<PAGE>

                       U.S. Securities and Exchange Commission
                                Washington, D.C. 20549
                                     Form 10-QSB

(Mark One)

[X]  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934

     For the quarterly period ended February 28, 1998

[ ]  Transition report Pursuant to Section 13 or 15(d) of the Exchange Act

     For the transition period from ______ to ______.

                            COMMISSION FILE NUMBER 0-21753

                         SERVICE SYSTEMS INTERNATIONAL, INC.
          (Exact Name of Small Business Issuer as Specified in Its Charter)

NEVADA                                  88-0263701
(State of Other Jurisdiction of         (IRS Employer Identification No.)
Incorporation or Organization)

                  2800 INGLETON AVENUE, BURNABY, B.C. CANADA V5E SS5
                       (Address of Principal Executive Offices)

                                     604-451-1069
                   (Issuer's Telephone Number, Including Area Code)


               -------------------------------------------------------
               (Former name, former address and former fiscal year, if
                              changed since last report)

     Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such report(s), and (2)
has been subject to such filing requirements for the past 90 days.  Yes X  No
                                                                       ---   ---

                     PROCEEDINGS DURING THE PRECEDING FIVE YEARS

     Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court.  Yes ___ No ___

                         APPLICABLE ONLY TO CORPORATE ISSUERS

     State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:  7,762,886 as of April 8, 1998

     Transitional Small Business Disclosure Format (check one):

Yes    No X
   ---   ---


<PAGE>

                                        INDEX

--------------------------------------------------------------------------------

PART I    FINANCIAL INFORMATION


ITEM 1.   CONSOLIDATED FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . 2

Consolidated Balance Sheets as of February 28, 1998
     and 1997 (unaudited). . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Consolidated Statements of Operations for the six months ended 
     February 28, 1998 and 1997 (unaudited). . . . . . . . . . . . . . . . . . 4

Consolidated Statements of Cash Flows for the six months ended 
     February 28, 1998 and 1997 (unaudited). . . . . . . . . . . . . . . . . . 5

Notes to the FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . 6  to 8

Item 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF

          OPERATIONS AND FINANCIAL CONDITIONS. . . . . . . . . . . . . . 9 to 12

Part II   Other Information. . . . . . . . . . . . . . . . . . . . . . . . . .12

Item 1.   LEGAL PROCEEDINGS  . . . . . . . . . . . . . . . . . . . . . . . . .12

Item 2.   CHANGES IN SECURITIES  . . . . . . . . . . . . . . . . . . . . . . .12
 
Item 3.   DEFAULTS UPON SENIOR SECURITIES  . . . . . . . . . . . . . . . . . .12

Item 4.   SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . .12

Item 5.   OTHER INFORMATION  . . . . . . . . . . . . . . . . . . . . . . . . .12

Item 6.   EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . .12

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13


                                                                               1
<PAGE>

Part 1.   Financial Information

Item 1.   CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


                                                                              2
<PAGE>

Service Systems International, Ltd.
(A Development Stage Company)
Consolidated Balance Sheets
(Unaudited)

<TABLE>
<CAPTION>

                                                                                (Restated)
                                                                February 28,   February 28,
                                                                    1998           1997
                                  ASSETS
<S>                                                             <C>            <C>
Current assets:
     Cash                                                        $      140     $    6,620
     Accounts receivable                                             63,346         73,519
     Inventory                                                      365,880        432,463
     Prepaid expenses                                                84,761         15,933
     Held to maturity investment                                        -          220,417
     Research credit receivable                                     238,618        224,220
                                                                 ----------     ----------
          Total current assets                                      752,745        973,172

Loan Receivable                                                       9,500            -  
Capital Assets  (Note 4)                                            159,305        196,119
Goodwill - net of amortization (Note 5)                           1,819,057      2,304,138
Patents (Note 6)                                                     37,089         31,762
                                                                 ----------     ----------
                                                                 $2,777,696     $3,505,191
                                                                 ----------     ----------
                                                                 ----------     ----------

          LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Cheques issued in excess of funds on deposit                $    3,907     $      -  
     Accounts payable                                               147,197        128,389
     Accrued liabilities                                             17,492          9,985
     Vacation pay payable                                             6,931          8,646
     Customer deposits                                               18,727        117,527
     Loans owing to related parties                                 485,111        113,497
     Loans payable - minority stockholders of subsidiary            599,160        511,016
                                                                 ----------     ----------

