SECURITIES AND EXCHANGE COMMISSION
                                WASHINGTON, D.C. 20549

                                       FORM 10-KSB

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

                           For the year ended December 31, 2001

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934

For the transition period from                to
                              ----------------  ----------------

                             Commission file number 000-21753

             SERVICE SYSTEMS INTERNATIONAL, LTD.
             Name of Small Business Issuer in Its Charter


       NEVADA                                            88-0263701
State of Incorporation                        I.R.S. Employer Identification No.

2nd FLOOR, 5763 - 203 A STREET
LANGLEY B.C., CANADA                                      V3A 1W7
Address of Principal Executive Offices                   Zip code

604-539-9398
Issuer's Telephone Number

Securities registered under Section 12(b) of the Act:

NONE

Securities registered under Section 12(g) of the Act:

COMMON STOCK, PAR VALUE $0.001 PER SHARE
Title of class

Check whether the issuer: (1) filed all reports required to be filed by
Section13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes /X/   No / /

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation SB is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendments to this Form 10-KSB (  )

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The issuer's revenues for its most recent fiscal year were $1,408,194.00

The aggregate market value of the voting and non voting common equity held by
non-affiliates of the issuer computed by reference to the price at which the
common equity was sold, or the average bid and asked price of such common
equity, on May 2, 2002 was $ 806,628. The number of shares outstanding of the
issuer's only class of Common Stock $.001 par value was 27,204,165 on May 2,
2002.

Transitional Small Business Disclosure Format (check one): Yes /X/ No / /

THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH SERVICE
SYSTEMS' FINANCIAL STATEMENTS AND NOTES THERETO. INFORMATION DISCUSSED HEREIN
MAY INCLUDE FORWARD-LOOKING STATEMENTS REGARDING FUTURE EVENTS OR THE FINANCIAL
PERFORMANCE OF SERVICE SYSTEMS, AND IS SUBJECT TO A NUMBER OF RISKS AND OTHER
FACTORS WHICH COULD CAUSE THE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
CONTAINED IN ANY FORWARD LOOKING STATEMENTS. AMONG SUCH FACTORS ARE: GENERAL
BUSINESS AND ECONOMIC CONDITIONS; CUSTOMER ACCEPTANCE AND DEMAND FOR SERVICE
SYSTEMS' PRODUCTS; SERVICE SYSTEMS' OVERALL ABILITY TO DESIGN, TEST AND
INTRODUCE NEW PRODUCTS ON A TIMELY BASIS; THE NATURE OF THE MARKETS ADDRESSED BY
SERVICE SYSTEMS' PRODUCTS; AND OTHER RISK FACTORS LISTED FORM TIME TO TIME IN
DOCUMENTS FILED BY SERVICE SYSTEMS WITH THE SEC.

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                                       PART I
                                       ------



ITEM 1.   DESCRIPTION OF BUSINESS

Vancouver-based Service Systems International, Ltd., through its wholly owned
subsidiary UV Systems Technology, Inc. ("UVS"), is the manufacturer and marketer
of state of the art ultraviolet disinfection systems for wastewater and potable
water. We are committed to a legacy of a healthy planet for future generations
through the development and commercialization of superior, cost-effective,
environmentally friendly, ultraviolet-based water treatment systems. Through
UVS, we hold two United States patents and five international patents on various
components of our ultraviolet disinfection system, including the flow reactor
chamber and flow balanced discharge weir.

Our executive offices were moved to 2nd Floor 6753 203A Street, Langley BC,
Canada, V3A 1W7 on January 26th, 2002 (formerly 11- Burbidge Street, Coquitlam,
BC, Canada, V3A 1W7. The telephone number is (604) 539-9398 and the facsimile
number is (604) 539-9383. References in this document to we, us, our, and the
company include its consolidated wholly-owned subsidiary, UV Systems Technology
Inc., unless the context otherwise requires. ULTRA GUARDR and "WAVY LINES &
DESIGNS" logo are our registered trademarks. Any other trademarks or trade names
referred to in this document are the property of their respective owners. All
monetary figures in the document are in United States dollars except Canadian
dollars which are indicated as "C$".

SERVICE SYSTEMS' BACKGROUND

Our company, Service Systems International Ltd., was incorporated in Nevada in
August 1990 and was inactive until eight Canadian and European individuals
acquired it in July 1995. The investor's intent was to develop the company into
the United States marketing arm of UV Systems Technology Inc., which was
incorporated in British Columbia, Canada in 1993. Our company issued 1,600,000
shares of its restricted common stock ("Common Stock") to certain individual
stockholders and one of our officers, as repayment of cash paid to others for
expenses related to the acquisition.

In an effort to further advance our marketing objective, in September 1995, we
entered into a marketing distribution agreement (embodying an earlier oral
agreement) with UV Systems Technology Inc., for marketing rights for the Ultra
GuardR system in eight Western states. In July 1996 we entered into a funding
agreement with UVS. Under the funding agreement, we supplied 50% of UVS'
operating funds for a six-month period. During this period, we structured an
agreement with two principals and certain minority shareholders and exchanged
common stock to acquire 50.69% of UVS. [ We also entered into an agreement with
the owners of the balance of the common stock (Working Opportunity Fund and MDS
Ventures Pacific, Inc., (49.39%) to complete the purchase UVS. Under this
agreement we were required to fully fund the operations of UVS and if we were
successful in raising C$2.0 million of operating capital, the remaining common
stock of UVS would have been purchased. The operating funds advanced by us would
be forfeited if the agreement was not concluded. This agreement was extended a
number of times through to July 15, 1998, after which it was allowed to lapse.]
Under subsequent agreement with the two principal shareholders dated February
14, 2000 (discussed in Management discussions), we acquired the remaining 49.31%
of common stock and all outstanding preferred stock of UVS.

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INDUSTRY BACKGROUND

The treatment of municipal wastewater and drinking water to eliminate
contaminants injurious to health and the environment is a worldwide concern.
World spending for drinking water purification and municipal wastewater
treatment only was an estimated $500 billion in the year 2000. The American
Waterworks Association estimated in a study that over the next 20 years, up to
$1 trillion dollars will be needed to upgrade the water structure in the United
States alone. A United States Environmental Protection Agency survey in 1984
reported that 15,378 municipal treatment plants were in operation in the United
States and projected the number to increase to approximately 21,000 by the year
2000. Of the 15,378 plants operating in 1984, only 107 were using or were being
constructed and designed for UV treatment. Some of these 15,378 plants had
limited or no disinfection. Many of the existing plants identified in 1984 will
be required to upgrade or be replaced to meet new United States environmental
standards, at an estimated cost of more than $180 billion. This, together with
the new treatment plants projected to be built, represents the United States
municipal wastewater treatment market for the ultraviolet treatment industry.

Treatment of municipal wastewater begins by settling or filtering out solid
wastes and removing chemicals, minerals, etc. After this treatment, the effluent
must be disinfected before discharge into a body of water. Five major factors
are used to decide which method of disinfection will be used. The first four
are: performance, operating cost, safety of method selected and verification by
pilot study. These relate to the disinfection process itself. The fifth factor
is potential adverse effects of the disinfectant on the environment. Currently,
the majority of treatment systems in the United States use chlorination. Other
treatment alternatives include ozonation and ultraviolet light.

The chlorination process can raise significant environmental concerns. As
reported in a 1986 U.S. Environmental Protection Agency study, MUNICIPAL
WASTEWATER DISINFECTION, even low chlorine residuals levels are very difficult
to control in receiving streams. The waste stream is influenced by factors such
as temperature, pH, alkalinity, suspended solids, chemical oxygen demand and
nitrogen containing compounds. All of these factors influence the effectiveness
of chlorine disinfection. The environmental impact includes the toxicity of
residual chlorine to plant and wildlife and the formation of potentially toxic
halogenated organic compounds. Many treatment plants use sulfur dioxide to
remove the chlorine from the treated water. This reduces the chlorine residual,
but probably does not affect halogenated organic compounds and adds its own
negative effect in the receiving water. Chlorine is extremely volatile
therefore; its safe transportation is difficult. Many states' regulations
require that a treatment facility using chlorine train its personnel in correct
handling and safety procedures. Popular Mechanics, in an article in its March
2001 issue entitled "Chlorine Quandary" reported that "chlorine is a chemical
whose time has passed. Persistent organic pollutants (POPs) threaten the health
and well-being in every region of the world". The United Nations Environmental
Program prepared a list of the 12 most globally threatening POPs. Each is a
chlorine-bearing compound known as organochlorine. In December, diplomats from
122 countries including the United States and Canada, met and a treaty that will
ban most POPs immediately and replace them with more environmentally benign
agents.

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Ozone, an unstable gas, is very effective as a bactericide and virucide.
However, in some instances, mutagenic and/or carcinogenic compounds have
resulted from ozone's use. Ozone treatment can be expensive; ozone must be
generated on-site in an expensive process. The ozonation process is relatively
complex to operate and maintain, and the equipment costs are high.

According to a 1996 study, ULTRAVIOLET DISINFECTION IN MUNICIPAL WATER
AND WASTEWATER, the number of UV disinfection systems in the United States will
increase from about 1,000 to about 3,000 between 1995 and 2000 and the market
will increase from $20 million annually to $100 million annually in the same
time period. By the year 2010, half of municipal disinfection systems are
expected to use technologies other than chlorine, and use of chlorine will be
almost eliminated by 2025. About 56% of chlorine alternative installations are
forecast to be UV systems.

Ultraviolet (UV) light treatment is a non-chemical process, which is very
effective as a bactericide and virucide. Ultraviolet light radiation at a
wavelength of 254 nanometers (nm) penetrates the cell wall and is absorbed by
the bacteria's nucleic acids. This prevents the replication of the cell.
Because UV is non-chemical, no toxic residues are produced. UV systems are
simple to operate and maintain, have no known adverse environmental impact, and
need minimal space. UV is a cost-effective alternative to chlorination and
ozonation.

The installations of UV disinfection systems have been slowed by a number of
factors. UV system lamps become fouled and require frequent cleaning. UV
equipment using low pressure, low intensity ultraviolet lamps requires a large
number of lamps when used in large treatment plants. UV lamps need to be
replaced about once a year. A large number of lamps equal: 1) high cleaning and
replacement labor costs, 2) high power cost, and 3) high lamp replacement costs.
Reduction in disinfection performance occurs due to contaminants such as a high
level of suspended solids, color, turbidity, and soluble organic matter in the
effluent. These contaminants affect the transmittance of the fluid and reduce
ability of the ultraviolet light to penetrate the fluid.

We believe that a UV system, such as that provided by our company that deals
with these issues will greatly enhance the marketing opportunities for UV
systems. Our UV system is environmentally friendly, efficient in operation and
cost-effective.

SERVICE SYSTEM'S STRATEGY

Service Systems is committed to a legacy of a healthy planet for future
generations through the development and commercialization of superior,
cost-effective, environmentally friendly, UV-based water treatment systems. Our
objective is to become a leading supplier of UV disinfection systems for
municipal wastewater and, eventually, for industrial process water and potable
water. We believe that the current, widespread use of chlorine as the treatment
method does not address its environmental effects. A superior, cost-effective
system for water disinfection is needed around the world. Our UV system answers
these needs. It is state of the art, proprietary, environmentally friendly,
efficient, and provides numerous opportunities for us to expand the scope of our
activity beyond municipal wastewater.

Key elements of our strategy are:

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TECHNOLOGICAL SUPERIORITY

We currently hold patents on the flow control reactor module and the
flow-balanced weir. These components are used in our treatment system. The
system also includes several proprietary features which include: 1) automatic
lamp cleaning to deal with the problem of lamp fouling, 2) automatic variability
of lamp intensity to match effluent flow to reduce power consumption, and 3)
automatic variability of lamp intensity to treat varied transmission. We intend
to continue technological development as a response to the changing needs and
applications of the water and wastewater treatment industry. In 2000, we
completed the commercialization of our new Ultra Flow Single Lamp Reactor (SLR)
Disinfection System for wastewater and drinking water. The Ultra Flow Single
Lamp Reactor (SLR) Disinfection System is an arrangement of autonomous single
lamp reactors in which each individual UV lamp will disinfect up to 1.0 million
gallons of wastewater per day. The SLR Disinfection System permits a Wastewater
Treatment Plant operator to use any number of SLRs to control the disinfection
in accordance with the capabilities of each single lamp.

EXPANSION OF PRODUCT LINES

Our UV technology can be applied to many treatment needs. These include
industrial process water disinfection, potable water disinfection, and other
fluid and air disinfection. Once we establish a base in the wastewater
disinfection market, we intend to expand our business into disinfection of
industrial process water. We also expect to pursue other business segments,
which show growth potential currently and for the future, such as potable water
disinfection, other fluid disinfecting and air disinfectionThese product lines
primarily address the disinfection needs for consumers and potable water
markets.

Recent testing of ultraviolet light as a means to deactivate Crypto and Giardia
in potable water has proven that at very low doses (below 20mWs/cm2), UV
treatment will meet quality standards acceptable for drinking water. Crypto and
Giardia cannot be deactivated using chlorine, and the alternative to UV is the
use of filtration or ozonation, both expensive alternatives to UV. Currently,
the US EPA has sanctioned additional testing of UV and has approved the use of
UV systems in potable water applications. We see expanded activity and requests
for proposals for UV in potable water applications. Recent purchasing activity
indicates that the use of UV( has received general acceptance) for potable water
application in North America and other regions of the world.

Process water disinfection is required in industries such as breweries, soft
drink producers, pharmaceutical, pulp and paper production, agriculture,
aquaculture, and marine life systems. Potable water treatment is needed for
drinking water from normal municipal supply, bottled water and disaster relief.
Disinfection is also needed in bottled and packaged juices and other fluids.

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ENHANCEMENT AND EXPANSION OF MARKETING EFFORTS.

Our product is marketed through a representative's network in North America and
in selected countries of the world. This network expanded significantly with
our signing on January 26, 2001 of a strategic alliance agreement with US
Filter's Wallace and Tiernan Products group to sell the Ultra Guard product
line. Through this strategic alliance, the US Filter agent network of over 100
companies will be actively selling our products in North, South and Central
America and the Caribbean. The process of expanding the representative's network
will continue in other selected countries of the world until we achieve full
direct user access in those countries.

Subject to available funding, when and if the opportunity arises, we intend to
acquire firms serving a similar industry.

EXPAND INTERNATIONAL SALES

While awareness of the need for water disinfection in North America is high,
that awareness in other parts of the world also has expanded and the market for
treatment and disinfection systems is expanding. With the compact and adaptable
nature of our treatment system, its patented and proprietary technology, and the
full-size production demonstration units (PDU), we believe we have a good
potential to expand into the international market. Given adequate resources, it
is our intention to pursue this market aggressively.

OUR PRODUCT

Service Systems manufactures and markets its UV disinfection system under its
registered trademark, Ultra Guard-Registered Trademark-. The Ultra Guard system
incorporates: 1) low-pressure, high intensity, high efficiency UV lamps, 2)
infinitely variable ultraviolet lamp controllers, 3) a patented high-performance
reactor module, 4) patented flow-balanced weirs, and 5) an automatic quartz
sheath cleaning system. The mechanical cleaning system has been developed and
has been introduced into the marketplace by demonstration on our full-scale
demonstration systems. Currently our product is used primarily for municipal
wastewater disinfection. However, our UV technology can be applied to many
treatment needs. These include industrial process water disinfection, potable
water disinfection, and other fluid and air disinfection. Once we establish a
base in the wastewater disinfection market, we intend to expand our business
into those areas.

UV disinfection systems have none of the safety issues with which chlorination
systems must deal. UV has the advantage of being relatively simple to operate
and maintain. UV disinfection is a physical, rather than chemical process, using
UV radiation to permeate bacterial and viral cell walls and prevent the cells
from replicating.


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In competing UV systems, after solid materials are removed, the effluent is
directed through banks of low pressure, low intensity or medium pressure, high
intensity UV light producing mercury vapor arc lamps. In order to disinfect a
liquid, the UV energy within the 240 - 280 nm wave band must be directed into
the liquid at a minimum intensity level. As the lamp emits radiation and the
fluid distance from the lamp increases, the intensity is reduced. Traditionally,
maximum exposure has been obtained by utilizing a very large number of low
pressure, low intensity lamps through which fluid passes. Murkier fluids require
more lamps and closer placement of the lamps in proximity to one another. Like
competing UV systems, our Ultra Guard system also exposes fluid to UV light for
a time sufficient to damage the reproductive ability of the microorganisms.
However, in the Ultra Guard disinfection process, fluid to be disinfected, 1)
passes through a diffuser plate to even the flow, 2) passes through our patented
flow single lamp reactor which surrounds the UV lamp, and 3) leaves the
disinfection channel through our patented flow-balanced discharge weir.

