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,  the  Company  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 the Company's business, you should consider:

o    all of the information in this quarterly report on Form 10-QSB;
o    the risk  factors  described  in the  Company's  Form 10-KSB filed with the
     Securities and Exchange Commission on March 31, 2003; and
o    the risk factors described below.

                                  RISK FACTORS

Although  the  Company   believes  that  the   expectations   reflected  in  its
forward-looking  statements are reasonable,  the Company cannot guarantee future
results, levels of activity, performance or achievements or other future events.
Moreover,  neither the Company nor anyone else  assumes  responsibility  for the
accuracy or completeness of forward-looking  statements. You should consider the
Company's forward-looking  statements in light of the following risk factors and
other  information  contained  in the  quarterly  report.  If  any of the  risks
described  below  occurs,  the  Company's  business,  results of  operation  and
financial  condition  could differ from those  projected in its  forward-looking
statements.  The  Company is under no duty to update any of its  forward-looking
statements after the date of this quarterly  report.  You should not place undue
reliance on forward-looking statements.

Limited Operating History; History of Losses

The  Company  commenced  operations  in March  1998 and,  therefore,  has only a
limited operating history upon which an evaluation of its business and prospects
can be based. The Company and its predecessors incurred net losses of $6,951,393
and  $3,020,704  in the years ended  December  31, 2002 and  December  31, 2001,
respectively  and incurred net losses of $620,431  and  $2,405,532  in the three
months  ended June 30,  2003 and June 30,  2002,  respectively.  The Company has
never been  profitable  and there can be no assurance  that, in the future,  the
Company will be profitable on a quarterly or annual basis.

In view of the rapidly evolving nature of the Company's business and markets and
limited   operating   history,   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.

The Auditors'  Report on the Company's  December 31, 2002  Financial  Statements
includes  additional  comments by the auditor on Canada-United  States reporting
differences  that indicate the financial  statements  are affected by conditions
and events that cast substantial doubt on the Company's ability to continue as a
going  concern.  The financial  statements do not include any  adjustments  that
might result from the outcome of this uncertainty.

Need for Additional Financing

The Company will be required to seek additional financing to fund its operations
during the  remainder  of the 2003 fiscal year.  There is no assurance  that the
Company will be able to secure financing or that such financing will be obtained
on terms favorable to the Company.  Failure to obtain  adequate  financing could
result in  significant  delays in  development of new products and a substantial
curtailment of Imagis' operations.


<PAGE>


New Product Development

The Company  expects that a  significant  portion of its future  revenue will be
derived  from the sale of newly  introduced  products  and from  enhancement  of
existing products,  such as CABS, ID-2000, and ChildBase.  The Company's success
will depend,  in part,  upon its ability to enhance its current  products and to
install such products in end-user  applications  on a timely and  cost-effective
basis.  In addition,  the Company must 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.

Lengthy Sales Cycles

The  purchase  of  a  computerized   arrest  and  booking  system  is  often  an
enterprise-wide  decision  for  prospective  customers  and requires the Company
(directly or through its business  partners) 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.  In
addition,  an installation  generally  requires  approval of a governmental body
such as municipal,  county or state  government,  which can be a  time-intensive
process and  require  months  before a decision  to be made.  Due in part to the
significant  impact  that the  application  of CABS 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
six (6) to twelve (12) months.  Consequently,  if sales forecast 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.

Dependence on a Small Number of Customers

The Company  derives a substantial  portion of its  revenues,  and it expects to
continue to derive a  substantial  portion of its  revenues in the near  future,
from  sales to a  limited  number of  customers.  Unless  and until the  Company
further  diversifies  and expands its customer base, the Company's  success will
depend significantly upon the timing and size of future purchase orders, if any,
from its largest  customers,  as well as their product  requirements,  financial
situation,  and, in particular,  the successful deployment of services using the
Company's products. The loss of any one or more of these customers,  significant
changes in their product requirements, delays of significant orders could have a
material  adverse  affect upon the  Company's  business,  operating  results and
financial condition.

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 may need to hire a number of
technical and sales  personnel.  Competition for such personnel is intense,  and
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.

The loss of the services of any of the Company's senior  management or other key
employees or the inability to attract and retain the necessary technical,  sales
and managerial personnel could have a material adverse effect upon its business,
financial condition, operating results and cash flows. With the exception of its
President and Chief Executive Officer and two software  developers,  the Company
does not  currently  maintain "key man"  insurance for any senior  management or
other key employees.


