**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**







**Form
      10-Q**








**þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES**


**EXCHANGE ACT OF 1934**




**For
      the quarterly period ended March 31, 2008**





**o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES**


**EXCHANGE ACT OF 1934**




**For the
      transition period from ________to _________**





Commission
      File Number 001-16173




**Systems
      Management Solutions, Inc.**


(Exact
      name of small business issuer as specified in its charter)





**Nevada**
            
            **88-0460457**(State
                or other jurisdiction of
              incorporation
                or organization)
            
            (I.R.S.
                Employer
              Identification
                No.)**4703
                Shavano Oak, Suite 104****San
                Antonio, Texas**
            
            **78249**(Address
                of principal
              executive
                offices)
            
            (Zip
                Code)





Registrant's
      telephone number, including area code: (210) 541-9100







Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Exchange Act during the preceding 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 þ  No o





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting company.
      See
      the definitions of “large accelerated filer,” “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act:




Large
                  accelerated filer      o
              
              
              Accelerated filer                       oNon-accelerated filer       o
              
              
              Smaller reporting company      þ


There
      were 30,690,386 shares of the registrant’s common stock issued and outstanding
      as of May 15, 2008.





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).




Yes o  No þ





**IMPORTANT
      INFORMATION REGARDING THIS FORM 10-Q**





Unless
      otherwise indicated, references to “we,” “us,” and “our” in this Quarterly
      Report on Form 10-Q refer collectively to Systems Management Solutions, Inc.
      and
      its wholly-owned subsidiaries.





Systems
      Management Solutions, Inc., a Nevada corporation, (“SMS” or the “Company”) is
      the parent company to its wholly-owned subsidiaries: Aspect Business Solutions,
      Inc., a Texas corporation (“Aspect”), and SMS Envorifuels, Inc. (“SMSE”), a
      Texas corporation.





Readers
      should consider the following information as they review this Quarterly
      Report:





**Forward-Looking
      Statements**





The
      statements contained or incorporated by reference in this Quarterly Report
      on
      Form 10-Q that are not historical facts are “forward-looking statements” (as
      such term is defined in the Private Securities Litigation Reform Act of 1995),
      within the meaning of Section 27A of the Securities Act of 1933, as amended,
      and
      Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange
      Act”).  All statements other than statements of historical fact are,
      or may be deemed to be, forward-looking statements.  Forward-looking
      statements include any statement that may project, indicate or imply future
      results, events, performance or achievements.  The forward-looking
      statements contained herein are based on current expectations that involve
      a
      number of risks and uncertainties. These statements can be identified by the
      use
      of forward-looking terminology such as “believes,” “expect,” “may,” “will,”
“should,” “intend,” “plan,” “could,” “estimate” or “anticipate” or the negative
      thereof or other variations thereon or comparable terminology, or by discussions
      of strategy that involve risks and uncertainties.





Given
      the
      risks and uncertainties relating to forward-looking statements, investors should
      not place undue reliance on such statements.  Forward-looking
      statements included in this Quarterly Report on Form 10-Q speak only as of
      the
      date of this Quarterly Report on Form 10-Q and are not guarantees of future
      performance.  Although we believe that the expectations reflected in
      the forward-looking statements are reasonable, such expectations may prove
      to
      have been incorrect.  All subsequent written and oral forward-looking
      statements attributable to us, or persons acting on our behalf, are expressly
      qualified in their entirety by these cautionary statements.





**Subsequent
      Events**





All
      statements contained in this Quarterly Report on Form 10-Q, including the
      forward-looking statements discussed above, are made as of May 20, 2008, unless
      those statements are expressly made as of another date.  We disclaim
      any responsibility for the accuracy of any information contained in this
      Quarterly Report on Form 10-Q to the extent such information is affected or
      impacted by events, circumstances or developments occurring after May 20, 2008
      or by the passage of time after such date.  Except to the extent
      required by applicable securities laws, we expressly disclaim any obligation
      or
      undertakings to release publicly any updates
      or revisions to any statement or information contained in this Quarterly Report
      on Form 10-Q, including the forward-looking statements discussed above, to
      reflect any change in our expectations with regard thereto or any change in
      events, conditions or circumstances on which any statement or information is
      based.





SYSTEMS
      MANAGEMENT SOLUTIONS, INC.