As effluent enters the disinfection channel, uneven fluid pressure creates
variances in the flow rate among the top, middle and bottom layers of effluent.
As a result of uneven fluid pressure, flow velocity varies, resulting in varying
rates of disinfection as these uneven flows pass the UV lamps. In our UV system,
the diffuser plate (a perforated plate) intercepts the incoming fluid and mixes
the varying velocity layers. This ensure uniform column flow before the fluid
enters the patented flow reaction chamber, permitting the lamp intensity to be
set for a consistent, predictable fluid flow rate.

After passing through the diffuser screen, the fluid enters our Ultra Guard
patented single lamp reactor chamber. Service Systems' competitors'
straight-through module systems require repeated and continuous exposure to
multiple banks of UV lights. In our UV system, the fluid oscillates as in moves
through the flow reactor. This ensures that all influent receives exposure at
the quartz sheath, the highest UV intensity point output of UV light from a
single lamp. The high flow velocity (about .5 seconds) through our reactor
provides an additional benefit. In other UV systems, slow fluid flow velocity
(about 8 seconds) through the lamps and higher temperature permit build up of
sedimentary deposit on the quartz sleeve surrounding each lamp, which reduces
the efficiency of their systems. Our reactor is designed to cause the fluid to
move to the quartz sleeve and closer to the UV light. Due to the fluid's high
velocity, sedimentary deposits (fouling) are removed off the quartz sleeve that
houses the UV lamp. The reduction of fouling permits the lamps to continue to
operate at their peak efficiency for longer periods of time. When fouling does
occur, our mechanical sleeve wiper incorporated into the single lamp reactor
automatically cleans the quartz sleeve. The combination of reduced sedimentation
and reduced fouling, and the automatic cleaning system, directly addresses one
of the major concerns about the use of UV disinfection systems. We believe that
our advanced method of fouling reduction will contribute to acceptance of our UV
systems.

As the effluent leaves the reactor module, it discharges from the disinfection
channel through the patented flow balanced weir. Most other UV systems use
conventional counterbalanced flap gates or other powered weirs to control flow

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and water levels in the disinfection channel. Incorrectly adjusted,
counterbalanced and other powered weirs, can cause surging of the fluid or
excessive fluid discharge, exposing the UV lamp to air and reducing system
efficiency. The Ultra Guard patented flow-balanced weir is based on the
principle of atmospheric pressure equalization. It will maintain correct channel
depth without moving gates, valves, special sensors or other methods requiring
operator involvement.
Our UV lamp remains fully submerged even during periods when there is zero flow
at the wastewater plant.

The flow volume into our disinfection system is measured by a flow meter mounted
within the wastewater plant in front of the disinfection system. A UV
transmission monitor calculates the transmission of the effluent and provides
continuous readings of the effluent transmission quality. These readings are fed
to our system microprocessor control, where they are used to select appropriate
power intensity settings for UV lamps. In multi-channel and multi-lamp
installations, powered channel gates and powered gates are mounted at each
single lamp reactor (SLR). These gates can be used to control the number of
operating UV lamps required for disinfection ( flow pacing the number of lamps
in operation to match the flow through the wastewater plant), direct the flow
between channels, control the number of SLRs in operation, and take a channel or
SLR off-line for routine maintenance or lamp replacement. Using data feedback
from UV intensity monitors reading UV intensity at each lamp, UV output for each
lamp can be increased or decreased to compensate for unusual quartz sheath
fouling, lamp aging, increased or decreased fluid flow, changes in fluid
transmission, or maintenance shutdown.

In our UV system, we use low-pressure, super high intensity, high efficiency
(504 watts as compared to our competitors' 100 watts UV lamps. These lamps emit
super high intensity light to penetrate murky effluent and reduce fecal coliform
or other pathogen counts to design specification levels. These lamps operate at
about 60% of the electrical power consumption of other low-pressure,
low-intensity lamps or low-pressure, high-intensity lamps and 12 to 20% of the
electrical power used in medium pressure lamps. Our Ultra Guard system also
requires about 1/30th of the lamps used in other low-pressure, low-intensity
lamps systems and 1/6th of the lamps used in low-pressure, high-intensity lamp
systems. Medium pressure lamp systems take 3 - 5 medium pressure lamps to equal
1 of our lamps. We also minimize replacement downtime for our lamps because our
lamps can be replaced quickly from above while the lamp module remains in the
channel.

Our UV disinfection system has a compact size. Providing for future expansion
can be easily accomplished by adding additional flow stopped mounting slots on
the cross channel plates holding the SLR. When plant flows exceed the plant's
capacity, additional SLRs are installed on the cross channel plate and the flow
stops are removed. In applications of more turbid than normal effluent or where
more stringent effluent discharge regulations must be met, a second, third or
fourth SLR may be installed immediately behind the first module. We have
designed the UV system to disinfect wastewater treatment plant flows up to any
size. Systems can be customized to suit specific site conditions and discharge
requirements. Our single lamp systems cost between $8,000 and $15,000; the cost
of systems requiring more lamps is a multiple of that, with volume discounts
available for larger sales. Typically a system requires one lamp for every 0.5
- 0.8 million gallons of wastewater disinfected.

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CUSTOMERS

Our customers to date have been municipal wastewater treatment facilities
projects, sold through our distributors and representatives, and semi-conductor
plants to which sales have been made through our Japanese agent. Ultra Guard
systems have been installed at four wastewater treatment facilities. The first
system was commissioned in February 1995 in Paraparaumu, New Zealand and has
been in operation since that time. Other specific sales and system locations are
detailed in Management Discussion and Analysis.

On January 26, 2001, we entered into a Strategic Alliance Agreement (and
associated agreements) with US Filter's Wallace and Tiernan Products group to
market our Ultra Guard UV System in North, South and Central America and the
Caribbean. See our further discussion below under "Sales and Marketing".

SALES AND MARKETING

Our Ultra Guard UV system has been marketed both domestically and
internationally by two marketing employees and through distributors and
representatives with specialized training in wastewater disinfection. As of
December 31, 2000, UVS had 1 distributor and 52 representatives, 41 in North
America and 11 internationally. Distributors purchase systems and components for
resale in a designated territory on an exclusive basis and provide full service
to customers. Some agreements require a distributor to purchase a minimum
amount of product each year. Distributorship agreements are performance related
and usually have a term of one year, including an automatic renewal clause.
Sales representatives act as agents for our Ultra Guard UV system and sell
these systems in designated territories. All distributorship contracts and sales
representatives contracts include a 30 day cancellation clause. Representatives
are paid a commission for sales made within their territories. The usual
contract is for a period of one year, with an automatic renewal clause.

On January 25, 2001, the Registrant ("Service Systems") and its wholly owned
subsidiary, UV Systems Technology, Inc., a British Columbia company ("UV
Systems"), entered into a Strategic Alliance Agreement and related agreements
with US Filter/Wallace & Tiernan, Inc., a Delaware corporation ("U.S.
Filter/Wallace &Tiernan"). In general, the Strategic Alliance Agreement
provides that U.S. Filter/Wallace & Tiernan will market, offer and sell Service
Systems' UltraGuard ultraviolet disinfection systems (the "Systems"), including
aftermarket components and spare parts, on an exclusive basis for ten years
throughout a territory consisting of North America, Central America (including
the Caribbean Zone) and South America (the "Territory"). Certain of the basic
terms of the Strategic Alliance Agreement and the related agreements are

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summarized below. The summaries are subject to and qualified by the agreements
themselves. Reference should be made to the agreements themselves to insure
adequate understanding.

Strategic Alliance Agreement. The parties to the Strategic Alliance Agreement
----------------------------
are Service Systems and UV Systems, and U.S. Filter/Wallace & Tiernan, Inc. The
term of the Strategic Alliance Agreement is ten years, subject to earlier
termination, including a termination for convenience by either party after three
years. If not terminated, the Agreement is subject to automatic one-year
renewals. During the term, U.S. Filter/Wallace & Tiernan will act as the
exclusive agent within the Territory for the marketing, sales and distribution
of the Systems, including aftermarket components and spare parts, for all
municipal (excluding aquatics) and industrial water and wastewater treatment
applications. Service Systems will refrain from any direct or indirect attempt
to market, sell or distribute Systems or components within the Territory. U.S.
Filter/Wallace & Tiernan will use its existing sales network and distribution
system to market, offer and distribute the Systems, and also will provide start
up assistance, ongoing service, and components, parts and spares installation
support. U.S. Filter/Wallace & Tiernan will cause certain companies related to
it to refrain from any direct or indirect attempt to market, sell or distribute
competitive products within the Territory.  Service Systems will sell
ultraviolet disinfection systems and components to U.S. Filter/Wallace &
Tiernan, and will provide related support services. The purchase price to be
paid by U.S. Filter/Wallace & Tiernan for each System or component manufactured
or supplied by Service Systems will be based upon Service Systems' list price
and applicable tax, less a negotiated deduction, and will be subject to further
adjustment depending upon the price at which U.S. Filter/Wallace & Tiernan sells
the System or component to the end user. U.S. Filter/Wallace & Tiernan will
make progress payments as the design and manufacture of the System progresses
through to delivery and final acceptance of the System by the end user. If
Service Systems is unable or unwilling to meet specified manufacture and supply
requirements, then U.S. Filter/Wallace & Tiernan may manufacture and supply
Systems and components. U.S. Filter/Wallace & Tiernan will pay a royalty
payment for each System or component, whether manufactured or supplied by
Service System or U.S. Filter/Wallace & Tiernan. The Strategic Alliance
Agreement also gives U.S. Filter/Wallace & Tiernan a right of first refusal with
respect to any distribution or marketing agreements, which Service Systems or UV
Systems may wish to make outside the Territory.

License Agreement. Service Systems, UV Systems and U.S. Filter/Wallace &
-----------------
Tiernan also entered into a License Agreement by which Service System and UV
Systems granted to U.S. Filter/Wallace & Tiernan certain exclusive rights in and
to patents, trademarks, trade secrets, copyrights, software and know-how related
to the sale, distribution, promotion, marketing or manufacture of Systems for
installation within the Territory. U.S. Filter/Wallace & Tiernan will pay a
royalty equal to 5% of the net sales price with respect to any System
manufactured or supplied by Service Systems/UV Systems and a royalty between 5%
and 10% with respect to any System manufactured or supplied by U.S.
Filter/Wallace & Tiernan. In connection with the License Agreement, the parties
have entered a Trust Agreement with Fort Knox Escrow Services, Inc., a Georgia
corporation, which provides that software and manufacturing instructions be
placed into escrow.

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Stock Purchase Warrants. Concurrently with the execution of the Strategic
------------------------
Alliance Agreement, Service Systems granted three Stock Purchase Warrants to
U.S. Filter/Wallace & Tiernan for an aggregate of 3,000,000 shares of Service
Systems common stock, as follows:

o   1,000,000 shares at an exercise price equal to the lower of $0.97 per
    share or the "Fair Market Value" of the common stock as of April 25, 2001;
o   1,000,000 shares at an exercise price of $1.00 per share; and
o   1,000,000 shares at an exercise price of $2.00 per share.

As a term of a subsequent Funding Agreement, the exercise prices on the
3,000,000 warrants was reduced to $0.24per share. In addition, 5,000,000 Class
A warrants (the Additional Warrants) may be issued if the full funding amount of
$785,000 (the "Target Level") is used by Service Systems. Should the funding
provided be less or more than the Target Level, the number of Additional
Warrants will be increased or decreased proportionately. The exercise price for
the Additional Warrants is also $0.24 per share. All warrants issued to USFilter
may be exercised until October 10, 2010.

If the Strategic Alliance Agreement is terminated for convenience, the warrants
will expire on the second anniversary of the effective date of the termination
for convenience. In addition, on January 25 of each year during the term of the
Strategic Alliance Agreement, Service Systems will grant to U.S. Filter/Wallace
& Tiernan additional warrants to purchase Service Systems common stock, based
upon the orders for Systems booked or significantly influenced by U.S.
Filter/Wallace & Tiernan during the preceding 12 months. Provided at least
US$10,000,000 of orders for Systems have been booked or influenced, each warrant
will permit U.S. Filter/Wallace & Tiernan to purchase 50,000 shares and also 500
shares for each US$10,000 of orders for Systems booked or significantly
influenced by U.S. Filter/Wallace & Tiernan in excess of US$10,000,000 during
the preceding 12 months.

Registration Rights Agreement. Service Systems and U.S. Filter/Wallace &
------------------------------
Tiernan also entered into a Registration Rights Agreement. The Registration
Rights Agreement entitles U.S. Filter/Wallace & Tiernan to demand registrations
(two long form registrations and, if available, short form registrations at
specified intervals) and piggyback registrations for the shares of Service
Systems common stock issued upon exercise of the warrants.

Security Agreement. Service Systems and UV Systems have granted to U.S.
------------------
Filter/Wallace & Tiernan a security interest in certain rights in and to their
patents, trademarks, trade secrets, copyrights, soft ware and know how, and
contracts related to the use or exploitation of these rights in connection with
the sale, distribution, promotion, marketing or manufacture of Systems for
installation within the Territory. The security interest secures an obligation
to make a $100,000 payment under the Strategic Alliance Agreement upon a
termination by convenience, or a termination, rejection, disclaiming or
repudiation of the License Agreement in connection with insolvency proceedings.

<PAGE>
Page 13

Service Systems believes the Strategic Alliance with US Filter/Wallace & Tiernan
will benefit Service Systems through a reduction of operating and working
capital, as US Filter/Wallace & Tiernan will be responsible for sales and
marketing expenses and after sales costs associated with start up, installation
support and ongoing service, among other things. Due to the operational cost
reduction, margin expectations remain consistent with those contemplated before
the signing of the Agreement.

With the signing of our Strategic Alliance Agreements and related agreements
with US Filter's Wallace and Tiernan Products Group on January 25, 2001, the
responsibility for marketing the Ultra Guard System within the Exclusive
Territory was transferred to US Filter. The exclusive territory consists of
North, South and Central America and the Caribbean. A joint determination was
made as to which of our agents were retained by US Filter, those not taken over
were terminated. US Filter's representative companies have the responsibility
for all our sales within the Exclusive Territory.

Through UVS, we will continue to recruit distributors and representatives
throughout the nonexclusive territory, during our attendance at international
exhibitions and through independent solicitations

We expect that our sales will be to diverse wastewater treatment plants
beginning primarily in the United States and Canada, and then expanding
world-wide. Other than for initial sales, no one end customer is likely to
account for more than 10% of our sales, averaged over a five-year period.
Because of the size of each project, one project may be expected to represent
more than 10% of sales in any given year. Our UV product target sales are to
communities of all population sizes.

As part of our sales effort we have in completed 3 production demonstration
units, which are available for demonstration activities. One PDU has been sold
to our North Carolina representative, Emory Wilson and Associates, and moves to
various wastewater plants in response to requests for testing. The two other
PDUs are currently located at the UV Systems plant facilities. Four additional
units are in process and will be completed, as demand for testing requires. US
Filter had committed the purchase of two PDUs of the current production to be
delivered in 2002. PDUs are fully functional Ultra Guard SLR systems complete
with all of the patented components and designed for IN SITU testing at
wastewater plants. They are compact in size and designed for placement next to
an existing outflow channel. A PDU can accommodate flow rates from 100 to 800
U.S. gallons per minute, about 8% of an average Wastewater Treatment Plants
flow. An inflow pump draws fluid from the plant's system discharge, at the flow
rate required for testing, so that the PDU operates, in effect, as part of the
treatment system. The testing period generally runs from two to three weeks in
duration and is operated by our technicians. If necessary, the staff at the
treatment plant or the site design engineer's staff can be trained to operate
the PDU.

<PAGE>
Page 14

We access marketing opportunities outside of US Filter's exclusive territory
through: 1) published articles in trade publications that are directed to
wastewater treatment, 2) the marketing efforts of our distributors and
representatives, 3) presentation of technical papers at industry meetings, and
4) meetings with design engineers and others involved in treatment plant design.
Videotapes and brochures are available for potential customers and for use by
distributors and representatives. Sales opportunities for our UV wastewater
treatment systems are made available through requests for proposal received from
public entities, and contractor and engineering firms acting for public
entities. These opportunities are for systems designed in response to specific
wastewater plant criteria. We actively respond to requests for proposal in the
United States and throughout the world and normally will provide two to four
quotations per week.

COMPETITION

Service Systems competes with other producers of UV equipment and other water
treatment technologies, many of which are more established and have
significantly greater resources.

