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:

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

     |_|  the risk factors described in the Company's Annual report for the year
          ended  December  31,  2000  filed  with the  Securities  and  Exchange
          Commission; and

     |_|  the risk factors described below.

Risk Factors

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

Potential Fluctuations in Quarterly Operating Results

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

     The Company  believes that economic  development  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 services.  In addition,  current 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 factor have adversely  affected demand for
products  and  services  offered  by the  Company,  as certain  prospective  and
existing customers have delayed or deferred  purchasing  decisions.  The Company
believes  that these  factors will  continue to affect  demand for the Company's
products  and  services in 2001,  particularly  demand for  software and related
services.

     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 has 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


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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 effected. As
a result,  net income may be  disproportionately  affected  because a relatively
small amount of the Company's expenses vary with its revenue.  The Company is in
the process of  implementing  its e-Business  strategy,  which it anticipates it
will receive revenues on a month-to-month or per-transaction  basis. The Company
anticipates that costs associated with implementing its e-Business  strategy may
increase  the  Company's  e-Business  operating  expenses.  In  particular,  the
Company's  anticipates  that it will  be  required  to  increase  its  operating
expenses related its e-Business  strategy and to concentrate  resources on sales
and marketing efforts,  expanding its e-Business distribution channels,  funding
greater  levels of research and  development,  improving  its  customer  support
capabilities  and  increasing  its  administrative   resources  to  successfully
penetrate the market for its e-Business  products and services.  These increased
expenditures  may  not  be  offset  by  increased   revenue  until  the  Company
successfully  penetrates the market for its ASP-based  service.  There can be no
assurance  that the Company will  effectively  compete in this market or receive
sufficient revenues from its e-Business to offset such costs.

     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 its rate of 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 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,  2000,  1999 and
1998,  4.6%,  14.1%  and  27.7%,  respectively,  of the  Company's  revenue  was
attributable  to third party products and services.  For the three month periods
ended March 31, 2001 and 2000,  6.6% and 3.9%,  respectively,  of the  Company's
revenue was  attributable  to third party  products  and  services.  Because 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  an
enterprise-wide  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


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lengthy sales cycle ranging from several months to several years.  Consequently,
if sales  forecasted from a specific  customer for a particular  quarter are not
realized in that quarter,  the Company may not be able to generate  revenue from
alternative  sources in time to compensate for the shortfall.  The loss or delay
of a large  contract  could  have a  material  adverse  effect on the  Company's
quarterly financial condition, operating results and cash flows, which may cause
such results to be less than  analysts'  expectations.  Moreover,  to the extent
that significant contracts are entered into and required to be performed earlier
than  expected,  operating  results for  subsequent  quarters  may be  adversely
affected. In particular, the Company has recently experienced an increase in the
time necessary to complete the negotiation and signing of certain contracts with
some of its larger 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, 2000,
1999,  and 1998,  approximately  25.8%,  31.0% and 30.2%,  respectively,  of the
Company's  consolidated  revenue was  attributable  to five or fewer  customers.
During the years ended December 31, 2000, 1999 and 1998, one customer  accounted
for 5.8%, 10.1% and 8.5%,  respectively,  of the Company's consolidated revenue.
The  Company  believes  that  revenue  derived  from  current  and future  large
customers will continue to represent a significant portion of its total revenue.
See "Forward  Looking  Statements".  The inability of the Company to continue to
secure and maintain a sufficient number of large contracts would have a material
adverse effect on the Company's business, financial condition, operating results
and cash flows.  Moreover,  the  Company's  success will depend in part upon its
ability to obtain orders from new customers,  as well as the financial condition
and success of its customers and general economic conditions.

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

Potential Fluctuations in Backlog

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


<PAGE>

Exposure to General Economic Conditions

     The  Company  believes  that recent  unfavorable  economic  conditions  and
reduced  capital  spending by existing and  prospective  customers may adversely
affect  demand for the Company's  products and services in 2001. In  particular,
service providers,  utilities companies and telecommunications  companies in the
North America were impacted  during the later half of 2000 and the first quarter
of 2001. 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, and financial condition.

Seasonal Variations in Demand

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

Limited Operating History; History of Losses; Increased Expenses

     The Company commenced  operations in February 1993 and therefore has only a
limited operating history upon which an evaluation of its business and prospects
can be based. As of December 31, 2000, the Company had an accumulated deficit of
$9.7 million,  and as of March 31, 2001, the Company had an accumulated  deficit
of $15.8  million.  There can be no assurance  that, in the future,  the Company
will realize  revenue growth or be profitable on a quarterly or annual basis. In
addition,  the Company plans to increase its operating  expenses  related to the
implementation  of its  e-Business  strategy,  expand  its sales  and  marketing
operations,  continue to fund  significant  levels of research and  development,
broaden its  customer  support  capabilities  and  increase  its  administration
resources.  A relatively high percentage of the Company's  expenses is typically
fixed in the short term as 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  would be  materially
adversely affected. In addition, in view of the Company's recent revenue growth,
the rapidly evolving nature of its business and markets,  the Company's  limited
operating  history  and the  recent  acquisitions,  the  Company  believes  that
period-to-period comparisons of financial results are not necessarily meaningful
and should not be relied upon as an indication of future performance.