                                                                  1,278,525        889,060

Long-term Debt (Note 8)                                           1,469,660      1,469,660
          
Convertible Debenture (Note 7)                                      215,139            -  
                                                                 ----------     ----------

                                                                  2,963,324      2,358,720
                                                                 ----------     ----------
Stockholders' equity:
Common stock, $.001 par value,
     50,000,000 shares authorized, 7,678,168 
     and 5,239,338 issued and outstanding
     respectively                                                     7,678          5,239
Additional paid-in capital                                        2,399,086      1,798,956

Deficit accumulated during development stage                     (2,606,479)      (652,937)
Foreign exchange translation adjustment                              14,087         (4,787)
                                                                 ----------     ----------

                                                                   (185,628)     1,146,471
                                                                 ----------     ----------

                                                                 $2,777,696     $3,505,191
                                                                 ----------     ----------
                                                                 ----------     ----------


</TABLE>

                   See accompanying notes to financial statements.


                                                                              3
<PAGE>

Service Systems International, Ltd.
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)


<TABLE>
<CAPTION>

                                                                                        (Restated)
                                                                 Six Months             Six Months
                                                                    Ended                  Ended
                                                              FEBRUARY 28, 1998      FEBRUARY 28,1997
                                                              -----------------      ----------------
<S>                                                           <C>                    <C>
Project Revenue                                                  $    2,799             $   25,074
                                                                 ----------             ----------

Project costs                                                         2,468                 33,919
Manufacturing Costs Not Applied                                      43,811                 13,753
                                                                 ----------             ----------

Gross Profit  (Loss)                                                (43,480)               (22,598)
                                                                 ----------             ----------


Expenses
     General and administrative                                  $  459,621             $  132,550
     Research and development                                        61,030                 76,650
     Selling                                                        100,426                 56,556
                                                                 ----------             ----------

                                                                    621,077                265,756
                                                                 ----------             ----------

Net Loss from Operations Before Other Items                        (664,557)              (288,354)

Other Items

     Amortization of goodwill (Note 5)                             (242,540)              (121,270)
     Interest Income                                                      -                  1,435
     Miscellaneous Income                                                 -                 20,263
     Interest expense                                               (59,739)               (23,793)
                                                                 ----------             ----------

Net Loss for the period                                          $ (966,836)            $ (411,719)
                                                                 ----------             ----------
                                                                 ----------             ----------


Net Loss per share                                                   $(0.15)                $(0.09)
                                                                 ----------             ----------
                                                                 ----------             ----------


Weighted average shares outstanding                               6,474,450              4,351,669
                                                                 ----------             ----------
                                                                 ----------             ----------

</TABLE>

                   See accompanying notes to financial statements.


                                                                              4
<PAGE>

Service Systems International, Ltd.
(A Development Stage Company)
Consolidated Statemenst of Cash Flows
(Unaudited)

<TABLE>
<CAPTION>

                                                                                      (Restated)
                                                                 Six Months           Six Months
                                                                    Ended                Ended
                                                             FEBRUARY 28, 1998     February 28, 1997
                                                             -----------------     -----------------
<S>                                                          <C>                   <C>
Cash Flows to Operating Activities
     Net Loss                                                    $(966,836)           $(411,719)

Adjustments to reconcile net loss to cash
     Depreciation                                                   23,917                8,956
     Amortization of goodwill (Note 5)                             242,540              121,270
     Discount on convertible debenture                             120,279                    -

Change in non-cash working capital items:
     (Increase) Decrease in accounts receivable                       (315)               7,664
     (Increase) in inventory                                        (8,872)             (25,445)
     (Increase) in prepaid expenses                                (72,211)              (4,103)
     Decrease (Increase) in research credit receivable               6,173              (13,650)
     (Decrease) in accounts payable, accrued liabilities
       vacation pay payable and customers' deposits                (52,549)             (28,525)
                                                                ----------           ----------

Net Cash Used In Operating Activities                             (707,874)            (345,552)
                                                                ----------           ----------