Other major technologies currently in use include chlorination, chlorination
with de-chlorination using sulfur dioxide, sodium hypochlorite, and ozonation.
Competitive factors include system effectiveness, safety regulation costs,
operational cost and practicality of application, pilot study requirements and
potential adverse environmental effects. Competition in our company's primary
business of wastewater and process water treatment is primarily with producers
using chlorination disinfection systems and with other UV system manufacturers.
While we also compete with ozonation systems, ozonation is more commonly used
for drinking water purification.

Of all of the disinfection technologies in use, including UV, the most prevalent
is chlorination (or chlorination with de-chlorination using sulfur dioxide). The
most predominant treatment modalities in municipal wastewater and industrial
process water systems in the United States and world-wide are chlorine-based
systems. However, because of environmental concerns, and more recently safety
concerns, we expect the use of chlorine to decrease significantly over the next
three decades. Section 112(r) of the EPA Clean Air Act has recently been revised
to address safety issues of citizens in the surrounding area of wastewater
plants using hazardous chemicals, including chlorine. Each plant was required to
have a risk management plan in place by June 21, 1999. Some States also require
a state-level equivalent of the plan and the Occupational Safety and Health
Administration also requires a process safety management program. An industry
survey has forecasted that over half of chlorine alternative installations will
be UV by 2010. See "INDUSTRY BACKGROUND."

<PAGE>
Page 15

Our UV competitor's estimates respective shares of the North American market in
wastewater and process water are: 1) Trojan Technologies Inc., 41 %, 2)
PCI-Wedeco, 36%, 3) IDI Industries, Inc. 4%, 4) Aquionics, Inc, 3%, 5), and 6)
Others, 16%. Trojan Technologies, Inc. focuses on UV applications for use in
both the sewage wastewater and potable water industry. They are the largest
producer of a product (the medium pressure lamp UV4000) that directly competes
with the Ultra Guard UV system, in addition, they offer a low-pressure, high
intensity UV lamp system. We believe our system to be superior to Trojan's
technologically, because of our lower operational costs, our ease of expansion
and our lower number of lamps. Aquionics Inc. competes primarily in the potable
water and process industrial water sector using medium pressure UV lamps
characterized by their resultant high power consumption. IDI and PCI-Wedeco
sell UV systems of the low pressure, low intensity type, and recently introduced
low-pressure, high intensity UV lamp system for high quality wastewater
disinfection. These new UV systems will require from 5 to 10 lamps to equal one
UltraGuard lamp. Compared to competing systems, our UV systems are more compact
and use less land area, consume 40 to 60% less electrical power than used in low
pressure, low intensity and low-pressure, high intensity systems, and use 80 to
90% less electrical power than used in Trojan's UV4000. These factors result in
a lower life cycle operating cost for our systems compared to competitors. Our
systems can treat very poor quality effluents, have better hydraulic
performance, have automated lamp cleaning, and can be demonstrated using a
full-scale, single lamp unit (our PDU). Combining all of these factors as a
whole, we believe we can provide a substantially better and consistent quality
effluent discharge in terms of total fecal coliform, e-coli or other
microbiological concentrations at reduced capital and operating cost.

In competing in this marketplace, we must address the conservative nature of the
customer and our financial resources. Although we can demonstrate our systems'
superiority, our relative newness in the market and our minimal financial
resources have resulted in reluctance on the part of the customer to conclude an
acquisition of the Ultra Guard system. With the consummation of the US Filter
Strategic Alliance and the transfer of sales and after sales activities
responsibility to US Filter, we expect that these factors will have for the most
part been eliminated in US Filter's exclusive territory. - Refer to Risk
Factors

PATENTS AND TRADEMARKS

We hold patents on key components of our Ultra Guard system. Our UV
disinfection system reactor module was issued in 1996, is patented in the United
States, Canada and 11 European Countries. Our flow-balanced weir was patented in
the United States in 1995.

Patent protection on the lamps expired in 1999, but due to the technology and
the cost involved in manufacturing the lamp and the compatible electronics
needed to operate the lamps, we believe that the expiration of the patents
should not materially affect our business. With the patents we hold on other key
components in the Ultra Guard system, competing systems, even if they use our
lamps, would operate at about 50% of the capability of our system. The patents
on the other patented key components were recently issued in the United States
and will extend into the year 2018.

We also hold registered trademarks on "ULTRA GUARD" and on its "wavy lines and
design" logo in the United States and Canada.

<PAGE>
Page 16

REGULATORY MATTERS

Our business and manufacturing are conducted from British Columbia, Canada. We
are not subject to any special regulatory requirements above those that are
applicable to manufacturing businesses in general in Canada and the United
States. Environmental regulations that apply to the sewage industry are
specific to the effluent being delivered to the receiving waters. The wastewater
treatment plant must comply with these regulations. In the United States,
wastewater and process water treatment plants must comply with clean water
standards set by the Environmental Protection Agency under the authority of the
Clean Water Act and standards set by states and local communities. Through the
request for proposal (bidding process), any regulations are passed on to us in
the system design requirements. These requests for proposal detail the
specifications for the system, including the effectiveness required to meet any
regulatory requirements. Compliance with microbiological discharge standards is
determined by subsequent operation of the wastewater treatment plant and is
generally the responsibility of the plant, unless our treatment system failed to
comply with specifications for some reason (a problem that we take great effort
to avoid). It is possible that through the inaccuracy or inadequacy of request
for proposal specifications and if our potential liability is not indemnified,
we could become liable to third parties for environmental problems. We could be
required to comply with direct regulations by law or regulations enacted in the
future (including environmental laws). In these cases, our costs could
significantly increase.

We are not aware of any regulations that would adversely affect our ability to
market our system. The effectiveness of the Ultra Guard UV system enhances our
ability to respond to and comply with the applicable sections of the stringent
regulatory clean water standards included within requests for proposal.

In many jurisdictions, including the United States, wastewater treatment systems
require permits from environmental regulatory agencies. Delays in permitting
could cause delays in construction or usage of our systems by a customer. This
in turn could have a material adverse impact on our business. In addition, many
of our customers will rely on municipal financing for the purchase of our UV
systems. Sales to these customers may be adversely affected by delays in
obtaining, or the unavailability of, funds caused by budgetary constraints or
the bureaucratic process.

MANUFACTURING

The Ultra Guard systems are assembled at our Coquitlam facility. Components for
the systems are manufactured by a variety of Canadian, United States and
international suppliers. We obtain our UV lamps for the systems from a sole
supplier for each. To ensure against any interruption of supply should one of
these suppliers be unable or unwilling to provide the parts as required, we are
continuing the process of identifying and arranging for alternative sources for
these components.

RESEARCH AND DEVELOPMENT

Research and development are considered to be key components of our business
strategy. As of December 31, 2001, we had 10 employees collaborating on product
manufacturing and development activities, with a combined 100 years of related
experience. We also use lamp design and computer software consultants to assist
in product development decisions. During the current period, our focus has been
on the design and implementation of our previous research and development
efforts. Work on alternative sheath cleaning technology, including the use of
ultrasonic methods continues, with increased emphasis on systems automation.
Future efforts will focus on expanding and developing technology and equipment
for applications such as water treatment units for industrial processes, in
addition to sewage effluent disinfection. On a combined pro forma basis our
research and development expense , in fiscal 1998 was $264,282 in fiscal 1999
was $258,132, in fiscal 2000 was $591,811 and for fiscal 2001 it was $367,778.

<PAGE>
Page 17

EMPLOYEES

As of December 31, 2001, Service Systems had three part-time employees, and UV
Systems Technology, Inc had 11 full-time employees and 3 part-time employees.
The Service Systems' part-time employees were engaged in management. The UV
Systems' part-time employees were engaged in design and in office services. Of
the full-time employees, 2 employees are engaged in management, 2 employees were
engaged in sales and marketing, 2 are engaged in office services, 1 employee was
engaged in R & D and design, and 6 were engaged in production and manufacturing
of the Ultra Guard systems which have been sold. The company receiving the
benefit of consulting services, Service Systems or UV Systems Technology, pays
for the service.

RISK FACTORS

THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH
"SELECTED FINANCIAL DATA" AND SERVICE SYSTEMS' CONSOLIDATED FINANCIAL STATEMENTS
AND NOTES THERETO. INFORMATION DISCUSSED HEREIN MAY INCLUDE FORWARD-LOOKING
STATEMENTS REGARDING FUTURE EVENTS OR THE FUTURE FINANCIAL PERFORMANCE OF
SERVICE SYSTEMS, AND ARE SUBJECT TO A NUMBER OF RISKS AND OTHER FACTORS WHICH
COULD CAUSE THE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN ANY
FORWARD-LOOKING STATEMENTS. AMONG THESE FACTORS ARE: GENERAL BUSINESS AND
ECONOMIC CONDITIONS; CUSTOMER ACCEPTANCE AND DEMAND FOR SERVICE SYSTEMS'
PRODUCTS; SERVICE SYSTEMS' OVERALL ABILITY TO DESIGN, TEST AND INTRODUCE NEW
PRODUCTS ON A TIMELY BASIS; THE NATURE OF THE MARKETS ADDRESSED BY SERVICE
SYSTEMS' PRODUCTS; AND OTHER RISK FACTORS LISTED FROM TIME TO TIME IN DOCUMENTS
FILED BY SERVICE SYSTEMS WITH THE SEC.

WE ARE SUBJECT TO THE RISKS, EXPENSES, PROBLEMS AND DIFFICULTIES FREQUENTLY
ENCOUNTERED IN THE ESTABLISHMENT OF A MANUFACTURING BUSINESS, ESPECIALLY IN THE
CONTINUALLY EVOLVING, INTENSELY COMPETITIVE, WASTEWATER AND WATER TREATMENT
INDUSTRY. We have generated no profits to date and have a loss as of the end of
the December 31, 2000 fiscal year of $7,558,494. We cannot assure that we will
become profitable at any time in the foreseeable future.

SERVICE SYSTEMS COMPETES WITH WELL-ESTABLISHED WATER TREATMENT COMPANIES, MANY
OF WHICH HAVE FINANCIAL, TECHNOLOGICAL AND MARKETING RESOURCES SIGNIFICANTLY
GREATER THAN THOSE WE HAVE AVAILABLE. They may have established relationships
with customers or potential customers that afford them a competitive advantage.
Some of these competitors in the United States market include, Trojan
Technologies, Inc., PCI-Wedeco, IDI, Inc., and Aquionics, Inc. Although the
Ultra Guard system does provide us competitive technological and operational
advantages, we cannot assure that this advantage will continue. Moreover, we
cannot assure that our current UV technology may not be rendered less effective,
or obsolete by UV and other water treatment technologies developed by our
competitors. We may not be able to compete effectively in the current or future
markets competitive pressure may adversely affect our business, financial
condition or results of operations.

<PAGE>
Page 18

We may experience periods of limited working capital and may be expected to
require financing for working capital during those periods. The nature of our
business may be expected to include a normal lag time between the incurring of
operating expenses and the collection of contract receivables, which may be
expected to be due largely from governments when sales are made. In addition, we
are dependent on sales both to licensees, which are obligated to purchase agreed
upon system components we provide, and on awards of water treatment system
contracts for non-recurring projects. Many of our contracts may be expected to
include provision for hold back, entitling the other party to the contract to
withhold a specified portion of the payment for a given period of time until
after completion of a project. For these and other reasons, we may experience
periods of limited working capital and may be expected to require financing for
working capital during those periods. In addition, we will require financing
over and above our current resources to sustain our operations and expand our
marketing efforts. We may not be able to obtain the additional financing on a
timely basis, or on terms that are acceptable, or at all.

Sales on both an annual and quarterly basis are subject to fluctuations, which
are often beyond our control. Our sales of Ultra Guard systems to US Filter and
governmental entities may be expected to occur on an intermittent rather than
consistent basis as requests for proposal are issued and awards made.

In connection with the sale of our wastewater treatment systems, we expect to
enter into performance contracts, which can extend for more than a year.
Initially, we are required to bid most of these as fixed price contracts
incorporating all labor, materials, and other costs which we may incur in
performing the contract. To the extent that we underestimate those costs, or if
the cost of procuring a particular category of materials or services rises
substantially during the course of performance of a large contract, we could
experience reduced profitability or losses.

Environmental regulations that apply to the sewage industry are specific to the
effluent being delivered to the receiving waters. The wastewater treatment
plant, and our installed systems, must comply with these regulations. Our
business and manufacturing are conducted from British Columbia, Canada. We are
not currently subject to any special regulatory requirements above those that
are applicable to manufacturing businesses in general in, Canada and the United
States. Refer to REGULATORY MATTERS

We anticipate that Ultra Guard systems may be installed as replacement systems
for existing disinfection systems, especially chlorinated systems. The trend is
to phase out chlorinated systems because of their adverse environmental impact.
This potential business is dependent upon the availability of funding for
municipalities to replace or retrofit existing systems, which cannot be
predicted with any certainty.

Our systems contain state-of-the-art components that could be in short supply.
We cannot assure that we will continue to be able to obtain all of the
components we require or that the price of certain components in short supply
will not materially and adversely affect our business, financial condition or
results of operations. We are dependent upon third parties for the continuing
supply of these components. Two of these components, the lamps and the
controllers, are obtained from sole suppliers. We are in the process of
identifying alternative suppliers for these components; however, alternate
sources with the quality, efficiency and at a price we require may be difficult
to locate. Moreover, suppliers may discontinue or upgrade some of the
components incorporated into our systems. This could require that we redesign a
system to incorporate newer or alternative technology. We do not have contracts
that would assure availability and price of components to meet our short-term
requirements. Lack of timely availability of components could cause delays in
installation of the Ultra Guard system and affect our revenues during certain
periods. As well, this could lead to customer dissatisfaction. Limited
availability of components could also require premium payments for parts to make
installation deadlines and thus adversely affect our profit margin, or cause us
to increase our inventory of scarce parts and thus adversely affect our cash
flow.

<PAGE>
Page 19

Our success is largely dependent upon our President, Ken Fielding, and the Chief
Financial Officer, Secretary and Treasurer, John Gaetz. No employment agreements
are in place with either of these employees, nor do we carry key man insurance
with respect to them. Our continued growth and prosperity, our ability to
maintain our competitive position and our ability to attract and service new
business, depend to a large extent upon the ability to retain key employees and
to attract additional qualified personnel. Loss of the services of these
employees could have a material adverse effect on our business. We might not be
able to continue to retain or attract qualified personnel.

Our products are developed to meet certain existing and anticipated
environmental, performance and operational standards and guidelines. Changes
could cause us to incur significant expense to redesign or upgrade our system.
These standards and guidelines are continuing to develop and have been and are
subject to change, especially with respect to acceptable microbiological
discharge levels.

The Ultra Guard system might be subject to product liability or commercial
warranty claims. We do not have product liability insurance. Considering the
use of our systems in large-scale municipal and industrial water treatment
systems, the lack or insufficiency of product liability insurance could
materially adversely affect our financial condition and ability to do business.
We may not be able to obtain coverage at acceptable premiums that will be
adequate to protect us from liability.

Service Systems, through UVS, owns patents on its flow reactor chamber and
discharge weir, and manufactures and markets its products under those patents.
Issued patents could be infringed or additional patents that are applied for may
not be issued. The costs of prosecuting an infringement suit can be very
significant. If an infringement occurs, we may not be able to preserve our
exclusive rights to the patented technology or protect the rights. This could
have a material adverse effect on our business. We could potentially infringe on
patent, trademark, or copyrights owned by others, for which licenses may not be
available. The expenses of defending claims through the prosecution of
infringement actions vary and can be substantial. Some of our patented
technology, such as the flow reaction chamber, was developed as "work for hire"
and, as such, can be subject to claim by the individual(s) who developed it.

We have outstanding warrants and options that could negatively influence our
ability to raise additional equity capital in the future. To the extent that
these warrants and options to purchase our common stock are exercised, there
will be additional dilution in excess of that resulting from use of common
shares in earnings calculations. As of December 31, 2001, we had 21,276,235
vested warrants and options outstanding.

Our common stock is traded on the Electronic Bulletin Board, on the over the
counter market. While a public market currently exists for our common stock,
trading of relatively small blocks of stock can have a significant impact on the
price at which the stock is traded. In addition, the over the counter market
has experienced, and is likely to experience in the future, significant price
and volume fluctuations which could adversely affect the market price of the
common stock without regard to our operating performance. We believe factors
such as quarterly fluctuations in financial results, announcements of new
technologies impacting our systems, announcements by competitors or changes in
securities analysts' recommendations may cause the market price to fluctuate,
perhaps substantially. These fluctuations, as well as general economic
conditions, such as recessions or high interest rates, may adversely affect the
market price of our stock.