<PAGE>


Dependence on Marketing Relationships

The Company's  products are  primarily  marketed by its business  partners.  The
Company's existing agreements with business partners are nonexclusive and may be
terminated by either party without cause. Such  organizations are not within the
control of the Company,  are not obligated to purchase products from the Company
and may also  represent and sell competing  products.  There can be no assurance
that the Company's existing business partners will continue to provide the level
of services and technical  support  necessary to provide a complete  solution to
its 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 business partners,
the failure of such parties to perform under  agreements with the Company or the
inability of the Company to attract and retain new business 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.

Additionally,  with  respect to most sales,  the Company  supplies  products and
services  to a  customer  through  a  third-party  supplier  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
third-party  supplier  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.

Competition

The  markets  for face and image  recognition  systems  and arrest  and  booking
systems  are  highly   competitive.   Numerous   factors  affect  the  Company's
competitive  position,  including supplier  competency,  product  functionality,
performance and reliability of technology,  depth and experience in distribution
and operations, ease of implementation,  rapid deployment,  customer service and
price.

Certain of the  Company's  competitors  have  substantially  greater  financial,
technical,  marketing and distribution  resources than the Company. 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 the Company will be able to compete  successfully against current or future
competitors  or alliances of such  competitors,  or that  competitive  pressures
faced  by it will  not  materially  adversely  affect  its  business,  financial
condition,  operating  results  and cash  flows.  See also  "Item 1 - Business -
Competition".

Proprietary Technology

The  Company's  success  will be  dependent  upon its  ability  to  protect  its
intellectual  property rights. The Company relies principally upon a combination
of  copyright  and  trade  secret  laws,  non-disclosure  agreements  and  other
contractual  provisions to establish  and maintain its rights.  The source codes
for the Company's  products and  technology  are protected both as trade secrets
and as unpublished  copyrighted  works. To date, the Company has not applied for
any  patents  or  trademarks.  As part of its  confidentiality  procedures,  the
Company 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  its
proprietary technology is infringed upon by unauthorized third parties.


<PAGE>


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. 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 its  business,  financial
condition, operating results and cash flows.

Exchange Rate Fluctuations

Because the Company's  reporting currency is the Canadian dollar, its operations
outside Canada face additional risks,  including fluctuating currency values and
exchange rates, hard currency shortages and controls on currency  exchange.  The
Company does not  currently  engage in hedging  activities or enter into foreign
currency  contracts  in an attempt to reduce the  Company's  exposure to foreign
exchange  risks. In addition,  to the extent the Company has operations  outside
Canada,  it 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 Canada. Since such financial statements
are prepared utilizing  Canadian dollars as the basis for presentation,  results
from  operations  outside Canada  reported in the financial  statements  must be
restated  into  Canadian  dollars  utilizing the  appropriate  foreign  currency
exchange  rate,  thereby  subjecting  such results to the impact of currency and
exchange rate fluctuations.

Risk of Software Defects

Software products as complex as those offered by the Company  frequently contain
errors or defects,  especially  when first  introduced  or when new  versions or
enhancements are released.  Despite product testing, the Company has in the past
released products with defects in certain of its new versions after introduction
and  experienced  delays or lost revenue  during the period  required to correct
these errors.  The Company  regularly  introduces  new versions of its software.
There  can be no  assurance  that,  despite  testing  by  the  Company  and  its
customers,  defects and errors will not be found in existing  products or in new
products,  releases,  versions or enhancements  after commencement of commercial
shipments.  Any such  defects  and  errors  could  result  in  adverse  customer
reactions,  negative publicity  regarding the Company and its products,  harm to
the Company's reputation, loss or delay in market acceptance or required product
changes,  any of which could have a material  adverse  effect upon its business,
results of operations, financial condition 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.

Involvement of Directors and Officers in Other Projects

Many of the officers and directors of the Company  serve as directors,  officers
and/or employees of companies other than the Company. While the Company believes
that such officers and directors  will be devoting  adequate time to effectively
manage the Company, there can be no assurance that such other positions will not
negatively impact an officer's or director's duties for the Company.


<PAGE>


Strategic Alliance with OSI

The Company entered into a share  subscription  agreement and ancillary business
agreements with OSI, a diversified global developer,  manufacturer and seller of
optoelectronic based components and systems. The Company issued to OSI 1,166,667
common  shares and 291,667  warrants,  each warrant to purchase one common share
exercisable until July 8, 2004, at an exercise price of US$1.50 per share, at an
aggregate  purchase price of US$1,750,000.  The subscription  agreement provides
for an  adjustment  to the purchase  price  through the  issuance of  additional
shares if the Company issues common shares or other securities  convertible into
or exercisable  for common shares in another  financing  (with some  exceptions)
prior to July 9, 2003,  at a price less than  US$1.50  per share.  The  warrants
provide for a similar adjustment as to the number of warrants and exercise price
in the event of such an issuance. The Company agreed to designate one nominee of
OSI to its Board of Directors,  and OSI has designated Deepak Chopra,  its Chief
Executive Officer and a director,  who was subsequently  appointed as a director
of Imagis.  As a result of its  purchase  of the shares  and  warrants,  OSI has
become a significant shareholder of Imagis.

