<PAGE>
                          SECURITIES AND EXCHANGE COMMISSION
                                WASHINGTON, D.C. 20549
                                           
                                           
                                     FORM 10-QSB
                                           
               [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                           SECURITIES EXCHANGE ACT OF 1934

                   For the Quarterly Period ended November 30, 1998
                        
               [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE 
                           SECURITIES EXCHANGE ACT OF 1934
                                           
For the transition period from .................... to ........................

Commission file number   0-21753

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

604-541-1069
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 
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 reports), and 
(2) has been subject to such filing requirements for the past 90 days.  
Yes / X / No / /

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:   12,662,988 as of January 11, 1999

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

                                                                             1
<PAGE>

                                        INDEX
                                        -----

PART I    Financial Information


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

Consolidated Balance Sheets as of November 30, 1998
     and 1997 (unaudited). . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Operations for the three months ended 
     November 30, 1998 and 1997 (unaudited). . . . . . . . . . . . . . . . . . .

Consolidated Statements of Cash Flows for the three months ended 
     November 30, 1998 and 1997 (unaudited). . . . . . . . . . . . . . . . . . .

Notes to the Financial Statements. . . . . . . . . . . . . . . . . . . . . . . .

Item 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
          FINANCIAL CONDITIONS

Part II   OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . .

ITEM 1.   LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . .

ITEM 2.   CHANGES IN SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . .

ITEM 3.   DEFAULT UPON SENIOR SECURITIES . . . . . . . . . . . . . . . . . . . .

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

ITEM 5.   OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . .

ITEM 6    EXHIBITS AND REPORTS ON FORM 8K. . . . . . . . . . . . . . . . . . . .

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

                                                                             2

<PAGE>

Part 1.   Financial Information

Item 1.   FINANCIAL STATEMENTS (UNAUDITED)


                                                                             3

<PAGE>

Service Systems International, Ltd.
Consolidated Balance Sheet
As of November 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
                                                        November 30,  November 30,
                                                           1998           1997
<S>                                                     <C>           <C>
          Assets
Current Assets
   Cash and short-term investments                        $6,146        $76,622
   Short-term investments - restricted (Note 3)          258,393              0
   Accounts receivable                                   227,429         63,174
   Inventory                                             267,798        358,746
   Prepaid expenses                                       23,715        105,372
   Research credit receivable                                  0        240,137
                                                      ----------     ----------
                                                         783,481        844,051

Capital assets (Note 4)                                  107,780        169,450
Goodwill - net of amortization                         1,455,246      1,940,327
Patents and trademarks (Note 5)                           93,436         36,658
                                                      ----------     ----------
                                                      $2,439,943     $2,990,486
                                                      ----------     ----------
                                                      ----------     ----------

        Liabilities and Stockholders' Equity
Current Liabilities
   Accounts payable                                      115,780         96,122
   Accrued liabilities                                    42,503         31,023
   Vacation pay payable                                    7,806          5,812
   Customer deposits                                           0         18,726
   Loan payable - other                                        0         44,047
   Amounts owing to related parties (Note 6)             115,357        367,022
   Loans payable - minority stockholders
    of subsidiary                                              0        570,300
                                                      ----------     ----------
                                                         281,446      1,133,052
Long-term debt (Note 7)                                2,347,998      1,469,660
Convertible Debentures                                         0        541,141
                                                      ----------     ----------
                                                       2,629,444      3,143,853
                                                      ----------     ----------

Stockholders' Equity
Common stock, $.001 par value,
  50,000,000 shares authorized, 12,662,988
  and 5,354,644 issued and outstanding respectively       12,663          5,355
  Additional paid-in capital                           3,073,619      1,911,501

Deficit                                               (3,275,783)    (2,071,972)

Foreign exchange translation adjustment                        0          1,749
                                                      ----------     ----------


                                                        (189,501)      (153,367)
                                                      ----------     ----------

                                                      $2,439,943     $2,990,486
                                                      ----------     ----------
                                                      ----------     ----------
</TABLE>

                    See accompanying note to financial statements

                                                                             4



<PAGE>

Service Systems International, Ltd.
Consolidated Statements of Operations and Deficit
For the three months ended November 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
                                                      Three Months   Three Months
                                                          ended         ended
                                                      Nov. 30, 1998  Nov. 30, 1997
<S>                                                   <C>             <C>
Project Revenue                                       $   106,811     $    1,935
Project Costs                                              82,430          2,155
                                                      -----------     ----------