<PAGE>
Page 20

Future sales by existing shareholders could adversely affect the prevailing
market price of our common stock. As of December 31, 2001, we had 26,887,601of
common stock outstanding. Of these shares, approximately 12, 221,544 are now
eligible for sale in the public market without restriction pursuant to Rule
144(k) or Regulation S under the Securities Act.

Since our inception, we have not paid cash dividends on our common stock. Our
intention is to retain future earnings, if any, to provide funds for business
operations. Accordingly, we do not anticipate paying any cash dividends on our
common stock in the foreseeable future.

We have not held an annual meeting of shareholders since we became a reporting
company. Because of the cost involved and our limited financial resources, we
have not convened annual meetings of shareholders. Because we have not done so,
shareholders have not had the opportunity to vote on election of directors or
ratification of auditors, and to receive proxy statements. We plan to hold a
shareholders' meeting as soon as our financial resources permit us to do so.

ITEM 2.   DESCRIPTION OF PROPERTY

In March 2002, Service System's executive offices were relocated to 2nd Floor,
5763-203A Street, Langley, British Columbia. The premises have approx. 600
square feet of executive offices. The initial lease term was for a period of
one year and expires in March 2003. Insurance plans cover the contents in an
amount considered adequate in the industry (although no assurance can be given
that the amount will, in fact, be sufficient should a claim arise).

ITEM 3.   LEGAL PROCEEDINGS

On October 20, 1998 a suit was filed in the Supreme Court of British Columbia by
Thomas O'Flynn against Service Systems, Kenneth Fielding (Service Systems'
President and Director), and Charles P Nield (a former Director and Vice
President of the Company). O'Flynn alleges that in April of 1996, he purchased
shares of Service Systems' common stock based on a representation that they
would be free trading in 40 days of "the filing of a prospectus". He further
alleges that, in September of 1996, he purchased additional shares of common
stock based on the representation that the shares would be free trading within
40 days of the common stock becoming free trading. O'Flynn alleges that the
representation was a warranty and was incorrect. He further alleges that he
suffered a loss because the share price decreased while he was holding the
shares. He seeks damages for breach of warranty, negligence, misrepresentation
and breach of fiduciary duty. The amount claimed is not specified. Service
Systems filed an answer denying the claims and continues to actively defend the
suit. Examination for discovery of Charles P Nield was conducted in June 1999,
since then there has been no further activity.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Service Systems did not submit any matter to a vote of security holders during
the fiscal year covered by this report. Refer to Risk Factors.

<PAGE>
Page 21

                                        PART II

ITEM 5.   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Service System's common stock is traded in the over-the-counter market and is
listed on the Bulletin Board under the symbol "SVSY". The following table sets
forth for the periods indicated the high and low bid prices of our common stock
as reported by the Electronic Bulletin Board. The quotations reflect
inter-dealer prices, without retail mark-up, markdown or commission, and may not
represent actual transactions.

FISCAL YEAR 1998
   Quarter ended November 30, 1997        1.562     0.625
   Quarter ended February 28, 1998        0.687     0.281
   Quarter ended May 31, 1998             0.375     0.170
   Quarter ended August 31, 1998          0.187     0.10

FISCAL YEAR 1999
   Quarter ended November 30, 1998        0.115     0.07
   Quarter ended February 28, 1999        0.23      0.09
   Quarter ended May 31, 1999             1.218     0.20
   Quarter ended August 31, 1999          0.687     0.21

FISCAL YEAR 2000
   Quarter ended November 30, 1999        0.75      0.26
   Quarter ended February 29, 2000        0.88      0.29
   Quarter ended May 31, 2000             1.00      0.31
   Quarter ended August 31, 2000          0.93      0.437

FISCAL YEAR ENDED DEC 2000
   Quarter ended November 30, 2000        1.09      0.31
   December 1, 2000-December 31, 2000     0.55      0.25

FISCAL YEAR 2001
   Quarter ended March 31, 2001           0.33      0.71
   Quarter ended June 30, 2001            0.155     0.40
   Quarter ended September 30, 2001       0.12      0.27
   Quarter ended December 31, 2001        0.95      0.22


As of December 31, 2001 there were approximately 127 holders of record of the
common stock.

Service Systems has never had profits and has never paid cash dividends on its
common stock. It is our intention to retain future earnings, if any, to provide
funds for business operations and, accordingly, we do not anticipate paying any
cash dividends on our common stock in the foreseeable future. However, we are
under no restriction as to the payment of dividends.


<PAGE>
Page 22

OTHER SALES

During the quarter ended December 31, 2001, Service Systems made the following
sales in U.S. and Canada. These shares were issued under the exemption provided
by Section 4(2) of the 1933 Act with representations from the purchasers as to
their investment intent, their access to information and their sophistication,
no underwriters were involved and no commissions were paid in connection with
the sales.

--------------------------------------------------------------------------------
Name                  Date           Units          Price per unit         Total
----                  ----           -----          --------------         -----
Braumburger         17 Oct 2001      45,000               $0.22       $ 9,900.00
L Braumburger       25 Oct 2001      45,455               $0.22       $10,000.00
Vitzrosys Co. Ltd   25 Oct 2001     400,000               $0.15       $60,000.00
M Smith             31 Oct 2001       2,600               $0.10       $ 2,600.00
K Swift             31 Oct 2001       1,450               $0.10       $   145.00
S Shrestha          31 Oct 2001       3,287               $0.10       $   328.70
J Lalonde           31 Oct 2001       4,181               $0.10       $   418.10
F Shamlou           31 Oct 2001      11,550               $0.10       $ 1,155.00
A St Louis          31 Oct 2001       8,198               $0.10       $   819.00
David Free          19 Nov 2001     200,000               $0.19       $38,000.00
David Free          20 Nov 2001      25,000               $0.19       $ 4,725.00
L Braumburger       20 Nov 2001      41,752               $0.22       $ 9,191.00
S Shrestha          27 Nov 2001       7,685               $0.10       $   768.50
K Swift             27 Nov 2001       2,175               $0.10       $   217.50
J Lalonde           27 Nov 2001       4,042               $0.10       $   404.20
F Shamlou           27 Nov 2001       9,227               $0.10       $   922.70
A St Louis          27 Nov 2001       8,326               $0.10       $   832.60
M Heppner           27 Nov 2001       5,043               $0.10       $   504.30
D Mackay            13 Dec 2001       5,522               $0.10       $   552.20
S Shrestha          13 Dec 2001       4,028               $0.10       $   402.80
K Swift             13 Dec 2001       1,375               $0.10       $   137.50
P Emmett            13 Dec 2001      10,000               $0.10       $ 1,000.00
M Smith             13 Dec 2001       4,000               $0.10       $   400.00
L Popescu           13 Dec 2001       4,980               $0.10       $   798.00
D Smith             13 Dec 2001      17,341               $0.136      $ 2,358.40
D Smith             20 Dec 2001      10,928               $0.136      $ 1,493.82
L Braumburger       20 Dec 2001      41,064               $0.22       $ 9,023.08


ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS AND FINANCIAL
          CONDITION.

The following discussion and analysis should be read in conjunction with our
Financial Statements and the Notes attached. Information discussed in this
report may include forward-looking statements regarding events or our financial
performance and are subject to a number of risks and other factors, which could
cause the actual results to differ materially from those, contained in the
forward-looking statements. Among such factors are,1) general business and
economic conditions, 2) customer acceptance and demand for our products, 3) our
overall ability to design, test and introduce new products on a timely basis, 4)
the nature of the markets addressed by our products, and, 5) other risk factors
listed from time to time in documents filed by our company with the SEC. See
"PART 1. Item 1. DESCRIPTION OF BUSINESS - RISK FACTORS" above.

<PAGE>
Page 23

BASIS OF PRESENTATION

The financial statements include accounts of Service Systems International Ltd.
and its 100% owned subsidiary, UV Systems Technology Inc.

MANAGEMENT'S DISCUSSION

Our company was incorporated in the State of Nevada in August 1990, and remained
inactive until September 1995. The initiation of the current business was
accompanied by a change of ownership (see Service System Background). Through
UVS, Service Systems manufactures and markets its Ultra Guard ultra
violet-based patented water treatment system. These products are sold primarily
for municipal wastewater disinfection; however, the system can also be adapted
for treatment of process and industrial wastewater, and for potable water,
bottled products and agriculture and aquaculture water treatment.

In September 1995 Service Systems initiated a marketing distribution agreement
with UVS, a manufacturer of equipment using proprietary ultraviolet light
technology for the microbiological disinfection of industrial and municipal
wastewater. In July 1996 Service Systems entered into a funding agreement with
UVS, whereby under the funding agreement, Service Systems provided 50% of UVS'
operating cash needs for a six-month period. On December 1, 1996, Service
Systems acquired 50.69% of the common stock of UVS from two principals and the
minority stockholders. On February 14, 2000, Service Systems entered into an
agreement with the remaining two minority stockholders, Growth Works Capital
Ltd. (Managers of Working Opportunity Fund (EVCC) Ltd.) (WOF) and MDS Ventures
Pacific Inc.(MDS), to acquire the remaining 49.31% common stock and preferred
stock. Under this letter agreement, Service Systems issued to WOF 2,809,723
shares of restricted common shares under Regulation S to acquire all UVST Class
A and B shares held by WOF and debt of UVST totaling C$2,301,098 and to MDS
1,404,109 shares of restricted common shares under Regulation S to acquire all
UVST Class A and B shares held by MDS and debt of UVST totaling C$1,275,000.

During the period from December 1, 1996 to September 30, 1997, Service Systems
continued with UVS' system development and testing programs. These programs
included the development of both a mechanical and electronic automatic quartz
sheath cleaning system, to remove the fouling build-up due to suspended solids
and chemical prevalent in wastewater.

Field testing of the mechanical wiper cleaning system was concluded during
October and November 1997, at a PDU test site near Montreal, Quebec. The test
results concluded that the cleaning system did perform above anticipated levels,
and the system has now been incorporated into current products sold. The
temperature control system for the UVS System was also tested at the Ville de
Repentigney test site during temperatures ranging down to minus 8 degrees
Celsius and up to plus 8 degrees Celsius. The test showed that with temperature
control, infinite variable lamp UV output intensity was stable and controllable.
This feature is now included on all product sales. The benefits of the
temperature control are, instant response to changes in power settings,
consistent UV output, infinite controllability through a full range of UV
settings, and expected longer lamp-in-service life. To our knowledge, no other
UV equipment supplier can offer this degree of control of a UV lamp.
Development of the electronic ultrasonic cleaning system has been suspended as
test to the end of the development program were not sufficiently encouraging to
warrant additional expenditures.

Negotiations continue on finalizing a project delivered to New Zealand in 1995
by UVS and release of hold back funds. Testing of the system is ongoing to
determine if the equipment is in compliance at times of correct effluent flow
conditions. During the year ended December 31, 2001, the client ordered changes
to its UV system amounting to C$31,200 and C$45,952 all of which was prepaid.
C$31,200 of the work had been completed and delivered by the end of this fiscal
period.

<PAGE>
Page 24

A 6-lamp Ultra Guard UV system value at $127,000, capable of disinfecting a
wastewater flow of 3.5 million gallons per day, was sold to Hamilton, Alabama
and was installed in March, 1999. Successful final performance testing was
conducted in July 1999. This UV project is the first full scale operating Ultra
Guard UV system installed in North America. This system in Hamilton has
provided significant equipment exposure to other wastewater plants contemplating
upgrading their treatment plant discharges, including replacing chlorine as the
disinfecting means with environmentally friendly ultraviolet disinfection.

In September 1999 the formal order for a project in Toronto, Canada was secured
for about C$ 685,000. The UV system to be delivered to Toronto is part of a C$50
million combined storm overflows (CSO) project (the world largest submersible
CSO pumping station) and will be used for disinfection of CSO before discharge
into Lake Ontario. The project delivery was completed in the fourth quarter of
2001. Installation will be complete in early May 2002.

After successful PDU testing in September & October 1998 at the City of
Peterborough wastewater treatment plant, we received an order valued at over
C$1,100,000 (approximately $748,000.) in March 1999. The UV system will
disinfect effluent flow in excess of 36 million gallons per day. The Wastewater
Plant has been rescheduled to be operational by the end of April 2001. The
majority of the equipment was delivered in the fourth quarter of this year. The
final shipments were made in January 2002 with installation and startup to be
complete for May 15, 2002

Purchase orders for two additional UV systems valued at approximately C$150,000
(approximately $258,000.) were produced during the 2000-2001 period and
delivered into the Province of Ontario. Additional orders for shipment to
Louisiana and Virginia were received, with an aggregate value of about $258,000.
These two systems were delivered in 2001.

In January 1999 a PDU was installed at the County Sanitation Districts of Los
Angeles Country (the County). The purpose of the test was to determine the Ultra
Guard UV system's ability to disinfect wastewater to Title 22 Guidelines, a
stringent test protocol required as a precursor to use of a company's UV product
in reuse of wastewater for agriculture and other purposes. Testing was
completed in July 1999 and was conducted and paid for by the County. The County
reported that the findings of the five-month testing program confirmed the
ability of the Ultra Guard UV system's to achieve Title 22 design objectives at
fifty percent of the dose required by low pressure, low intensity technology
previously tested. Using the same safeties as had been applied to low
pressure, low intensity technology, a substantial saving in energy usage, 12.7%
was achieved by using the Ultra Guard system. On February 28, 2000 the
Department of Health Services advised Service Systems that Title 22 approval had
been granted.

In October 1999 Service Systems signed an agreement with a leading Australian UV
equipment manufacturer to market its product in North America.

During the year ended August 31, 2001, Service Systems entered into a
development to reconfigure its UV system. In the quarter ended February 29,
2000, Service Systems produced the prototype of a new UV product line, the
Ultra-Flow SLR. This product, with a designed disinfection capacity of up to 1.0
million gallons per day per lamp, will incorporate Service Systems' patented
flow reactor chamber, the proprietary low pressure, high intensity UV lamp and
the patented flow balanced weir. It encompasses layout flexibility, infinite

<PAGE>
Page 25

automatic flow control and monitoring, future expansion can be easily
accomplished. The client can monitor system and component performance locally or
remotely. Additional features include full password- protected, Internet-based,
web-monitored, microprocessor control which will permit monitoring of the
Ultra-Flow SLR UV system from Service Systems' plant or from any location
equipped with an Internet connection.

On January 26, 2001 Service Systems entered into a Strategic Alliance Agreement,
and related agreement with US Filter's Wallace Tiernan Products Group, under
which US Filter has the exclusive right to market Service Systems' Ultra Guard
UV system in North, South and Central America, and the Caribbean. See
"Business: Sales and Marketing."

Korean Manufacturing License

In September 2001 we licensed the Korean company, VITROSYS, the exclusive rights
to manufacture and sell our SLR Ultraviolet disinfection systems within the
Republic of Korea and a non-exclusive right to manufacture for sale into other
territories not currently represented by Service Systems agents. VITROSYS will
pay a royalty on each UV system sold. The royalty fee is variable, dependant on
the selling price of the UV system. Under the License Agreement, Service Systems
will provide full manufacturing drawings, software technology and expertise, and
a specified number of hours of training at Service Systems' facilities. As a
requirement of the License Agreement, VITROSYS will be required to purchase from
Service Systems, a key component for each SLR system. This key component is
defined as the royalty verification component. Its purchase will trigger a sale
and resultant royalty payment liability. The Korean market for UV is expected to
increase as a result of legislation that will require all municipal and
Industrial wastewater to be disinfected.

We anticipate recent US and world events will accelerate the use of ultraviolet
products for use in drinking water applications, and as well, in air treatment,
both for surface and ventilation. As a result of this, our company has started
research and development of products to be used in these applications. UV units
for the drinking water market will target application such as point of entry
(POE and point of entry (POU). POE UV systems will treat water for the home
though the use of various combinations of filters and ultraviolet installed at
the entry point into single-family homes or apartment complexes. Point of use
systems will treat water within the home, sing a like type system installed
under the sink. Air systems for ventilation will use ultraviolet lamps and
filtration, installed within ventilation ducts. Surface disinfections systems
will use ultraviolet systems mounted above and/or under conveyors to disinfect
articles on the conveyor, such as food and drink packaging container. Other
applications could include external disinfection of mail or packages mounted on
a conveyor. Ultraviolet will not penetrate the envelope or the wrappings to
disinfect the contents of the package but is applicable to external surface
disinfection.