Cash Flows (to) from Investing Activities
     Capital assets acquired                                        (9,918)              (2,776)
     Additions to intangible assets                                   (431)              (2,145)
     (Increase) in loans receivable                                 (9,500)                   -
     Acquisition of subsidiary                                           -                1,537
                                                                ----------           ----------


Net Cash (Used in) Provided by Investing Activities                (19,849)              (3,384)
                                                                ----------           ----------

Cash Flows from (to) Financing Activities
     Funds applied against cheques issued
       in excess of deposit                                         (4,845)                   -
     Common stock issued                                           553,518              312,233
     Conversion of bonds to shares                                (507,518)                   -
     (Decrease) in loan payable - other                            (21,206)                   -
     Increase (decrease) in amounts
       owing to related parties                                    124,558              (33,911)
     Increase in loans payable to
       minority shareholders of subsidiary                          42,520               23,793
     Proceeds from convertible debenture                           526,110                    -
     Foreign exchange translation adjustment                        14,087               (3,547)
                                                                ----------           ----------


Net Cash Provided by Financing Activities                          727,224              298,568
                                                                ----------           ----------

Increase (decrease) in cash                                           (499)             (50,368)
Cash - beginning of period                                             639               56,988
                                                                ----------           ----------

Cash - end of period                                            $      140           $    6,620
                                                                ----------           ----------
                                                                ----------           ----------

</TABLE>

                   See accompanying notes to financial statements.


                                                                              5
<PAGE>
Service Systems International, Ltd.
(A Development Stage Company)
Notes to the Consolidated Financial Statements

1.   Development Stage Company

          The Company is a development stage company which was incorporated in
          the State of Nevada in August, 1990 and remained inactive until
          September 1, 1995. The initiation of the Company's current business
          was accompanied by a change of ownership. On December 1, 1996 the
          Company acquired 50.69% of UV Systems Technology Inc. ("UVS"). Through
          UVS, the Company manufactures and markets its Ultra Guard -TM-
          ultraviolet based patented water treatment system.  These products 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.

          In a development stage company, management devotes most of its
          activities to establishing a new business. Planned principal
          activities have not yet produced significant revenue. The ability of
          the Company to emerge from the development stage with respect to its
          planned principal business activity is dependent upon its successful
          efforts to raise additional equity financing and develop the market
          for its products.

2.   Significant Accounting Policies

          Cash and cash equivalents

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

          Fixed assets

          Fixed assets are recorded at cost. Depreciation is computed utilizing
          the straight-line method using an estimated useful life of five years
          for all asset categories.

          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 which recognizes project revenue and profit during
          construction based on expected total profit and estimated progress
          towards completion during the reporting period. All related costs are
          recognized in the period in which they occur.

          Estimates

          The preparation of the Company's consolidated financial statements
          requires management to make estimates and assumptions that affect the
          amounts reported 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.

          Intangible assets

          Goodwill on consolidation is amortized to operations over its
          estimated useful life of five years. Patent protection costs will be
          amortized to operations over their estimated useful lives being expiry
          of each patent.

          Foreign currency

          i)   Translation of foreign currency transactions and balances

               Revenue, expenses and non-monetary balance sheet items in foreign
               currencies are translated

                                                                              6
<PAGE>

               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 period with any
               translation gain or loss charged to operations as a separate
               component of other items.

3.   Restatement

     Comparative figures of prior periods have been restated to reflect the
     change in the accounting policy from full write-off of goodwill on
     consolidation to amortizing goodwill on consolidation to operations over
     its estimated useful life of five years. In addition, adjustment has been
     made to reflect the amount of goodwill as reported for the fiscal year
     ending August 31, 1997. The effect of the restatement on prior period
     accounts is:

<TABLE>

          <S>                              <C>                 <C>
          Goodwill net of amortization                         $2,304,138
          Inventory                                               124,793
          Accounts receivable                                    (202,850)
          Deficit                                              (2,226,081)
</TABLE>

4.   Capital Assets

     Capital assets are stated at cost less accumulated depreciation.