Gross Profit (Loss)                                        24,381           (220)
Manufacturing Costs Not Applied                            22,634         24,740
                                                      -----------     ----------

                                                            1,747        (24,960)
                                                      -----------     ----------
Expenses
  Selling                                                  65,387         59,214
  General and administrative                               77,339        175,140
  Research and development                                 28,003         22,845
  Amortization of goodwill                                121,270        121,270
  Interest, net of interest income                         20,682         28,900
  Foreign exchange translation (gain) loss                 39,650              0
                                                      -----------     ----------
                                                          352,331        407,369
                                                      -----------     ----------
Net Loss for the period                                   350,584        432,329

Deficit - Beginning of period                           2,925,199      1,639,643
                                                      -----------     ----------

Deficit - End of period                               $ 3,275,783     $2,071,972
                                                      -----------     ----------
                                                      -----------     ----------


Net Loss per share                                    $     (0.03)    $    (0.08)
                                                      -----------     ----------
                                                      -----------     ----------

                                                            #              #

Weighted average shares outstanding                    12,662,988      5,354,644
                                                      -----------     ----------
                                                      -----------     ----------
</TABLE>

                    See accompanying notes to financial statements
                                                                             5


<PAGE>


Service Systems International, Ltd.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
                                                       Three Months    Three Months
                                                           ended           ended
                                                      Nov. 30, 1998    Nov. 30, 1997
                                                      -------------    -------------
<S>                                                   <C>              <C>
Cash Flows to Operating Activities
   Net loss                                            $(350,584)      $(432,329)

Adjustments to reconcile net loss to cash

   Amortization of goodwill                              121,270         121,270
   Depreciation                                           10,684          11,718
   Foreign exchange translation adjustment                39,650           1,749
   Discount on convertible debenture                           0          12,500

Change in non-cash working capital items
   (Increase) in accounts receivable                    (116,472)           (143)
   (Increase) in inventory                               (29,517)         (1,738)
   Decrease (Increase) in prepaid expenses                12,460         (92,822)
   Decrease in research credit receivable                      0           4,654
   Increase (Decrease) in accounts payable, accrued 
      liabilities, vacation pay payable 
      and customers' deposits                              40,960        (91,213)
                                                      -----------     ----------

Net Cash Used in Operating Activities                    (271,549)      (466,354)
                                                      -----------     ----------

Cash Flows (to) from Investing Activities
   Acquisition of short-term investment - restricted       (9,076)             0
   Additions to patents and trademarks                       (952)             0
   Disposal (Acquisition) of Capital assets                22,933         (7,864)
                                                      -----------     ----------

Net Cash (Used in) Provided by Investing Activities        12,905         (7,864)
                                                      -----------     ----------

Cash Flows from (to) Financing Activities
  Funds applied against cheques issued in
   excess of deposit                                            0         (8,752)
  Common stock issued                                           0         63,610
  Increase in loans payable - other                             0         22,841
  Increase (decrease) in amounts owing to
   related parties                                         19,915          6,469
  Increase in borrowings from minority shareholders        37,823         13,660
  Proceeds from convertible debenture                           0        452,373
                                                      -----------     ----------

Net Cash Provided by Financing Activities                  57,738        500,201
                                                      -----------     ----------

Increase (Decrease) in Cash and Cash Equivalents         (200,906)        75,983

Cash and Cash Equivalents - Beginning of Period           207,052            639
                                                      -----------     ----------

Cash and Cash Equivalents - End of Period                  $6,146        $76,622
                                                      -----------     ----------
                                                      -----------     ----------
</TABLE>

                    See accompanying notes to financial statements

                                                                              6

<PAGE>

Service Systems International, Ltd.

Notes to the Consolidated Financial Statements

1.   Nature of Operations and Continuance of Business
     The Company 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. See Note 4
     regarding acquisition of UV Systems Technology Inc. a Canadian Company 
     ("UVS") on December 1, 1996. Through UVS, the Company manufactures and 
     markets its Ultra Guard-TM- ultraviolet based patented water treatment 
     system. These products and systems are sold primarily for municipal waste
     disinfection, treatment of process and industrial waste water, and for
     potable water, bottled products and agriculture and aquaculture water
     treatment.