Integration of Acquisitions

     The  Company  may,  when  and  if the  opportunity  arises,  acquire  other
products,  technologies or businesses involved in activities,  or having product
lines, that are complementary to the Company's  business.  Acquisitions  involve
numerous risks,  including  difficulties in the  assimilation of the operations,
technologies  and  products  of  the  acquired   companies,   the  diversion  of
management's  attention  from other business  concerns,  risks  associated  with
entering  markets or  conducting  operations  with which the  Company  has no or
limited  direct prior  experience and the potential loss of key employees of the
acquired  company.  Moreover,  there can be no  assurance  that any  anticipated
benefits of an acquisition will be realized.  Future acquisitions by the Company
could  result in  potentially  dilutive  issuance's  of equity  securities,  the
incurrence of debt and contingent liabilities,  amortization of expenses related
to goodwill and other intangible assets and write-off of restructuring costs and
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,
Advantex ASP, eService Manager,  and from enhancement of existing products.  See
"Forward-Looking  StatementsThe  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


<PAGE>

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,  such as Advantex r7. The increased time
required for the initial  implementation  and field  testing of a new version of
software has resulted in delays in commencement of additional  installations  of
the Advantex r7 product.  MDSI completed its first r7  installation in the first
quarter of 2001, and anticipates it will complete an additional  installation of
the Advantex r7 product during the second quarter of 2001.

e-Business Development

     The Company  intends to provide access to its mobile  workforce  management
and wireless connectivity application software products over the Internet from a
wirelessly-enabled  ASP  site  on a  subscription  or "per  transaction"  basis.
Currently the Company  derives  e-Business  revenue from  consulting and hosting
services,  and  there  can  be  no  assurance  that  the  Company  will  realize
significant revenues from its new e-Business products.  The Company's e-Business
products  are  targeted  at  Internet  intermediaries  who offer a wide range of
services,  including  home  services  to  consumers  and small and  medium-sized
businesses. The Company anticipates that its operating expenses will increase as
the Company  establishes a comprehensive 7 day, 24 hour customer service support
center  to  provide  various  levels  of  customer  support  for its  e-Business
customers and increases its development and marketing efforts.  The Company does
not currently have any  e-Business  customers,  operating on a commercial  basis
although  field trials have  commenced,  and there can be no assurance  that the
Company will successfully  implement its e-Business strategy.  There also can be
no  assurance  that the  Company  will be able to compete  successfully  against
current  or  future  competitors  or  alliances  of  such  competitors,  or that
competitive  pressures faced by the Company will not materially adversely affect
its business, financial condition, operating results and cash flows.

     As part of MDSI's eBusiness strategy,  MDSI has made strategic  investments
in two private  companies that have created Internet  marketplaces.  At December
31, 2000, MDSI has made an aggregate investment of approximately $2.5 million in
such  companies.  During  the first  quarter  of 2001,  the  Company  recorded a
valuation  allowance  for the full costs of these  investments.  There can be no
assurance that such entities will be  commercially  successful or that MDSI will
be able to recover or realize a return on its investment in such companies.

Management of Growth and Reduction of Workforce

     Since its inception,  the Company has  experienced  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 nine employees in Canada in February 1993 to 564 employees located in
Canada,  the United  States and other  international  locations  at December 31,
2000. In addition, the recent acquisition of Connectria has increased the number
of products the Company supports and markets,  as well as the number of vertical
markets into which it sells  products.  The Company also  recently  expanded the
geographical  areas in which it operates.  The Company  believes that  continued
growth in the number and  complexity  of  products  and the number of  qualified
personnel will be required to maintain the Company's competitive  position.  The
Company's  rapid  growth,  coupled  with the rapid  evolution  of the  Company's
markets, has placed, and is likely to continue to place,  significant strains on
its management, administrative,  operational and financial resources, as well as
increased demands on its internal systems,  procedures and controls. On March 30
and April 26, 2001,  the Company  announced its intent 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.  As a result,  the
Company's  ability to manage its  continuing  operations  and future growth will
require  the  Company  to  continue  to improve  its  financial  and  management
controls,  reporting  systems and procedures on a timely basis, to implement new
systems as necessary and to effectively train, motivate and manage its sales and
technical personnel.  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.