<TABLE>
<CAPTION>
                                                                                 FEB 28, 1998  FEB 28, 1997
                                                                  ACCUMULATED      NET BOOK       NET BOOK
                                                       COST       DEPRECIATION       VALUE          VALUE
                                                         $              $              $              $
     <S>                                             <C>          <C>            <C>           <C>
     Computer Equipment                               35,936         10,443         25,493         24,097
     Computer software                                 4,071          1,296          2,775          2,769
     Display equipment                                31,835         12,734         19,101         25,866
     Office furniture & Equipment                     29,131         10,639         18,492         20,686
     Plant jigs, dies, moulds, tools & equipment     121,382         41,745         79,637        103,250
     Leasehold improvements                           26,724         12,917         13,807         19,451
                                                     -------         ------        -------        -------

                                                     249,079         89,774        159,305        196,119
                                                     -------         ------        -------        -------
                                                     -------         ------        -------        -------

     Depreciation per class of asset
                                                                                       $              $  

     Computer equipment                                                              2,872          1,193
     Computer software                                                                 348            153
     Display equipment                                                               3,183          1,617
     Office furniture & equipment                                                    2,775          1,293
     Plant jigs, dies, moulds, tools & equipment                                    12,066          3,343
     Leasehold improvements                                                          2,673          1,357
                                                                                   -------        -------

                                                                                    23,917          8,956
                                                                                   -------        -------
                                                                                   -------        -------

</TABLE>


                                                                              7
<PAGE>

5.   Goodwill

     Goodwill on consolidation for prior periods presented for comparative
     purposes has been restated to account for the change in accounting policy
     of amortizing to operations over its estimated useful life of five years.
     Amortization of $242,540 has been charged to current operations and
     comparative figures of $121,270 include only three months from December 1,
     1996 to February 28, 1997.

6.   Patents

     Intangible assets represent legal costs associated with registering and
     protecting certain patents and trademarks associated with the Ultra
     Guard-TM- System. These costs will be amortized when the Company completes
     its pilot plant testing and completion of certain modifications and
     improvements to the Ultra Guard-TM- System. Components of the Ultra
     Guard-TM- System were patented in the United States on April 12, 1996.
     Applications have been made for patent protection under the International
     Patent Protection Treaty covering up to 40 countries.

7.   Convertible debenture

     The Company issued, in previous quarters, 12% Series "A" Senior
     Subordinated Convertible Redeemable Debentures due July 31, 1998 having a
     face amount of $230,000, bearing interest at 12% per annum payable
     quarterly. The Company discounted these debentures by 20% of the face
     amount and received net proceeds of $184,000.  Interest of $9,917 has been
     accrued to February 28, 1998. For placement of the full amount ($631,285)
     of convertible debentures, the Agent was issued 66,625 warrants for 
     shares exercisable at $1.64 per share.

     These debentures are convertible into common stock at the option of the
     holder,  at the lower of (a) 20% below the closing bid price the business
     day immediately preceding notice of conversion or (b) 20% below the five
     day average closing bid price of the Company's stock immediately preceding
     the closing. The Company can redeem the debentures at 120% of the face
     amount to the extent conversion has not occurred.  If the debentures are
     not converted prior to maturity the Company has the option to prepay and
     then the holder has the option to accept the cash or convert at the five
     day closing price prior to conversion.

8.   Long term debt

     UVS issued 2,000 Class "A" preferred shares at C$1,000 per share for a
     total of C$2,000,000 (US$1,469,660). The holders of these shares also own
     49.31% of UVS. These shares are retractable once sales reach C$10,000,000
     and net income reaches C$1,000,000. All preferred shares are to be redeemed
     by June 30, 1999.

     Pursuant to an agreement dated December 6, 1996 between the Company, UVS
     and UVS's minority stockholders, the Company agreed to raise $2,000,000
     (the "Financing") by March 31, 1997 (extended to April 15, 1998). Within 30
     days of the Financing the minority stockholders will each convert up to
     one-half of their Class "A" preferred shares to secured debentures. The
     minority stockholders may also convert, at their option, up to one-half of
     the loans payable into common shares of the Company at the rate of C$2.00
     per share. The Company will repay the loans from the Financing except to
     the extent converted. Within 30 days of the Financing the minority
     stockholders will exchange one-half of their preferred shares for 250,000
     common shares of the Company. Each common share issued pursuant to this
     agreement will include a warrant to acquire an additional share at C$2.00
     per share expiring four years after issuance of the common shares.