     During fiscal 1998 the Company emerged from a development stage company to
     an operating company. Even though its status has changed to an operating
     company, the 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.
          
2.   Significant Accounting Policies

     CONSOLIDATED FINANCIAL STATEMENTS

     These financial statements include the accounts of the Company, and its
     50.7% owned Canadian subsidiary, UVS.

     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.

     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 which
     would indicate inability to recover the carrying amount. Such evaluation 
     is based on various analyses including discounted cash flows and 
     profitability projections which necessarily involves management judgment.

     PATENTS AND TRADEMARKS

     Patents and trademarks will be amortized to operations over their estimated
     useful lives not exceeding 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 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.

     FOREIGN CURRENCY

     i)   Translation of foreign currency transactions and balances:

                                                                              7

<PAGE>

          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 charged
          to operations as a separate component of other items.

3.   Restricted Cash

     Pursuant to a letter of credit, required under a long-term project to be
     completed in fiscal 1999, the Company purchased a C$396,000 face value
     Bankers' Acceptance to be held as a bond for the letter of credit.

4.   Capital Assets

     Capital assets are stated at cost less accumulated depreciation.
<TABLE>
<CAPTION>
                                                                             1998           1997
                                                           Accumulated     Net Book       Net Book
                                                Cost       Depreciation      Value          Value
                                                  $             $              $              $
<S>                                           <C>            <C>            <C>            <C>
   Computer equipment                          35,403         15,720         19,683         25,670
   Computer software                            5,033          2,054          2,979          2,503
   Display equipment                           31,836         17,510         14,326         20,732
   Office furniture and equipment              29,157         15,014         14,143         19,610
   Plant jigs, dies, moulds, tools
     and equipment                             88,333         41,481         46,852         85,757
   Leasehold improvements                      26,724         16,927          9,797         15,178
                                              -------        -------        -------        -------
                                              216,486        108,706        107,780        169,450
                                              -------        -------        -------        -------
                                              -------        -------        -------        -------
</TABLE>


   Depreciation per class of asset:
<TABLE>
<CAPTION>
                                                          Three Months   Three Months
                                                              ended          ended
                                                          Nov. 30, 1998  Nov. 30, 1997
                                                                $               $
<S>                                                           <C>            <C>
   Computer equipment                                          1,762          1,404
   Computer software                                             255            169
   Display equipment                                           1,592          1,552
   Office furniture and equipment                              1,459          1,355
   Plant jigs, dies, moulds, tools and equipment               4,278          5,936
   Leasehold improvements                                      1,338          1,302
                                                              ------         ------
                                                              10,684         11,718
                                                              ------         ------
                                                              ------         ------
</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-TM- System. These costs will be amortized not exceeding
   twenty years starting September 1, 1998. 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 13 European countries.

6. Amounts Owing to Related Parties
<TABLE>
<CAPTION>
                                                              1998          1997
                                                                $             $
<S>                                                          <C>           <C>
   (a)  Amounts owing to a shareholder, due on demand,
        unsecured and non-interest bearing                        -         123,760

   (b)  Amounts owing to two directors, due on demand,
        unsecured and non-interest bearing                   115,357        243,262
                                                             -------        -------
                                                             115,357        367,022
                                                             -------        -------
                                                             -------        -------
</TABLE>

7. Long-term Debt

                                                                              8

<PAGE>

   Prior to fiscal 1998, UVS issued 2,000 Class "A" preferred shares at
   C$1,000 per share for proceeds of C$2,000,000 (US$1,304,546). The holders
   of these shares also own 49.3% of UVS ("minority shareholders"). Class "A"
   Preferred Shares are retractable once sales reach C$10,000,000 and net
   income reaches C$1,000,000, and are to be redeemed by June 30, 2000.

   During fiscal 1997, minority shareholders advanced C$631,000 to UVS.
   Interest accrued to June 29, 1998, at 20% per annum, totaled C$280,000.
   Pursuant to an interim refinancing agreement ("the Agreement"), dated June
   29, 1998, all accrued interest was waived. The principal repayment of
   C$631,000 has been deferred to June 29, 2003, and interest at 20% accrues
   until December 29, 2000, after which  it  is paid monthly. The Company
   waived interest of C$217,000 accrued on its loan to UVS of C$1,287,000.

