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                         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

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

                     For the period ended December 31, 2000

For the transition period from August 31, 2000 to December 31, 2000 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.

2800 INGLETON AVE.,
BURNABY, B.C., CANADA                                V5C 6G7
Address of Principal Executive Offices                Zip code

604-451-1069
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


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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 (  )

The issuer's revenues for its most recent fiscal year were $0.00.

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 March 23, 2001 was $8,219,189. The number of shares outstanding of
the issuer's only class of Common Stock $.001 par value, was 22,214,023 on March
23, 2001.

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


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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.

                                     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 are located at 2800 Ingleton Avenue, Burnaby, BC, Canada
V5C6G7. The telephone number is (604) 451-1069 and the facsimile number is (604)
451-1072. 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 GUARD-Registered Trademark- 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 it was acquired in July 1995 by eight
Canadian and European individuals. The investors' 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 Guard-Registered Trademark- 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. Under a 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 $300 billion (plus another $200 for industrial
treatment needs) 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 Canada, met and developed a treaty that will
ban most POPs immediately and replace them with more environmentally benign
agents.

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


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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:

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


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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
disinfection. In November 1999, we signed a Licensing and Distribution Agreement
with a leading Australian UV equipment manufacturer for their product line.
This product line primarily addresses the disinfection needs for the 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 a UV system in potable water applications. We see
expanded activity and requests for proposals for UV in potable water
applications. As a result of this testing, 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.

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 25, 2001 of a strategic alliance agreement with US Filter's
Wallace and Tiernan Products group to sell the Ultra Guard-Registered Trademark-
product line. Through this strategic alliance, the US Filter agent network of
about 87 companies will be actively selling our products in North, South and
Central America and the Caribbean. The process of expanding the representatives
network will continue in other selected countries of the world until we achieve
full direct user access in those countries.

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,
we intend 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.


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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.

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-Registered Trademark- system also exposes
fluid to UV light for a time sufficient to damage the reproductive ability of
the microorganisms. However, in the Ultra Guard-Registered Trademark-
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-Registered Trademark- 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
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-Registered Trademark- 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


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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 (504 watts as
compared to our competitors' 100 watts), high efficiency 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-Registered
Trademark- system also requires about 1/30th of the lamps used in other
low-pressure, low-intensity lamp 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.

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-Registered Trademark- 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 25, 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-Registered Trademark- 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-Registered Trademark- UV system has been marketed both
domestically and internationally by two marketing employees and through a
network of 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


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year, including an automatic renewal clause. Sales representatives act as agents
for our Ultra Guard-Registered Trademark- 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 Service Systems and its wholly owned subsidiary, UV
Systems Technology, Inc., a British Columbia company ("UVS"), entered
into a Strategic Alliance Agreement and related agreements with US
Filter/Wallace & Tiernan, Inc., a Delaware corporation ("U.S. Filter"). In
general, the Strategic Alliance Agreement provides that U.S. Filter will market,
offer and sell Service Systems' UltraGuard-Registered Trademark- 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 summarized below. The summaries are
subject to and qualified by the agreements themselves.

STRATEGIC ALLIANCE AGREEMENT. The parties to the Strategic Alliance Agreement
are Service Systems and UVS, 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 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 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 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, and will provide related support services. The purchase price to be paid
by U.S. Filter 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 sells the System or component to the end user.
U.S. Filter 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 may manufacture and supply
Systems and components. U.S. Filter will pay a royalty payment for each System
or component, whether manufactured or supplied by Service System or U.S. Filter.
The Strategic Alliance Agreement also gives U.S. Filter a right of first refusal
with respect to any distribution or marketing agreements, which Service Systems
or UVS may wish to make outside the Territory.

LICENSE AGREEMENT. Service Systems, UVS and U.S. Filter also entered into
a License Agreement by which Service System and UVS granted to U.S.
Filter 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 will pay a royalty equal to 5% of the net sales price with respect to any
System manufactured or supplied by Service Systems/UVS and a royalty
between 5% and 10% with respect to any System manufactured or supplied by U.S.
Filter. 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 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.

The warrants may be exercised from time to time from October 3, 2002 up to and
including 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 additional warrants to purchase Service Systems common
stock, based upon the orders for Systems booked or significantly influenced by
U.S. Filter during the preceding 12 months. Provided at least US$1,000,000 of
orders for Systems have been booked or influenced, each warrant will permit U.S.
Filter 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 in excess
of US$10,000,000 during the preceding 12 months.

REGISTRATION RIGHTS AGREEMENT. Service Systems and U.S. Filter also entered into
a Registration Rights Agreement. The Registration Rights Agreement entitles U.S.
Filter 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 UVS have granted to U.S. Filter 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.

Service Systems believes the Strategic Alliance with US Filter will benefit
Service Systems through a reduction of operating and working capital, as US
Filter 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-Registered Trademark- systems
within the Exclusive Territory was transferred to US Filter. The exclusive
territory consists of North, South and Central America and the Caribbean. At
this time, a joint determination is being made as to which of our agents will be
retained by US Filter, those not taken over will be terminated. US Filter's
representative companies will then 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. In October 2000, we exhibited
at the Water Environment Federation in Anaheim, CA., North America's largest
water and wastewater show.

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 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.


                                       10
<PAGE>

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 has committed to the purchase of one PDU, which is
currently in production. PDUs are fully functional Ultra Guard-Registered
Trademark- 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 plant's 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.

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. As of December 31, 2000, we had fort-two requests awaiting
response. The large backlog of inquiries is as a result of the activities of our
distributor network and US Filter.

 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."