9.   Consolidated financial statements

     These interim financial statements include the accounts of the Company, and
     its 50.69% owned subsidiary, UVS. As UVS was acquired on December 1, 1996,
     results of operations include only Consolidated Statements for the period
     from December 1, 1996 to February 28, 1998. Comparative figures for
     February 28, 1997 include three months' operations for UVS and six months'
     operations for the Company.


                                                                              8
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATION AND
FINANCIAL CONDITION

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

OVERVIEW

     The Company is a development stage company that was incorporated in the
State of Nevada in August 1990, and remained inactive until September 1995.  The
initiation of the Company's current business was accompanied by a change of
ownership.  Through its majority-held subsidiary, UV Systems Technology, Inc.
("UVS"), the Company manufactures and markets its Ultra Guard-TM-
ultraviolet-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 (where it is
currently being applied through UVS' Japanese agent) and for potable water,
bottled products and agriculture and aquaculture water treatment.

     In September 1995, the Company initiated a marketing distribution agreement
with UVS, a manufacturer of equipment using proprietary ultra violet light
technology for the microbiological disinfection of industrial and municipal
wastewater.  In July 1996, the Company entered into a funding agreement with UVS
whereby the Company provided 50% of UVS' operating cash needs for a six-month
period.  On December 1, 1996, the Company acquired 50.69% of the common stock of
UVS from two principals and the minority stockholders.  On December 6, 1996, the
Company entered into an agreement with the remaining two minority stockholders,
Working Opportunity Fund (EVCC) Ltd. and MDS Ventures Pacific Inc., to acquire
the remaining 49.31% common stock and their preferred stock.  The effect of
these transactions when and if completed will be to give the Company 100%
ownership of UVS.

     During the period from December 1, 1996, the majority acquisition date, the
Company has continued with UVS' System development and testing programs.  These
programs include the development of both a mechanical and electronic automatic
cleaning system, in addition to the Company's already existing quartz sheath
system, to remove the fouling build-up due to suspended solids prevalent in
wastewater.  The program of development of the mechanical cleaner is essentially
completed except for on-going component refinements.  Development of the
electronic ultrasonic cleaning system continues.  The supplier of the ultrasonic
equipment, which is partnering with the Company and has provided the prototype
equipment for testing at no cost, delivered the equipment during the first
quarter of fiscal 1998. This equipment has been installed on a UV module and
testing has started at the Chilliwack test site and is being evaluated against
the mechanical wiper system so that the effectiveness of each system as to
performance and operating cost may be compared.  The Company is assessing
whether the ultrasonic cleaning system can provide equivalent or better
performance than the mechanical cleaning system.  Reducing mechanical components
and moving parts is anticipated to enhance UVS system preference over other UV
systems as a result of reduced maintenance and operating cost to the client.

     In March 1997, the Company received an order for a full scale System to
treat one-fifth of a major Eastern Canadian city's sewage effluent.  In June,
the client requested that the order be delayed until the end of the current year
disinfection period (October 31, 1997).  During discussions held in November
1997, the client indicated its interest in proceeding with the project.
Subsequent information provided by the client indicated that it has been able to
reduce the period of UV treatment from six months per year to four months per
year, which will make the economic of replacing the existing equipment less
attractive. A revised proposal, which addressed previous problems, has been
presented. The Company cannot be assured that the client will accept the revised
proposal, that testing, if the proposal is accepted, will be successful, or that
even if testing is successful, negotiations for the total project, valued at
approximately C$2 million, will result in award of the project to the Company.

     The Company has been unable to complete testing of a full-scale
demonstration system at the City of Chilliwack, located in western Canada, due
to flows almost twice those contracted for through the sewage treatment plant. 
The Company continues to use this site for demonstration, research and
development; however ongoing sewage plant modifications have stalled further
equipment tests until late summer.


                                                                              9
<PAGE>
     During the report period ended November 30, 1997, the Company was advised
that an order will be forthcoming for a project in Montreal, Quebec Province,
Canada, in the revised amount of C$390,809.  As of February 28, 1998, the order
had not been received, although the request for proposal (RFP) for the sewage
plant, which included the UV system, closed on March 18, 1998.  The Company
believes that award for this project is imminent because the Company's UV System
price was placed into the RFP and no alternative UV supplier was permitted to
quote. This project was pilot tested using the Company's production
demonstration unit at which power monitoring and systems efficiencies were
demonstrated and showed the UV System provided significant performance and
cost-saving potential over an alternative system.

