<PAGE>

<TABLE>
<S><C>
                          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 FEBRUARY 28, 1999

               [ ] 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: 12,773,988 as of April 12, 1999

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


                                                                              1

<PAGE>

                                      INDEX

PART I   FINANCIAL INFORMATION

Item 1.  CONSOLIDATED FINANCIAL STATEMENTS.................................... 3

Consolidated Balance Sheets as of February 28, 1999

         and 1998 (unaudited)................................................. 4

Consolidated Statements of Operations for the six months ended

         February 28, 1999 and 1998 (unaudited)............................... 5

Consolidated Statements of Cash Flows for the six months ended

         February 28, 1999 and 1998 (unaudited)............................... 6

Notes to the FINANCIAL STATEMENTS........................................ 7 to 9

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

                  OPERATIONS AND FINANCIAL CONDITIONS...................10 to 14

Part II  Other Information....................................................15

Signatures....................................................................16


                                                                              2
<PAGE>


Part 1.           Financial Information

Item 1. FINANCIAL STATEMENTS (UNAUDITED)





                                                                              3
<PAGE>

Service Systems International, Ltd.
Consolidated Balance Sheet
As of February 28, 1999 and 1998
(Unaudited)

<TABLE>
<CAPTION>
                                                                                  February 28,        February 28,
                                                                                      1999                1998
                                                                                        $                   $
<S>                                                                             <C>                   <C>
           Assets
Current Assets
       Cash and short-term investments                                                 2,145                140
       Short-term investments - restricted (Note 3)                                  265,722                  0
       Accounts receivable                                                           199,493             63,346
       Inventory                                                                     276,645            365,880
       Prepaid expenses                                                               23,233             84,761
       Research credit receivable                                                          0            238,618
                                                                                ------------        -----------

                                                                                     767,238            752,745
Loan Receivable                                                                            0              9,500
Capital assets (Note 4)                                                               98,590            159,305
Goodwill - net of amortizatin                                                      1,333,976          1,819,057
Patents and trademarks (Note 5)                                                      102,593             37,089
                                                                                ------------        -----------

                                                                                   2,302,397          2,777,696
                                                                                ------------        -----------
                                                                                ------------        -----------

           Liabilities and Stockholders' Equity
Current Liabilities

       Cheques issued in excess of funds on deposit                                        0              3,907
       Accounts payable                                                              147,897            147,197
       Accrued liabilities                                                            35,035             17,492
       Wages and vacation pay payable                                                 12,521              6,931
       Customer deposits                                                                   0             18,727
       Bank Loans                                                                     59,690                  0
       Loans payable - other                                                               0             58,658
       Amounts owing to related parties (Note 6)                                     182,460            426,453
       Loans payable - minority stockholders of subsidiary                            23,251            599,160
                                                                                ------------        -----------

           Total current liabilities                                                 460,854          1,278,525

Long-term debt (Note 7)                                                            2,412,584          1,469,660
Convertible Debentures                                                                     0            215,139
                                                                                ------------        -----------

                                                                                   2,873,438          2,963,324
                                                                                ------------        -----------

Stockholders' Equity:

Common stock (Note 10), $.001 par value,
       50,000,000 shares authorized, 12,773,988
       and 7,678,168 issued and outstanding respectively                              12,774              7,678
       Additional paid-in capital                                                  3,084,608          2,399,086

Deficit accumulated during development stage                                      (3,668,423)        (2,606,479)
Foreign exchange translation adjustment                                                    0             14,087
                                                                                ------------        -----------

                                                                                    (571,041)          (185,628)
                                                                                ------------        -----------

                                                                                   2,302,397          2,777,696
                                                                                ------------        -----------
                                                                                ------------        -----------
</TABLE>
                 See accompanying notes to financial statements               4
<PAGE>


Service Systems International, Ltd.
Consolidated Statement of Operations and Deficit
For the six months ended February 28, 1999 and 1998
(Unaudited)