AND
      SUBSIDIARIES




**CONTENTS**







PART
                I – FINANCIAL INFORMATIONITEM
                1 – UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
                Consolidated Balance Sheets as of March 31, 2008, and December 31,
                2007
            F-1 –
                F-2(Unaudited)
                Consolidated Statements of Operations for the three months ended
                March 31,
                2008 and 2007
            F-3(Unaudited)
                Consolidated Statements of Changes in Stockholders’ Deficit for the three
                months ended March 31, 2008 and the years ended December 31, 2007
                and
                2006
            F-4(Unaudited)
                Consolidated Statements of Cash Flows for the three months ended
                March 31,
                2008 and 2007
            F-5NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
            7 –
                15ITEM
                2 – MANAGEMENT’S DISCUSSIONS AND ANALYSIS OF
              FINANCIAL
                CONDITION AND RESULTS OF OPERATIONS
            16 –
                19ITEM
                3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES
              ABOUT
                MARKET RISKS
            20ITEM
                4T – CONTROLS AND PROCEDURES
            20PART
                2 – OTHER INFORMATIONITEM
                1 – LEGAL PROCEEDINGS
            22ITEM
                2 – CHANGES IN SECURITIES
            23ITEM
                6 – EXHIBITS AND REPORTS ON FORM 8K
            23







SYSTEMS
        MANAGEMENT SOLUTIONS, INC.
 AND
        SUBSIDIARIES
 
 CONSOLIDATED
        BALANCE SHEETS
 
 ASSETS
 
 March 31, 2008
              
              December 31, 2007CURRENT
                  ASSETSCash
              
              $
              7,969
              
              $
              19,776Accounts
                  receivable, less allowance for doubtful accounts of $11,448 and
                  $59,925
              
              
              -
              
              
              -Current
                  Note Receivable
              
              
              32,500
              
              
              -Prepaid
                  Expenses
              
              
              -
              
              
              11,310Total
                  Current Assets
              
              
              40,469
              
              
              31,086ASSETS
                  HELD FOR SALE, Net
              
              
              574,619
              
              
              577,438OTHER
                  ASSETSDeposits
              
              
              85,000
              
              
              85,000Long
                  Term Note Receivable
              
              
              24,375
              
              
              -Total
                  Other Assets
              
              
              109,375
              
              
              85,000TOTAL
                  ASSETS
              
              $
              724,463
              
              $
              693,524
 
 *The
        accompanying notes are an integral part of these consolidated financial
        statements.*
  F-1
  SYSTEMS
        MANAGEMENT SOLUTIONS, INC.
 AND
        SUBSIDIARIES
 
 CONSOLIDATED
        BALANCE SHEET
 
 LIABILITIES
        AND STOCKHOLDERS' DEFICIT
 
 March 31, 2008
              
              December 31, 2007CURRENT
                  LIABILITIESAccounts
                  Payable
              
              $
              243,613
              
              $
              278,409Accounts
                  Payable, Related Parties
              
              
              172,716
              
              
              154,716Deferred
                  Liability
              
              
              70,000
              
              
              70,000Littigation
                  Settlement Liability
              
              
              307,500
              
              
              307,500Notes
                  Payable and Accured Interest
              
              
              842,706
              
              
              805,993Notes
                  Payable to Stockholders and Accrued Interest
              
              
              5,872,081
              
              
              5,750,942Other
                  Current Liabilities
              
              
              91,515
              
              
              119,566Total
                  Current Liabilities
              
              
              7,600,131
              
              
              7,487,126TOTAL
                  LIABILITIES
              
              
              7,600,131
              
              
              7,487,126COMMITMENTS
                  AND CONTINGENCIES
              
              
              -
              
              
              -STOCKHOLDERS'
                  DEFICITPreferred
                  Stock, $.0001 par value, 5 million shares authorized; no shares
                  outstanding
              
              
              -
              
              
              -Common
                  Stock, $.0001 par value, 100 million shares authorized; 30,690,386
                  and
                  20,690,386 shares outstanding
              
              
              3,069
              
              
              2,069Additional
                  Paid-in Capital
              
              
              20,271,267
              
              
              19,813,836Accumulated
                  Deficit
              
              
              (27,150,004
              )
              
              (26,609,507
              )TOTAL
                  STOCKHOLDERS' DEFICIT
              
              
              (6,875,668
              )
              
              (6,793,602
              )TOTAL
                  LIABILITIES AND STOCKHOLDERS' DEFICIT
              
              $
              724,463
              
              $
              693,524
 
 *The
        accompanying notes are an integral part of these consolidated financial
        statements.*
  F-2
  SYSTEMS
        MANAGEMENT SOLUTIONS, INC.
 AND
        SUBSIDIARIES
 
 CONSOLIDATED
        STATEMENTS OF OPERATIONS
 
 Quarter Ended
              
              Quarter EndedMarch 31, 2008
              
              March 31, 2007REVENUES
              
              $
              -
              
              $
              -COST
                  OF REVENUES
              
              
              -
              
              
              -GROSS
                  PROFIT
              
              
              -
              
              
              -EXPENSESPayroll,
                  contract labor and consultants
              
              
              395,147
              
              
              115,137Selling,
                  general and administrative expenses
              
              
              11,813
              
              
              6,329OPERATING
                  LOSS FROM CONTINUING OPERATIONS
              
              
              (406,960
              )
              