     Shipment and billing of the majority of any of these or other sales which
may be made in fiscal 1998 (which the Company cannot assure), other than the
sale to Hamilton, Alabama, for a fixed price of $127,000 will not occur until
fiscal 1999.

     Sales and marketing of the Company's UV products continue, with bids sent
out during the current quarter amounting to approximately $26 million. During
this period the Company displayed its products at Globe 98, an exhibition
directed to new technologies in the environmental field, attended by over 400
delegates and 10,000 international visitors.  At this exhibition, the Company
was able to showcase the Ultra Guard-TM- benefits to a focused audience,
including engineers, plant owners and City managers. The Company believes that
its presentations were well received and many contacts were made for application
of the Company's UV products. As a result of the presentations at Globe 98, the
Company has responded to a number of potential opportunities. 

RESULTS OF OPERATION

     GENERAL NOTE. When comparing the Six Months period Ended February 28, 1998
to the period ended February 28,1997, the reader must be aware that the six
months ended February 28, 1997 includes six months of SVSY operations and three
months of UVS operations for the period from acquisition, December 1, 1996 to
February 28, 1997. Comparisons of changes in Income and Expense values do not
reflect comparable conditions.

     SIX MONTHS ENDED FEBRUARY 28, 1998 AND 1997.   During the six months ended
February 28, 1998, the Company had project revenues of $2,799, derived from
sales of parts.  Project costs and manufacturing costs not applied to projects
amounting to $43,811 resulted in a Gross Loss of $43,480 compared to a Gross
Loss of  $22,598 in the six months period ended February 28, 1997. 
Manufacturing costs not applied to projects are made up of allocated overhead
amounts not identified to a specific project.

     PROJECT REVENUE. During the six-months ended February 28, 1998 project
revenues decreased 89% to $2,799, from $25,074, for the six-month period ended
February 28, 1997 (the first period of comparison after the acquisition of UVS).

     GROSS LOSS.  For the six-months ended February 28, 1998 gross loss
increased 92% to $43,480, from $22,598 for the six-month period ended February
28, 1997 (the first period of comparison after the acquisition of UVS). The
losses were due to the decrease in revenues and the increase in manufacturing
costs not applied to projects.

     During the six months ended February 28, 1998 and 1997 respectively,
operational expenses increased 234% to $621,077 from $265,756 in the comparable
1997 period (including, general and administrative expense of $459,621 compared
to $132,550, research and development cost of $61,030 compared to $76,650 and
selling expense of $100,426 compared to $56,556), bringing the Net Loss from
Operations Before Other Items to $664,557 compared to $288,354 for the
comparable 1997 period. The higher costs of General and Administrative were as a
result of accrued (unpaid) management fees, discounts on convertible debentures,
corporate relations and legal and accounting fees.  Other Items, including
Amortization of goodwill in the amount of $242,540 in connection with the UVS
acquisition (see Note 3 in the financial statements identifying the restated
write-off of principal) and Interest Expense in the amount of $59,739 paid
largely on UVS debt owed to minority shareholders (accrued and not paid) and
interest on convertible debentures, brought net Loss for the period to $966,836,
a per share loss amounting to $0.15.

     RESEARCH AND DEVELOPMENT EXPENSES. For the six months ended February 28,
1998, research and development expenses decreased 26% to $61,030 from $76,650
for the comparable 1997 period due to a reduced need to continue the R & D at
the spending level in early 1997. This trend should continue as the base
technology is at a level of full marketability. During the recent quarter, the
Company entered into a development and testing

                                                                             10
<PAGE>
program being carried out at McGill University. This R & D program is intended
to demonstrate UVS lamp efficacy compared to other lamp technology. Results of
this testing should be available in the fourth quarter.

     SELLING EXPENSES.  For the six months ended February 28, 1998, selling
expenses  increased 78% to $100,426 from $56,556 in the 1997 comparable period
reflecting the reduced period of UVS activity as noted above.