<TABLE>
<CAPTION>
                                                                                   Six Months       Six Months
                                                                                      ended            ended
                                                                                  Feb. 28, 1999    Feb. 28, 1998
                                                                                        $                $
<S>                                                                                <C>             <C>
Project Revenue                                                                      158,357              2,799
Project Costs                                                                        130,716              2,468
                                                                                ------------        -----------

Gross Profit                                                                          27,641                331
Manufacturing Costs Not Applied                                                       39,060             43,811
                                                                                ------------        -----------

                                                                                     (11,419)           (43,480)
                                                                                ------------        -----------
Expenses
       Selling                                                                       119,822            100,426
       General and administrative                                                    169,763            459,621
       Research and development                                                       82,657             61,030
       Amortization of goodwill                                                      242,540            242,540
       Interest, net of interest income                                               42,701             59,739
       Foreign exchange translation loss                                              74,322                  0
                                                                                ------------        -----------

                                                                                     731,805            923,356
                                                                                ------------        -----------

Net Loss for the period                                                              743,224            966,836

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

Deficit - End of period                                                            3,668,423          2,606,479
                                                                                ------------        -----------
                                                                                ------------        -----------



Net Loss per share                                                              $     (0.06)        $   ($0.15)
                                                                                ------------        -----------
                                                                                ------------        -----------


                                                                                       #                   #

Weighted average shares outstanding                                               12,681,488          6,474,450
                                                                                ------------        -----------
                                                                                ------------        -----------
</TABLE>


                 See accompanying notes to financial statements                5


<PAGE>


Service Systems International, Ltd.
Consolidated Statement of Cash Flows
(Unaudited)

<TABLE>
<CAPTION>
                                                                                 Six Months         Six Months
                                                                                    ended              ended
                                                                                Feb. 28, 1999      Feb. 28, 1998
                                                                                      $                  $
<S>                                                                             <C>                <C>
Cash Flows to Operating Activities
       Net loss                                                                   (743,224)           (966,836)

Adjustments to reconcile net loss to cash

       Amortization of goodwill                                                    242,540             242,540
       Depreciation                                                                 21,359              23,917
       Foreign exchange translation adjustment                                      74,322                   0
       Discount on convertible debenture                                                 0             120,279

Change in non-cash working capital items

       (Increase) in accounts receivable                                           (88,536)               (315)
       (Increase) in inventory                                                     (38,364)             (8,872)
       Decrease (Increase) in prepaid expenses                                      12,942             (72,211)
       Decrease in research credit receivable                                            0               6,173
       Increase (Decrease) in accounts payable, accrued
           liabilities, vacation pay payable

           and customers' deposits                                                  70,325             (52,549)
                                                                             -------------            --------

Net Cash Used in Operating Activities                                             (448,636)           (707,874)
                                                                             -------------            --------

Cash Flows (to) from Investing Activities

       (Disposal) of capital assets                                                 21,448              (9,918)
       Acquisition of short-term investment - restricted                           (16,405)                  0
       Additions to patents and trademarks                                         (10,109)               (431)
       (Increase) in loans receivable                                                    0              (9,500)
                                                                             -------------            --------

Net Cash (Used in) Provided by Investing Activities                                 (5,066)            (19,849)
                                                                             -------------            --------

Cash Flows from (to) Financing Activities

       Funds applied against cheques issued in excess of deposit                         0              (4,845)
       Increase in bank borrowing                                                   59,690                   0
       Common stock issued                                                          11,100             553,518
       Conversion of bonds to shares                                                     0            (507,518)
       Decrease in loan payable - other                                                  0             (21,206)
       Increase in amounts owing to related parties                                 87,018             124,558
       Increase in borrowings from minority shareholders                            90,987              42,520
       Proceeds from convertible debenture                                               0             526,110
       Foreign exchange translation adjustment                                           0              14,087
                                                                             -------------            --------

Net Cash Provided by Financing Activities                                          248,795             727,224
                                                                             -------------            --------
Increase (Decrease) in Cash and Cash Equivalents                                  (204,907)               (499)
Cash and Cash Equivalents - Beginning of Period                                    207,052                 639
                                                                             -------------            --------
Cash and Cash Equivalents - End of Period                                            2,145                 140
                                                                             -------------            --------
                                                                             -------------            --------
</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

