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:

| | all of the
information in this quarterly report on Form 10-QSB;
|- | ---------------------------------------------------------------

| | the  risk
factors  described  in the  Company's  Form  10-KSB  filed  with  the
Securities and Exchange Commission on March 21, 2002; and
|- | -----------------------------------------------------------------------------------------------------------------------------------------

| | 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 in this 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 the quarterly report. You should not place undue reliance on
forward-looking statements.

Limited Operating History;
History of Losses; Increased Expenses

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 $3,020,704 and $3,010,031 in the
years ended December 31, 2001 and December 31, 2000, respectively and incurred
net losses of $2,797,374 and $927,774 in the six months ended June 30, 2002 and
June 30, 2001, 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. The Company plans to increase its operating expenses
to expand its sales and marketing operations, fund greater levels of research
and development, broaden its customer support capabilities and increase its
administration resources. 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, 2001 Consolidated 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.

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 and
ID-2000. 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

1

---

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 three (3) to nine (9) 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 intends to hire a number of additional technical
and sales personnel. See Note Regarding Forward-Looking Statements.
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 Andy Amanovich, the Companys Chief
Technology Officer, and David Lutes, the Companys Chief Engineer, the
Company does not currently maintain key man insurance for any senior
management or other key employees.

2

---

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 arrest and
booking systems, and facial recognition software 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.

The Company primarily
competes in the arrest and booking systems market with ImageWare Software, Smith
& Wesson and Spillman. The Companys primary competitors in the facial
recognition software market with Miros (Trueface), Viisage Technology (Viisage
Gallery) and Visionics (FaceIt).

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.

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

3

---

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.

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.

4

---

Directors' and Officers'
Involvement 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.

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

The Company recently
entered a strategic alliance agreement with Sanyo Semiconductor Company and
Intacta Technologies Inc. to form Zixsys Inc. (formerly known as SecurityART
Inc.)., an entity that 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. There can be no assurance that this relationship or the
integration of these technologies will prove to be successful in the future or
will result in any material revenue for the Company.

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 (TSX) 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, 2001. 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.

5

---