RESULTS OF OPERATIONS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2001

The following selected financial data for the years ended August 31, 2000
through December 31, 2001 have been derived from Service Systems' audited
consolidated financial statements with the exception of the statement of
operations for the 12 months ended December 31, 2000 which is unaudited and was
prepared by management from audited financial statements. This information is
provided to assist the reader in understanding the discussion, which follows.
For full information, the reader should refer to the audited consolidated
financial statements and related notes for the periods discussed.

<PAGE>
Page 26


                                             12/31        12/31        08/31
                                              2001         2000         2000
                                              ----         ----         ----
                                            (Audited)   (Unaudited)   (Audited)

Project revenue                            $1,408,194    $  63,778    $  74,388
Project costs                               1,129,213       58,162       61,777
Gross profit from projects                    278,981        5,616       12,611
License revenue                               242,846         -            -
License costs                                  66,103         -            -
Gross profit from license revenue             176,743         -            -
Manufacturing costs not applied               100,010      173,365      170,809
Amortization of goodwill                      444,661      485,081      485,081
Foreign exchange loss (gain)                   14,734      (26,584)      65,505
General and administrative                    909,230      907,722      650,203
Interest, net of interest income and
  interest recovered                           95,340     (100,375)     (89,556)
Research and development                      367,778      700,149      591,811
Selling expenses                              355,672      244,642      240,362
Stock based compensation                         -         149,326         -
Net loss for the year                       1,831,701    2,527,710    2,101,604
Loss per common and common
  equivalent share                         $    (0.08)  $    (0.12)  $    (0.12)

                                                          (Audited)

Total assets                               $2,070,166   $1,313,092   $1,386,198
Long-term debt                                   -      $  342,244   $  206,230
Total liabilities                          $3,059,633   $1,390,916   $  898,479
Total stockholders' equity (deficit)       $ (989,467)  $  (77,824)  $  487,719

Twelve-month Period Ended December 31, 2001 compared to Twelve-month Period
Ended December 31, 2000.

   Revenues. For fiscal 2001, we reported revenues of $1,408,194, an increase
of $1,344,416, or 2108%, from $63,778 in the comparable period of 2000. The
increase resulted from completed projects shipped and invoiced and projected
percentage completion of projects in progress in the factory.

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Page 27

   Direct Project Costs. For fiscal 2001, we reported direct project costs of
$1,129,213, an increase of $1,071,051 or 1841%, from $58,162 in the comparable
period of 2000. The increase of costs incurred resulted from the increase in
sales shipments and projected costs of sales on projects in process.

   Gross Profit. For fiscal 2001, we reported gross profit of $278,981, an
increase of $273,365, or 4868%, from $5,616 in the comparable period of 2000.
The increase resulted from increased sales activities.

   Gross Profit from License Revenue. For fiscal 2001, we reported income
from licensing of our technology to a Korean company resulting in a one-time
gain of $242,846, less cost of $66,103, resulting in a net amount of $176,743,
compared to $0 in the comparable period of 2000.

   Manufacturing Costs Not Applied. Manufacturing costs not applied are
annual plant overhead costs not being charged against contracts. The balance not
charged is identified as manufacturing cost not applied. As our level of
activity increases, we expect that these costs will be fully recovered. For
fiscal 2001, we reported $100,010 of these costs, a decrease of $73,355, or 42%,
from $173,365 in the comparable period of 2000. This decrease occurred as a
result of increased manufacturing activities, which allowed more of the overhead
costs to be applied directly to production cost. The reported amounts represent
manufacturing costs such as facilities, plant personnel, power, etc. which
continue to be incurred irrespective of manufacturing activity.

   Amortization of Goodwill. For fiscal 2001, we reported amortization of
goodwill of $444,661, a decrease of $40,420 or 8%, from $485,081 in the
comparable period of 2000. The goodwill resulted from our acquisition of a
majority interest in our subsidiary, UVS. The goodwill was completely amortized
in fiscal 2001.

   Foreign Exchange Translation Loss. For fiscal 2001, we reported a foreign
exchange translation loss of $14,734, an increase of $41,318, or 155%, compared
to ($26,584) in the comparable period of 2000. The increase in loss in fiscal
2001 resulted from an increase in the value of the Canadian dollar as compared
to the comparable period of 2000.

   General and Administrative Expense. For fiscal 2001, we reported general
and administrative expense of $909,230, an increase of $1,508, or 0%, from
$907,722 in the comparable period of 2000.

   Interest, Net of Interest Income. For fiscal 2001, we reported interest,
net of interest income, of $95,340, compared to ($100,375) in the comparable
period of 2000. The increase was due to interest costs on additional short term
loans required to fund manufacturing, compared to favorable results achieved
through forgiveness of interest on long-term debt negotiated with minority
shareholders, recorded in comparable period of 2000.

   Research and Development Expense. For fiscal 2001, we reported research
and development expense of $367,778, a decrease of $332,371, or 47%, from
$700,149 in the comparable period of 2000. The decrease in R & D activities was
as a result of reduced activities on design of components for the Single lamp
reactor UV system that was completed during the fiscal 2001. Included in this
cost are items such as design, engineering and prototyping expenses for
mechanical and structural components as well as printed circuit boards and
computer based software for the web-based operating system of the single lamp
reactor product. These costs and all other R & D activities were fully expensed
during the fiscal 2001.

<PAGE>
Page 28

   Selling Expenses. For fiscal 2001, we reported selling expenses of
$355,672, an increase of $111,030, or 45%, from $244,642 in the comparable
period of 2000. This increase primarily was as a result of stock based
compensation resulting from the Strategic Alliance signed with USFilter/Wallace
Tiernan Inc. in January 2001, commission, Production Demonstration Unit testing
costs, increased travel and training costs due to the Strategic Alliance signed
with the USFilter/WT.

   Stock based compensation. For fiscal 2001 no amount was reported however
$106,549 was incurred and was allocated directly to selling and general and
administrative expenses compared to $149,326 in the comparable period of 2000.
(See Note 9 of the Financial Statements for additional information).

   Net Loss for the Period. For fiscal 2001, we reported a net loss of
$1,831,701, a decrease of $696,009, or 28%, compared to $2,527,710 reported in
the comparable period of the prior year. The decrease in net loss was due
primarily to increased revenue from project sales and income from licensing,
decreased engineering and prototyping expenses, a reduction of manufacturing
costs not applied compared to lack of sales and increased engineering and
prototyping expenses during the comparable period of the prior year.

   Net Loss per Share. For 2001, we reported a net loss per share of ($0.08),
a decrease of $0.04, or 33%, from ($0.12) in the comparable period of prior
year. The decrease in the net loss per share was partly due to the decrease in
net loss and partly as a result of the loss being allocated over an increased
number of shares and share equivalents in fiscal 2001.

Four-month period ended December 31, 2000 compared to the four-month period
ended December 31, 1999.

   Revenues. For the 2000 fiscal period, we reported no revenues, a decrease
of $10,610, or 100%, from $10,610 in the comparable period of 1999. The
decrease resulted from delayed completion of projects in process. Revenue from
these delayed projects will be realized in the next fiscal year.

   Direct Project Costs. For the fiscal 2000 period, we reported no direct
project costs, a decrease of $3,614 or 100%, from $3,614 the comparable period
of 1999. No costs of projects were expensed, as no project revenues were booked
during the period. Costs incurred on projects in progress were assigned to work
in process inventory.

   Gross Profit. For the fiscal 2000 period, we reported no gross profit, a
decrease of $6,996, or 100%, from $6,996 in the comparable period of 1999. This
decrease resulted from delays in putting projects into manufacturing and delayed
completion of projects.

   Manufacturing Costs Not Applied. Manufacturing costs not applied are
annual plant overhead costs not being charged against specific contracts. The
balance not charged is identified as manufacturing cost not applied. As our
level of activity increases, we expect that these costs will be fully recovered.
For the fiscal 2000 period, we reported $47,169 of these costs, an increase of
$2,556, or 6%, from $44,613 in the comparable period of 1999. This increase
occurred as a result of delay in putting projects into manufacturing and
resultant decreased manufacturing activities.

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Page 29

   Amortization of Goodwill. For the fiscal 2000 period, we reported
amortization of goodwill of $161,693, the same figure as reported in the
comparable period of 1999. The goodwill resulted from our acquisition of a
majority interest in our subsidiary, UVS. The goodwill will be completely
amortized in fiscal 2001. [**change from all prior reporting, which said 2002]

   Foreign Exchange Translation (Gain) Loss. For the fiscal 2000 period, we
reported a foreign exchange translation gain of $ (785), an increase of $92,089,
or -101%, over $91,304 in the comparable period of 1999. The increase in loss
in the fiscal 2000 period resulted from a decrease in the value of the Canadian
dollar as compared to the fiscal 1999 period.

   General and Administrative Expenses. For the fiscal 2000 period, we
reported general and administrative expense of $444,050, an increase of
$257,519, or 138%, from $186,531 in the comparable period of 1999. This
increase resulted primarily from increase in expenses relating to investors
relations, commissions on private placements and funds raised, legal fees of the
US Filter Strategic Alliance Agreement, and consulting fees.

   Interest, Net of Interest Income. For the fiscal 2000 period, we reported
interest, net of interest income of $13,951 a decrease of $10,819, or 44%, over
$24,770 in the comparable period of 1999. This decrease resulted from the
reduced amount of the loans payable and outstanding in the fiscal 2000 period.

   Research and Development Expense. For the fiscal 2000 period, we reported
research and development expense of $150,730, an increase of $108,338, or 256%,
from $42,392 in the comparable period of 1999. The increase was due to the
write-off of all R & D activity costs incurred during this period.

   Selling Expenses. For the fiscal 2000 period, we reported selling expenses
of $101,720, an increase of $4,280, or 4%, from $97,440 in the comparable period
of 1999. This increase primarily was as a result of increased exhibit expenses.

   Net Loss for the Period. For the fiscal 2000 period, we reported a net
loss of $918,528, an increase of $276,780, or 43% over $641,748 reported in the
comparable period of 1999. The increase in net loss was due to lack of
manufacturing activity, the write-off of research and development expenses and
the increase in expenses relating to investors, fees paid on private placement
share sales and fund raising, legal fees, and consulting fees.

   Net Loss per Share. For the fiscal 2000 period, we reported a net loss per
share of $0.04, equal to the loss per share of $0.04 in the comparable period of
1999. Although the net loss increased, the increased net loss was allocated
over an increased number of outstanding shares and share equivalents in the
fiscal 2000 period.


LIQUIDITY

The nature of our business may be expected to include a normal lag time between
the incurring of operating expenses and the collection of contract receivables,
which may be expected to be due largely from governments, if and when sales are
made. In addition, we are dependent on sales to a licensee, which is obligated
to purchase agreed upon system components, and on awards of water treatment
system contracts for non-recurring projects. Many of our contracts may be
expected to include provision for hold back, entitling the other party to the
contract to withhold a specified portion of the payment for a given period of
time until after completion of a project. For these and other reasons, we may
experience periods of limited working capital and may be expected to require
financing for working capital during those periods.

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Page 30

Our sales of Ultra Guard systems to governmental entities may be expected to
occur on an intermittent rather than consistent basis as requests for proposal
("RFP") are issued and awards made. Sales on both an annual and quarterly basis
are subject to fluctuations that are often beyond our control.

In addition, we will require financing over and above our current resources to
sustain our operations and expand our marketing efforts. We cannot assure that
the additional financing can be obtained on a timely basis, on terms that are
acceptable or if at all.

During the year ended December 31, 2001 current assets increased $1,113,952 as
compared to the fiscal period ended December 31, 2000. The increase, net of
decrease, was due primarily to the increase in accounts receivable of $990,010,
prepaid expenses and deposits of $208,637, offset by decrease of cash of
$25,680, short-term investments of $15,746 and inventory of $38,730. Long-term
assets decreased, net of increases, during the fiscal period ended December 31,
2001 by $356,878, as compared to the fiscal year ended December 31, 2000, due to
the amortization of goodwill of $444,661, depreciation of capital assets of
$53,046 and amortization of patents and trademarks of $4,104; offset by
increases due to the acquisition of capital assets of $85,462 and additions to
patents and trademarks of $59,471.

Current liabilities increased during the year ended December 31, 2001 by
$2,010,961 as compared to the fiscal year ended December 31, 2000. The increase
as detailed on the financial statements was due to cheques issued in excess of
funds on deposit of $4,539, accounts payable of $951,623, accrued liabilities of
$50,873, wages and vacation payable of $45,274, loans payable of $508,966 and
amounts owing to related parties of $475,453, offset by a decrease in customer
deposits of $25,767. Long-term debt decreased during the year ended December
31, 2001 by $342,244 as compared to the year ended December 31, 2000 due solely
to the decrease in the amounts owing to related parties.

<PAGE>
Page 31

During the four months ended December 31, 2000 current assets increased $63,401
as compared to the fiscal period ended August 31, 2000. The increase, not
decrease, was due primarily to the increase in accounts receivable of $41,637,
inventory of $28,221, and cash of $20,928; offset by a decrease short-term
investments of $4,934 and prepaid expenses and deposits of $22,451. Long-term
assets decreased, net of increases, during the fiscal period ended December 31,
2000 by $136,507, as compared to the fiscal year ended August 31, 2000, due to
the amortization of goodwill of $161,593 and patents and trademarks of $822 and
depreciation of capital assets of $15,762; offset by increase due to the
acquisition of capital assets of $41,475 and patents and trademarks of $295.

Current liabilities increased during the four-month period ended December 31,
2000 by $356,423 as compared to the fiscal year ended August 31, 2000. The
increase as detailed on the financial statements was due to increases in
accounts payable of $14,869, accrued liabilities of $56,515, wages payable of
$6,246, customer deposits of $58,741, loans payable of $314,839 and offset by
the decrease in the amounts owing to related parties of $94,787. Long-term debt
increased during the period ended December 31, 2000 by $136,014 as compared to
the year ended August 31, 2000 due solely to the increase in the amounts owing
to related parties.

We financed our operations during this fiscal period, in part, from proceeds of
sales of restricted common stock, bank loans, loans from Elco Bank, loans from
related parties and minority shareholders of UVS

We expect that, during fiscal 2002, as and if sales at UVS increase, we will
continue to depend on receipt of additional funds through public or private
equity or debt sales or other lender financing to fund the manufacturing of
products sold and general operational and sales expenses. Except as previously
indicated, no arrangements are currently in place to raise funds, although we
actively continue to seek sources. Failure to receive these funds may be
expected to have a material adverse effect on our company.

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Item 7. Consolidated Financial Statements
-----------------------------------------

Item 7. Consolidated Financial Statements



Index to Consolidated Financial Statements



Independent Auditors' Report

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Cash Flows

Notes to the Consolidated Financial Statements

<PAGE>
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<TABLE>
<CAPTION>
<S><C>
MANNING ELLIOTT                                11th floor, 1050 West Pender Street, Vancouver, BC, Canada V6E 3S7
CHARTERED ACCOUNTANTS                          Phone: 604.714.3600   Fax: 604.714.3669   Web: manningelliott.com
</TABLE>

        Independent Auditors' Report


To the Board of Directors and Stockholders of
Service Systems International, Ltd.


We have audited the accompanying consolidated balance sheets of Service Systems
International, Ltd. as of December 31, 2001 and 2000, and the related
consolidated statements of operations and deficit and cash flows for the years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards
used in the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Service Systems
International, Ltd. as of December 31, 2001 and 2000, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles used in the United States.

The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has not generated profitable operations since
inception and has a working capital deficit of $1,213,985 as at December 31,
2001. These factors raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters are
also discussed in Note 1. These financial statements do not include any
adjustments, which might result from the outcome of this uncertainty.