    Service Systems International, LTD. (SVSY) was incorporated in the State of
    Nevada in August, 1990 and remained inactive until September 1, 1995. The
    initiation of SVSY's current business was accompanied by a change of
    ownership. See Note 4 regarding acquisition of UV Systems Technology Inc.
    ("UVST") on December 1, 1996, a Canadian company. Through UVST, SVSY
    manufactures and markets its Ultra Guard ultra violet-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 SVSY 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 SVSY has experienced significant losses to date. The ability of SVSY to
    continue operations is dependent upon its successful efforts to raise
    additional equity financing in the long term, to continue developing the
    market for its products, and/or to attain 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, UVST.

    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 involve 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:

         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.


                                                                              7

<PAGE>



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, SVSY 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>
                                                                                                1999          1998
                                                                             Accumulated      Net Book      Net Book
                                                                 Cost       Depreciation        Value         Value
                                                                   $              $               $             $
        <S>                                                     <C>         <C>               <C>           <C>
        Computer equipment                                       36,663       17,480          19,183        25,493
        Computer software                                         5,033        2,306           2,727         2,775
        Display equipment                                        31,836       19,101          12,735        19,101
        Office furniture and equipment                           29,157       16,472          12,685        18,492
        Plant jigs, dies, moulds, tools and equipment            88,558       45,760          42,798        79,637
        Leasehold improvements                                   26,724       18,262           8,462        13,807
                                                              ---------     --------         -------       -------

                                                                217,971      119,381          98,590       159,305
                                                              ---------     --------         -------       -------
                                                              ---------     --------         -------       -------

<CAPTION>
                                                                                 Six Months      Six Months
Depreciation per class of asset:                                                    ended           ended
                                                                                Feb. 28, 1999    Feb. 28, 1998
                                                                                      $               $
        <S>                                                                     <C>                <C>
        Computer equipment                                                        3,522             2,872
        Computer software                                                           507              348
        Display equipment                                                         3,183             3,183
        Office furniture and equipment                                            2,917             2,775
        Plant jigs, dies, moulds, tools and equipment                             8,557            12,066
        Leasehold improvements                                                    2,673             2,673
                                                                                 ------           -------

                                                                                 21,359            23,917
                                                                                 ------           -------
                                                                                 ------           -------
</TABLE>

5.      Patents and Trademarks

        Patents and trademarks represent legal costs associated with designing,
        registering and protecting certain patents and trademarks associated
        with the Ultra Guard System. These costs will be amortized not
        exceeding twenty years starting September 1, 1998. Components of the
        Ultra Guard 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>
                                                                                      1999               1998
                                                                                        $                  $
        <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                                     182,460            302,693
                                                                                     -------            -------
                                                                                     182,460            426,453
                                                                                     -------            -------
                                                                                     -------            -------
</TABLE>


                                                                               8

<PAGE>


7.      Long-term Debt

        Before fiscal 1998, UVS issued 2,000 Class "A" preferred shares at
        C$1,000 per share for proceeds of C$2,000,000 (US$1,326,436). 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, totalled 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 10%
        accrues until December 29, 2000, after which interest 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$1,135,576 will be transferred into 1,135,576 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 (SVSY or Service Systems) 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- 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 UVST's Japanese agent)
and for potable water, bottled products, and agriculture and aquaculture water
treatment.

In September 1995 SVSY 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 SVSY entered into a funding agreement
with UVS whereby SVSY 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,
SVSY 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 SVSY
be unsuccessful in raising C$2.0 million. In June 1998 this agreement was not
renewed as SVSY 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$909,000.00 of additional funding and to reduce debt by requiring MDS to
convert $500,000 of Class "A" Preferred shares to Class "X" Preferred shares and
its current loans receivable into long term loans receivable. Service Systems
was required to convert its non-secured loans receivable into Class "X"
Preferred shares and its current loans receivable into long term loans
receivable . The Class "X" Preferred shares are retractable by the holder only
if there is a sale or IPO which values the equity of UVS at C$20.0 million,
including the Class "A" preferred shares, but excluding the Class "X" Preferred
shares. 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.