              (121,466
              )Gain
                  on Disposal of Assets
              
              
              62,151
              
              
              -Interest
                  expense
              
              
              (32,229
              )
              
              (30,869
              )NET
                  LOSS FROM CONTINUING OPERATIONS
              
              
              (377,038
              )
              
              (152,335
              )DISCONTINUED
                  OPERATIONS (Note 9)Loss
                  from discontinued operations
              
              
              (163,459
              )
              
              (241,320
              )NET
                  LOSS
              
              $
              (540,497
              )
              $
              (393,655
              )NET
                  LOSS PER SHARE:Common
                  Stock:Basic
                  and Diluted Net Loss Per Share
              
              $
              (0.01
              )
              $
              (0.01
              )Basic
                  and Diluted Net Loss Per Share for Discontinued Operations
              
              $
              (0.01
              )
              $
              (0.01
              )Total
                  Basic and Diluted Net Loss Per Share
              
              $
              (0.02
              )
              $
              (0.02
              )Denominator
                  for Basic and Diluted Net Loss Per ShareWeighted
                  Average Number of Common Shares Outstanding
              
              
              28,820,000
              
              
              20,690,000
  *The
        accompanying notes are an integral part of these consolidated financial
        statements.*
 F-3
  SYSTEMS
        MANAGEMENT SOLUTIONS, INC.
 AND
        SUBSIDIARIES
 
 CONSOLIDATED
        STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
 
 Additional
              
              
              
              TotalCommon Stock
              
              Paid-In
              
              Accumulated
              
              Stockholders'Shares
              
              Amount
              
              Capital
              
              Deficit
              
              Deficit**BALANCE
                  — December 31, 2005**
              
              
              **20,640,386**
              
              **$**
              **2,064**
              
              **$**
              **19,429,420**
              
              **$**
              **(23,721,232**
              **)**
              **$**
              **(4,289,748**
              **)**Shares
                  Issued for Loan Incentive
              
              
              50,000
              
              
              5
              
              
              5,495
              
              
              —
              
              
              5,500Interest
                  Imputed on Non-Interest Bearing Notes Payable
              
              
              —
              
              
              —
              
              
              168,053
              
              
              —
              
              
              168,053Net
                  loss
              
              
              —
              
              
              —
              
              
              —
              
              
              (1,441,988
              )
              
              (1,441,988
              ).**BALANCE
                  — December 31, 2006**
              
              
              **20,690,386**
              
              
              **2,069**
              
              
              **19,602,968**
              
              
              **(25,163,220**
              **)**
              
              **(5,558,183**
              **)**Interest
                  Imputed on Non-Interest Bearing Notes Payable
              
              
              —
              
              
              —
              
              
              210,868
              
              
              —
              
              
              210,868Net
                  loss
              
              
              —
              
              
              —
              
              
              —
              
              
              (1,446,287
              )
              
              (1,446,287
              ).**BALANCE
                  — December 31, 2007**
              
              
              **20,690,386**
              
              
              **2,069**
              
              
              **19,813,836**
              
              
              **(26,609,507**
              **)**
              
              **(6,793,602**
              **)**Compensatory
                  Element of Stock Issuance
              
              
              2,500,000
              
              
              250
              
              
              99,750
              
              
              —
              
              
              100,000Stock
                  Issued for Consulting Services
              
              
              7,500,000
              
              
              750
              
              
              299,250
              
              
              —
              
              
              300,000Interest
                  Imputed on Non-Interest Bearing Notes Payable
              
              
              —
              
              
              —
              
              
              58,431
              
              
              —
              
              
              58,431Net
                  loss
              
              
              —
              
              
              —
              
              
              —
              
              
              (540,497
              )
              
              (540,497
              ).**BALANCE
                  — March 31, 2008**
              
              
              **30,690,386**
              
              **$**
              **3,069**
              
              **$**
              **20,271,267**
              
              **$**
              **(27,150,004**
              **)**
              **$**
              **(6,875,668**
              **)**
  *The
        accompanying notes are an integral part of these consolidated financial
        statements.*
 F-4
  SYSTEMS
        MANAGEMENT SOLUTIONS, INC.
 AND
        SUBSIDIARIES
 
 CONSOLIDATED
        STATEMENTS OF CASH FLOWS
 
 Quarter Ended
              
              Quarter EndedMarch 31, 2008
              
              March 31, 2007CASH FLOWS FROM OPERATING ACTIVITIESNet
                  Loss
              
              $
              (540,497
              )
              $
              (393,655
              )Loss
                  from Discontinued Operations
              