/s/ Manning Elliott

Chartered Accountants
Vancouver, Canada
April 29, 2002

<PAGE>
Page 34

Service Systems International, Ltd.
Consolidated Balance Sheets

                                                     December 31,   December 31,
                                                        2001           2000
ASSETS                                                   $              $

Current Assets
   Cash                                                     -            30,219
   Short-term investment - restricted (Note 3)           244,599        260,345
   Accounts receivable (Note 6)                        1,116,744        126,734
   Inventory and contract work in progress               254,154        292,884
   Prepaid expenses and deposits                         230,151         21,514
                                                       ---------      ---------

Total Current Assets                                   1,845,648        731,696
Property, Plant and Equipment (Note 4)                   118,624         86,208
Other Assets
   Goodwill                                                 -           444,661
   Patents and trademarks (Note 5)                       105,894         50,527
                                                       ---------      ---------

Total Assets                                           2,070,166      1,313,092
                                                       =========      =========

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities
   Cheques issued in excess of funds on deposit            4,539           -
   Accounts payable (Note 6)                           1,130,572        178,949
   Accrued liabilities (Note 6)                          130,674         79,801
   Wages and vacation pay payable                         70,566         25,292
   Customer deposits                                     121,396        147,163
   Loans payable (Note 7)                              1,076,419        567,453
   Amounts owing to related parties (Note 8)             525,467         50,014
                                                       ---------      ---------

Total Current Liabilities                              3,059,633      1,048,672

Long-Term Debt
   Amounts owing to related parties (Note 8)                -           342,244
                                                       ---------      ---------

Total Liabilities                                      3,059,633      1,390,916
                                                       ---------      ---------

Stockholders' Deficit

Common stock, (Note 9) $.001 par value,
   50,000,000 shares authorized,
   26,887,601 and 22,214,023 issued and
    outstanding respectively                              26,888         22,214
   Additional paid-in capital                          8,266,082      7,067,856
   Common shares paid for but unissued                     1,209        390,600
   Stock based compensation                              255,875        149,326
Deficit                                               (9,539,521)    (7,707,820)
                                                       ---------      ---------

Total Stockholders' Deficit                             (989,467)       (77,824)
                                                       ---------      ---------

Total Liabilities and Stockholders' Deficit            2,070,166      1,313,092
                                                       =========      =========

Contingencies (Notes 1 and 11)
Subsequent Events (Note 12)

                 (See Accompanying Notes to the Financial Statements)

<PAGE>
Page 35

Service Systems International, Ltd.
Consolidated Statements of Operations and Deficit

<TABLE>
<CAPTION>
                                                     Twelve months      Four months     Twelve months
                                                         ended            ended             ended
                                                      December 31,      December 31,      August 31,
                                                          2001             2000              2000
                                                                         (Note 1)
                                                           $                $                 $
<S>                                                 <C>              <C>              <C>
Project Revenue                                      1,408,194             -              74,388

Project Costs                                       (1,129,213)            -             (61,777)
                                                    ----------       ----------       ----------

Gross Profit from Projects                             278,981             -              12,611
                                                    ----------       ----------       ----------

License Revenue                                        242,846             -                -

License Costs                                          (66,103)            -                -
                                                    ----------       ----------       ----------

Gross Profit from License Revenue                      176,743             -                -
                                                    ----------       ----------       ----------

                                                       455,724             -              12,611
Manufacturing Costs Not Applied                       (100,010)         (47,169)        (170,809)
                                                    ----------       ----------       ----------

Total Gross Profit (Loss)                              355,714          (47,169)        (158,198)
                                                    ----------       ----------       ----------

Expenses
   Amortization of goodwill                            444,661          161,693          485,081
   Foreign exchange                                     14,734             (785)          65,505
   General and administrative                          909,230          444,050          650,203
   Interest                                             95,340           13,951          (89,556)
   Research and development                            367,778          150,730          591,811
   Selling                                             355,672          101,720          240,362
   Stock based compensation                               -             149,326             -
                                                    ----------       ----------       ----------

Total Expenses                                       2,187,415        1,020,685        1,943,406
                                                    ----------       ----------       ----------

Net Loss for the Year                                1,831,701        1,067,854        2,101,604

Deficit - Beginning of Year                          7,707,820        6,639,966        4,538,362
                                                    ----------       ----------       ----------

Deficit - End of Year                                9,539,521        7,707,820        6,639,966
                                                    ==========       ==========       ==========

Net Loss per Share                                       (0.08)           (0.05)           (0.12)
                                                    ==========       ==========       ==========

Weighted Average Number of Shares Outstanding       24,219,000       22,284,000       18,230,000
                                                    ==========       ==========       ==========
</TABLE>


<PAGE>
Page 36

Service Systems International, Ltd.
Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                     Twelve months      Four months     Twelve months
                                                         ended            ended             ended
                                                      December 31,      December 31,      August 31,
                                                          2001             2000              2000
                                                                         (Note 1)
                                                           $                $                 $
<S>                                                 <C>              <C>              <C>
Cash Flows to Operating Activities
   Net Loss                                         (1,831,701)      (1,067,854)      (2,101,604)

   Adjustments to reconcile net loss to cash
     Amortization of goodwill                          444,661          161,693          485,081
     Depreciation and amortization                      57,150           16,584           49,365
     Research and development expenses                    -                -             131,590
     Foreign exchange                                   14,734             (785)          65,505
     Common stock issued for expenses                  519,202            2,431          269,715
     Accrual of interest                                93,743           14,832             -
     Stock based compensation                          106,549          149,326             -
     Recovery of interest on long-term debt               -                -            (119,670)

   Change in non-cash working capital items
     (Increase) decrease in accounts receivable       (990,010)         (44,518)         218,589
     Decrease (increase) in inventory and contract
      work in progress                                  38,730          (28,221)           9,929
     Decrease (increase) in prepaid expenses and
      deposits                                        (208,637)          22,451           (6,799)
     Increase in accounts payable, accrued
      liabilities, wages and vacation pay payable
      and customers' deposits                        1,018,070          144,971          (26,035)
                                                    ----------       ----------       ----------

Net Cash Used in Operating Activities                 (737,509)        (629,090)      (1,024,334)
                                                    ----------       ----------       ----------

Cash Flows (to) from Investing Activities
   Reduction (acquisition) of short-term
     investment - restricted                               528              (46)           1,373
   Additions to patents and trademarks                 (59,471)            (295)            -
   Acquisition of capital assets                       (85,462)         (41,475)         (17,603)
                                                    ----------       ----------       ----------

Net Cash Used in Investing Activities                 (144,405)         (41,816)         (16,230)
                                                    ----------       ----------       ----------

Cash Flows from (to) Financing Activities
   Decrease in bank demand loan                           -                -            (209,381)
   Common stock issued (returned to treasury)          683,698          (40,000)       1,263,055
   Increase in loans payable                           419,641          300,007         (152,172)
   Increase in amounts owing to related parties        133,209           41,227          140,368
   (Decrease) increase in shares subscriptions
     received                                         (389,392)         390,600             -
                                                    ----------       ----------       ----------

Net Cash Provided by Financing Activities              847,156          691,834        1,041,870
                                                    ----------       ----------       ----------
</TABLE>

<PAGE>
Page 37


<TABLE>
<CAPTION>
                                                     Twelve months      Four months     Twelve months
                                                         ended            ended             ended
                                                      December 31,      December 31,      August 31,
                                                          2001             2000              2000
                                                                         (Note 1)
                                                           $                $                 $
<S>                                                    <C>               <C>           <C>
(Decrease) Increase in Cash                            (34,758)          20,928            1,306

Cash - Beginning of Year                                30,219            9,291            7,985
                                                       -------           ------        ---------

Cash (Deficiency) - End of Year                         (4,539)          30,219            9,291
                                                       =======           ======        =========
Non-Cash Financing Activities
   400,000 common shares were issued for
     licensing costs                                    60,000             -                -
   2,426,767 shares were issued to settle debts        459,202             -                -
   6,500 shares were issued to settle debts               -               2,431             -
   4,213,832 shares were issued to settle debts           -                -           2,449,383
Supplementary Information
   Cash paid for interest                               11,947            2,768           13,484
   Cash paid for income taxes                             -                -                -
</TABLE>


1.   Nature of Operations and Continuance of Business

     The Company manufactures and markets its Ultra Guard ultra violet based
     patented water treatment system through its wholly-owned Canadian
     subsidiary, UV Systems Technology Inc. ("UVS"). These products and systems
     are sold primarily for municipal waste disinfection, treatment of process
     and industrial wastewater, and for potable water, bottled products and
     agriculture and aquaculture water treatment.

     Effective December 31, 2000 pursuant to a Consent of Directors, dated
     January 9, 2001 the Company changed its year end from August 31 to December
     31.

     Operating activities have not generated profitable operations since
     inception and the Company has a working capital deficit of $1,213,985 as at
     December 31, 2001. These factors raise substantial doubt about the
     Company's ability to continue as a going concern. The ability of the
     Company to continue operations is dependent upon its successful efforts to
     raise additional equity financing in the long term, continue developing the
     market for its products, and/or the attainment of profitable operations.

2.   Significant Accounting Policies

     Consolidated financial statements

     These financial statements include the accounts of the Company, and its
     wholly-owned Canadian subsidiary, UV Systems Technology Inc. ("UVS"). All
     significant intercompany transactions and balances have been eliminated.

     Cash and cash equivalents

     Cash and cash equivalents include cash on hand, in banks and all highly
     liquid investments with maturity of three months or less when purchased.
     Cash equivalents are stated at cost, which approximates market.

     Property, plant, and equipment

     Property, Plant, and Equipment are recorded at cost. Depreciation is
     computed on a straight-line method using an estimated useful life of five
     years.

<PAGE>
Page 38

   Goodwill

     Goodwill represented the excess of purchase consideration over fair market
     value of net identifiable assets acquired, and is amortized on a straight-
     line basis over five years. Goodwill is evaluated in each reporting period
     to determine if there were events or circumstances that would indicate
     inability to recover the carrying amount. Such evaluation is based on
     various analyses including discounted cash flows and profitability
     projections that necessarily involve management judgment.

     Patents and trademarks

     Patents and trademarks are amortized to operations over their estimated
     useful lives of twenty years.

     Revenue recognition

     Product sales are recognized at the time goods are shipped. System and
     project revenue are recognized utilizing the percentage of completion
     method that recognizes project revenue and profit during construction
     based on expected total profit and estimated progress towards completion
     during the reporting period. All related costs are recognized in the period
     in which they occur.

     Estimates and assumptions

     The preparation of financial statements in conformity with generally
     accepted accounting principles requires management to make estimates and
     assumptions that affect the reported amounts of assets and liabilities in
     the financial statements and accompanying notes. Actual results could
     differ from these estimates.

2.   Significant Accounting Policies (continued)

     Foreign currency

     i)     Translation of foreign currency transactions and balances:

            Revenue, expenses and non-monetary balance sheet items in foreign
            currencies are translated into US dollars at the rate of exchange
            prevailing on the transaction dates. Monetary balance sheet items
            are translated at the rate prevailing at the balance sheet date. The
            resulting exchange gain or loss is included in general and
            administration expenses.

     ii)    Translation of foreign subsidiary balances:

            Monetary balance sheet items of UVS are translated into US dollars
            at the rates of exchange on the balance sheet date. Non-monetary
            balance sheet items are translated into US dollars at the rate of
            exchange prevailing on the transaction dates. The foreign
            subsidiary's operating results are translated into US dollars using
            the average exchange rate for the year with any translation gain or
            loss and are included separately in operations.

<PAGE>
Page 39


     Basic and Diluted Net Income (Loss) Per Share

     The Company computes net income (loss) per share in accordance with SFAS
     No. 128, "Earnings per Share". This statement requires presentation of both
     basic and diluted earnings per share (EPS) on the face of the income
     statement. Basic EPS is computed by dividing net income (loss) available to
     common shareholders (numerator) by the weighted average number of common
     shares outstanding (denominator) during the period. Diluted EPS gives
     effect to all dilutive potential common shares outstanding during the
     period including stock options, using the treasury stock method, and
     convertible preferred stock, using the if-converted method. In computing
     Diluted EPS, the average stock price for the period is used in determining
     the number of shares assumed to be purchased from the exercise of stock
     options or warrants. Diluted EPS excludes all dilutive potential common
     shares if their effect is anti dilutive.

     Accounting for Stock-Based Compensation

     The Company accounts for stock based compensation in accordance with SFAS
     No. 123, "Accounting for Stock-Based Compensation." This statement requires
     that stock awards granted subsequent to January 1, 1995, be recognized as
     compensation expense based on their fair value at the date of grant.
     Alternatively, a company may account for granted stock awards under
     Accounting Principles Board Opinion (APB) No. 25, "Accounting for Stock
     Issued to Employees," and disclose pro forma income amounts which would
     have resulted from recognizing such awards at their fair value. The Company
     has elected to account for stock-based compensation for employees under APB
     No. 25 and make the required pro forma disclosures for compensation expense
     in accordance with SFAS No. 123 (see Note 9(b)).

     New Financial Accounting Standards Board ("FASB") Pronouncements

     In June 2000 FASB issued Statement of Financial Accounting Standard
     ("SFAS") No. 138, "Accounting for Certain Derivative Instruments and
     Hedging Activities." This Statement establishes accounting and reporting
     standards for derivative instruments and requires recognition of all
     derivatives as assets or liabilities in the statement of financial position
     and measurement of those instruments at fair value. The statement is
     effective for fiscal quarters and fiscal years beginning after June 15,
     2000. The Company does not have any derivative instruments and has not
     entered into any hedging activities.

     In September 2000 FASB issued SFAS No. 140, "Accounting for Transfers and
     Servicing of Financial Assets and Extinguishments of Liabilities". This
     Statement establishes accounting and reporting standards for transfers of
     financial assets and whether control is surrendered. The Company accounts
     for transfers of financial assets, where control has been given up, as a
     sale.

     In June 2001 FASB issued SFAS No. 141, "Business Combinations". This
     Statement requires that all business combinations be accounted for by a
     single method - the purchase method. This Statement applies to all business
     combinations initiated after June 30, 2001. The Company has not yet
     initiated any business combinations.

2.   Significant Accounting Policies

     New Financial Accounting Standards Board ("FASB") Pronouncements
     (continued) In June 2001 FASB issued SFAS No. 142, "Goodwill and Other
     Intangible Assets" - This Statement eliminates amortization of such assets
     after they have been acquired and also addresses how such assets acquired
     individually or with a group of other assets (but not those acquired in a
     business combination) should be accounted for in financial statements upon

<PAGE>
Page 40

     their acquisition. Instead of amortizing such assets they will be evaluated
     at least annually for impairment. Intangible assets that have limited
     useful lives will continue to be amortized over their useful lives such as
     the Company's patents and trademarks. This statement applies to fiscal
     years beginning after December 15, 2001. The Company's recorded goodwill
     was fully amortized prior to this statement coming into effect.

     In June 2001 FASB issued SFAS No. 143, "Accounting for Asset Retirement
     Obligations". This Statement addresses financial accounting and reporting
     for obligations associated with the retirement of tangible long-lived
     assets and the associated asset retirement costs. The Company does not have
     such obligations.

     In October 2001 FASB issued SFAS No. 144, "Accounting for the Impairment or
     Disposal of Long-Lived Assets". This Statement requires that long-lived
     assets be measured at the lower of carrying amount or fair value less cost
     to sell. This Statement is effective for fiscal years beginning after
     December 15, 2001. This Statement will apply to the Company's fiscal year
     beginning January 1, 2002.

     Income Taxes

     The Company has adopted the provisions of FASB's SFAS No. 109, "Accounting
     for Income Taxes". SFAS No. 109 requires that deferred taxes reflect the
     tax consequences on future years of differences between the tax bases of
     assets and liabilities and their financial reporting amounts. At the date
     of adoption of SFAS 109, there was no material effect on the Company's
     financial statements. As of December 31, 2001 the Company has accumulated
     net operating losses in Canada and the United States available to offset
     future taxable income as scheduled below:

                           Canadian                  US
                            Losses      Expiration  Losses     Expiration
         Year                  $          Date        $           Date
         1995                87,000       2002        -
         1996               491,000       2003     240,000        2011
         1997               993,000       2004     202,000        2012
         1998               453,000       2005     650,000        2013
         1999               845,000       2006     152,000        2014
         2000-August 31   1,060,000       2007     444,000        2015
         2000-December 31   579,000       2007     517,000        2016
         2001               643,000       2008     688,000        2017
         --------------------------------------------------------------
                          5,151,000               2,893,000
         ==============================================================

     Pursuant to SFAS 109 the Company is required to compute tax asset benefits
     for net operating losses carried forward. If total losses were recognized
     the Company would receive a tax benefit of $3,500,000. The potential
     benefit of net operating losses has not been recognized in the financial
     statements because the Company cannot be assured that it is more likely
     than not that it will utilize the net operating losses in future years,
     therefore, a valuation allowance of $3,500,000 has been recognized.

3.   Restricted Cash

     In connection with a letter of guarantee, required under a long-term
     project bonding, the Company purchased a C$391,000 face value Bankers'
     Acceptance maturing March 7, 2002, yielding a 2% return, to be held as a
     bond for the letter of guarantee of C$390,809. Upon satisfaction of certain
     minor follow-up engineering this letter of guarantee will be extinguished
     and the cash will become unrestricted.

<PAGE>
Page 41


4.   Property, Plant, and Equipment

     Property, plant, and equipment are stated at cost less accumulated
     depreciation.