Our UV competitors' estimated respective shares of the North American market in
wastewater and process water are: 1) Trojan Technologies Inc., 50%, 2)
PCI-Wedeco, 22%, 3) IDI Industries,


                                       11
<PAGE>

Inc. 8%, 4) Aquionics, Inc, 5%, and 5), Others, 15%. 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-Registered Trademark-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 a 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-Registered Trademark- 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-Registered Trademark-
system. Our UV disinfection system reactor module is patented in 1996. Our flow
balanced weir is patented 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-Registered Trademark- 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.


                                       12
<PAGE>

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-Registered Trademark- 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-Registered Trademark- 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 and
controllers 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, 2000, we had 8 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 this four month transition period was $150,730.

                                       13
<PAGE>

EMPLOYEES

As of December 31, 2000, Service Systems had three part-time employees, and
UV Systems Technology, Inc had 13 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 employees
were engaged in production and manufacturing of the Ultra Guard-Registered
Trademark- 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 AVILITY TO DESIGN, TEST AND INTRODUCE NEW
PRODUCTS ON A TIMELY BASIS; THE NATURE OF THE MARKETS ADDRESSED BY SERVICE
SYSTEMS' PRODUCTS; AND OTHER RESK FACTORS LISTED FROM TIME TO TIME IN DOCUMENTS
FILED BY SERVICE SYSTEMS WITH THE SEC.

WE HAVE HAD NO PROFITS, AND 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 $7,707,820. 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-Registered Trademark- system does provide us competitive
technological and operational advantages, we cannot assure that these advantages
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.

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


                                       14
<PAGE>

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-Registered Trademark-
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-REGISTERED TRADEMARK- 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-Registered Trademark- 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.

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


                                       15
<PAGE>

could have a material adverse effect on our business. We might not be able to
continue to retain or attract qualified personnel.

OUR SUCCESS WILL DEPEND IN LARGE MEASURE UPON MARKETING EFFORTS IN THE WESTERN
HEMISPHERE, AND THESE ARE TO BE PERFORMED BY AN INDEPENDENT, THIRD PARTY THAT WE
DO NOT CONTROL. In January, 2001 we entered into a Strategic Alliance Agreement
with US Filter/Wallace & Teirnan, Inc. ("US Filter"). Under this agreement,
US Filter has the exclusive right to market, offer and sell our
UltraGuard-Registered Trademark- ultraviolet disinfection 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. We do not control US Filter. We cannot
assure that sales in this Territory will be sufficient to meet our expectations.
A failure by US Filter successfully to market and sell our systems would
materially adversely affect our ability to market our products in that area.

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-REGISTERED TRADEMARK- 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, 2000, we had 7,625,147
vested warrants and options outstanding. In addition, US Filter was granted a
total of 3,000,000 warrants exercisable beginning on October 3, 2002, with
the ability for additional warrants depending on sales of our systems by US
Filter.

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.


                                      16
<PAGE>

FUTURE SALES BY EXISTING SHAREHOLDERS COULD ADVERSELY AFFECT THE PREVAILING
MARKET PRICE OF OUR COMMON STOCK. As of December 31, 2000, we had 22,214,023
shares of common stock outstanding. Of these shares, approximately 12,663,734
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

Service System's executive offices are located at 2800 Ingleton Avenue, Burnaby,
British Columbia. The leased premises have 2,537 square feet of executive
offices and 9,088 square feet of manufacturing facilities. The initial lease
term was for a period of five years, and expired in September 2000. We have been
occupying the premises on a month-to-month basis since then. In October, 2000,
we signed a five-year lease for new premises, for both manufacturing and
administration, located at 201-11 Burbridge Street, Coquitlam, B.C., Canada V3K
7B2. The new premises have 2,880 square feet for executive offices and 7,780
square feet for manufacturing space. The base rent is C$8,875.68 per month. UVS'
manufacturing operation moved to the new premises on November 1, 2000. The
office operations, including executive offices, of both Service Systems and UV
Systems will be moved to the new premises on or about April 22, 2001. Insurance
plans covering all of our facilities and contents, as well as general liability
insurance 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 Service Systems). 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.

                                     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


                                       17
<PAGE>

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.

<TABLE>

<S>                                                 <C>               <C>
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

</TABLE>

As of December 31, 2000 there were approximately 125 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.

OTHER SALES

During the one month period ended December 31, 2000, 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.

<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------------------------------
NAME                       DATE                 UNITS                 PRICE PER UNIT             TOTAL
----                       ----                 -----                 --------------             -----
<S>                        <C>            <C>                         <C>                      <C>
Joseph Daly                 12/00               6500                     $0.374                    2431.00
Returned to treasury
Level Jump Trading          12/00           (100,000) shares              $0.40                   ($40,000)

</TABLE>

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


                                       18
<PAGE>

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.

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-Registered
Trademark- 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 placed in abeyance pending
availability of additional development funds.

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 fiscal year ended August 31,


                                       19
<PAGE>

2000, the client ordered changes to its UV system amounting to C$31,200 and
C$45,952, respectively. C$31,200 of the work had been completed by the end of
the fiscal period, and C$45,952 will be completed in the second quarter of
the 2001 fiscal year, all of which was prepaid.

 .
A 6-lamp Ultra Guard-Registered Trademark- 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-Registered Trademark- 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 project is currently in design and manufacture and has
been rescheduled for delivery due to delays in delivery of components in April
2001. 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.

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.