              
              163,459
              
              
              241,320Loss
                  from Continuing Operations
              
              
              (377,038
              )
              
              (152,335
              )Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:Imputed
                  interest
              
              
              58,431
              
              
              -Gain
                  on Disposal of Assets
              
              
              (62,151
              )
              
              -Issuance
                  of Common Stock for services
              
              
              400,000
              
              
              -Changes
                  in operating assets and liabilities:Accounts
                  Receivable
              
              
              -
              
              
              -Other
                  Current Assets
              
              
              -
              
              
              (170,000
              )Accounts
                  Payable
              
              
              (16,796
              )
              
              (9,080
              )Accrued
                  Expenses
              
              
              (70,083
              )
              
              (44,860
              )Prepaid
                  expenses
              
              
              11,310Litigation
                  Settlement
              
              
              -
              
              
              147,500NET
                  CASH USED IN OPERATING ACTIVITIES
              
              
              (56,327
              )
              
              (228,775
              )CASH
                  FLOWS FROM INVESTING ACTIVITIESPurchases
                  of Fixed Assets
              
              
              -
              
              
              -Principal
                  payments on notes receivable
              
              
              8,125
              
              
              -NET
                  CASH PROVIDED/(USED) IN INVESTING ACTIVITIES
              
              
              8,125
              
              
              -CASH
                  FLOWS FROM FINANCING ACTIVITIESNote
                  Proceeds from Stockholders loans
              
              
              39,730
              
              
              244,319Note
                  Proceeds from Other loans
              
              
              -
              
              
              (240,000
              )NET
                  CASH PROVIDED BY FINANCING ACTIVITIES
              
              
              39,730
              
              
              4,319DISCONTINUED
                  OPERATIONSDiscontinued
                  Operating Activities
              
              
              (3,335
              )
              
              214,130Discontinued
                  Investing Activities
              
              
              -
              
              
              (1,726
              )NET
                  CASH USED IN DISCONTINUED OPERATIONS
              
              
              (3,335
              )
              
              212,404NET
                  DECREASE IN CASH
              
              
              (11,807
              )
              
              (12,052
              )CASH
                  - Beginning
              
              
              19,776
              
              
              33,077CASH
                  - Ending
              
              $
              7,969
              
              $
              21,025SUPPLEMENTAL
                  DISCLOSURES OF CASH FLOW INFORMATIONCash
                  paid for:Interest
              
              $
              -
              
              $
              31,947Income
                  Taxes
              
              $
              -
              
              $
              -Non-cash
                  investing and financing activities:Sale
                  of ASPECT business segment for notes receivable
              
              $
              65,000
              
              $
              -Offset
                  of Related Payable with Note Payable
              
              $
              -
              
              $
              -Transfer
                  of Deposit Rights to Note Holder
              
              $
              -
              
              $
              170,000
  *The
        accompanying notes are an integral part of these consolidated financial
        statements.*
  F-5




SYSTEMS
        MANAGEMENT SOLUTIONS, INC.
 AND
        SUBSIDIARIES
 NOTES
        TO
        UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS







NOTE
      1 – BASIS
      OF PRESENTATION





The
      accompanying unaudited interim financial statements of Systems Management
      Solutions, Inc. (“SMS”) have been prepared in accordance with accounting
      principles generally accepted in the United States of America and the rules
      of
      the Securities and Exchange Commission ("SEC"), and should be read in
      conjunction with the audited financial statements and notes thereto contained
      in
      SMS's financial statements filed with the SEC on Form 10-KSB for the year ended
      December 31, 2007. In the opinion of management, all adjustments, consisting
      of
      normal recurring adjustments, necessary for a fair presentation of financial
      position and the results of operations for the interim periods presented have
      been reflected herein. The results of operations for interim periods are not
      necessarily indicative of the results to be expected for the full year. Notes
      to
      the financial statements which would substantially duplicate the disclosure
      contained in the audited financial statements for the most recent fiscal year
      2007 as reported in Form 10-KSB have been omitted.





NOTE
      2 – GOING
      CONCERN





The
      Company sustained a substantial operating loss of approximately $407,000 during
      the three months ended March
      31 ,
      2008,
      and as of March
      31 ,
      2008,
      had an accumulated deficit of approximately $27,150,000. In addition, the
      Company had negative cash flows from operations of approximately $56,000 during
      the three months ended March
      31 ,
      2008.





These
      factors raise a substantial doubt about the Company’s ability to continue as a
      going concern. The accompanying financial statements do not include any
      adjustments that might result from the outcome of this uncertainty.





The
      Company does not have the resources at this time to repay its credit and debt
      obligations, make any payments in the form of dividends to its shareholders
      or
      fully implement its business plan. Without additional capital, the Company
      will
      not be able to remain in business.