<TABLE>
<CAPTION>
                                                                    December 31,   December 31,
                                                                        2001           2000
                                                       Accumulated    Net Book        Net Book
                                            Cost       Depreciation    Value           Value
                                             $              $            $               $
     <S>                                 <C>            <C>          <C>             <C>
     Computer equipment                   54,718         42,567       12,151         13,907
     Computer software                     9,378          6,270        3,108          3,380
     Display equipment                    33,016         33,016         -             1,809
     Office furniture and equipment       32,475         32,400           75          4,498
     Plant jigs, dies, moulds, tools
       and equipment                     129,080        100,547       28,533         30,803
     Leasehold improvements               93,439         18,682       74,757         31,811
                                         -------        -------      -------         ------
                                         352,106        233,482      118,624         86,208
                                         =======        =======      =======         ======
</TABLE>

     Depreciation per class of asset:

<TABLE>
<CAPTION>
                                                                   Twelve months   Four months
                                                                       ended         ended
                                                                    December 31,   December 31,
                                                                        2001          2000
                                                                         $             $
     <S>                                                              <C>            <C>
     Computer equipment                                                9,176          3,096
     Computer software                                                 1,465            546
     Display equipment                                                 1,809          2,201
     Office furniture and equipment                                    4,421          2,165
     Plant jigs, dies, moulds, tools and equipment                    17,493          7,309
     Leasehold improvements                                           18,682            445
                                                                      ------         ------

                                                                      53,046         15,762
                                                                      ======         ======
</TABLE>

5.   Patents and Trademarks

     Patents and trademarks represent legal costs associated with designing,
     registering and protecting certain patents and trademarks associated with
     the Ultra Guard System. These costs are amortized over twenty years.
     Amortization for the year ended December 31, 2001 was $4,104 and for the
     four months ended December 31, 2000 was $822. Components of the Ultra Guard
     System were patented in the United States on April 12, 1996. Applications
     have been approved for patent protection under the International Patent
     Protection Treaty covering 13 European countries. Translations and other
     requirements to formalize these patents will continue through the current
     fiscal year.

6.   Secured Liabilities

     Pursuant to a funding agreement $795,564 of accounts payable and $44,292 of
     accrued liabilities are secured by $839,856 of accounts receivable.


<PAGE>
Page 42

7.   Loans Payable

     a)   At December 31, 2000, the Company had loans payable to "Elco Bank
          Clients" located in Nassau, Bahamas, of $431,036 including principal
          and interest. During fiscal 2001, further loans were received
          totalling $53,436 and interest of $46,944 was accrued. As at December
          31, 2001 principal and interest totalled $531,416. These loans are
          unsecured, interest bearing at 10% per annum and due on demand.

     b)   A loan payable of $115,000 plus accrued interest of $14,002 is
          unsecured, bears interest at 8% per annum and is due on demand.

     c)   Loans payable of $200,000 plus accrued interest of $20,318 are
          unsecured and bear interest at 1% per month. The loan was due on May
          21, 2001. The principal portion of the loan can be converted into
          common shares at $0.50 per share.

     d)   A loan payable of $125,000 plus accrued interest of $12,863 is
          unsecured, bears interest at 13% per annum starting from December 20,
          2001 and will rise by 1% for every month the loan remains outstanding.

     e)   Loans payable of Cnd $92,000 (US$57,760) are secured by a general
          security agreement, bear interest at 8% per annum and will be due six
          months from the date of each advance. The loans are repayable between
          May 31, 2002 and June 26, 2002.


8.   Amounts Owing to Related Parties

     These amounts, totaling $525,467, represent unpaid wages and consulting for
     two directors. These amounts are due on demand, unsecured and non-interest
     bearing.


9.   Common Stock

<TABLE>
<CAPTION>
                                                                            Additional
                                                                  Common      Paid-in
                                                      Shares       Stock      Capital
                                                         #           $           $
     <S>                                          <C>          <C>        <C>
     Balance, December 31, 2000                   22,214,023   22,214     7,070,242

     Issuance of stock for expenses pursuant to
       the exercise of employee stock options        624,067      624       105,783
     Issuance of stock for cash pursuant to
       the exercise of employee stock options        554,716      556       127,670
     Issuance of stock for expenses at
       prices between $0.16 to $0.26 per share       349,375      349        77,844
     Issuance of stock for cash at prices
       between $0.15 to $0.50                      1,350,000    1,350       533,650
     Issuance of stock for expenses pursuant to
       exercise of warrants, at $0.136 per share      28,325       28         3,824
     Issuance of stock for expenses pursuant to
       exercise of warrants, at prices
       between $0.20 to $0.24 per share              342,095      342        77,744
     Issuance of stock for expenses pursuant to
       the Legal Services Plan (Note 9(d))         1,200,000    1,200       226,800
     Issuance of stock for certain patent rights
       pursuant to the Legal Services Plan (Note
       9(d))                                         225,000      225        42,525
     ------------------------------------------------------------------------------
     Balance, December 31, 2001                   26,887,601   26,888     8,266,082
     ==============================================================================
</TABLE>

<PAGE>
Page 43

9.   Common Stock (continued)

     (a)  Warrants outstanding as at December 31, 2001:

                         Exercise
     Class        #        Price            Expiry Date(s)

     "A"       2,880,459   $.30-$1.00   March 10, 2002 - December 20, 2003
     "B"       2,705,174   $.07-$.20    January 9, 2003 - December 3, 2003
     "C"       8,105,000   $0.24        October 3, 2010
     "D"       1,455,049   $0.40        June 2, 2002
     "E"       6,130,553   $.20-$.90    December 31, 2001 - December 3, 2003


          17,520 Class A warrants were issued at an exercise price of $.35
          expiring April 8, 2002 in connection with a shares for debt agreement
          where 17,520 shares were issued at $.35 to settle $6,132 of debt.

          760,439 Class A warrants were issued at various exercise prices of
          $.40 to $.90 per share with various expiry dates of June 30, 2001 to
          December 20, 2003 pursuant to various private placements and stock
          options exercised.

          1,217,456 Class B warrants and 2,399,790 Class E warrants were issued
          in connection with a shares for debt agreement. Refer to Note 6(a) for
          details.

          1,684,482 Class E warrants issued in prior years were reduced to an
          exercise price of $.20 per share and the expiration period was
          extended to June 30, 2002.

          100,000 Class A and 100,000 Class E warrants with an exercise price of
          $.60 and $.90 respectively were issued with an expiry period of May
          29, 2002 in connection with 200,000 performance shares issued.

          150,000 Class E warrants at an exercise price of $.40 were extended
          from December 31, 2000 to December 31, 2001.

          1,446,281 Class E warrants were issued at an exercise price of $.40
          pursuant to stock options exercised. These warrants expire September
          13, 2002.

          250,000 Class E warrants were issued at an exercise price of $.40 -
          $.90 per share pursuant to various private placements. These warrants
          expire from December 31, 2000 - February 20, 2003.

          100,000 Class A warrants were issued at an exercise price of $0.50 per
          share expiring December 15, 2003 for investor relations services. The
          value of the warrants on the date of issue was $34,690 which was
          charged to compensation expense.

          800,000 Class A warrants were issued during fiscal 2001 with an expiry
          date of December 8, 2002, 400,000 of these warrants have an exercise
          price of $0.60 per share and the balance of 400,000 have an exercise
          price of $1.00 per share. These warrants were issued pursuant to an
          Agreement for private placement financing and investor relations. The
          value of the warrants at the date of issue was $91,320 which was
          charged to compensation expense. The Agreement calls for a 7% finders
          fee to be paid pursuant to a private placement of units at $0.50 per
          unit. The Agreement also calls for an option to purchase 400,000
          shares from an existing shareholder at an exercise price of
          approximately $1.10 per share for a period of one year.

          712,500 Class A warrants were issued in fiscal 2001 at an exercise
          price of $1.00 per share pursuant to various private placements.
          645,000 of these warrants have an expiry date of February 7, 2003 and
          the remaining 67,500 have an expiry date of January 25, 2003. No value
          was placed on these warrants.

          390,000 Class A warrants were issued to a consultant at an exercise
          price of $0.30 per share expiring May, 2003 for website development,
          media services and other related services. The value of these warrants
          was $43,875 which is amortized to investor relations expense over one
          year. A total of $27,422 was charged during fiscal 2001.

<PAGE>
Page 44

9.   Common Stock (continued)

          100,000 Class E warrants were issued at $0.70 per share expiring
          August 31, 2002 for website development and other related services.
          The value of these warrants were $20,540 at the date of issue which
          was charged to compensation expense.

          1,487,718 Class B warrants were issued and exercisable at $0.0695 per
          share expiring January 9, 2003. These warrants were issued in
          replacement of 1,487,718 stock options available to the Vice-
          President.

          On October 3, 2000, 3,000,000 Class C warrants were issued pursuant to
          a Strategic Alliance and other agreements with US Filter's Wallace and
          Tiernan Products Group, a wholly owned subsidiary of U.S. Filter ("US
          Filter") to market and sell under license Service Systems' UltraGuard
          ultraviolet disinfection technology for water and wastewater
          applications. The value of the 3,000,000 Class C Warrants issued
          totalled $656,700. This amount is being amortized to operations as a
          marketing expense at a rate of $65,670 per annum. A total of $49,252
          was charged during fiscal 2001. These warrants were issued as follows:

          (i)     1,000,000 Class C warrants issued, exercisable at the lower of
                  $0.97 per share or the fair market value of the Company's
                  common stock at April 25, 2001 expiring October 31, 2011 and
                  restricted from exercise for two years from October 3, 2000.

          (ii)    1,000,000 Class C warrants were issued at an exercise price of
                  $1.00 per share, with expiry date of October 31, 2011 and
                  restricted from exercise for two years from October 3, 2000.

          (iii)   1,000,000 Class C warrants were issued at an exercise price of
                  $2.00 per share, with expiry date of October 31, 2011 and
                  restricted from exercise for two years from October 3, 2000.

          In June 2001, the Company entered into a funding agreement with US
          Filter/Wallace and Tiernan Products Group. As a term of the funding
          agreement, the warrant exercise price on the above 3,000,000 warrants
          was reduced to $0.24 per share and the restriction from exercise
          period was changed from October 3, 2003 to October 31, 2001. The
          expiry date of these warrants was changed to October 3, 2010. In
          addition, 5,105,000 Class C warrants were issued with an exercise
          price of $0.24 per share and an expiry date of October 3, 2010. These
          additional warrants were issued because of certain funding criteria
          being met. The value of the 5,105,000 Class C warrants issued totalled
          $478,000. This amount is being amortized to operations as a financing
          expense at a rate of $47,800 per annum. A total of $29,875 was charged
          during fiscal 2001.

     (b)  Employee Stock Option Plan

          The common stock underlying the Employee Stock Option Plan,
          registering 1,588,000 shares for future issuance, was registered with
          the Securities Exchange Commission on October 6, 1997 on Form S-8.

          On December 5, 2000, three employees were granted stock options to
          acquire 115,075 shares at $0.35 per share, expiring December 5, 2002.
          During fiscal 2001, these options were exercised for proceeds of
          $40,276.

          On December 6, 2000, a consultant was granted stock options to acquire
          100,000 shares at $0.40 per share, expiring December 6, 2002. These
          options were exercised during fiscal 2001 for proceeds of $40,000.

          On December 27, 2000, an employee was granted stock options to acquire
          5,000 shares at $0.25 per share. These options were exercised in
          fiscal 2001 for proceeds of $1,250.

          On June 11, 2001, two consultants were granted stock options to
          acquire 310,751 shares at $0.22 per share. These options were
          exercised in fiscal 2001 for proceeds of $68,365.

          On June 21, 2001, two consultants were granted stock options to
          acquire 488,890 shares at $0.135 per share. These options were
          exercised in fiscal 2001 for proceeds of $66,000.

          On July 5, 2001, two consultants were granted stock options to
          acquire 35,000 shares at $0.181 per share. These options were
          exercised in fiscal 2001 for proceeds of $6,335.

          On October 10, 2001, ten employees were granted stock options to
          acquire 124,067 shares at $0.10 per share. These options were
          exercised in fiscal 2001 for proceeds of $12,407.

<PAGE>
Page 45

9.   Common Stock (continued)

     These options were granted for services provided, or to be provided, to the
     Company. Statement of Financial Accounting Standards No. 123 ("SFAS 123")
     requires that an enterprise recognize, or at its option, disclose the
     impact of the fair value of stock options and other forms of stock based
     compensation in the determination of income. The Company has elected under
     SFAS 123 to continue to measure compensation cost on the intrinsic value
     basis set out in APB Opinion No. 25. As options are granted at exercise
     prices based on the market price of the Company's shares at the date of
     grant, no compensation cost is recognized. However, under SFAS 123, the
     impact on net income and income per share of the fair value of stock
     options must be measured and disclosed on a fair value based method on a
     pro forma basis.

     The fair value of the employee's purchase rights under SFAS 123, was
     estimated using the Black-Scholes model.

     If compensation expense had been determined pursuant to SFAS 123, the
     Company's net loss and net loss per share would have been as follows:

                                           Twelve months      Four months
                                           ended December     ended December
                                           31, 2001           31, 2000
                                           $                  $
     Net loss
          As reported                     (1,831,701)       (1,067,854)
          Pro forma                       (1,951,925)       (1,067,854)

     Basic net loss per share
          As reported                           (.08)             (.05)
          Pro forma                             (.08)             (.05)

     (c)  Long-Term Equity Incentive Plan

          The Company has allotted 5,000,000 shares pursuant to a Long-Term
          Equity Incentive Plan approved and registered December 17, 1999. The
          Plan permits the grant of Non-qualified Stock Options, Incentive Stock
          Options, Restricted Stock and Performance Shares.

     (d)  Legal Services Plan

          Pursuant to an S-8 Registration Statement filed and accepted on
          November 19, 2001 the Company issued 3,925,000 common shares at $0.19
          per share pursuant to three separate contracts. Of these, a total of
          2,500,000 shares have been cancelled as the related contract was never
          consummated.

10.  Segmented Information

     The business of the Company is carried on in one industry segment (See Note
     1).

     The Company operates in two geographic segments. The United States
     operations only consist of costs associated with debt and equity financing
     and being a public company.

<TABLE>
<CAPTION>
                                             Twelve months ended                     Four months ended
                                              December 31, 2001                      December 31, 2000
                                              -----------------                      -----------------

                                                    United                                 United
                                       Canada       States       Total        Canada       States       Total
                                          $            $           $             $            $           $
<S>                                  <C>          <C>          <C>            <C>          <C>          <C>
Revenue                              1,651,040         -        1,651,040         -            -              -
Expense                              2,355,861    1,126,880     3,482,741      389,637      678,217      1,067,854
Loss                                  (704,821)  (1,126,880)   (1,831,701)    (389,637)    (678,217)    (1,067,854)
------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>
Page 46

10.   Segmented Information (continued)
<TABLE>
<CAPTION>
                                           As of December 31, 2001                As of December 31, 2000
                                           -----------------------                -----------------------

                                                    United                                 United
                                       Canada       States       Total        Canada       States       Total
                                          $            $           $             $            $           $
<S>                                  <C>            <C>        <C>            <C>          <C>        <C>
Identifiable assets                  1,941,284      22,988     1,964,272      799,866      18,038       817,904
Goodwill and patents                   105,894        -          105,894       50,527     444,661       495,188
---------------------------------------------------------------------------------------------------------------
Total assets                         2,047,178      22,988     2,070,166      850,393     462,699     1,313,092
===============================================================================================================
</TABLE>

11.  Legal Proceedings

     On October 20, 1998 a suit was filed in the Supreme Court of British
     Columbia by Thomas O'Flynn against the Company, Kenneth Fielding (the
     Company's President and Director), and Charles P. Nield (a former Director
     and Vice President of the Company), O'Flynn alleges that in April of 1996,
     he purchased shares of the Common Stock based on a representation that they
     would be free trading in 40 days of "the filing of a prospectus." He
     further alleges that in September of 1996 he purchased additional shares of
     Common Stock based on the representation that the shares would be free
     trading within 40 days of the Common Stock becoming free trading. O'Flynn
     alleges that the representation was a warranty and was incorrect. He
     further alleges that he suffered a loss because the share price decreased
     while he was holding the shares. He seeks damages for breach of warranty,
     negligence, misrepresentation and breach of fiduciary duty. The amount
     claimed is not specified. The Company filed an answer denying the claims
     and continues to actively defend the suit. There has been no loss provision
     set-up pursuant to this action against the Company.


12.  Subsequent Events

     Subsequent to December 31, 2001:

     (a)  the Company received $30,000 and issued 300,000 common shares at $.10
          per common share pursuant to a private placement.

     (b)  the Company received $1,208 in December 2001, and issued 16,564 common
          shares at $.10 per common share pursuant to the exercise of options.

