<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 May 31, 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 3S5
                      (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: 12,658,935 as of July 6, 1998

     Transitional Small Business Disclosure Format (check one):

Yes     No  X
    ---    ---

<PAGE>

                                     INDEX
                                     -----

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


PART I    FINANCIAL INFORMATION
<TABLE>

<S>                                                                     <C>
ITEM 1.   CONSOLIDATED FINANCIAL STATEMENTS. . . . . . . . . . . . . . .     2

Consolidated Balance Sheets as of May 31, 1998
     and 1997 (unaudited). . . . . . . . . . . . . . . . . . . . . . . .     3

Consolidated Statements of Operations for the nine months ended 
     May 31, 1998 and 1997 (unaudited) . . . . . . . . . . . . . . . . .     4

Consolidated Statements of Cash Flows for the nine months ended 
     May 31, 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. . . . . . . . . . . . . . . . . . . . . . .     13

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     14

</TABLE>

                                                                              1

<PAGE>

Part 1.        Financial Information

Item 1.   FINANCIAL STATEMENTS (UNAUDITED)






                                                                             2

<PAGE>

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

<TABLE>
<CAPTION>
                                                             (Restated)
                                            May 31,            May 31,
                                             1998                1997
                         ASSETS
<S>                                      <C>                 <C>
Current assets:
  Cash                                   $       346         $    10,084
  Accounts receivable                         91,530              70,116
  Amount due from related parties            207,497              -     
  Inventory                                  368,167             421,815
  Prepaid expenses                            50,173              13,160
  Held to maturity investment                  -                       0
  Research credit receivable                 233,165             237,794
                                         -----------         -----------

     Total current assets                    950,878             752,969

Loan Receivable                                9,500              -     
Capital Assets (Note 4)                      148,066             185,843
Goodwill - net of amortization (Note 5)    1,697,787           2,182,868
Patents (Note 6)                              37,564              35,638
                                         -----------         -----------

                                         $ 2,843,794         $ 3,157,318
                                         -----------         -----------
                                         -----------         -----------

 LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

  Accounts payable                        $  167,824          $  124,274
  Accrued liabilities                         13,514              11,311
  Vacation pay payable                         8,077              10,375
  Customer deposits                           18,299               7,242
  Loans payable - others                      28,917                   0
  Loans owing to related parties             288,953             217,945
  Loans payable - minority 
    stockholders of subsidiary               632,814             531,825
                                         -----------         -----------

                                           1,158,398             902,972

Long-term Debt (Note 8)                    1,469,660           1,469,660
                                         -----------         -----------

                                           2,628,058           2,372,632
                                         -----------         -----------

Stockholders' equity:
Common stock, $.001 par value,
  50,000,000 shares authorized, 
  12,662,988 and 5,279,338 issued and 
  outstanding respectively                    12,663               5,279
Additional paid-in capital                 3,218,686           1,848,916

Deficit accumulated during 
  development stage                       (3,039,067)         (1,063,151)

Foreign exchange translation adjustment       23,454              (6,358)
                                         -----------         -----------

                                             215,736             784,686
                                         -----------         -----------

                                         $ 2,843,794         $ 3,157,318
                                         -----------         -----------
                                         -----------         -----------
</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)
                                                 Nine months      Nine months
                                                    Ended             Ended  
                                                 May 31, 1998      May 31,1997
                                                -------------     ------------
<S>                                              <C>               <C>
Project Revenue                                  $     2,787       $   25,074
                                                 -----------       ----------

Project costs                                          2,463           33,912
Manufacturing Costs Not Applied                       65,617           24,538
                                                 -----------       ----------

Gross Profit  (Loss)                                 (65,293)         (33,376) 
                                                 -----------       ----------
          
Expenses
          General and administrative               $ 645,235       $  238,792
          Research and development                    82,498          175,532
          Selling                                    163,961          103,707
                                                 -----------       ----------

                                                     891,694          518,031
                                                 -----------       ----------

Net Loss from Operations Before 
          Other Items                               (956,987)        (551,407)

Other Items

          Amortization of goodwill (Note 5)         (363,810)        (242,540)
          Interest Income                              -                1,435
          Miscellaneous Income                         -               20,263
          Interest expense                           (78,627)         (49,684)
                                                 -----------       ----------

Net Loss for the period                          $(1,399,424)      $ (821,933)
                                                 -----------       ----------
                                                 -----------       ----------

Net Loss per share                               $     (0.18)      $    (0.18)
                                                 -----------       ----------
                                                 -----------       ----------

Weighted average shares outstanding                7,992,401        4,656,448
                                                 -----------       ----------
                                                 -----------       ----------
</TABLE>



                   See accompanying notes to financial statements.