Purchase orders for two additional UV systems valued at approximately C$150,000
(approximately $258,000.) were produced during the 2000-2001 period and will be
delivered into the Province of Ontario. One project was delivered in May, 2000
and the second partially shipped in January, 2001, with the balance to be
delivered in the second quarter of the 2001 fiscal year. Additional orders for
shipment to Louisiana and Virginia were received, with an aggregate value of
about U$258,000. These two systems are to be 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-Registered Trademark- 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-Registered Trademark- 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-Registered
Trademark- 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. The products
provided through this agreement will permit Service Systems to sell into market
areas not currently serviced. These products will service small to intermediate
scale projects for municipal and industrial clients in the area of potable
water, food processing and recreational services. In addition, the products are
used by clients requiring treatment solutions beyond disinfection, such as
oxidation of chemical and organic by-products occurring in nature as well as
those occurring as a result of production processes. The implementation of these
products into Service Systems' product line has been delayed, pending setup of a
division to lead this business segment and the funding necessary for its
implementation. As a result of the rapidly expanding need for the use of UV in
the disinfection of potable water, this implementation has been placed high on
Service Systems' priority list as a business segment to develop and exploit in
the 2001 fiscal year.

During the fiscal 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


                                       20
<PAGE>

flow reactor chamber, the proprietary low pressure, high intensity UV lamp and
the patented flow balanced weir. It encompasses layout flexibility, infinite
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 25, 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-Registered Trademark- UV system in North, South and Central America, and
the Caribbean. See "Business: Sales and Marketing."

RESULTS OF OPERATIONS FOR THE FOUR MONTHS ENDED DECEMBER 31, 2000.

The following selected financial data for the years ended August 31, 1999
through December 31, 2000 have been derived from Service Systems' audited
consolidated financial statements and are 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.

<TABLE>
<CAPTION>

                                                              12/31             08/31            08/31
                                                              2000              2000             1999
                                                              ----              ----             ----

<S>                                                          <C>               <C>               <C>
Revenue                                                           $ 0.00          $ 74,388          $398,063

Loss per common and common
          Equivalent share                                     $   (0.04)       $    (0.12)       $    (0.13)

Total assets                                                  $1,313,092        $1,386,198        $2,259,106

Long-term debt                                                 $ 342,244         $ 206,230        $2,491,056

Total liabilities                                             $1,390,916         $ 898,479        $3,651,936
Total stockholders' equity                                     $ (77,824)        $ 487,719       $(1,392,830)

</TABLE>

Four month period Ended December 31, 2000 compared to 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 in 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.


                                       21
<PAGE>

         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.

         GENERAL AND ADMINISTRATIVE EXPENSE. 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.

         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.

         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 2002.

         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.

         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 gain in fiscal 2000
period resulted from a decrease in the value of the Canadian dollar as compared
to the fiscal 1999 period. See Note 8(a).

         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 $0.4 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.

YEAR ENDED AUGUST 31, 2000 COMPARED TO THE YEAR ENDED AUGUST 31, 1999 Note:
This comparison is made between the last reported fiscal year before the
fiscal year end change (August 31, 2000) and the previous fiscal year (August
31, 1999).

         REVENUES. For fiscal 2000, we reported revenues of $74,388, a
decrease of $323,675, or 81%, from $398,063 in fiscal 1999. The decrease
resulted from customer driven delayed completion of projects in process.
Revenue from these delayed projects should be realized in the next fiscal
year.

         DIRECT PROJECT COSTS. For fiscal 2000, we reported direct project costs
of $61,777, a decrease of $282,362 or 82%, from $344,139 in fiscal 1999. This
decrease resulted from customer driven delays in putting projects into
manufacturing and from non-completion of contract work from sub-contractors.

         GROSS PROFIT. For fiscal 2000, we reported a gross profit of $12,611, a
decrease of $41,313, or 77%, from $53,924 in fiscal 1999. This decrease resulted
from customer driven


                                       22
<PAGE>

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 fiscal 2000, we reported $170,809 of these costs, an increase of $136,317,
or 395%, from $34,492 in fiscal 1999. This increase occurred as a result of lack
of sales and resultant decreased manufacturing activities.

         SELLING EXPENSES. For fiscal 2000, we reported selling expenses of
$240,362, a decrease of $25,108, or 9%, from $265,470 in fiscal 1999. This
decrease primarily was a result of reduced sales commissions.

         GENERAL AND ADMINISTRATIVE EXPENSE. For fiscal 2000, we reported
general and administrative expense of $650,203, an increase of $228,721, or 54%,
from $421,482 in fiscal 1999. This increase resulted primarily from increase in
expenses relating to investors, administrative management, legal fees, and
advertising and promotion and consulting fees, due to securing new projects.
Part of the increase is also due to bad debt expense and accounting office help
for the audit work.

         RESEARCH AND DEVELOPMENT EXPENSE. For fiscal 2000, we reported
research and development expense of $591,811, an increase of $333,679, or
129%, from $258,132 in fiscal 1999. The increase was due to the write-off of
design costs of $144,981, which had previously been capitalized, and
engineering and prototyping expenses incurred during fiscal 2000.

         AMORTIZATION OF GOODWILL. For fiscal 2000, we reported amortization of
goodwill of $485,081, the same figure as reported for fiscal 1999. The goodwill
resulted from our acquisition of a majority interest in our subsidiary, UVS. The
goodwill will be completely amortized in 2002.

         INTEREST, NET OF INTEREST INCOME. For fiscal 2000, we reported
interest recovery, net of interest income and interest waived, of ($89,556),
a decrease of $187,756, or 191%, over $98,200 in fiscal 1999. This decrease
resulted from the interest recovery from interest expense waived by minority
shareholders and by Service Systems, a provision included in the purchase of
the minority shareholders' 49.31% ownership of Service Systems' subsidiary,
UV Systems Technology Inc.

         FOREIGN EXCHANGE TRANSLATION LOSS. For fiscal 2000, we reported a
foreign exchange translation loss of $65,505, a decrease of $38,725, or 37%,
over $104,230 in fiscal 1999. The decrease in loss in the fiscal 2000 resulted
from an increase in the value of the Canadian dollar as compared to the fiscal
1999.