   Under the Agreement, one of the minority shareholders advanced C$909,000 to
   UVS. This advance is secured by a subordinated debenture on all of UVS's
   assets, bears interest at 10%, payable monthly, is due in 2003, and ranks
   ahead of the minority shareholder loans and Class "A" Preferred Shares.

   The Company's subsidiary, UVS, completed its debt and share restructuring
   subject to completion of documentation and regulatory approval. Class "X"
   Preferred Shares will be a new class of shares added to the authorized
   capital stock of UVS. 500 Class "A" Preferred Shares, representing 50% of
   the Class "A" preferred shares held by one of UVS's minority shareholders,
   will be replaced with 500,000 Class "X" Preferred Shares retractable at
   C$1.00 per share. The Company's loan to UVS of C$1,287,000 will be
   transferred into 1,287,379 Class "X" Preferred Shares retractable at C$1.00
   per share. These Class "X" Preferred Shares will be retractable by the
   holders only if there is a sale of UVS or an initial public offering of its
   securities which values UVS, excluding Class X Preferred Shares, at C$20
   million. If not retracted by June 29, 2002, the Class X Preferred Shares
   will be redeemable by UVS for C$1 in total.

8. Comparative Figures

   Certain of the prior year's figures have been reclassified to conform with
   the current year's presentation.

                                                                             9
<PAGE>

SERVICE SYSTEMS INTERNATIONAL, LTD.

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

THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH OUR 
FINANCIAL STATEMENTS AND THE NOTES ATTACHED. INFORMATION DISCUSSED IN THIS 
REPORT MAY INCLUDE FORWARD-LOOKING STATEMENTS REGARDING EVENTS OR OUR 
FINANCIAL PERFORMANCE AND ARE SUBJECT TO A NUMBER OF RISKS AND OTHER FACTORS  
WHICH COULD CAUSE THE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE 
CONTAINED IN THE FORWARD-LOOKING STATEMENTS. AMONG SUCH FACTORS ARE, 1) 
GENERAL BUSINESS AND ECONOMIC CONDITIONS, 2) CUSTOMER ACCEPTANCE AND DEMAND 
FOR OUR PRODUCTS, 3) OUR OVERALL ABILITY TO DESIGN, TEST AND INTRODUCE NEW 
PRODUCTS ON A TIMELY BASIS, 4) THE NATURE OF THE MARKETS ADDRESSED BY OUR 
PRODUCTS, AND, 5) OTHER RISK FACTORS LISTED FROM TIME TO TIME IN DOCUMENTS 
FILED BY OUR COMPANY WITH THE SEC.

MANAGEMENT'S DISCUSSION

OVERVIEW

Our company is an ultraviolet disinfection equipment manufacturing company 
which 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 "Company Background").  Through UV 
Systems Technology Inc. (UVS), Service Systems manufactures and markets its 
Ultra Guard-TM- 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 ( where it is currently being applied through UVST's Japanese 
agent) and for potable water, bottled products and agriculture and 
aquaculture water treatment.

In September 1995 Service Systems initiated a marketing distribution 
agreement with UV Systems Technology Inc., 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 UV Systems Technology Inc., 
(UVS) whereby 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 
December 6, 1996, Service Systems entered into an agreement with the 
remaining two minority stockholders, Working Opportunity Fund (EVCC) Ltd. 
(WOF) and MDS Ventures Pacific Inc.(MDS),  to acquire the remaining 49.31% 
common stock and their preferred stock (Purchase Agreement). Any funds 
advanced under this agreement would be forfeit should Service Systems be 
unsuccessful in raising C$2.0 million. In June 1998 this agreement was not 
renewed as  Service Systems was unable to raise the C$2.0 million required to 
complete the transaction. WOF agreed to loan UVS additional funds (see 
details following) and agreed to allow conversion of the funds advanced under 
the Purchase Agreement into preferred shares.