In
      addition to operational expenses, as the Company executes its business plan,
      it
      is incurring expenses related to complying with its public reporting
      requirements. In order to finance these expenditures, the Company has raised
      capital in the form of debt which will have to be repaid, as discussed in detail
      below.  The Company has depended on shareholder loans for much of its
      operating capital.  The Company will need to raise capital in the next
      twelve months in order to remain in business.


7




SYSTEMS
          MANAGEMENT SOLUTIONS, INC.
 AND
          SUBSIDIARIES
 NOTES
          TO
          UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




Management
      anticipates that significant dilution will occur as the result of any future
      sales of the Company’s common stock and this will reduce the value of its
      outstanding shares. The Company cannot project the future level of dilution
      that
      will be experienced by investors as a result of its future financings, but
      it
      will significantly affect the value of its shares.





Management
      has plans to address the Company’s financial situation as follows:





In
      the
      near term, management plans to continue to focus on raising the funds necessary
      to fully implement the Company’s business plan. Management believes that certain
      shareholders will continue to advance the capital required to meet the Company’s
      financial obligations. There is no assurance, however, that these shareholders
      will continue to advance capital to the Company or that the new business
      operations will be profitable. The possibility of failure in obtaining
      additional funding and the potential inability to achieve profitability raise
      doubts about the Company’s ability to continue as a going concern.




In
      the
      long term, management believes that the Company’s previously announced projects
      and initiatives will be successful and will provide significant profit to the
      Company which will be used to finance the Company’s future growth. However,
      there can be no assurances that the Company’s planned activities will be
      successful, or that the Company will ultimately attain profitability.  The
      Company’s long term viability depends on its ability to obtain adequate sources
      of debt or equity funding to meet current commitments and fund the continuation
      of its business operations and the ability of the Company to ultimately achieve
      adequate profitability and cash flows from operations to sustain its operations.





NOTE
      3
– ACCOUNTING
      POLICIES





BASIC
      AND
      DILUTED EARNINGS (LOSS) PER SHARE - Basic
      and diluted earnings (loss) per share equals net loss divided by weighted
      average shares outstanding during the period. Diluted earnings (loss) per share
      includes the impact of common stock equivalents using the treasury stock method
      when the effect is dilutive. There were no common stock equivalents at March
      31,
      2008.


8




SYSTEMS
          MANAGEMENT SOLUTIONS, INC.
 AND
          SUBSIDIARIES
 NOTES
          TO
          UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




NOTE
      4 – ASSETS
      HELD FOR SALE





In
      an
      effort to secure additional capital for operations, the Company began actively
      seeking a purchaser for the assets located at its subsidiaries, SMSE, production
      plant located in Poteet, Texas. On October 5, 2006, SMSE received a letter
      of
      intent (“LOI”) from Earth Biofuels, Inc. (“EBOF”) for the acquisition of these
      assets. The terms of the LOI created a tiered consideration payment based on
      SMSE’s ability to meet two levels of production; the minimum consideration was
      $2.7 million and the maximum was $4.7 million. EBOF did not meet the terms
      of
      the LOI and it expired with no sale transaction occurring. The Company will
      continue to pursue buyers for these assets.





The
      assets held for sale have a net book value at March 31, 2008 of $574,619 with
      no
      corresponding liabilities. On April 8, 2008 the Company signed a non-binding
      Letter of Intent with an unrelated third-party to begin discussions relating
      to
      the SMSE facility. Based upon these discussions and an expected sales price
      similar to the previously discussed EBOF LOI the Company believes that the
      fair
      value of this facility’s assets exceeds its net book value.





NOTE
      5 – SALE
      OF ASPECT BUSINESS SOLUTIONS, INC.





On
      January 15, 2008 the Company reached an agreement with certain affiliated
      parties to sell the company’s Aspect subsidiary, the sale was finalized prior to
      March 31, 2008. The terms of the agreement call for the payment of approximately
      $65,000 to the Company in return for 100% of Aspect’s stock. The $65,000 is
      being paid over 24 months in the form of a note receivable with monthly payments
      of $2,708 per month which began on February 15, 2008 and included the first
      payment due at closing. In addition, the Company agreed to continue assuming
      Aspect’s outstanding debt as of the date of the sale which was already
      previously consolidated. As a result of this transaction the Company classified
      Aspect as “Discontinued Operations” for the purposes of these financial
      statements in accordance with FASB statement 144 and recorded a “Gain on
      Disposal of Assets” of $62,151 which represented the value of the assets given
      up of $2,849 less the consideration received. Additional disclosure can be
      found
      in Note 9. The total debt continuing to be assumed by the Company and not part
      of the sale was approximately $2,385,000.