In connection  with OSI's purchase of shares and warrants,  on July 8, 2002, the
Company entered into the following additional agreements with OSI:

     i.   Product Development and Marketing Agreement ending July 8, 2004. Under
          this  agreement,  the Company formed a strategic  alliance with OSI to
          develop mutually agreed integrated airport and transportation security
          products using its facial recognition  technologies and OSI's security
          products.  The  Company  agreed  to  form an  internal  transportation
          security  group and commit a minimum of  US$125,000  to develop  these
          products and operate this group. Imagis will receive a royalty for all
          sales made by OSI of products developed under this agreement.

     ii.  Software Developer Services  Agreement.  Under this agreement,  Imagis
          agreed to engage,  and OSI agreed to make  available,  the services of
          software  engineers  and  equipment  in  OSI's  software   development
          facility  in  Hyderabad,  India.  The  Company  agreed to pay to OSI a
          minimum of US$125,000  during the term of the agreement  which expires
          on December 31, 2004.

     iii. Joint  Venture  Letter of Intent.  Under this  letter of intent,  upon
          OSI's establishment of a Brazilian entity to oversee marketing, sales,
          service and assembly and  marketing of OSI's  products,  in Brazil and
          the  establishment  of  an  office  in  Brazil,   Imagis  will  invest
          US$250,000 for a 20% equity ownership in that entity.

     iv.  the Company  has agreed  that,  subject to  regulatory  approval,  the
          exercise  price of the warrants  for the  purchase of 291,667  shares,
          issued in  conjunction  with the private  placement  to OSI  completed
          during 2002, will be reduced from US$1.50 (CDN$2.28) to the same price
          per share as that afforded the investors under the financing currently
          under negotiation.

     v.   the Company has agreed to pay OSI a management fee of US$250,000 on or
          before March 20, 2004

There  can be no  assurance  that the  relationships  with OSI will  prove to be
successful in the future or will result in any material revenue for the Company.

Strategic  Alliance with Sanyo  Semiconductor  Company and Intacta  Technologies
Inc. to form Zixsys. (formerly known as SecurityART Inc.)

During the second quarter of 2002, the Company entered into a strategic alliance
agreement with Sanyo Semiconductor  Company and Intacta to form Zixsys (formerly
known as  SecurityART  Inc.).  Zixsys will  integrate  the hardware and software
technologies of all three companies and thereafter  market security products for
use  in  airports,   buildings,   laboratories,   document   authentication  and
verification  for  passports,  visas  and ID cards.  During  the  quarter  ended
September 30, 2002 Imagis  acquired the rights to Intacta's  royalties'  payable
under the strategic alliance  agreement for consideration of US$150,000.  During
the fourth quarter of the year the Company  acquired all patents held by Intacta
outside  the  United  States  in  consideration  of  US$50,000.  There can be no
assurance that the  relationship  with Zixsys or the integration of technologies
with  Zixsys  will prove to be  successful  in the future or will  result in any
material revenue for the Company.


<PAGE>


Volatility of the Company's Share Price

The  Company's  share price has  fluctuated  substantially  since the  Company's
common shares were listed for trading on the TSX Venture  Exchange and quoted on
the  Over-The-Counter  Bulletin  Board  ("OTCBB").  The  trading  price  of  the
Company's  common shares is subject to significant  fluctuations  in response to
variations  in  quarterly  operating  results,  the gain or loss of  significant
orders,  announcements of technological innovations,  strategic alliances or new
products by the Company or its competitors, general conditions in the securities
industries and other events or factors. In addition, the stock market in general
has  experienced  extreme price and volume  fluctuations  that have affected the
market price for many companies in industries  similar or related to the Company
and have been unrelated to the operating  performance of these companies.  These
market  fluctuations  may  adversely  affect the market  price of the  Company's
common shares.

Certain  Shareholders  May  Exercise  Control  over  Matters  Voted  Upon by the
Company's Shareholders

Certain of the Company's  officers,  directors and entities  affiliated with the
Company  together  beneficially  owned a  significant  portion of the  Company's
outstanding  common shares as of December 31, 2002. While these  shareholders do
not hold a majority of the Company's  outstanding  common  shares,  they will be
able to  exercise  significant  influence  over  matters  requiring  shareholder
approval,  including  the  election of  directors  and the  approval of mergers,
consolidations and sales of the Company's assets. This may prevent or discourage
tender offers for the Company's common shares.