                                                                              10

<PAGE>
During the period from December 1, 1996 to September 30, 1997, SVSY 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 Repentigny 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
Repentigny 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 1998 in the amount of
about C$390,000. The project is currently being manufactured and is scheduled
for delivery and installation in June 1999, with final testing to occur in July
1999.

A 6 lamp Ultra Guard-TM- UV system capable of disinfecting a wastewater flow 
of 3.5 MGD sold to Hamilton, Alabama was installed in March, 1999. Final 
performance testing is scheduled for the end of April 1999 when the 
Wastewater Treatment Plant is expected to be complete. This UV project is the 
first full scale operating Ultra Guard-TM- UV system installed in North 
America, in a market area in which UV systems are being actively introduced. 
We expect that the Ultra Guard-TM- UV system in Hamilton will provide 
significant equipment exposure to others contemplating, in line with the 
current trend, upgrading their Wastewater Treatment Plant discharges by 
replacing chlorine as the disinfecting means with environmentally friendly 
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. We are currently working closely with
the site Contractor, assisting him with his negotiations with his client. The
Contractor is insisting on the Ultra Guard-TM- UV system and a final decision is
now expected by April 30, 1999.

In September and October 1998, our Production Demonstration Unit performed 
testing at a municipal wastewater plant in Eastern Canada. Testing was 
successful and a 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 Engineer and 
Wastewater Plant Manager visited our manufacturing facility in late March 
1999 and were, we believe, favorably impressed. The project is valued at 
about C$900,000. Based on information we received from the wastewater plant, 
the RFP is expected in late April 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 in
November, 1998 to determine the efficacy of UV to disinfect wastewater
containing levels of ferric chloride (Fe) at ranges on .03 to 4.0 mg/l. This
testing was successful, due to the low temperatures produced by our UV system
and proved the ability of the Ultra Guard-TM- UV system to disinfect, even with
high level of (Fe) present in the wastewater. Low temperature operation is
important to minimize fouling of the quartz sleeves around the lamps. Previous
testing using two competing UV systems, (low pressure, low intensity and medium
pressure high intensity), was performed by the City of Toronto. Testing was
unsuccessful as a result of the high temperature radiated by the competing
medium pressure UV system. Immediate and continual fouling of the quartz sleeves
occurred, even though this UV system used an automatic quartz cleaning system.
The low pressure, low-intensity system which uses manual cleaning failed for
almost the same reasons. The results of these tests, which were presented at the
CAWQ conference on water pollution held in Hamilton, Ontario in February 1999,
were perceived as an
                                                                              11

<PAGE>
important advancement in the use of ultraviolet disinfection. Effluents using
ferric chloride as a flocculent had previously been considered as poor
candidates for UV disinfection.

In December 1998, a PDU was shipped to the County Sanitation Districts of Los 
Angeles County (the County). The testing program, conducted and paid for by 
the County, is testing the Ultra Guard-TM- UV system's ability to disinfect 
wastewater to Title 22 Guidelines, a stringent test protocol required as a 
precursor to use of a company's UV product in reuse of wastewater for 
agriculture and other purposes. Test results have been exceptional when 
compared to other UV technologies. The Ultra Guard-TM- UV system is achieving 
flow rates in excess of 150 gallons per minute (GPM) compared to 35 GPM for a 
medium pressure lamp system and 4.5 GPM for a low pressure, low intensity 
lamp system. Testing is ongoing by the County. As well, testing will address 
the specific needs of the California State Health Services for Title 22 
approval. On completion of this program the PDU will be sent to Colorado to 
qualify our equipment for bid on a project which will be purchased in 1999.

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 unit is currently being fitted for a test program in 
Virginia.