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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.  The  Company  intends to hire a number of
additional  technical and sales personnel in the next year. See "Forward-Looking
Statements." Competition for qualified personnel is intense, and in light of the
Company's  recent  layoffs there can be no assurance that the Company can retain
its key  technical,  sales and  managerial  employees or that it will be able to
attract or retain  highly-qualified  technical and  managerial  personnel in the
future if demand for the Company's products and services  increase.  The loss of
the services of any of the Company's senior management or other key employees or
the inability to retain the necessary technical,  sales and managerial personnel
could have a material  adverse  effect upon the  Company's  business,  financial
condition, operating results and cash flows.

Dependence on Selected Vertical Markets

     Prior to 1996,  substantially all of the Company's revenue was derived from
the sale of products and services to  customers in the utility  market.  For the
years ended December 31, 1997 and 1996, the utility market accounted for greater
than 50% of the Company's revenue.  In those years, the Company sought to reduce
its  reliance  on the  utility  market by  developing  or  acquiring  compatible
products for organizations with mobile workforces in other vertical markets.  In
1998,  the  utility  market  accounted  for  greater  than 40% of the  Company's
revenue.  In  1999,  the  telecommunications  market  accounted  for  48% of the
Company's revenue.  In 2000 the  telecommunications  and cable markets accounted
for greater than 45% of the Company's  revenue.  The Company  anticipates that a
significant portion of its future revenue will be generated by sales of products
to the  telecommunications  market and that  recent  economic  developments  and
trends have  adversely  affected  and may  continue to affect  levels of capital
spending by companies in a variety of industries,  including  telecommunications
and  broadband.  See  "Forward-Looking  Statements." A decline in demand for the
Company's products in the utility or  telecommunications  markets as a result of
competition,  technological  change or otherwise,  would have a material adverse
effect on the Company's  business,  financial  condition,  operating results and
cash flows.  There can be no assurance that the Company will be able to continue
to diversify its product offerings or revenue base by entering into new vertical
markets.

Dependence on Marketing Relationships

     The  Company's  products are marketed by the  Company's  direct field sales
force as well as by resellers.  The Company's existing agreements with resellers
of its products 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
resellers  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 resellers,  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.

     The  Company  intends to market its  e-Business  products  through a direct
sales force, and through  marketing  relationships  with ASP's that are offering
end-to-end  suites of operating  solutions to MDSI's targeted  vertical markets,
wireless carriers and operators of Internet sites that aggregate smaller service
providers  for home  services.  The  Company  anticipates  that these  marketing
relationships will be nonexclusive and may be terminated by either party without
cause. There can be no assurance that the Company's e-Business solutions will be
compatible with these  marketing  partners or that they will not emphasize their
own or  third-party  products to the  detriment of the Company's  products.  The
Company's  failure to enter into  marketing  relationships,  the  failure of the
parties to perform  under these  agreements  or the  inability of the Company to
provide  effective  e-Business  solutions  successfully  could  have a  material
adverse effect on the Company's business, financial condition, operating results
and cash flows.


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Competition

     The  markets  for  mobile  workforce  management   applications,   wireless
connectivity  software,  mobile  data  network  equipment  and mobile  computing
devices are highly  competitive.  Numerous  factors  affect  MDSI's  competitive
position,   including  price,   product   features,   product   performance  and
reliability, ease of use, product scalability,  product availability on multiple
platforms  (server,  wireless  carrier,  and  mobile  workstation),  ability  to
implement mobile workforce management solutions domestically and internationally
while meeting customer schedules,  integration of products with other enterprise
solutions,  availability  of project  consulting  services  and  timely  ongoing
customer service and support.  Within these markets, there are a small number of
new ventures,  either small companies attempting to establish a business in this
market or large companies attempting to diversify their product offerings.  MDSI
expects such competition to intensify as acceptance and awareness of mobile data
communications and technology  continue.  See "Forward Looking  Statements".  In
addition,  a  small  number  of  MDSI's  potential  customers  develop  software
solutions internally,  thereby eliminating the requirement for suppliers such as
MDSI. Current or potential  competitors may establish  cooperative  arrangements
among themselves or with third parties to increase the ability of their products
to  address   customer   requirements.   Certain  of  MDSI's   competitors  have
substantially greater financial, technical, marketing and distribution resources
than  MDSI.  As a result,  they may be able to  respond  more  quickly to new or
emerging technologies and changing customer  requirements,  or to devote greater
resources to the development and distribution of existing products. There can be
no assurance that MDSI will be able to compete  successfully  against current or
future  competitors  or  alliances  of such  competitors,  or  that  competitive
pressures  faced by MDSI will not  materially  adversely  affect  its  business,
financial  condition,  operating results and cash flows. MDSI primarily competes
in the utility market with Utility Partners,  L.C.,  Alterra Corp., M3i Systems,
Inc. and iMedeon,  Inc. MDSI has several competitors in the  telecommunications,
cable and broadband markets,  a few of which have historical  relationships with
certain of the large telecommunications companies. MDSI's primary competitor for
telecommunications customers is Telcordia (formerly Bellcore), and more recently
ClickSoftware, Inc (formerly IET) and ViryaNet Ltd. MDSI's principal competitors
in the cable and broadband markets are Telcordia, MobileForce Technologies, Inc.
(formerly Ubiquinet, Inc.), Pointserve (through its merger with Brazen Software,
Inc.),  and CSG Systems  International.  In the general  field  service  market,
MDSI's principal  competitors are Astea  International  Inc. and Metrix Inc., in
addition  to several  larger  enterprise  software  companies,  such as Clarify,
Oracle, PeopleSoft and Siebel Systems, which offer less comprehensive solutions.
In the public safety market,  MDSI's  principal  competitors are Cerulean,  PRC,
Tiberon Systems and New World Systems.