         NET LOSS FOR THE PERIOD. For fiscal 2000, we reported a net loss of
$2,101,604, an increase of $488,441, or 30% over $1,613,163 reported in fiscal
1999. The increase in net loss was due to decreased revenues, the write-off of
research and development expenses and the increase in expenses relating to
investors, administrative management, legal fees, advertising and promotion and
consulting fees, due to securing new projects.

         NET LOSS PER SHARE. For fiscal 2000, we reported a net loss per
share of $0.12, a decrease of $0.01, or 7%, from $0.13 in fiscal 1999. The
net loss per share reduced as a result of the net loss being allocated over
an increased number of outstanding shares and share equivalents in fiscal
2000.

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


                                       23
<PAGE>

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. Pursuant to the Strategic Alliance Agreement 35%
of project financing is paid to Service Systems before shopping of the project.
See Description of Business.

Our sales of Ultra Guard-Registered Trademark- 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 four months ended December 31, 2000 current assets increased $63,401
as compared to the fiscal period ended August 31, 2000. The increase, net of
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 2001, 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.

                                       24
<PAGE>

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


                                       25
<PAGE>
                          [MANNING ELLIOTT LETTERHEAD]
                          INDEPENDENT AUDITORS' REPORT



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


We have audited the accompanying consolidated balance sheet of Service Systems
International, Ltd. as of December 31, 2000, and the related consolidated
statements of operations and deficit and cash flows for the four months 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 audit.

We conducted our audit in accordance with U.S. generally accepted auditing
standards. 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, 2000, and the results of its operations
and its cash flows for the four months then ended in conformity with U.S.
generally accepted accounting principles.

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 significant revenues or
profitable operations since inception. 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
March 26, 2001


                                       26
<PAGE>

Service Systems International, Ltd.
Consolidated Balance Sheets


<TABLE>
<CAPTION>
                                                                                December 31      August 31,
                                                                                   2000             2000
                                                                                     $               $
<S>                                                                            <C>              <C>

ASSETS

Current Assets
       Cash and short-term investments                                             30,219           9,291
       Short-term investments - restricted (Note 3)                               260,345          262,279
       Accounts and other receivables                                             126,734           85,097
       Inventory and contract work in progress                                    292,884          264,663
       Prepaid expenses and deposits                                               21,514           43,965
                                                                               -----------      -----------

Total Current Assets                                                              731,696          668,295
Property, Plant and Equipment (Note 4)                                             86,208           60,495
Other Assets
       Goodwill (net of amortization of $1,980,747)                               444,661          606,354
       Patents and trademarks (Note 5)                                             50,527           51,054
                                                                               -----------      -----------

Total Assets                                                                    1,313,092        1,386,198
                                                                               ===========      ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
       Accounts payable                                                           178,949          164,080
       Accrued liabilities                                                         79,801           23,286
       Wages and vacation pay payable                                              25,292           19,046
       Customer deposits                                                          147,163           88,422
       Loans payable  (Note 6)                                                    567,453          252,614
       Amounts owing to related parties (Note 7(a))                                50,014          144,801
                                                                               -----------      -----------

Total Current Liabilities                                                       1,048,672          692,249

Long-Term Debt
       Amounts owing to related parties (Note 7(b))                               342,244          206,230
                                                                               -----------      -----------

Total Liabilities                                                               1,390,916          898,479
                                                                               ===========      ===========

Stockholders' Equity

Common stock, (Note 8) $.001 par value,
       50,000,000 shares authorized,
       22,214,023 and 22,307,523 issued and outstanding respectively               22,214           22,308
       Additional paid-in capital                                               7,067,856        7,105,377
       Common shares paid for but unissued  (representing 840,000 shares)         390,600               --

Stock based compensation                                                          149,326               --

Deficit                                                                        (7,707,820)      (6,639,966)
                                                                               -----------      -----------

Total Stockholders' Equity (Deficit)                                              (77,824)         487,719
                                                                               -----------      -----------

Total Liabilities and Stockholders' Equity                                      1,313,092        1,386,198
                                                                               ===========      ===========
</TABLE>




                See accompanying notes to financial statements.


                                       27
<PAGE>

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


<TABLE>
<CAPTION>
                                                     Four Months    Four Months
                                                        ended          ended
                                                     December 31,   December 31,
                                                        2000           1999
                                                                    (Unaudited)
                                                          $              $

<S>                                                  <C>            <C>
Project Revenue                                               --         10,610

Project Costs                                                 --          3,615
                                                     -----------    -----------

Gross Profit                                                  --          6,995

Manufacturing Costs Not Applied                           47,169         44,613
                                                     -----------    -----------

                                                         (47,169)       (37,618)
                                                     -----------    -----------
Expenses
       Selling                                           101,720         97,440
                                                     -----------    -----------

       General and administrative                        444,050        186,531
                                                     -----------    -----------

       Research and development
          Materials                                       57,133          3,663
          Wages and benefits                              29,514         21,387
          Subcontracting                                  49,788          2,397
          Depreciation                                       945          1,028
          Equipment rental                                   104            102
          Indirect costs                                   7,958          6,225
          Shipping                                         1,332          3,427
          Travel                                           3,956          4,163
                                                     -----------    -----------

                                                         150,730         42,392
                                                     -----------    -----------

       Amortization of goodwill                          161,693        161,693
                                                     -----------    -----------

       Interest, net of interest income                   13,951         24,770
                                                     -----------    -----------

       Foreign exchange (gain) loss                         (785)        91,304
                                                     -----------    -----------

       Stock based compensation                          149,326             --
                                                     -----------    -----------

Total Expenses                                         1,020,685        604,130
                                                     -----------    -----------

Net Loss for the period                                1,067,854        641,748

Deficit - Beginning of period                          6,639,966      4,538,362
                                                     -----------    -----------

Deficit - End of period                                7,707,820      5,180,110
                                                     ===========    ===========

Net Loss per Share                                         (0.05)         (0.04)
                                                     ===========    ===========

Weighted Average Number of Shares Outstanding         22,284,000     14,689,000
                                                     ===========    ===========
</TABLE>





                See accompanying notes to financial statements.