In June 1998, UVS entered into an agreement with WOF (Agreement) to provide 
C$900,000.00 of additional funding and to reduce debt by requiring MDS and 
Service Systems to convert their loans receivable into Class "X" Preferred 
shares, retractable by the holder only if there is a sale or IPO which values 
the equity of UVS, including the Class "A" preferred shares, but excluding 
the Class "X" Preferred shares, at C$20.0 million. If not retracted within 4 
years from the closing date of this Agreement, the Class "X" Preferred shares 
will be redeemable by UVS for C$1.00.

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 chemicals prevalent in wastewater.  The program of 
development on the mechanical cleaner determined that the method chosen was 
viable and performs the function desired. Field testing of the mechanical 
wiper cleaning system was concluded at a PDU test site at Ville de 
Repentigney near Montreal, Quebec.  The test results concluded that the 
cleaning system did perform above anticipated levels and the cleaning 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 ambient air temperatures readings  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.

As a result of the PDU testing an order was received in May of 1998 in  the 
amount of about C$390,000. The project is currently being manufactured and is 
scheduled for delivery and installation in March 1999, with final testing to 
occur in May 1999.

A 6 lamp Ultra Guard-TM- UV system capable of disinfecting a wastewater flow 
of 3.5 MGD sold to Hamilton, Alabama is scheduled for delivery on January 15, 
1999, with installation and testing to follow by the end of January. This 
project is the first full scale operating Ultra Guard-TM- UV system to be 
installed in North America. Its destination is a market area in which UV 
systems are being actively introduced. We expect that the Ultra Guard-TM- UV 
system in Hamilton will provide 


                                                                             10

<PAGE>

equipment exposure to others contemplating upgrading their wastewater 
discharges to ultraviolet disinfection.  

In June 1998, UVS received a letter of intent for a UV system valued at 
C$605,000 for a project in Eastern Canada. The issuing of a purchase order 
for and subsequent delivery of this system is subject to a number of 
conditions, including a  provision that the purchaser must receive an order 
from the General Contractor for this phase of the project.  The Contractor is 
currently completing his negotiations with his client and has requested a 
revised quotation to address minor changes in the design condition. The 
project is scheduled for purchase by the end of February 1999. 

In September and October 1998, our Production Demonstration Unit  performed 
testing at a municipal wastewater plant in Eastern Canada. Testing was 
successful and an engineering report has been issued by the client's 
engineer, CH2M Gore & Storrie Ltd., recommending the Ultra Guard-TM- UV 
system as acceptable for the project and further stating  "it appears that 
satisfactory results can be achieved with this type of equipment with a very 
low number of lamps and low energy consumption for given flow". The project 
is valued at about C$900,000.  Based on information we received from the 
wastewater plant, the RFP is scheduled to be issued in February 1999. We will 
submit a response to the RFP and hope, based on the engineering report, to be 
awarded the project, although we cannot be certain that it will be awarded to 
us.

Additional PDU testing was performed at the City of Toronto, Humber plant to 
determine the efficacy of UV to disinfect wastewater containing levels of 
iron (Fe) at ranges on .3 to 4.0 mg/l. This testing was successful, proving 
the ability of the Ultra Guard-TM- UV system to disinfect with these high 
levels of iron present in the wastewater. The results of these tests will be 
presented at the CAWQ conference on water pollution being held in February 
1999. In December 1998, a PDU was  shipped to the County Sanitation Districts 
of Los Angeles County (the County). The testing program, which is conducted 
and paid for by the County, will test the Ultra Guard-TM- UV system's ability 
to disinfect wastewater to Title 22 Guidelines a stringent test protocol 
required as a precursor use of a company's UV product in reuse of wastewater 
for agriculture purposes. Additional tests are scheduled for Colorado on 
completion of the County testing.

In November 1998, a PDU valued at about $68,000 including training services 
was sold and delivered to our agent in North Carolina. The purchase was made 
by the agent so that he would have immediate access and opportunity to 
demonstrate the low power usage and low operating costs of the Ultra 
Guard-TM- UV system. The agent reports he has 5 sites which have requested 
PDU testing.

RESULTS OF OPERATIONS 

THREE MONTHS ENDED NOVEMBER 30, 1998
 
During the quarter ended November 30, 1998 our project revenues increased by 
$104,876 to $106,811 from $1,935 for the comparable quarter for the previous 
year, primarily because of estimated manufacturing completion of projects and 
the sale of a PDU.  Our Project costs for the quarter increased by $80,275 to 
$82,430, from $2,155 in the prior years quarter as a result of the increase 
in revenue generating work. Our Gross Profit, which results when Project 
Costs and Manufacturing Costs Not Applied are subtracted from Project 
Revenue, increased $26,707 to $1,747 from ($24,740), again as a result of 
increased business activity.

