party products and services,  and for the nine
months ended  September 30, 2003 and 2002,  10.8% and 7.8%  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 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



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<PAGE>

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 the Company's or 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, 2002,
2001, and 2000,  approximately  29.9%,  29.8%,  and 30.6%  respectively,  of the
Company's  consolidated  revenue was  attributable  to five or fewer  customers.
During the year ended December 31, 2002,  TELKOM South Africa Limited  accounted
for 9.0% of the Company's  consolidated revenue.  During the year ended December
31,  2001,  Eircom  P.L.C.  accounted  for 11.9% of the  Company's  consolidated
revenue.  During the year ended December 31, 2000, no single customer  accounted
for 10% or more of the Company's  consolidated revenue.  During the three months
ended September 30, 2003 revenue from TELKOM South Africa  Limited,  and Transco
PLC  accounted  for  approximately  17.9% (2002 - 14.4%) and 18.7% (2002 - nil),
respectively,  of total revenue. During the nine months ended September 30, 2003
revenue  from  Transco PLC,  and TELKOM  South  Africa  Limited,  accounted  for
approximately  21.5% and 18.2%,  respectively,  of total  revenue.  For the nine
months  ended  September  30, 2002 one customer did not account for greater than
10% of total 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,   effectively
negotiate the specifications for a workforce management system,  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 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



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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 have and may continue to
adversely  affect  demand for the  Company's  products and services in 2003.  In
particular,   service  providers,  utilities  companies  and  telecommunications
companies  in North  America have been  impacted  since the latter half of 2000.
While the Company  believes that economic  conditions in certain of its vertical
markets show signs of improvement, the Company believes that economic conditions
and general trends are likely to continue to 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.


History of Losses and Fixed Operating Expenses

     As of September 30, 2003, the Company had an  accumulated  deficit of $25.9
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
are 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 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 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  issuances  of equity  securities,  the
incurrence  of debt  and  contingent  liabilities,  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



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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.


Litigation

     On November 22, 2000,  the Company  filed a suit against  Citizens  Telecom
Services Co.,  L.L.C.,  generally  alleging  that Citizens  breached a series of
contracts  dated  October 15, 1998.  The suit alleged that  Citizens  wrongfully
terminated  the contracts  and failed to pay sums due. The suit sought  damages,
interest and attorneys' fees. Citizens filed an answer and counterclaim 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  addition,  Citizens'
counterclaims  alleged  fraud,  negligent  misrepresentation,  breach of express
warranty and breach of implied  warranties.  Citizens  sought  actual,  special,
incidental and consequential  damages  associated with these  counterclaims,  in
addition to punitive  damages,  interest and attorneys'  fees. On April 16, 2003
the Company  received notice that Citizens reached a settlement on its breach of
contract  and warranty  claims with MDSI's  insurer as  discussed  below,  which
settles  Citizens  claims for refunds under the contact and any  contractual  or
consequential  damages. This settlement will not result in the Company recording
any charge to earnings.

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

     On April 16,  2003,  the Company was informed  that its insurer  reached an
agreement  with  Citizens to settle  Citizens'  breach of contract and breach of
warranty  counterclaims  for $1  million.  The  Company  is not a  party  to the
settlement  agreement and the  settlement  amount is to be paid by the insurance
company.  The settlement  agreement  preserved the Company's right to appeal the
court's ruling that dismissed the Company's  claims on summary judgment for lack
of  sufficient  evidence  of damages and  Citizens'  right to appeal the court's
ruling that dismissed Citizens' claims of fraud and negligent misrepresentation.
On May 14, 2003, the Company filed its Notice of Appeal, and on May 28, 2003 the
Citizens  appealed  the court's  motion for  summary  judgment,  that  dismissed
Citizens' counterclaims for fraud and negligent misrepresentation.  Both parties
are awaiting a court date as to when the appeals will be heard.

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

     In its  consolidated  balance  sheet as of  September  30,  2003,  MDSI has
classified  approximately  $3.7  million in  amounts  due from  Citizens,  which
amounts  are  subject  to the  suit,  as a long  term  receivable,  as it is not
expected to be realized within one year.  MDSI has, in a prior period,  recorded
$1.0  million of such  amounts as doubtful  accounts  and has not  recorded  any
amounts  claimed by Citizens as a contingent or other liability of MDSI. If MDSI
is not successful in its claims against  Citizens,  MDSI may need to take a $2.7
million  dollar  charge to earnings.  If Citizens is  successful in any fraud or
negligent  misrepresentation  counterclaims,  the  Company  may  need to take an
additional charge to earnings to the extent of the judgment. Although the amount
of any such judgment against the



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Company  for  fraud or  negligent  misrepresentation  cannot be  determined,  if
Citizens  is  successful  in any  appeal and  subsequent  trial,  the  Company's
financial  condition  and results of operations  would be  materially  adversely
affected.  There is currently no provision  in MDSI's  financial  statements  to
address   any  refund  or  other   payment  to  Citizens  in  respect  of  these
counterclaims, as MDSI views this to be an unlikely event.