                                       28
<PAGE>

Service Systems International, Ltd.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>

                                                                   Four Months    Four Months
                                                                       ended         ended
                                                                   December 31,   December 31,
                                                                       2000           1999
                                                                                  (Unaudited)
                                                                        $              $
<S>                                                                 <C>             <C>
Cash Flows to Operating Activities
       Net loss                                                     (1,067,854)     (641,748)

Adjustments to reconcile net loss to cash
       Amortization of goodwill                                        161,693       161,693
       Depreciation                                                     16,584        18,968
       Foreign exchange (gain) loss                                       (785)       91,304
       Common stock issued for expenses                                  2,431         6,972
       Accrual of interest                                              14,832        34,208
       Stock based compensation                                        149,326            --

Change in non-cash working capital items
       (Increase) decrease  in accounts receivable                     (44,518)      210,453
       (Increase) in inventory and contract work in progress           (28,221)      (37,745)
       Decrease in prepaid expenses and deposits                        22,451         6,824
       Decrease (increase) in accounts payable, accrued
           liabilities, wages and vacation pay payable
           and customers' deposits                                     144,971       (34,326)
                                                                    ----------    ----------

       Net Cash Used in Operating Activities                          (629,090)     (183,397)
                                                                    ----------    ----------

Cash Flows (to) from Investing Activities
       Acquisition of short-term investment-restricted                     (46)          (40)
       Additions to patents and trademarks                                (295)      (77,819)
       Capital assets acquired                                         (41,475)       (8,638)
                                                                    ----------    ----------

       Net Cash Used in Investing Activities                           (41,816)      (86,497)
                                                                    ----------    ----------

Cash Flows from (to) Financing Activities
       (Decrease) in bank demand loan                                       --      (193,388)
       Common stock returned to treasury                               (40,000)      351,881
       Increase in loans payable                                       300,007        64,633
       Increase in amounts owing to related parties                     41,227        86,310
       Increase in share subscriptions received                        390,600            --
                                                                    ----------    ----------

Net Cash Provided by Financing Activities                              691,834       309,436
                                                                    ----------    ----------

Increase in Cash                                                        20,928        39,542

Cash - Beginning of Period                                               9,291         7,985
                                                                    ----------    ----------

Cash  - End of Period                                                   30,219        47,527
                                                                    ==========    ==========

Non-Cash Financing Activities

     6,500 shares were issued to settle debts at $0.374 per share        2,431            --

Cash Paid for
     Interest                                                            2,768         4,976
     Income Taxes                                                           --            --
</TABLE>




                See accompanying notes to financial statements.


                                       29
<PAGE>

Service Systems International, Ltd.
Notes to the Consolidated Financial Statements


1.   Nature of Operations and Continuance of Business

        The Company manufactures and markets its Ultra Guard-Registered
        Trademark- 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 yet produced significant revenue and the
        Company has experienced significant losses to date. 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.

        Subsequent to December 31, 2000 the Company received $55,000 for
        subscriptions to a private placement and $360,000 in additional
        financing.

2.      Significant Accounting Policies

        CONSOLIDATED FINANCIAL STATEMENTS

        These financial statements include the accounts of the Company, and its
        Canadian subsidiary, UVS, of which the Company owned 50.7% until
        February14, 2000, when it acquired 100% of UVS' capital stock.

        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.

        GOODWILL

        Goodwill represents 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 will be amortized to operations over their
        estimated useful lives of twenty years.

        REVENUE RECOGNITION

        Product sales will be recognized at the time goods are shipped. System
        and project revenue will be 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.


                                       30
<PAGE>

        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.

        EARNINGS PER SHARE

        The earnings per share is 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.

        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.

        INCOME TAXES

        The Company has adopted the provisions of Financial Accounting Standards
        Board Statement No. 109 (SFAS 109), Accounting for Income Taxes. SFAS
        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 August 31, 2000 the Company has accumulated net operating losses in
        Canada and the United States available to offset future taxable income
        as scheduled below:
<TABLE>
<CAPTION>

                                       Canadian                          US
                                         Losses                      Losses
                Year                          $     Expiration Date       $   Expiration Date
<S>                                   <C>               <C>       <C>             <C>

                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
                ------------------------------------------------------------------------------
                                      4,508,000                   2,205,000
                ==============================================================================
</TABLE>


        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 $2,852,000. 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 $2,852,000 has been
        recognized.


                                       31
<PAGE>

        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 expense
        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 ACCOUNTING PRONOUNCEMENTS

        Effective September 1, 1998, the Company adopted Statement of Financial
        Accounting Standards No. 130, "Reporting Comprehensive Income." This
        statement requires that all items that are required to be recognized
        under accounting standards as components of comprehensive income be
        reported in a financial statement that is displayed with the same
        prominence as other financial statements. Comprehensive income is the
        same as net income for all periods presented.

        Effective September 1, 1998, the Company adopted Statement of Accounting
        Standards No. 131, "Disclosures about Segments of an Enterprise and
        Related Information." This statement requires the Company to report
        income (loss), revenue, expense and assets by business segment including
        information regarding the revenues derived from specific products and
        services and about the countries in which the Company is operating. The
        Statement also requires that the Company report descriptive information
        about the way that operating segments were determined, the products and
        services provided by the operating segments, differences between the
        measurements used in reporting segment information and those used in the
        Company's general-purpose financial statements and changes in the
        measurement of segment amounts from period to period. As noted above
        this statement establishes standards for reporting and display and has
        no material effect on the Company's financial condition or results of
        operations. See Note 10 for segmented information disclosures.