<PAGE>
Page 47

ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE


None

                                      PART III


ITEM 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

The Executive Officers and Directors of the Company are as follows:

--------------------------------------------------------------------------------
Name                    Age        Position
--------------------------------------------------------------------------------
Kenneth E. Fielding     51         Director, President, and President of UV
                                   Systems Technology, Inc.
John R. Gaetz           62         Director, Secretary-Treasurer and Vice-
                                   President of Finance (CFO)

Kenneth E. Fielding has served as a Director and President of Service Systems
since June 1995 and as president of UVS since December 1996. He is also, and
has been since 1976, the president of Alliance Installations Electrical
Contractors Ltd., an inactive industrial electrical construction contractor
which until January 1996 provided electrical systems for schools, hospitals,
institutions, warehouses, restaurants and commercial installations. Mr. Fielding
is devoting his full time to management and operations of Service Systems. In
addition to the administrative position with our company, Mr. Fielding has
overall responsibility for UVS as president. Mr. Fielding holds an Electrical
Contractor's license with the Province of British Columbia and a journeyman
electrician designation form the BC Institute of Technology.

John R. Gaetz has served as a Director, Secretary-Treasurer and Chief
Financial Officer since June 15, 1997, and as a Director, Vice president, and
Secretary of UVS since August 1995, positions he held in UVS' predecessor, UV
Waterguard Systems Ltd. since 1990.


BOARD MATTERS

The Board of Directors has no standing committees. The Board of Directors is
responsible for nominating a proposed slate of Directors for each year to stand
for election at the annual shareholders meeting. We have no provision for
recommendation by shareholders of nominees for Director.

Members of the Board of Directors, by virtue of their position, owe a fiduciary
duty to our company. However, in accordance with Nevada law, the Company has
provided in Article XI of its Articles of Incorporation (i) that contracts and
acts with another corporation are not affected by the fact that a Director has a
pecuniary or other interest in or is a director or officer of the other
corporation and (ii) that a Director may be a party to or interested in a
contract or transaction with our company if the interest has been disclosed to
the Board or the Board knows of the interest before a vote is taken on the
contract or transaction. As of December 31, 2000 we had no such contracts or
transactions with any Director or corporation in which a Director had an
interest.

Service Systems or its subsidiary, UVS, employs the Executive Officers of the
Company full-time. See "Executive Compensation."


<PAGE>
Page 48

Based solely upon a review of Forms 3, 4 and 5 and their amendments, furnished
under Rule 16a-3(a) of the Securities Exchange Act of 1934 during our most
recent fiscal year and written representations from persons required to file
those Forms, all Directors and Officers filed all reports required by Section
16(a) of the Act.


ITEM 10.  EXECUTIVE COMPENSATION

The following table sets forth an overview of compensation for the fiscal years
ended August 31, 1998, 1999 and 2000 and for the transition period from August
31, 2000 to December 31, 2000 to the Chief Executive Officer and each of Service
Systems' other Executive Officers whose total compensation exceeded $100,000

<TABLE>
<CAPTION>
                                            SUMMARY COMPENSATION TABLE
---------------------------------------------------------------------------------------------------------------------------
    (1)            (b)           (c)           (d)           (e)           (f)           (g)           (h)
                                                                                 Restricted
Name and                                                                Other     Securities                        All
Principal                                                   Annual      Stock    Underlying     LTIP             Other
Position                                                    Compen     Award(s)   Options      Payouts           Compen
                                                            -sation                                              sation
                  Year       Salary ($)      Bonus ($)       ($)         ($)       (SARs)        ($)               ($)
<S>               <C>        <C>             <C>             <C>         <C>       <C>           <C>               <C>
Kenneth Fielding
President,
CEO and
President
of UVS Inc.       1998       49,422*         0                    0      0         150,500       0                 0
                  1999       53,218          0               45,000*     0               0       0                 0
                  2000       57,143**        0               54,000*     0               0       0                 0
   4 month        2000       19,731          0               18,000*     0               0       0                 0
                  2001      112,329***
</TABLE>

  * Accrued
 ** Accrued 32,318
*** Accrued 87,329

No options were granted to the named executive officer during the 2001 fiscal
year or the transition period.

The following table sets forth information with respect to the individual grants
of stock options made during the fiscal year ended August 31, 2000, the
transition period from August 31, 2000 to December 31, 2000 to each of our named
Executive Officers. During the year ended December 31, 2001 stock option
totaling 200,000 shares were cancelled.:

<PAGE>
Page 49

--------------------------------------------------------------------------------
                                                                    VALUE OF
                                                    NUMBER OF      UNEXERCISED
                                                   UNEXERCISED     IN-THE-MONEY
                                                    OPTION AT       OPTIONS AT
                       SHARES                      DEC 31, 2001    Dec 31, 2000
                      ACQUIRED                     YEAR END (#)     YEAR END($)
                         ON            VALUE        EXERCISED/       EXERCISED/
    NAME             EXERCISE (#)     REALIZED     UNEXERCIZED      UNEXERCIZED
    (A)                  (B)            (C)             (D)              (E)
--------------------------------------------------------------------------------
Kenneth E. Fielding   150,500            -            200,000             -
 Fiscal 2000
--------------------------------------------------------------------------------

Transition period

COMPENSATION OF DIRECTORS

We do not compensate Directors for their service as such, although we do
reimburse reasonable expenses incurred by them in conducting Service Systems'
affairs and in attending meetings.

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS

We have no employment agreements with our Executive Officers, nor do we have
agreements respecting termination of employment or change-in-control. We expect
to enter into employment agreements with Executive Officers in the foreseeable
future, but have not begun negotiation of those agreements. Mr. Fielding and Mr.
Gaetz are the only Executive Officers receiving compensation.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial
ownership of common stock, as of August 31, 2000 and December 31, 2000 of (i)
each person known to own beneficially more than 5% of our Common Stock, (ii)
each Director of the Company, (iii) each of Service Systems' Executive Officers,
and (iv) all Officers and Directors as a group. Except as otherwise noted,
Service Systems believes that the persons listed below have sole investment and
voting power with respect to the Common Stock owned by them.

                                     December 31, 2000        December 31, 2001

NAME AND ADDRESS               SHARES        PERCENT       SHARES        PERCENT
OF BENEFICIAL               BENEFICIALLY       OF       BENEFICIALLY       OF
OWNER (1)                     OWNED (2)      CLASS       OWNED (2)        CLASS
--------------------------------------------------------------------------------
Kenneth E. Fielding         2,659,904 (3)     12.0%      2,659,904 (3)     9.9%

John R. Gaetz               3,594,062 (4)*    16.2%      3,594,062 (4)    13.4%

MDS Ventures Pacific, Inc   1,404,109 (5)(7)   6.3%      1,404,109 (5)(7)  5.2%

Working Opportunity Fund    2,809,723 (6)(7)  13.0%      2,809,723 (6)(7) 10.45%
(EVVC) Ltd

All officers and directors
 as a group                 6,253,966(3&4)    28.2%      6,253,966(3&4)   28.2%
* incorrectly reported as 3,794,062
--------------------------------------------------------------------------------

(1)   The address for all shareholders is in care of the company at 201 - 11
      Burbidge Street, Coquitlam BC, Canada, V3K 7B2. The Company's address will
      change on March 23, 2002 ( approx.), to 2nd Floor 5763 - 203A Street,
      Langley British Columbia, Canada V3A 1W7

(2)   A person is deemed to be the beneficial owner of securities that can be
      acquired by that person within 60 days from the date of this Annual Report
      upon exercise of options or warrants. Each beneficial owner's percentage
      ownership is determined by assuming that options or warrants that are held
      by that person and that are exercisable within 60 days from the date of
      this Annual Report have been exercised.

(3)   Includes, 7,000 of these shares owned by Mr. Fielding's minor daughter and
      1,243,445 shares which Mr. Fielding has the right to acquire at a price of
      $0.20 under immediately exercisable E Warrants.


<PAGE>
Page 50

(4)   Includes 600,000 shares which Mr. Gaetz has the right to acquire at a
      price of $0.40 under immediately exercisable warrants, 20,000 shares which
      Mr. Gaetz has the right to acquire at a price of $0.40 (reduced in fiscal
      2000 from $0.60) under immediately exercisable warrants, 341,037 shares
      which Mr. Gaetz has the right to acquire at a price of $0.40 under
      immediately exercisable E Warrants, 1,487,718 shares warrants issued to
      Mr. Gaetz in exchange for an option agreement held with UVS; to acquire 5%
      of the outstanding shares of UVS, which Mr. Gaetz has the right to acquire
      at a price of approx $0.07 under immediately exercisable B Warrants and
      33,770 shares owned by Mr. Gaetz's wife.

(5)   Shares acquired under an agreement dated February 14th, 2000, issued in
      exchange for debt and the acquisition of MDS Venture Pacific, Inc's 24.65%
      ownership of UVS.

(6)   Shares acquired under an agreement dated February 14th, 2000, issued in
      exchange for debt and the acquisition of Working Opportunity Fund (EVVC)
      Ltd's 24.65% ownership of UVS.

(7)   Under the letter agreement dated February 14th, 2000, the shares issued to
      MDS Venture Pacific, Inc and Working Opportunity Fund (EVVC) Ltd., in
      aggregate totaling 4,213,832, conferred to John R Gaetz and Kenneth E.
      Fielding jointly, the voting rights to the shares issued until August 31,
      2001.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In July 1995, Service Systems was acquired by eight Canadian and European
individuals. The individuals intended to develop the Company into the United
States marketing arm for UVS Ultra Guard UV system. We issued 1,600,000 shares
of our restricted common stock to these individual stockholders, including one
of our officers as reimbursement of cash advanced by them to others for expenses
related to the acquisition. See "Service Systems Background." Mr. Fielding may
be considered to be a promoter of Service Systems.

In connection with Service Systems' acquisition in 1996 of UVS in exchange for
their UVS shares, our common stock was issued to: Kenneth Fielding (a Director
and Executive Officer) 11,257 shares; John Gaetz (a Director and Executive
Officer), 600,000 shares and 600,00 warrants for Common Stock; In addition,
common stock was issued to adult relatives of Mr. Gaetz: his wife, C.A. Gaetz,
33,700 shares; his brother, F. Gaetz, 901 shares; his brother, Jim G. Gaetz,
4,503 shares; and his daughter, L.L. Alentejano, 5,629 shares.

Since the acquisition of Service Systems by the investor group in 1995 until
December 31, 2001, the following Directors, Executive Officers, and greater than
5% shareholders, have made loans to us for additional working capital: John R
Gaetz, $266,618 and Ken Fielding $250,974.

In July 1996, John Gaetz purchased for cash 20,000 shares of Common stock and
20,000 warrants for Common Stock in a private offering at a cost of $0.75 per
share. In April 1998, John Gaetz purchased for cash 341,037 shares of Common
stock and 341,037 warrants for Common Stock in a private offering at a cost of
$0.20 per share, the market price on that date was $0.18.

In April 1998, Ken Fielding purchased for cash 1,243,445 shares of Common stock
and 1,243,445 warrants for Common Stock in a private offering at an exercise
price of $0.20 per share. The market price on that date was $0.18.

In April 1998, options for 150,100 shares of Common Stock were granted to each
of Kenneth Fielding and John Gaetz, at an option price of $0.15. The market
price on the date of grant was $0.18.


<PAGE>
Page 51

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

(a)   Exhibits (exhibit reference numbers refer to Item 601 of
      Regulation SB

Exhibit Number    Description                                   Method of Filing

   (3)(i)         Articles of Incorporation (1)

   (3)(ii)        Bylaws, as amended (2)

  (10)(iii)       Agreement between Douglas Sommerville
                  and Company dated 12/6/96 (3)

  (10)(iv)        Agreement between John Gaetz and the
                  Company dated 12/6/96 (4)

  (10)(v)         Sample Agreement among minority
                  Shareholders of UV Systems
                  Technology, Inc. and the Company
                  each dated 2/28/97 (5)

  (10)(vi)        Marketing Distribution Agreement
                  Between UV Systems Technology, Inc.
                  and the Company (2)

  (10)(vii)       Sales Representation Agreement
                  between UV Systems Technology,
                  Inc. and "The Representative" (2)

  (10)(viii)      Exclusive Distributorship Agreement
                  Between UV Waterguard Systems, Inc.
                  and Chiyoda Kohan Co., Ltd., and NIMAC
                  Corporation. (2)

  (10)(ix)        1997 Stock Option Plan (4)

  (10)(x)         Interim Funding Agreement
                  between UVS, MDS and WOF (5)

  (10)(xi)        Letter Agreement between Service
                  Systems and Elco Bank and Trust
                  Company Limited (5)

  (10)(xii)       Loan Agreement between the Company
                  and TD Bank (6)

  (10)(xiii)      Service Systems 1999 Long-Term
                  Equity Incentive Plan (7)

<PAGE>
Page 52

  (10)(xiv)       Letter Agreement between Service
                  Systems, UVS, MDS and WOF dated
                  Feb 13, 2000 (7)

  (10)(xv)        Lease dated October 2000 between
                  Service Systems, UV Systems and
                  Slough Estates Canada Limited (8)

  (10)(xvi)       Legal Services Plan between Rosenfeld,
                  Goldman & Ware, Inc filed on November
                  19, 2001

  (11)            Statement Regarding Computation               Filed Herewith
                  of Per Share Earnings                         Electronically

  (21)            Subsidiaries of the Corporation:
                  UV Systems Technology, Inc.,
                  incorporated in British Columbia,
                  Canada

  (23)            Consent of Manning Elliott                    Filed Herewith
                                                                Electronically

(1)   Incorporated by reference to the Corporation's Form 10SB effective on
      January 22, 1997
(2)   Incorporated by reference to the Corporation's Form S-8 filed with the
      Commission on October 6, 1997.
(3)   Incorporation by reference to the Corporation's Form 10Q for the fiscal
      Year ended February 28, 1997.
(4)   Incorporation by reference to the Corporation's Form 10KSB for the fiscal
      Year ended August 31, 1997.
(5)   Incorporation by reference to the Corporation's Form 10KSB for the fiscal
      Year ended August 31, 1998.
(6)   Incorporation by reference to the Corporation's Form 10KSB for the fiscal
      Year ended August 31, 1999.
(7)   Incorporation by reference to the Corporation's Form 10KSB for the fiscal
      Year ended August 31, 2000.
(8)   Incorporation by reference to the Corporation's Form 10Q for the fiscal
      Quarter ended November 30, 2000.

(b)   Reports on Form 8-K
      The Company filed two reports on Form 8-K , filed on January 25, 2001
      reported the Strategic Alliance between Service Systems, UV Systems and
      USFilter/Wallace & Tiernan, and on June 18, 2001 reported a Procurement
      Assistance Services between Service Systems, UV Systems and USFilter/
      Wallace & Tiernan


<PAGE>
Page 53

                                       SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.


           SERVICE SYSTEMS INTERNATIONAL, LTD.


           /s/ Kenneth R. Fielding
           -------------------------------
           Kenneth R. Fielding, President



Date: May 3, 2002                 /s/ Kenneth R. Fielding
-----------------                 -------------------------------
                                  Ken Fielding, Director



Date: May 3, 2002                 /s/ John R Gaetz
-----------------                 -------------------------------
                                  John R Gaetz, Director

<PAGE>
Page 54

EXHIBIT 11



                      Service Systems International, Ltd.
                        Computation of Per-Share Income
                             Treasury Stock Method
                            As Modified for 20% Test



                                                  Period Ended December 31, 2001
                                                  ------------------------------


Weighted average number of shares outstanding                        24,219,000
                                                                   ============


Total common and common equivalent shares                            26,887,601
                                                                   ============


Net income (loss) for the period                                   $ (1,831,701)
                                                                   ============


Loss per common and common equivalent shares                       $      (0.07)
                                                                   ============




Earnings per share:

The earnings per share are computed by dividing the net income (loss) for the
period by the weighted average number of common shares outstanding for the
period. Common stock equivalents are excluded from the computation if their
effect would be anti-dilutive.





<PAGE>
Page 55


EXHIBIT 23


                         Consent of Independent Auditors
                         -------------------------------



Service Systems International, Ltd.
2800 Ingleton Avenue, Burnaby, BC  V5C 6G7, Canada


We do hereby consent to the use of our audit report on the consolidated
financial statements of Service Systems International, Ltd. as of and for the
year ended December 31, 2001 contained in the Company's Annual Report on Form
10KSB for its fiscal year ended December 31, 2001.


Dated this 3rd day of May, 2002

MANNING ELLIOTT
Chartered Accountants
Vancouver, BC, Canada

/s/ Manning Elliott
---------------------------------------------


<PAGE>