During the quarter ended November 30, 1998, Expenses decreased by $55,038 to 
$352,331 from $407,369 in the comparable quarter of the prior fiscal year, 
primarily as a result of a significant decrease in general and administrative 
expenses. Selling expense increased by $6,173 to $65,387 from $59,214 in the 
prior year's quarter, largely  because of the expenses incurred for PDU 
testing and because the quarter reflects the salary during the entire quarter 
of the Vice President-Sales and Marketing we hired in October 1997, midway 
through the prior year's quarter.  General and administrative expense 
decreased by $97,801 to $77,339 from $175,140 in the prior year's quarter. 
This decrease resulted primarily resulted from of a reduction in spending on 
public relations consulting during the quarter ended November 30, 1998 and 
the cost incurred because of the discounts and commission expense on the 
convertible debentures that were issued in the comparable quarter of the 
prior year. Research and Development expenses increased by $5,158 to $28,003 
from $22,845 in the prior year's quarter because of system automation design 
labor. Amortization of goodwill in connection with the acquisition of UVS 
(see Notes 2- Goodwill under Note to Financial Statements) was the same in 
both quarters.  Interest, net of interest income decreased by $8,218 to 
$20,682 from  $28,900, primarily because of a lower rate of interest on funds 
due to related parties (see Note 7 Financial Statements). Foreign exchange 
expenses increased during the quarter by $39,650 from 0 as a result of the 
increase in the value of the Canadian dollar as compared to the fiscal year 
end value. Foreign debts (our Long Term Debt) are required to be revalued and 
restated at any reporting period, to reflect any increase or decrease in 
foreign exchange rates. This revaluation, for the increase in the value of 
the Canadian dollar, resulted in an incremental increase of the  Long term 
debt, stated in US dollars. This increase is booked as an increase in the 
foreign exchange expense.

Net Loss for the quarter ended November 30, 1998 decreased by $81,745 to 
$350,584 from $432,329 for the comparable quarter of the previous fiscal 
year, because of an increase in Project Revenue due to increased business 
activity and lower operating cost as discussed in the previous paragraph.

LIQUIDITY

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


                                                                             11

<PAGE>

periods of limited working capital and may be expected to require financing 
for working capital during those periods.

Our 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 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 
which are acceptable or if at all.

During the twelve months ended August 31, 1998, our liquidity was improved as 
a result of actions taken by management. Accrued interest payable on loans 
from related parties and minority shareholders and our Company to UVS in the 
amount of $353,570 were waived by the debt holders. The remaining principal 
balances of those loans were transferred from Current Liabilities  to Long 
term debt and the interest rate on those loans was reduced to 10%, reducing 
our interest costs in the quarter ended November 30, 1998 and in the future.

We expect that during fiscal 1999, if sales of UVS systems increase as we 
anticipate, 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.        

YEAR 2000 ISSUE

DESCRIPTION OF THE ISSUE.  The Y2K issue refers to the inability of certain 
date-sensitive computer chips, software, and systems to recognize a two-digit 
date field as belonging to the 21st century. Mistaking "00" for 1900 or any 
other incorrect year could result in a system failure or miscalculations 
causing disruptions to operations, including manufacturing, a temporary 
inability to process transactions, or send invoices, or engage in other 
normal business activities. This is a significant issue for most, if not all 
companies, with far reaching implications, some of which cannot be 
anticipated or predicted with any degree of certainty. The Y2K issue may 
create unforeseen risks to our from our internal computer systems as well as 
from computer systems of third parties with which it deals. Failures of our 
and/or third parties' computer systems could have a material adverse impact 
on our ability to conduct its business.

YEAR 2000 TASK FORCE.  We have set up an internal task force comprised of our 
Director of Manufacturing and Engineering managers to review our products, 
business and engineering applications and suppliers and develop contingency 
plans for Y2K readiness. This task is to be completed by the end of calendar 
1999. The goal of the task force is to minimize the effect that Y2K issues 
will have on the Company and its customers. The Director of Manufacturing 
will update the CEO of the Company on its Y2K readiness.