     AMORTIZATION OF GOODWILL. For the six-months ended February 28, 1998, 
amortization of goodwill increased to $242,540 from $121,270 for the 
comparable 1997 period. Amortization of goodwill is as a result of the 
majority acquisition of UVS (see Note 5 in financial statements).

     INTEREST EXPENSE. For the six-months ended February 28, 1998, interest
increased 251% to $59,739, from $23,793 for the comparable 1997 period.  This
increase resulted largely from interest payable on UVS debt owed to minority
shareholders and interest on convertible debentures.

     NET LOSS FOR THE PERIOD. The Net Loss for the six months ended February 
28, 1998 increased 230% to $664,557 from $288,354 for the 1997 comparable 
period, due to the increased costs resulting from the majority acquisition of 
UVS and the Company's attendant and continuing effort to improve, 
commercialize and sell its Ultra Guard-TM- systems.

     NET LOSS PER SHARE. For the six-months ended February 28, 1998, net loss
per common share was $0.15 compared to $0.09 for the six-months ended February
28, 1997. 

LIQUIDITY

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

     Because the Company's sales of Ultra Guard-TM-  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 which are often beyond
the Company's control.

     In addition, the Company requires and will require financing over and above
its current resources to sustain its operations, expand its marketing efforts,
and complete the purchase of the remaining non-owned 49.31% of the outstanding
stock of UVS.  Additional financing may be in the form of debt or equity
financing, or both.  There can be no assurance that the additional financing can
be timely obtained on terms acceptable to the Company, if at all.  Failure to
receive these funds may be expected to have a material adverse effect on the
Company and its business.

     During the quarter ended November 30, 1997, the Company financed its
operation largely from loans from related parties and shareholders of UVS, and
the sale of 12% convertible debentures.  In June 1997, the Company signed an
agreement with London Select Enterprises, Ltd., as broker, to place, in an
offering conducted in compliance with Regulation S, promulgated under the
Securities Act of 1933, up to $750,000 face amount in 12%, one year convertible
debentures due July 31, 1998, if not earlier redeemed.  The agreement provided
that each debenture would be sold at 80% of face value and would be convertible
into common stock of the Company at a conversion price of 20% below the closing
bid price of the Company's stock immediately preceding the date of conversion or
20% below the 5-day average closing bid price of the Company's common stock
immediately preceding the closing date.  During the six months ended February
28, 1998, net proceeds in the amount of $505,028 were received from the sale of
the debentures. During the same period, convertible debentures amounting to face
value including interest, $507,518, were converted, at an average conversion per
share price of $0.232, into 2,198,830 shares of common stock. At the end of this
reporting period the balance of convertible debentures and unpaid interest not
converted amounted to $ 239,917.

                                                                             11
<PAGE>

     As part of its expanded marketing effort, the Company is actively seeking
additional sales agents and distributors.  During this period one agent, Bio
Light located in Santiago, Chile, was appointed for Chile.  The Company
continues to seek additional North American sales agents and international
distributor.   

     The Company has determined that its internal reporting systems are Year
2000 compliant.  Final determination regarding the impact and materiality of
Year 2000 issues pertaining to the Company's products has not been completed,
although the Company does not believe, based upon current anaylsis, they will be
significant.



PART II             OTHER INFORMATION

Item 1.        Legal Proceedings

                    None

ITEM 2.        CHANGES IN SECURITIES

                    None

ITEM 3.        DEFAULTS UPON SENIOR SECURITIES

                    None

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

                    None

ITEM 5.        OTHER INFORMATION

                    None

ITEM 6.        EXHIBITS AND REPORTS on Form 8-K

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

               Exhibit Number                     Description
          
               (3)(i)                             Articles of Incorporation

               (3)(ii)                            Bylaws

               (11)                               Statement re: computation
                                                    of per share earnings

               (27)                               Financial Data Schedule

               (b)                                Reports on Form 8-K
                                                     None

--------------------
     (1)  Incorporated by reference to the Registrant's Form 10-SB effective
          1/17/97

     (2)  Incorporated by reference to the Registrant's Form S-8 effective
          10/6/97


                                                                             12
<PAGE>

                                      Signatures


In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, hereunto duly
authorized.


Dated: April 14, 1998

                            Service Systems International Ltd.


                            By: /s/ Ken Fielding
                                -----------------------------
                                Ken Fielding, President


                                                                             13