        Effective September 1, 1998 the Company adopted Statement of Financial
        Accounting Standards No. 132, "Employers' Disclosures about Pensions and
        other Post Retirement Benefits." This statement standardizes the
        disclosure requirements for pension and other post retirement benefits.
        The Company typically does not offer the types of benefit programs that
        fall under the guidelines of this statement.

        In June 1998 and June 1999, the FASB issued Statement of Financial
        Accounting Standards No.'s 133 and 137, "Accounting for 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.

3.      Restricted Cash

        In connection with a letter of credit, required under a long-term
        project bonding, the Company purchased a C$391,000 face value Bankers'
        Acceptance to be held as a bond for the letter of credit of C$390,809.



                                       32
<PAGE>

4.      Property, Plant, and Equipment

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

<TABLE>
<CAPTION>
                                                                                                 Dec. 31,        Aug. 31,
                                                                                                   2000            2000
                                                                                 Accumulated     Net Book        Net Book
                                                                   Cost         Depreciation       Value           Value
                                                                     $                $              $               $

<S>                                                               <C>              <C>              <C>            <C>
        Computer equipment                                         47,298           33,391          13,907         15,263
        Computer software                                           8,184            4,804           3,380          3,925
        Display equipment                                          33,016           31,207           1,809          4,010
        Office furniture and equipment                             32,477           27,979           4,498          6,662
        Plant jigs, dies, moulds, tools and equipment             113,857           83,054          30,803         30,190
        Leasehold improvements                                     58,535           26,724          31,811            445
                                                                  -------           ------          ------         ------
                                                                  293,367          207,159          86,208         60,495
                                                                  =======          =======          ======         ======
</TABLE>

        Depreciation per class of asset:
<TABLE>
<CAPTION>
                                                                                                Four months ended
                                                                                             Dec. 31,        Dec.31,
                                                                                               2000           1999
                                                                                                          (Unaudited)
                                                                                                 $              $
<S>                                                                                            <C>            <C>

        Computer equipment                                                                      3,096          2,708
        Computer software                                                                         546            548
        Display equipment                                                                       2,201          2,201
        Office furniture and equipment                                                          2,165          1,998
        Plant jigs, dies, moulds, tools and equipment                                           7,309          6,238
        Leasehold improvements                                                                    445          1,782
                                                                                               ------         ------
                                                                                               15,762         15,475
                                                                                               ======         ======
</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-Registered Trademark- System. These costs are
        amortized over twenty years. Components of the Ultra Guard-Registered
        Trademark- 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.      Demand Loans

        a)   At August 31, 2000, the company had loans payable to "Elco Bank
             Clients" located in Nassau, Bahamas, of $121,644. During the four
             months ended December 31, 2000, additional loans of $297,635 were
             received and interest of $11,757 was accrued, bringing the loans
             payable balance to $431,036 at December 31, 2000. The loans payable
             to "Elco Bank Clients" are unsecured, interest bearing at 10% per
             annum and due on demand.

        b)   Loans payable to a shareholder of $119,883 are unsecured and bear
             interest at 8%.

        c)   Loans payable of $16,534 are due on demand, unsecured and bear
             interest at 10% per annum.

7.      Amounts Owing to Related Parties

        a)   These amounts, totaling $50,014, are owing to two directors, due on
             demand, unsecured and non-interest bearing.

        b)   During the four months ended December 31, 2000, two directors
             agreed to defer payment of their loans amounting to $342,244 until
             January, 2002.


                                       33
<PAGE>

8.      Common Stock

<TABLE>
<CAPTION>
                                                                                                       Additional
                                                                                        Common           Paid-in
                                                                       Shares            Stock           Capital
                                                                          #                $                $

<S>                                                                   <C>               <C>             <C>
    Balance August 31, 1998                                           12,662,988        12,663          3,073,619

        Issuance of stock at $0.10 per share to settle debt              111,000           111             10,989

        Issuance of stock for cash pursuant to stock options
        exercised at $0.15 per share                                     321,000           321             47,829
-------------------------------------------------------------------------------------------------------------------

    Balance August 31, 1999                                           13,094,988        13,095          3,132,437

        Issuance of stock for cash in private sales at
        prices ranging from $0.20 to $0.68                             2,855,340         2,856            910,336

        Issuance of stock for the 49.3% of UV Systems
        Technology from its minority shareholders
        at a fair market value of $0.58 per share                      4,213,832         4,214          2,445,169

        Issuance of stock for expenses pursuant to
        exercise of employee stock options                                20,000            20              2,980

        Issuance of stock for cash pursuant to stock options
              exercised at $0.20, per share                            1,446,281         1,446            287,810
              exercised at $0.40, per share                               60,000            60             23,940
              exercised at $0.50, per share                               78,000            78             38,922

        Issuance of stock for expenses at prices ranging
        from $0.20 to $0.48                                              208,160           208             72,865

        Issuance of stock under the Long-Term Equity
           Incentive Plan at a fair market value of
           prices ranging from $0.60 to $0.81                            330,922           331            193,258

        Issuance of stock under the Long-Term Equity
           Incentive Plan for nil consideration subsequently
           returned for cancellation                                     725,000             -                  -
                                                                        (725,000)            -                  -

        Share Issue Costs                                                                                  (2,340)
-------------------------------------------------------------------------------------------------------------------

    Balance, August 31, 2000                                          22,307,523        22,308         7,105,377

        Issuance of stock for expenses at  $0.374                          6,500             6             2,379

