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 $4,440,741 and $1,576,530 in the nine months
ended September 30, 2002 and September 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.

Need for Additional
Financing

As indicated at year-end, management
continues to believe that based on current projections, the Company will be able to
sustain its operations through the remainder of the year with its present resources.
Thereafter, the Company will be required to seek additional financing to fund its
operations. 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.

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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 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 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,

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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.

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

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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.

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

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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.

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
OSI Systems Inc.(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, among other things, 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 principal 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. 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$250,000 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$250,000 during the term of the
          agreement, which expires on June 30, 2003, provided that if the aggregate amount
          paid to OSI on such date is less than US$250,000, the agreement can be extended
          for six months.
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|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.
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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. The adjustment to the purchase price of the securities
issued to OSI through the issuance of additional shares and warrants that may occur as a
result of future financings completed at a price less than US$1.50 may make these
financings less attractive to investors.

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

During the second quarter of this
year the Company entered into a strategic alliance agreement with Sanyo Semiconductor
Company and Intacta Technologies Inc. to form Zixsys Inc. (formerly known as SecurityART
Inc.). Zixys 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

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verification for passports, visas and
ID cards. During the quarter ended September 30, 2002 Imagis acquired the rights to
Intacta Technologies Inc.s royalties payable under the strategic alliance
agreement for consideration of US$150,000. There can be no assurance that the relationship
with Zixsys or the integration of technologies with Zixys 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.