RESULTS OF OPERATIONS

SIX MONTHS ENDED FEBRUARY 28, 1999

During the six months ended February 28, 1999 our project revenues increased by
$155,558 to $158,357 from $2,799 for the comparable six months for the previous
year, primarily because of actual and estimated manufacturing completion of
projects and the sale of a PDU. Project costs for the quarter increased by
$128,248 to $130,716, from $2,468 in the prior year's six months 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 $27,310 to $27,641 from $331, again as a result of increased
business activity.

During the six months ended February 28, 1999, expenses decreased by $191,551 to
$731,805 from $923,356 in the comparable six month period of the prior fiscal
year, primarily as a result of a significant decrease in general and
administrative expenses. Selling expense increased by $19,396 to $119,822 from
$100,426 in the prior year comparable period, largely because of the expenses
incurred for PDU testing and costs for selling aids development. General and
administrative expense decreased by $289,858 to $169,763 from $459,621 in the
prior year's six month period. This decrease resulted primarily from a reduction
in spending on public relations consulting during the six months ended November
30, 1998 and reduction of the cost incurred because of the discounts and
commission expense on the convertible debentures that were issued in the
comparable six months of the prior year. Research and Development expenses
increased by $21,627 to $82,657 from $61,030 in the prior year's period because
of system automation design labor and equipment design drawing costs.
Amortization of goodwill in connection with the acquisition of UVS (see Note 2-
Goodwill under Notes to Financial Statements) remained the same in the six month
periods. Interest, net of interest income, decreased by $17,038 to $42,701 from
$59,739, 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 six month period by $74,322 from 0 as a result of the increase in the
value of the Canadian dollar. 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 increase of the Long-Term Debt.

Net Loss for the six months ended February 28, 1999 decreased by $223,612 to
$743,224 from $966,836 for the comparable six months 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.

                                                                             12

<PAGE>

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 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 to us or if at all.

We expect that during fiscal 1999, if sales of UVS systems increase, we will
continue to depend on receipt of additional funds through public or private
equity or debt sales or other lender financing to fund the manufacturing of
products sold, and general operational and sales expenses. Except as previously
indicated, no arrangements are currently in place to raise funds, although we
actively continue to seek sources. Failure to receive these funds may be
expected to have a material adverse effect on our company.

In addition, we have instituted a plan to identify a partner who has industry
recognition. The intent is to form a strategic alliance which could, through the
partner's financial strength and recognition in the wastewater industry, provide
us with the necessary funding and status and permit us to move into the
forefront of the UV marketplace. At this time, we have no partnerships pending.

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 SVSY 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 and will continue to review all internal business and
engineering computer systems to ensure that those 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, and security
and sprinkler systems to verify our Y2K readiness by the middle of fiscal 1999.

                                                                              13

<PAGE>

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 Y2K issues.

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 customers' decision to purchase our Ultra Guard-TM- UV
system. However, we cannot predict the impact on 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.

                                                                              14

<PAGE>


<TABLE>
<S>           <C>
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 Director), and Charles P. Nield ( a former
         Director and Vice President of the Company). The Company filed an
         answer denying the claims. Information about this suit may be found in
         SVSY's Form 10QSB for the quarter ended November 30, 1998.

Item 2. Changes in Securities

         On January 20, 1999, 111,000 shares of Common Stock at $0.10 and
         100,000 currently exercisable warrants to acquire an additional 100,000
         shares at $0.40 per share were issued to two employees in Canada in
         consideration for design services. These securities were issued in
         reliance on Section 4(2) of the Securities Act of 1933. Both of these
         employees have a pre-existing business relationship with SVSY, are
         sophisticated investors, and have sufficient knowledge and information
         about SVSY to make an informed investment decision.

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 8-K

                  During the reporting period we did not file any  Form 8-K 
                  reports

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

</TABLE>

                                                                              15

<PAGE>


                                   Signatures

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

Dated: April 14, 1999

                           Service Systems International Ltd.
                          
                    By:    /s/ Ken Fielding
                           Ken Fielding, President
                          
                    By:    /s/ John Gaetz
                           J. R. Gaetz, Vice President, Chief Financial Officer


                                                                             16