        Stock returned to treasury for cancellation                     (100,000)         (100)          (39,900)
-------------------------------------------------------------------------------------------------------------------

    Balance, December 31, 2000                                        22,214,023        22,214         7,067,856
-------------------------------------------------------------------------------------------------------------------
</TABLE>

    (a)  Warrants outstanding as at December 31, 2000:

<TABLE>
<CAPTION>
                                  Exercise
     Class            #            Price                Expiry Date(s)

<S>               <C>             <C>            <C>
     "A"          1,428,379       $.20-$.90      June 30, 2001 - December 20, 2003
     "B"          1,217,456           $0.20      December 3, 2003
     "D"          1,455,049           $0.40      June 2, 2002
     "E"          6,030,553       $.20-$.90      December 31, 2001 - December 3, 2003
</TABLE>


                                       34
<PAGE>

             450,420 Class A warrants exercisable at between $.40 to $.90 per
             share were extended to June 30, 2001.

             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.

             952,699 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.

             6,500 Class A warrants were issued at an exercise price of $0.60
             expiring June 1, 2003 in connection with a shares for debt
             agreement where 6,500 shares were issued at $0.374 to settle $2,431
             of debt. The value of the warrants was $2,776 which was charged to
             compensation expense.

             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.

             450,000 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.

             On December 19, 2000 the Company issued 100,000 Class A warrants
             exercisable at $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.

             On January 19, 2001 the Company issued 400,000 Class A warrants
             exercisable at $0.60 per share expiring December 8, 2002 pursuant
             to an Agreement dated September 30, 2000 with October Sun, Inc. 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 from an
             existing shareholder at an exercise price of approximately $1.10
             per share for a period of one year.

             On January 19, 2001 the Company issued 100,000 Class E Warrants
             exercisable 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.

        (b)  Warrants to be issued

             On January 25, 2001, the Company entered into a Strategic Alliance
             and other agreements (was previously disclosed as a subsequent
             event in the August 31, 2000 financial statements as a non-binding
             Letter of Intent) 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-Registered Trademark- ultraviolet disinfection
             technology for water and wastewater applications. The exclusive
             territory for the sales of UltraGuard-Registered Trademark- systems
             will be North, Central and South America and the Caribbean. The
             term of the agreement is 10 years. The agreement can be terminated
             for convenience after three years.

             The Agreements with US Filter will provide for a:

             o  Reduction of capital requirements through the provision of
                progress payments covering ultraviolet systems ordered. The
                Company will sell its systems and components to US Filter at a
                discounted price. If the Company is unable or unwilling to meet
                the manufacturing requirements then US Filter may manufacture
                the systems and components.


                                       35
<PAGE>

             -  Five percent (5%) license fee on all systems and components
                manufactured by the Company and 10% on all systems and
                components manufactured by US Filter.

             US Filter received on February 9, 2001:

             -  1,000,000 warrants for the purchase of common stock, exercisable
                equal to the lower of $0.97 per share or the fair market value
                of the stock at April 25, 2001 expiring October 31, 2011.

             -  1,000,000 warrants for the purchase of common stock, exercisable
                at $1.00 per share expiring October 31, 2011;

             -  1,000,000 warrants for the purchase of common stock, exercisable
                at $2.00 per share expiring October 31, 2011;

             -  US Filter has opportunities to earn further warrants upon
                receiving certain product sales levels.

             None of the warrants received will be exercisable before two years
             from the date of grant.

             On January 9, 2001 the Company issued 1,487,718 Class B warrants
             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.

        (c)  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 August 21, 1997 employees were granted stock options to acquire
             1,217,000 shares at $1.00 per share expiring August 21, 2000. These
             options are currently unexercised.

             On April 15, 1998 two directors and an employee were granted stock
             options to acquire 341,000 shares at $0.15 per share expiring April
             15, 2001. During fiscal 1999, 321,000 options were exercised for
             proceeds of $48,150. The remaining 20,000 were exercised
             subsequently.

             The options are granted for services 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 with the following
             assumptions used for grants on August 21, 1997: risk free interest
             rate was 5.57%, expected volatility of 120%, an expected option
             life of three years and no expected dividends; and for grants on
             April 15, 1998: risk free interest rate was 5.56%, expected
             volatility of 120%, an expected option life of three years and no
             expected dividends.

             If compensation expense had been determined pursuant to SFAS 123,
             the Company's net loss and net loss per share for the four months
             ended December 31, 2000 would have been the same as reported.

        (d)  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.
             During the prior year 330,922 performance shares were granted at a
             fair market value of $193,589.


                                       36
<PAGE>

9.      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>
                                              UNITED                                        UNITED
                                 CANADA       STATES          TOTAL         CANADA          STATES           TOTAL
                                        FOUR MONTHS ENDED                                 YEAR ENDED
                                          DECEMBER 31, 2000                             AUGUST 31, 2000
                                          -----------------                             ---------------
                                        $            $              $             $              $                $

<S>                              <C>          <C>          <C>              <C>            <C>            <C>
       Revenue                          -            -              -             -              -                -
       Expense                    389,637      678,217      1,067,854             -              -                -
       Income (loss)             (389,637)    (678,217)    (1,067,854)            -              -                -
-------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                          DECEMBER 31, 2000                             AUGUST 31, 2000
                                          -----------------                             ---------------
<S>                               <C>          <C>          <C>             <C>            <C>            <C>

       Identifiable assets        799,866       18,038        817,904       711,689         17,101          728,790
       Goodwill and patents        50,527      444,661        495,188        51,054        606,354          657,408
-------------------------------------------------------------------------------------------------------------------

       Total assets               850,393      462,699      1,313,092       762,743        623,455        1,386,198
===================================================================================================================
</TABLE>


10.     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.