9




SYSTEMS
          MANAGEMENT SOLUTIONS, INC.
 AND
          SUBSIDIARIES
 NOTES
          TO
          UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




NOTE
      6 – NOTES
      PAYABLE TO OTHERS





On
      February 3, 2006, SMS borrowed $500,000 from an independent lender. The security
      pledged for this note is equipment recently purchased plus the deposit placed
      on
      equipment currently being prepared for delivery in the future. The interest
      rate
      on the unpaid balance is 18%. The Company is in default on this note. On
      February 8, 2007, an agreement to transfer deposit rights and partial release
      of
      promissory note was signed by the Company and the independent note holder.
      In
      the agreement, the Company has transferred the rights to the deposit placed
      by
      the Company on 4 pieces of equipment that were to be used by its subsidiary
      SMSE, a value of $170,000, in exchange for a release and discharge of $240,000
      of the promissory note. In addition, the Company has the right to further
      release of $15,000 for any future transfer to note holder of the rights in
      the
      deposits of 2 additional pieces of equipment, a value of $85,000. At March
      31,
      2008, the deferred liability is $70,000 and the principal balance on the note
      is
      $260,000 with interest accrued of $152,186.





On
      October 5, 2006, SMSE received an LOI, from EBOF, for the purchase of assets
      associated with its production facility in Poteet. The initial terms of the
      LOI
      enabled SMSE to sign a promissory note with EBOF for a line of credit not to
      exceed $788,000. The expiration date of this note was February 2, 2007. SMSE
      is
      in default on this note. The terms of the LOI were not met by the purchaser
      and
      the LOI expired with no sale. The interest rate on the unpaid balance is 18%.
      At
      March 31, 2008, the principal balance on the note is $350,000 and interest
      accrued is $80,521.





NOTE
      7 – NOTES
      PAYABLE TO STOCKHOLDERS





On
      April
      15, 2003, SMS signed a one-year promissory note with a stockholder for a line
      of
      credit up to $2,000,000. This note was extended for an additional one-year
      term
      on April 15, 2004. On March 7, 2006, the line was reduced to $500,000 and
      extended to December 31, 2006. On December 31, 2006, the note was extended
      to
      February 28, 2008 with an increase in the line amount to $1,000,000. On February
      28, 2008 the note was extended until February 28, 2009. The note bears 10%
      interest, is payable on demand and has no collateral. At March 31, 2008, the
      principal balance was $594,634 and accrued interest was $132,916.





On
      February 24, 2003, SMSE signed a one-year promissory note with a stockholder
      for
      a line of credit up to $1,000,000. This note was extended for an additional
      one-year term on February 24, 2004. On March 7, 2006, the credit line was
      increased to $2,000,000 and extended to December 31, 2006. On December 31,
      2006,
      the note was extended to February 28, 2008 and the line was increased to
      $2,500,000. On February 28, 2008 the note was extended until February 28, 2009.
      The line of credit bears 10% interest, is payable on demand and has no
      collateral. At March 31, 2008, the principal balance was $2,078,652 and accrued
      interest was $694,069.


10




SYSTEMS
          MANAGEMENT SOLUTIONS, INC.
 AND
          SUBSIDIARIES
 NOTES
          TO
          UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





The
      majority stockholder of SMS also advanced money to ASPECT on an as-needed basis.
      The advances were assumed by SMS on January 15, 2008. As of March 31, 2008,
      the
      balance of these advances totaled $2,347,810.





During
      the three months ended March 31, 2008 the company borrowed an additional $40,000
      against these credit facilities. Total principal amounts due at March 31, 2008
      are $5,017,095.





NOTE
      8 – EQUITY





During
      the three months ended March 31, 2008 the Company issued 2,500,000 shares of
      its
      common stock to its new Chairman and CEO for services rendered valued at
      $100,000 based on the quoted market price of the Company’s common stock on the
      date of issuance.





Additionally,
      the Company issued 7,500,000 shares of its common stock to four consultants
      for
      services rendered during the Company’s transition valued at $300,000 based on
      the quoted market price of the Company’s common stock on the date of
      issuance.





Interest
      imputed on related party notes during the current quarter was $58,431.





11




SYSTEMS
          MANAGEMENT SOLUTIONS, INC.
 AND
          SUBSIDIARIES
 NOTES
          TO
          UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




NOTE
      9 - DISCONTINUED
      OPERATIONS





SMSE


SMSE,
      a
      subsidiary of the Company, ceased production in Dec 2006 and its assets located
      in Poteet, Tx. were classified as Held for Sale at December 31, 2006 (see Note
      4). The Company sought out arrangements in which the assets would be purchased
      but SMSE would retain management of the facility. Therefore, SMSE maintained
      the
      current staff which consisted of managerial, operational and custodial
      personnel. This provided a “ready” management team which made the purchase more
      attractive to potential buyers. However, in September and October, key
      managerial personnel employed by SMSE have resigned. The Company is no longer
      able to provide management of the facility and has therefore recognized this
      segment of its operations as discontinued.