INTERNAL BUSINESS AND ENGINEERING SYSTEMS.  The task force has completed a 
review of internal computer systems and will continue to review all internal 
business and engineering computer systems to ensure that these systems either 
will be Y2K ready, or will be modified or replaced by Y2K ready systems. We 
have already been assured that our accounting information system installed in 
1995 is Y2K ready as long as we adhere to the supplier's Y2K readiness 
guidelines. We plan to simulate and have tested, in a Y2K environment, our 
engineering and business information systems, internal telephone equipment, 
local networks, security and sprinkler systems to verify our Y2K readiness by 
the middle of fiscal 1999.

SUPPLIERS.  Our major suppliers are component parts distributors and contract 
manufacturers. Often the Company sources its products and manufacturing 
services from multiple, competing vendors. We are conducting a review of 
these key suppliers to ensure the Y2K readiness of as many vendors as 
possible and will initiate communication with all of our key suppliers to 
determine to what extent we may be vulnerable due to their failure to be Y2K 
ready. This communication, including site visits by our personnel, will be 
ongoing throughout fiscal 1999. There can be no assurance that the systems of 
other companies on which we rely will be Y2K ready on a timely basis and will 
not have an adverse effect on our operations. In instances where we are 
unable to determine that our vendors have taken appropriate steps to minimize 
disruption due to non-Y2K readiness, we will consider contingency plans, 
including moving to identified alternate sources, or developing new alternate 
sources.

PRODUCTS.  The task force will also assess outside sourced computer based 
control systems used within our product to determine if they have the 
capability of dealing with the year 2000.
 
COSTS.  We expect the cost of our Y2K assessment, including both incremental 
spending and redeployed resources, will not be material. The current 
assessment does not include potential costs related to any customer or other 
claims or the cost of internal software and hardware replaced in the normal 
course of business. This assessment is subject to change. Because there is no 
uniform definition of "Y2K readiness" and because all customer situations 
cannot be anticipated, particularly those involving third party products, we 
may see claims as a result of the Y2K transition. Such claims, if successful, 
could have a material adverse impact on future results.

CUSTOMERS. Because our customers all purchase built to order systems and our 
computer-based control systems will be manufactured to be compliant, we 
believe that Y2K will not effect a customer's decision to purchase our Ultra 
Guard-TM- UV 


                                                                             12

<PAGE>

system. However, we cannot predict the impact of our customers' lack of Y2K 
compliance and any disruptions caused to treatment systems we have installed 
because of their non-compliance. Costs and damages related to or arising from 
non-compliance could materially adversely affect our revenues or our 
business, even though we believe our systems themselves to be compliant.

COST ESTIMATES. We have not been required to incur costs for Y2K remedial 
work and have not set aside any contingency fund to deal with any 
contingencies which may arise. The costs for Y2K compliance are based on our 
best estimates, which were derived from numerous assumptions about future 
events, including third party modification plans and other factors. However, 
we cannot guarantee that those estimates will be accurate and actual results 
could differ materially from those plans. Specific factors that might cause 
material differences include, but are not limited to, the availability and 
cost of personnel trained in this area and ability to identify and correct 
all relevant computer codes.


                                                                             13

<PAGE>

PART II                                                       OTHER INFORMATION

Item 1.   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 a Director), and Charles P. 
          Neild (a former Director and Vice President of the Company). 
          O'Flynn alleges that in April of 1996, he purchased shares of 
          Common Stock based upon a representation that they would be free 
          trading within 40 days of "the filing of a prospectus". He 
          further alleges that in September of 1996 he purchased additional 
          shares of Common Stock based upon 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 has filed an answer denying the 
          claims.

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 (1)

          (3)(ii)               Bylaws (2)

          (4)                   Statement re: computation of per share earnings 
                                -- filed electronically herewith

          (27)                  Financial Data Schedule -- filed electronically 
                                herewith
     
     (B)  Reports on Form 8K
    
          During the reporting period we did not file any  Form 8-K.


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


                                                                             14

<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: January 14, 1999

                                           Service Systems International Ltd.


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


                                           By: /s/ J. R. Gaetz
                                               ------------------------------
                                               J. R. Gaetz, Vice President


                                                                             15