                                                                             4
<PAGE>

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

<TABLE>
<CAPTION>
                                                                         (Restated)
                                                  Nine months           Nine months
                                                     Ended                 Ended
                                                  May 31, 1998          May 31, 1997
                                                 -------------          ------------
<S>                                              <C>                    <C>
Cash Flows to Operating Activities
  Net Loss                                        $(1,399,424)          $(821,933)
 
Adjustments to reconcile net loss to cash
  Depreciation                                         35,873              17,726
  Amortization of goodwill (Note 5)                   363,810             242,540
  Discount on convertible debenture                   145,057                -     

Change in non-cash working capital items:
  (Increase) Decrease in accounts receivable         (235,996)             11,067
  (Increase) in inventory                             (11,159)            (14,797)
  (Increase) in prepaid expenses                      (37,623)             (1,330)
  Decrease (Increase) in research credit       
     receivable                                        11,626             (27,224)
  Increase in held to maturity investment                                 218,119
  (Decrease) in accounts payable, accrued 
     liabilities, vacation pay payable and 
     customers' deposits                              (35,182)           (138,645)
                                                  -----------           ---------

Net Cash Used In Operating Activities              (1,163,018)           (514,477)
                                                  -----------           ---------

Cash Flows (to) from Investing Activities
  Capital assets acquired                             (10,635)             (1,270)
  Additions to intangible assets                         (905)             (6,021)
  (Increase) in loans receivable                       (9,500)               -     
  Acquisition of subsidiary                              -                  1,537
                                                  -----------           ---------

Net Cash (Used in) Provided by Investing 
  Activities                                          (21,040)             (5,754)
                                                  -----------           ---------

Cash Flows from (to) Financing Activities
  Funds applied against cheques issued
     in excess of deposit                              (8,752)               -     
  Common stock issued                               1,378,103             362,233
  Conversion of bonds to shares (Note 7)             (745,624)               -     
  Increase in loan payable - other                      7,711                -     
  (Decrease) Increase in amounts
     owing to related parties                         (71,600)             65,455
  Increase in loans payable to
     minority shareholders of subsidiary               76,174              49,684
  Proceeds from convertible debenture                 524,299                -     
  Foreign exchange translation adjustment              23,454              (4,045)
                                                  -----------           ---------

Net Cash Provided by Financing Activities           1,183,765             473,327
                                                  -----------           ---------

Increase (decrease) in cash                              (293)            (46,904)
Cash - beginning of period                                639              56,988
                                                  -----------           ---------

Cash - end of period                               $      346          $   10,084
                                                  -----------           ---------
                                                  -----------           ---------
</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.  See Note 4 regarding acquisition of UV Systems
     Technology Inc. ("UVS") on December 1, 1996. 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 waste water, 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.


                                                                             6
<PAGE>

2.   Significant Accounting Policies (continued)

     FOREIGN CURRENCY
     i)  Translation of foreign currency transactions and balances:

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

     ii) Translation of foreign subsidiary balances:

         Monetary balance sheet items of UVS are translated into US dollars at
         the rates of exchange on the balance sheet date. Non-monetary balance
         sheet items are translated into US. dollars at the rate of exchange
         prevailing on the transaction dates. The foreign subsidiary's
         operating results are translated into US dollars using the average
         exchange rate for the year with any translation gain or loss 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. Adjustment has been made to
     reflect the amount of goodwill as reported for the fiscal year ending
     August 31, 1997. In addition, a reclassification was made from common
     stock to paid-in capital in the amount of $49,960. The effect of the
     restatement on prior period accounts is:

            Goodwill net of amortization            $2,182,868
            Inventory                                  124,793
            Accounts receivable                       (202,850)
            Deficit                                 (2,104,811)
            Common stock                               (49,960)
            Additional paid-in capital                  49,960

4.     Capital assets

<TABLE>
<CAPTION>
                                                                       MAY 31, 1998     MAY 31, 1997
                                                        ACCUMULATED      NET BOOK         NET BOOK
                                              COST      DEPRECIATION      VALUE            VALUE
                                                $            $              $                $
     <S>                                    <C>           <C>            <C>              <C>
     Computer Equipment                      35,902        11,879         24,023           22,953
     Computer software                        4,824         1,470          3,354            3,017
     Display equipment                       31,835        14,326         17,509           23,996
     Office furniture & 
      Equipment                              29,131        12,025         17,106           19,192
     Plant jigs, dies, 
      moulds, tools & 
      equipment                             121,382        47,779         73,603           98,781
     Leasehold 
      improvements                           26,724        14,253         12,471           17,905
                                            -------       -------        -------          -------