     MDSI  will  face  competition  from a number of  existing  competitors  and
emerging Internet-based competitors in the eBusiness field. Existing competitors
including iMedeon, ClickSoftware, FieldCentrix and eDispatch. MDSI believes that
these competitors are primarily targeting  smaller-sized  businesses with an ASP
service  offering.  These  companies  offer a "basic"  scheduling  and  dispatch
system. New competitors  targeting Internet  intermediaries for the provision of
scheduling  and/or dispatch  software  services  include  Microsoft  WebAppoint,
TimeTrade,  MegaTribe and X-Time.  These competitors are specifically focused on
Internet-based  scheduling  and  dispatching  services  for the growing  general
services market, but do not currently offer a wireless solution. The competitive
landscape  that  MDSI's  products  face is complex  since this  market is in the
relatively  early stages of  development.  By  positioning  itself as a wireless
Internet  ASP,  MDSI will also face  competition  from  wireless  infrastructure
providers  such as Aether  Systems,  Inc. and Broadbeam  Inc.,  and finally from
managed IT services providers such as Exodus  Communications Inc. and Jamcracker
Inc.

Risk of Product Defects

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

Proprietary Technology

     The  Company's   success  is  dependent  on  its  ability  to  protect  its
intellectual  property rights. The Company relies principally upon a combination
of copyright, trademark, trade secret and patent laws, non-disclosure agreements
and other contractual  provisions to establish and maintain its rights. To date,
the  Company  has been  granted  trademark  registrations  or has  registrations
pending in the United  States,  Canada and the European  Community for the MDSI,
Advantex  and  Compose  marks.   Other  than  one  patent  pending  for  certain
technology,  MDSI has not sought patent protection for its products.  As part of
its confidentiality  procedures, the


<PAGE>

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

Dependence on Third Parties

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

Exchange Rate Fluctuations

     Because the Company's  reporting  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


<PAGE>

and exchange rate charges on the Company's reporting in its financial statements
of the results from such operations outside the United States.

Risks Associated with International Operations

     In the years ended December 31, 2000,  1999, and 1998 revenue  derived from
sales outside of North  America  accounted for  approximately  20.0%,  22.1% and
3.1%, respectively of the Company's total revenue. Because the Company's revenue
is dependent,  in large part, on significant  contracts with a limited number of
customers,  the percentage of the Company's  revenues that is derived from sales
outside of North America has  fluctuated,  and may continue to  fluctuate,  from
period-to-period.   The  Company   believes  that  its   continued   growth  and
profitability 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.

Product Liability

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

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

     The Company's directors,  officers and their respective affiliates,  in the
aggregate,  beneficially  own  approximately  24.6%  of the  outstanding  Common
Shares.  As a result,  these  shareholders,  if acting together,  may be able to
exercise  significant  influence  over the  Company and many  matters  requiring
shareholder  approval,  including  the  election of  directors  and  approval of
significant  corporate  transactions.  Such concentration of ownership may under
certain circumstances also have the effect of delaying,  deferring or preventing
a change in control of the Company.

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

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

     In December 1998, the Company implemented a stock rights plan (the "Plan").
Pursuant to the Plan,  shareholders  of record on December  17, 1998  received a
dividend of one right to purchase, for CDN$140, one Common Share of the Company.
The rights are  attached  to the  Company's  Common  Shares and will also become


<PAGE>

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

     As a result of being a reporting issuer in certain provinces of Canada, the
Company is required to file certain  reports in such  jurisdictions.  As part of
such reports, the Company is required to file consolidated  financial statements
prepared in accordance with generally accepted accounting  principles as applied
in Canada  ("Canadian  GAAP").  Canadian and US GAAP differ in certain respects,
including the treatment of certain  reorganization  costs, acquired research and
development  costs,  and treatment of business  combinations.  As a result,  the
Company's  Consolidated  Financial Statements included in this report 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's
attention  and  resources,  which  would have a material  adverse  effect on the
Company's business, financial condition, operating results and cash flows.