SMSE’s
      activity represents the entirety of the Company’s alternative fuels segment (see
      Note 11). SMSE’s sales, reported in discontinued operations, for the three
      months ended March 31, 2008 and 2007 are $0 and $10,200, respectively. SMSE’s
      pretax loss from operations, reported in discontinued operations, for the three
      months ended March 31, 2008 and 2007 were $116,517 and $134,246 respectively.
      Prior year financial statements have been restated to present the operations
      of
      SMSE as a discontinued operation. The fixed assets of the discontinued operation
      are listed as “Assets Held for Sale” in the accompanying Balance Sheets at March
      31, 2008 and 2007. Below is a table of all assets and liabilities for the
      discontinued operations of SMSE:





At
              March
                31,
              2008
            
            At
              March
                31,
              2007Assets
                of discontinued operations:Cash
            
            $
            2,561
            
            $
            17,697Accounts
                Receivable
            
            
            -
            
            
            11,448Inventory
            
            
            -
            
            
            -Property
                and equipment, net
            
            
            574,619
            
            
            574,619Other
                Assets
            
            
            9,392
            
            
            10,657Total
                Assets
            
            $
            586,572
            
            $
            614,421Liabilities
                of discontinued operations:Accounts
                payable
            
            
            252,281
            
            
            384,607Accounts
                payable - related parties
            
            
            154,716
            
            
            81,000Accrued
                expense
            
            
            51,438
            
            
            53,015Total
                Liabilities
            
            $
            458,435
            
            $
            518,622




12




SYSTEMS
          MANAGEMENT SOLUTIONS, INC.
 AND
          SUBSIDIARIES
 NOTES
          TO
          UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




Aspect


Aspect,
      a
      subsidiary of the Company, was sold pursuant to a Stock Purchase Agreement
      with
      certain affiliated individuals of the Company on January 15, 2008 (see Note
      5).
      As a result of this transaction the Company classified Aspect as “Discontinued
      Operations” for the purposes of these financial statements.





Aspect’s
      activity represents the entirety of the Company’s software sales and programming
      segment (see Note 10). Aspect’s sales, reported in discontinued operations, for
      the three months ended March 31, 2008 and 2007 are $14,090 and $152,016,
      respectively. Aspect’s pretax gain/(loss) from operations, reported in
      discontinued operations, for the three months ended March 31, 2008 and 2007
      were
      $46,942 and $107,074 respectively. Prior year financial statements have been
      restated to present the operations of Aspect as a discontinued operation. Below
      is a table of all assets and liabilities for the discontinued operations of
      Aspect:





At
              March
                31,
              2008
            
            At
              March
                31,
              2007Assets
                of discontinued operations:Cash
            
            $
            -
            
            $
            13,055Accounts
                Receivable
            
            
            -
            
            
            68,340Prepaid
                Expenses
            
            
            -
            
            
            490Property
                and equipment, net
            
            
            -
            
            
            6,603Total
                Assets
            
            $
            -
            
            $
            88,488Liabilities
                of discontinued operations:Accounts
                payable
            
            
            -
            
            
            51,136Accounts
                and Notes Payable - related parties
            
            
            -
            
            
            1,980,117Accrued
                expense
            
            
            -
            
            
            45,610Total
                Liabilities
            
            $
            -
            
            $
            2,076,862




NOTE
      10 – INTERNAL
      REVENUE TAX LIEN





During
      the second and third quarters of 2005, ASPECT, one of the Company’s
      subsidiaries, did not have the funds necessary to cover all the payroll taxes.
      In January 2006, the Internal Revenue Service (“IRS”) placed a lien on ASPECT
      assets. A third party accounting firm which represented ASPECT, in the due
      process hearing, negotiated an installment plan to settle the outstanding
      liability. Payments were tendered from this third party firm on behalf of the
      Company’s largest shareholder and holder of a line of credit with ASPECT. The
      balance due at March 31, 2008 is $36,886.