                                            249,798       101,732        148,066          185,843
                                            -------       -------        -------          -------
                                            -------       -------        -------          -------
 </TABLE>

<TABLE>
<CAPTION>

     <S>                                                                <C>               <C>
     Depreciation per class of asset
                                                                             $                $  
     Computer equipment                                                    4,308            2,361
     Computer software                                                       522              302
     Display equipment                                                     4,775            3,199
     Office furniture & equipment                                          4,160            2,559
     Plant jigs, dies, moulds, tools 
      & equipment                                                         18,099            6,619
     Leasehold improvements                                                4,009            2,685

                                                                          35,873           17,726
                                                                         -------          -------
                                                                         -------          -------
</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 $363,810 has been charged to current operations and
     comparative figures of $242,540 include only six months from December 1,
     1996 to May 31, 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, bearing
     interest at 12% per annum payable quarterly. The Company discounted these
     debentures by 20% of the face amount. To May 31, 1998, interest of $20,339
     has been paid. For placement of the full amount ($745,624) of convertible
     debentures, less discount of $145,057, the Agent was issued 66,625 warrants
     for shares exercisable at $1.64 per share.

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 July 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 May 31, 1997. Comparative figures include six 
     months' operations for UVS and nine months' operations for the Company
     for May 31, 1997.


                                                                             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 ultraviolet 
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 complete except for on-going component refinements. 
Development of the electronic ultrasonic cleaning system continues.

     The Company demonstrates its systems with its Production Demonstration 
Units (PDU). The PDU is a two-lamp, full-scale UV system that may be moved to 
various Wastewater Treatment Plants (WWTP) which are in the final stage of UV 
equipment selection. The PDU will demonstrate the Company's UV systems 
ability to treat the effluent at that specific WWTP. Through this process, 
the Company demonstrates directly to interested buyers the efficacy and 
resultant lower operating costs of its systems compared to other UV suppliers 
and anticipates the generation of sales and resultant revenues.
                                           
     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). The client was able to reduce 
the period of UV treatment from six months per year to four months per year 
using its existing system, which made the economics of replacing the existing 
equipment less attractive. At the time of this report there is no further 
activity on the project and the Company has moved this project to its 
inactive list.

     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 will continue to use this site for demonstration, research 
and development; however, ongoing sewage plant modifications have not been 
completed and any further equipment research is delayed until late summer, 
1998.

     During the report period ended November 30, 1997, the Company was 
advised that an order will be forthcoming for a project near Montreal, 
Province of Quebec, Canada in the revised amount of C$390,809. During this 
most recently ended reporting period the purchase order number and document 
were received. The project is scheduled for delivery in November 1998. The 
Company received the purchase order against strong competition from its major 
competitor, Trojan Technologies Inc. of London, Ontario, Canada. As 
previously reported this project was pilot tested using the Company's 


                                                                             9
<PAGE>

PDU, and power use monitored by Hydro Quebec, a hydro power producer and 
supplier for the Province of Quebec as well as to the Eastern United States. 
This monitoring program, as well as other test criteria, provided independent 
corroboration that the Company's UV system provided improved performance and 
cost-saving to the client.

     On April 24, 1998, the Company received a purchase order in the amount 
of US$135,314 from its Japanese Licensee covering ultraviolet system 
components needed to complete 10 Industrial process water treatment systems. 
The project is scheduled to ship in August to be included in the 1998 fiscal 
year. The UV systems will be used in various industries including 
semiconductor plants, breweries and food processing. This order follows an 
initial order of 10 systems which were successfully prototype and Beta site 
tested at various locations in Japan. With this second order now received and 
verification of the product's ability to work in these industries, the 
Company is working to expand sales of this product to this client in Japan as 
well as other geographic market areas.

     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 and the sale 
to Japan, will not occur until fiscal 1999.

     Marketing of the Company's UV products continues, with bids sent out 
during the current quarter amounting to approximately $21 million. On April 
19 - 22, the Company presented a paper in Baltimore at Disinfection 98, The 
Latest Trends in Wastewater Disinfection: Chlorination vs UV disinfection. 
The specific seminar was hosted by the Water Environment Federation at which 
the Company showcased the Ultra Guard-TM- benefits to an audience of 
engineers, plant owners and City managers. Based on feedback received, as 
well as an invitation from the Water Environment Federation to join the 
Federation's Disinfection Committee, the Company believes that its 
presentations were well received. The Company made many contacts for 
application of the Company's UV products, and, as a result of the 
presentation, the Company has responded to a number of potential 
opportunities. 