                                       37
<PAGE>

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:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Name                     Age       Position
------------------------------------------------------------------------------
<S>                      <C>       <C>
Kenneth E. Fielding      50        Director, President, and President of UV
                                   Systems Technology, Inc.
John R. Gaetz            60        Director, Secretary-Treasurer and Vice-
                                   President of Finance (CFO)
</TABLE>

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,
Service Systems 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.

                                       38
<PAGE>

The Executive Officers of the Company are employed full-time by Service Systems
or its subsidiary, UVS. See "Executive Compensation."

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, one Director and Officer, John Gaetz, failed to file a
Form 4 timely, however, all other 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

                              SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
     (1) (b)        (c)           (d)       (e)        (f)          (g)          (h)

Name and                                               Other    Restricted    Securities     All
Principal                                              Annual     Stock       Underlying     LTIP        Other
Position                                    Compen     Award(s)   Options       Payouts      Compen
                                            sation                                           sation
                   YEAR          SALARY($)  BONUS($)     ($)       ($)          (SARs)        ($)         ($)
                   ----          ---------  ---------    ---       ---          ------        ---         ---
President, CEO
and President
of UVS Inc.

<S>                <C>             <C>          <C>       <C>       <C>         <C>         <C>            <C>
                   1998            49,442*      0         0         0           150,500                     0
                   1999            53,218       0         0         0              0        45,000*         0
                   2000            57,143**     0         0         0              0        54,000*         0
                   4 months 2000   19,731       0         0                                 18,000*
</TABLE>

      * Accrued
     ** Accrued  32,318

No options were granted to the named executive officer during the 2000 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, and the
transition period from August 31, 2000 to December 31, 2000 to each of our named
Executive Officers:
<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------------
                                                                               NUMBER OF              VALUE OF
                                                                              UNEXERCISED            UNEXERCISED
                                                                               OPTION AT            IN-THE-MONEY
                                   SHARES                                   DEC 31, 2000             OPTIONS AT
                                  ACQUIRED                                   YEAR END (#)           Dec 31, 2000
                                     ON                  VALUE                EXERCISED/             YEAR END($)
           NAME                 EXERCISE (#)            REALIZED              UNEXERCIZED            EXERCISED/
                                                                                                     UNEXERCIZED

            (A)                     (B)                   (C)                     (D)                    (E)
<S>                               <C>                    <C>                     <C>                     <C>
    Kenneth E. Fielding           150,500                 --                     200,000                 --
        Fiscal 2000
     Transition period
</TABLE>


                                       39
<PAGE>

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.

<TABLE>
<CAPTION>
                                            August 31, 2000            December 31, 2000


NAME AND ADDRESS               SHARES            PERCENT OF        SHARES        PERCENT
OF BENEFICIAL               BENEFICIALLY            CLASS      BENEFICIALLY     OF CLASS
OWNER (1)                      OWNED (2)                          OWNED (2)
------------------------------------------------------------------------------------------
<S>                           <C>                   <C>
Kenneth E. Fielding           2,859,904 (3)         12.9%       2,659,904         12.0%

John R. Gaetz                 3,794,062 (4)         17.1%       3,794,062         16.2%

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

Working Opportunity Fund
(EVVC) Ltd                    2,809,723 (6)(7)      12.7%       2,809,723         13.0%

All officers and directors
  as a group                  6,653,966  (3&4)        30%       6,253,966         28.2%

------------------------------------------------------------------------------------------
</TABLE>

(1)     The address for all shareholders is in care of the company at 2800
        Ingleton Avenue, Burnaby, British Columbia, Canada V5C 6G7. The
        Company's address will change on April 23, 2001 ( approx.), to 201 - 11
        Burbidge Street, Coquitlam BC, Canada, V3K 7B2.

(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


                                       40
<PAGE>

        shares which Mr. Fielding has the right to acquire at a price of $0.20
        under immediately exercisable E Warrants.

(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 Warrantsand 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-Registered Trademark- 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, J.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, 2000, the following Directors, Executive Officers, and greater than
5% shareholders, have made loans to us for additional working capital: John R
Gaetz, $180,072 and Ken Fielding $197,404. Of these loans, $342,244 has been
deferred to January 31, 2002.

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 August 1997, options (which expired on August 21, 2000) for 200,000 shares of
common stock were granted to each of Kenneth Fielding and John Gaetz at an
option price of $1.00.

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.


                                       41
<PAGE>


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.

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 (3)

        (10)(v)            Sample Agreement among minority
                           Shareholders of UV Systems
                           Technology, Inc. and the Company
                           each dated 2/28/97 (3)

        (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 (6)

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

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


                                       42
<PAGE>


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

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

        (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 Mannint Elliott             Filed Herewith
                                                                  Electronically


(1)     Incorporates 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)     Incorporated by reference to the Corporation's Form 10Q for the fiscal
        quarter 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)     Incorporated by reference to the Corporation's Form 10KSB for the fiscal
        year ended August 31, 1999

(7)     Incorporated by reference to the Corporation's Form 10QSB for the fiscal
        quarter ended February 29, 2000.

(8)     Incorporated by reference to the Corporation's Form 10QSB for the
        fiscal year ended August 31, 2000.

(b)     Reports on Form 8-K
        The Company filed one report on Form 8-K, filed on October 13,2000
        reported the letter of Intent for a Strategic Alliance Agreement
        between Service Systems, UV Systems Technology, Inc., and U.S.
        Filter/Wallace & Tiernan, INc. dated October 6, 2000.


                                       43
<PAGE>

                                   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: April 2, 2001                 /s/ Ken Fielding
----------------------------------------------------------
                                    Ken Fielding, Director

DATE: April 2, 2001                 /s/ John R. Gaetz
----------------------------------------------------------
                                    John R Gaetz, Director


                                       44