EXHIBT 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,  2003  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.



Any  Failure to Obtain  Securityholder  or Court  Approval,  or to Meet or Waive
Closing  Conditions May Prevent the Transaction with @Road From Being Completed,
Which May Adversely Affect the Company's Financial Position and Share Price

     The completion of the transaction  pursuant to which At Road Inc. ("@Road")
through its  indirect  wholly-owned  subsidiary,  Orion  Exchangeco,  Ltd.,  has
proposed  to acquire all the  outstanding  shares of the Company is subject to a
number of risks,  including that the Company's  securityholders will not approve
the transaction, that the Supreme Court of British Columbia will not approve the
transaction,  that the  Company  will be unable to satisfy or obtain a waiver of
other conditions  precedent,  including the continued  accuracy of the Company's
representations  and  warranties  in the  arrangement  agreement  and receipt of
certain third party consents. The arrangement agreement also contains conditions
in favor of @Road that include the Company maintaining net working capital of at
least $6,500,000,  the Company being in compliance in all material respects with
its  covenants  under the  agreement and that the holders of not more than 5% of
the Company's issued and outstanding  common shares shall have exercised and not
withdrawn dissent rights in relation to the transaction. Any failure to complete
the transaction may adversely impact the Company's share price.

     On  the  occurrence  of  certain  events,  @Road  will  be  entitled  to  a
termination  fee  of  $4.0  million  from  the  Company.  These  events  include
circumstances where (i) the Company's Board of Directors has withdrawn, modified
or changed  in a manner  adverse to @Road its  recommendation  to the  Company's
shareholders  in  favor  of the  proposed  transaction,  or (ii)  the  Board  of
Directors has  supported a competing  transaction,  or (iii) the Company  enters
into a letter or intent or similar document  regarding a competing  transaction,
or  (iv)  the  Company   breaches  its  agreement   not  to  solicit   competing
transactions,  or (v) a competing tender or exchange offer is made and the Board
of Directors fails to timely recommend  rejection of the offer. The Company will
be  required to pay @Road a  termination  fee of $3.1  million if the  Company's
security holders do not approve the transaction, and prior to termination of the
agreement  with  @Road a  competing  offer is  announced,  and  within 12 months
following the termination of the agreement with @Road, the Company consummates a
competing  transaction or enters into an agreement for a competing  transaction.
In no event will more than one termination fee be payable. If the Company



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becomes obligated to pay the termination fee, it must pay the termination fee in
immediately available funds and, generally, within one business day of demand by
@Road.

     Any  requirement  to pay the $4.0 million or $3.1 million  termination  fee
would adversely impact the Company's cash and cash equivalents and the Company's
financial  position and could impact the  Company's  ability to fund its current
level of operations.  If the Company is required to pay the termination fee, the
Company may be required to or may elect to borrow  against its existing  line of
credit,  raise additional capital through debt or equity  financings,  or reduce
operating  expenditures in order to pay the termination fee or to strengthen the
Company's cash position after such payment.


Completion of the @Road Transaction May Be Met With  Unfavourable  Reaction From
the Company's and @Road's Partners, Customers or Key Employees

     The Company's and @Road's current or prospective  business partners,  joint
venture partners,  service or equipment  suppliers or customers may, in response
to the announcement or completion of the proposed acquisition by @Road, delay or
cancel purchasing  decisions or decisions relating to joint ventures,  contracts
or other  business  alliances.  There can be no assurance  that there will be no
delay or  cancellation  by these  parties,  any of which  could  have a material
adverse  effect on the  business of either or both  companies  and the  combined
company following the transaction.  In addition, key employees of both companies
may feel that the proposed  transaction poses  uncertainties  that cause them to
leave the company, which could have a material adverse effect on the business of
either or both companies and the combined company.


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,  economic conditions
and  developments  in the  energy  markets  have had an  adverse  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.  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  are likely to  continue to affect
demand for the Company's products and services in 2004,  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



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certain   contracts   have  caused  delays  in   recognition   of  revenue  and,
consequently,  unanticipated  fluctuations in quarterly results. 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,  2003,  2002 and
2001,  9.5%,  6.5%,  and  5.5%  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 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



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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, 2003,
2002, and 2001,  approximately  44.3%,  29.1%,  and 33.2%  respectively,  of the
Company's  consolidated  revenue was  attributable  to five or fewer  customers.
During the year ended December 31, 2003,  TELKOM South Africa Limited  accounted
for 18.0% of the  Company's  consolidated  revenue and Transco PLC accounted for
17.1% of the Company's consolidated revenue.  During the year ended December 31,
2002  TELKOM  South  Africa  accounted  for 9.1% of the  Company's  consolidated
revenue.  During the year ended December 31, 2001,  eircom P.L.C.  accounted for
11.6% 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 man days incurred  compared to total man days
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
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 volatile 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 2004.  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


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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 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 March 31,  2004,  the  Company  had an  accumulated  deficit of $29.6
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 allocate 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.

     While it is expected that the Company's  combination with @Road will result
in synergies,  which in turn will result in the  Company's and @Road's  improved
financial  performance,  there is no guarantee that the Company or @Road will be
profitable in the future.


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 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



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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.


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 330  employees
located  in Canada,  the United  States  and other  international  locations  at
December 31, 2003. The Company has also expanded the geographical areas in which
it operates.  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  performance  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

     Since its inception,  substantially  all of the Company's  revenue has been
derived  from the sale of products  and  services to  customers  in the utility,
telecommunications  and cable/broadband  markets. The Company anticipates that a
significant  portion of its revenue  will  continue to be  generated by sales of
products and services to these  markets.  Demand for the  Company's  services in
these  markets has  fluctuated  and is likely to  fluctuate  in the  future.  In
additions,  the Company  believes 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 diversify  its product  offerings or
revenue base by entering  into new vertical  markets or continue to earn revenue
in current markets.



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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 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
workforce  management solutions 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., CGI Group Inc. (via its acquisition of Cognicase, Inc., owner of
MDSI competitor M3i Systems, Inc.),  Intergraph Corporation,  Axiom Corporation,
Oracle  Corporation,  Itron Inc.  (via its  acquisition  of e-Mobile  Data Inc.)
a.p.solve  Limited 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 include ClickSoftware,  Inc., ViryaNet Ltd., which
the  Company  mostly  sees  competing  for  small  accounts,  and more  recently
Accenture FFE. 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 largely 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


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<PAGE>

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 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.


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



                                       8
<PAGE>

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
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 or
MDSI 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 has entered 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  changes  on the
Company's  reporting  in its  financial  statements  of the  results  from  such
operations outside the United States.  During 2003, 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, 2003,  2002, and 2001 revenue  derived from
sales outside of North America  accounted for  approximately  44.5%,  30.9%, and
23.9%,  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



                                       9
<PAGE>

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


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 shareholder  rights plan (the
"Plan").  The Plan had a 5-year  term and was  subsequently  renewed in December
2003 for a further 5-year term.  Pursuant to the renewed Plan,  shareholders  of
record on December 17, 2003  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  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 Plan 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.
Pursuant to regulatory



                                       10
<PAGE>

requirements, the renewed Plan must be approved by the Company's shareholders at
a meeting to be held 6 months of implementation of the renewed Plan.

     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 US GAAP differ in certain  respects,  including
the treatment of certain reorganization costs, acquired research and development
costs,  and  the  expensing  of  stock  options.  As  a  result,  the  Company's
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
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