RESULTS OF OPERATION

     GENERAL NOTE. When comparing the nine-month period ended May 31, 1998, 
to the period ended May 31,1997, the reader must be aware that the nine 
months ended May 31, 1997, includes nine months of SVSY operations and six 
months of UVS operations for the period from acquisition, December 1, 1996 to 
May 31, 1997. Comparisons of changes in Income and Expense values do not 
reflect comparable conditions.

     NINE MONTHS ENDED MAY 31, 1998 AND 1997.  During the nine months ended 
May 31, 1998, the Company had project revenues derived from sales of parts of 
$2,787.  Project costs and manufacturing costs not applied to projects 
amounting to $68,080 resulted in a Gross Loss of $65,293 compared to a Gross 
Loss of $33,376 in the nine months period ended May 31, 1997, Manufacturing 
costs not applied to projects are made up of allocated overhead amounts not 
identified to a specific project.

     PROJECT REVENUE. During the nine months ended May 31, 1998, project 
revenues decreased 89% to $2,787, from $25,074, for the nine-month period 
ended May 31, 1997 (the second period of comparison after the acquisition of 
UVS). No revenues were booked during the third quarter as production had just 
commenced.

     GROSS LOSS.  For the nine-months ended May 31, 1998, gross loss 
increased 96% to $65,293, from $33,376 for the nine-month period ended May 
31, 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 nine months ended May 31, 1998 and 1997 respectively, 
operational expenses increased 72% to $891,694 from $518,031 in the 
comparable 1997 period (including, general and administrative expense of 
$645,235 compared to $278,792, a decrease in research and development cost of 
$82,498 compared to $175,532 and selling expense of $163,961 compared to 
$103,707), bringing the Net Loss from Operations Before Other Items to 
$956,987 compared to $551,407 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 $363,810 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 $78,627, due largely to debt owed to 
minority shareholders (accrued and not paid) and interest on convertible 
debentures, brought net Loss for the period to $1,399,424, a per share loss 
amounting to $0.18.

     RESEARCH AND DEVELOPMENT EXPENSES. For the nine months ended May 31, 1998,
research and development expenses decreased 53% to $82,498 from $175,532 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 

                                                                             10
<PAGE>

marketability. During the quarter ended May 31, 1998, the Company entered 
into a development and testing program being carried out at McGill 
University. This R&D program is intended to demonstrate the effect of the 
high intensity UV output of the Company's lamp to penetrate microbiological 
included suspended solid contained within sewage effluent as compared to 
results from other lamps. Results of a portion of this testing may be 
available in the fourth quarter.

     SELLING EXPENSES.  For the nine months ended May 31, 1998, selling 
expenses increased 58% to $163,961 from $103,707 in the 1997 comparable 
period reflecting the increased commercialization.

     AMORTIZATION OF GOODWILL. For the nine-months ended May 31, 1998, 
amortization of goodwill increased to $363,810 from $242,540 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 nine-months ended May 31, 1998, interest 
increased 68% to $78,627, from $46,684 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 nine months ended May 31, 
1998, increased 70% to $1,399,424 from $821,933 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 nine months ended May 31, 1998, net loss per 
common share was $0.18 compared to $0.18 for the nine months ended May 31, 
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 nine months ended May 31, 1998, 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 nine months ended May 31, 1998, all debentures, accrued 
interest, and principal outstanding at the end of the previous quarter and 
accrued interest to conversion date  (the "Debt") were converted into common 
shares of the Company. The Debt, amounting to $745,624, was converted, at an 
average conversion per share price of $0.1848, into 4,034,350 shares of 
common stock. At the end of this reporting period the balance of convertible 
debentures and unpaid interest not converted was zero.

                                                                            11

<PAGE>

     As part of its expanded marketing effort, the Company is seeking additional
North American sales agents and distributors.               




                                       12

<PAGE>

PART II        OTHER INFORMATION

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

[6~                    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 1

                    (3)(ii)                   Bylaws 2

                    (4)                       Statement re: computation of per 
                                              share earnings

                    (27)                      Financial Data Schedule

                    (b)                       Reports on Form 8-K


     On May 7, 1998, the Registrant filed a Form 8-K reflecting the issuance 
of the Registrant's Common Stock on April 23, 1998 to two of the Registrant's 
employees a total of 75,321 shares for unpaid services valued at $.20 per 
share. In addition, on that date the Registrant issued in a Regulation S 
transaction, in repayment of loans to the Registrant, to one Canadian 
individual, one United Kingdom corporation and three Bahamian corporations 
1,481,497 shares of common stock valued at $.20 per share. The four 
corporations, in addition to the common stock, were issued warrants to 
purchase an additional 1,446,281 shares of common stock at an exercise price 
of $.40 per share.

-----------------------
(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


                                                                             13
<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: July 14, 1998                         Service Systems International Ltd.



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



                                                                            14