EXHIBIT 99.1


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

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

     When evaluating MDSI's business, you should consider:

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

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

     o    the risk factors described below.

                                  RISK FACTORS

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

Potential Fluctuations in Quarterly Operating Results

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

     The  Company  believes  that the events of  September  11,  2001 and recent
economic  developments  and trends have  adversely  affected and may continue to
affect  levels of capital  spending  by  companies  in a variety of  industries,
including  companies  in the  vertical  markets  that the Company  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  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.  The Company believes that these
factors will continue to affect demand for the Company's  products and services,
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


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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.  In the most recent  quarter,  the Company's
revenue has declined  compared to the same period in 2000. These recent declines
have resulted from an economic  slow down in the vertical  industries  served by
the Company.  It is likely that in some future  quarter the Company's  operating
results will be below the  expectations of public market analysts and investors.
See "Forward  Looking  Statements".  In such event,  the 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 September 30, 2001 and 2000, 2.3% and 6.2%, 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.



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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 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,



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<PAGE>

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 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 and 2002.  In
particular,   service  providers,  utilities  companies  and  telecommunications
companies in the North America were  impacted  during the later half of 2000 and
the first nine months of 2001. The September 11, 2001 terrorist  attacks and the
resulting slow down in the U.S.  economy is expected to further delay purchasing
and implementation  decisions.  If the economic  conditions in the United States
and Canada worsen or if a wider or global economic slowdown occurs,  the Company
may experience reduced revenues,  increased costs, reduced margins and increased
risks associated with the collection of customer  receivables,  any of which may
have a material adverse impact on its business, operating results, 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  September  30, 2001,  the Company had an  accumulated
deficit of $22.1  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 hosting and IT services 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.



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New Product Development

     The Company  expects that a significant  portion of its future revenue will
be derived from the sale of newly introduced  products,  including  Advantex r7,
and from enhancement of existing products. See "Forward-Looking Statements". The
Company's  success  will  depend in part upon its ability to enhance its current
products on a timely and  cost-effective  basis and to develop new products that
meet  changing  market  conditions,   including  changing  customer  needs,  new
competitive product offerings and enhanced technology. There can be no assurance
that the Company will be successful in developing  and marketing on a timely and
cost-effective basis new products and enhancements that respond to such changing
market conditions.  If the Company is unable to anticipate or adequately respond
on a timely or cost-effective  basis to changing market  conditions,  to develop
new software products and enhancements to existing  products,  to correct errors
on a timely basis or to complete  products  currently under  development,  or if
such  new  products  or  enhancements  do not  achieve  market  acceptance,  the
Company's business, financial condition,  operating results and cash flows could
be  materially  adversely  affected.  In light of the  difficulties  inherent in
software development,  the Company expects that it will experience delays in the
completion and introduction of new software  products,  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  completed  five  additional
installation  of the Advantex r7 product during the second and third quarters of
2001.  MDSI  anticipates  that  it will  complete  additional  installations  of
Advantex r7 through the balance of 2001.

     As part of MDSI's e-Business strategy,  MDSI had 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.

System Failures Could Lead to Significant Costs

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



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Management of Growth and Reduction of Workforce

     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 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

     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.  If
the  Company  resumes  its  growth  in future  periods,  such  growth  may place
significant 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.  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.



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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 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.

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



                                      -7-
<PAGE>

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

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



                                      -8-
<PAGE>

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  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.



                                      -9-
<PAGE>

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

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

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



                                      -10-
<PAGE>

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.