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 335  employees
located  in Canada,  the United  States  and other  international  locations  at
September 30, 2003. The Company has also further 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.  In July  2002,  the  Company
completed the sale of its subsidiary Connectria  Corporation,  reducing the size
of its work force by 71 employees.  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.  In 2000
the  telecommunications  and cable/broadband  markets accounted for greater than
53% of the Company's revenue.  In 2002 and 2001 the utility market accounted for
65% and 70% respectively 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 utility,  telecommunications,  and  cable/broadband  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  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  or  continue  to earn  revenue in current
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



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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  to  spread.   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  emerged from Chapter 11 bankruptcy),  CGI Group
Inc. (via its  acquisition of Cognicase,  Inc.,  which owned MDSI competitor M3i
Systems, Inc.), Intergraph Corporation,  Axiom Corporation,  Oracle Corporation,
Itron Inc.  (via its  acquisition  of  e-Mobile  Data Inc.),  Accenture  FFE and
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.,  a  company  that has  historical
relationships  with  certain of the large  telecommunications  companies.  Other
competitors in the telecommunications  market include  ClickSoftware,  Inc., and
ViryaNet Ltd.,  which the Company mostly sees competing for small  accounts.  In
the  cable/broadband  market,  the Company's  primary  competitors are Telcordia
Technologies Inc., C-Cor.net Corp.,  PointServe Inc., CSG Systems  International
Inc., and Viryanet Ltd., again mostly for small accounts.

     The Company believes that the principal  competitive factors in other field
service  markets are the ability to improve the customer  service  aspects of an
organization's    business   and   increase   the    productivity   of   service
representatives.  In this  market,  MDSI  sells a wireless  enablement  product,
called MDSI ideligo that is a subset of Advantex. MDSI ideligo provides a mobile
extension of selected field service application vendors' solutions.  The initial
implementation  has been with Siebel  Systems'  Field  Service  offering.  Other
wireless  enablement  products  are  offered  by Aether  Systems  Inc.,  Antenna
Systems,  Broadbeam  Corporation,  Everypath Inc., Extended Systems Incorporated
and IBM,  as well as a variety of other  newer  competitors.  Also  serving  the
commercial field service market are enterprise  application  solution providers,
such as Astea  International  Inc.,  Metrix  Inc.,  and  FieldCentrix  Inc.,  in
addition to several larger enterprise software companies, such as Amdocs Limited
(which recently acquired the assets of Clarify), Oracle Corporation,  PeopleSoft
Inc.,  and Siebel Systems Inc. MDSI believes that these  enterprise  application
vendors offer less comprehensive  wireless  enablement  solutions than MDSI, and
are consequently  potential  partners for expanding  MDSI's  penetration in this
market.



                                      -7-


<PAGE>

Risk of Product Defects and Implementation Failure

     Software  products,   including  those  offered  by  the  Company,  contain
undetected errors or omissions. Software products, when implemented,  installed,
configured  and  customized,  may also fail to  perform  according  to  customer
expectations  due to the failure by the customer to properly  specify its system
requirements,  failure by the customer to properly  operate or interact with the
system,  operator error,  technical problems associated with the customer's host
system,  or the  resistance of the  customer's  workforce to the adoption of new
technology.  In addition,  software  products  may fail to perform  according to
expectations  due to the failure by the Company to properly design the system to
operate in the environment,  infrastructure or  communications  network in which
the product is to be used.  There can be no assurance  that,  despite testing by
the Company and by current and potential customers,  that the Company's products
will be  free of  errors  or  that  such  products  will  perform  according  to
expectations with respect to response time, ability to communicate over multiple
networks, scalability, stability and ease of use. Such errors and failures could
result in loss of or delay in market acceptance of the Company's  products,  the
cancellation  of contracts or the  imposition of substantial  penalties,  any of
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  several
patent  applications in the United States and  internationally  covering various
aspects of its  technology,  and has  recently  been  granted a U.S.  patent for
certain aspects of Compose.  The earliest of these applications has been granted
and will be issued as a U.S. patent, and the remainder are pending a substantive
examination.  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,  the risk of  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  may 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
grows 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.


Dependence on Third Parties

     Certain  contracts  require the Company to supply,  coordinate  and install
third party products and services or employ subcontractors. 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



                                      -8-
<PAGE>

directed by a customer to use a particular product. The failure of a third party
supplier or  subcontractor  to provide a sufficient and reliable 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.  During the period covered by this report,
the relative  weakness of the U.S.  dollar  contributed to an increase in direct
costs as a percentage  of revenue,  as the majority of direct costs are incurred
in Canadian dollars.


Risks Associated with International Operations

     In the years ended December 31, 2002,  2001, and 2000 revenue  derived from
sales outside of North America  accounted for  approximately  31.0%,  23.8%, and
23.6%,  respectively,  of the  Company's  total  revenue.  In the three and nine
months ended  September  30, 2003  approximately  42.0% (2002 - 28.6%) and 47.1%
(2002 - 26.1%)  respectively  of the  Company's  total  revenue was derived from
sales outside North  America.  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  revenue 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
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.

     As a result of the  international  scope of the Company's  operations,  the
Company's  business is carried out under an  international  corporate  structure
that has been  designed in part to  optimize  tax  savings to the  Company.  The



                                      -9-
<PAGE>

effectiveness of this international  corporate structure from a tax perspective,
and the corresponding  risk of any negative financial impact on the Company from
the  imposition of tax  liability on the Company in the event such  structure is
not effective,  depends on the quality of the Company's internal  compliance and
implementation  procedures,  as  well as  external  regulatory  factors  such as
investigations,  audits and  decisions by tax officials and changes in tax laws,
regulations and policies.


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. See "Forward-Looking Statements."


Anti-Takeover Effects; Investment Canada Act

     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 (the "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.

     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 ("GAAP") as
applied in Canada. Canadian and U.S. GAAP differ in certain respects,  including
the  treatment  of certain  reorganization  costs,  and  acquired  research  and
development costs. As a result, the Company's Condensed  Consolidated  Financial
Statements  included in this  report may differ  materially  from the  financial
statements filed by the Company in Canada.


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



                                      -10-
<PAGE>

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-