13




SYSTEMS
          MANAGEMENT SOLUTIONS, INC.
 AND
          SUBSIDIARIES
 NOTES
          TO
          UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




NOTE
      11 – OPERATING
      RESULTS AND SEGMENT INFORMATION





(Discontinued)
              Software
                Sales
              &
                Programming
            
            (Discontinued)
              Alternative
              Fuels
            
            All
                Other
            
            Total3
                Months Ended March 31, 2008Revenues
                from operations
            
            $
            14,634
            
            $
            -
            
            $
            -
            
            $
            14,634Net
                operating loss from operations
            
            
            -
            
            
            -
            
            
            (415,711
            )
            
            (415,711
            )Loss
                from discontinued operations
            
            
            (46,942
            )
            
            (116,517
            )
            
            -
            
            
            (163,459
            )Assets
                held for sale
            
            
            -
            
            
            574,619
            
            
            -
            
            
            574,619Capital
                Expenditures
            
            
            -
            
            
            -
            
            
            -
            
            
            -Current
                Depreciation (included in gain on disposal)
            
            
            2,819
            
            
            -
            
            
            -
            
            
            2,8193
                Months Ended March 31, 2007Revenues
                from external customers
            
            $
            152,016
            
            $
            10,200
            
            $
            -
            
            $
            162,216Net
                operating loss from operations
            
            
            -
            
            
            -
            
            
            (121,466
            )
            
            (121,466
            )Loss
                from discontinued operations
            
            
            (107,074
            )
            
            (134,246
            )
            
            -
            
            
            (241,320
            )Assets
                held for sale
            
            
            6,603
            
            
            574,619
            
            
            -
            
            
            580,922Capital
                Expenditures
            
            
            1,726
            
            
            -
            
            
            -
            
            
            1,726Depreciation
            
            
            1,941
            
            
            15,679
            
            
            -
            
            
            17,620





The
      Company reports its operations by segments, which for the Company, relates
      to
      specific subsidiaries and therefore are individually managed and have separate
      financial results that are viewed by the Company’s chief operating
      decision-maker. Profit from operations is net sales less cost of sales and
      selling, general and administrative expenses. There are two segments: Software
      sales, programming, and data capturing and storage and Renewable Energies.
      In
      addition, the Company reports certain administrative activities under the
      corporate segment labeled “All Other”.





As
      previously discussed, SMSE shuttered its BioDiesel refinery in late 2006. The
      assets related to this business segment are currently held for sale and are
      presented herein as discontinued operations.





Also,
      as
      previously discussed the Company sold its Aspect business segment during the
      three months ended March 31, 2008. The results of Aspect are presented herein
      as
      discontinued operations.


14




SYSTEMS
          MANAGEMENT SOLUTIONS, INC.
 AND
          SUBSIDIARIES
 NOTES
          TO
          UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




NOTE
      12 – RELATED
      PARTY TRANSACTIONS





The
      majority stockholder of SMS advances money to SMS, SMSE and ASPECT on an as
      needed basis (see note 7).





The
      purchase of SMS Envirofuels, Inc. involved related parties. Prior to the
      acquisition, a majority stockholder owned the majority stock of SMS Envirofuels,
      Inc.





SMSE
      occupies approximately 11 acres of land in Poteet, Texas. The lease is with
      Texian Land and Cattle Company, LLC, a Wyoming limited liability company,
      authorized to do business in the state of Texas as “Big As Texas Land Co., LLC.,
      with annual rents totaling $72,000 annually. Certain stockholders of the Company
      hold an interest in Texian Land and Cattle.





In
      July
      2007, Texian Land and Cattle, a related party to the Company, filed for Chapter
      11 bankruptcy protection. The Company cannot be certain of any effects this
      may
      have on its subsidiary’s SMSE production facility lease agreement with
      Texian.





The
      Company is located in office space which is sub-leased from our largest
      shareholder. This space is approximately 1,500 square feet, with an average
      monthly rent of $2,300.





NOTE
      13 – RECLASSIFICATION





Certain
      accounts from prior periods have been reclassified to conform to current period
      presentations.




NOTE
      14 – SUBSEQUENT
      EVENTS





On
      May
      14,  2008
      the
      former CEO of the Company was served with a lawsuit, on behalf of the Company,
      relating to an unpaid Promissory Note between the Company and a shareholder.
      Current management has not received a copy of this lawsuit and can therefore
      make no statement as to the potential liability related
      thereto.


15


**ITEM
              2:**
            **MANAGEMENT'S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                OPERATIONS**




**FORWARD
      LOOKING STATEMENTS**


This
      document contains "forward-looking statements" within the meaning of the Private
      Securities Litigation Reform Act of 1995.  Forward-looking statements may
      be identified by words such as "expects," "anticipates," "intends," "plans,"
      "believes," "seeks," "estimates," "will" or words of similar meaning and
      include, but are not limited to, statements about the expected future business
      and financial performance of the Company.  Forward-looking statements are
      based on management's current expectations and assumptions, which are inherently
      subject to uncertainties, risks and changes in circumstances that are difficult
      to predict.  Actual outcomes and results may differ materially from these
      expectations and assumptions due to changes in global political, economic,
      business, competitive, market, regulatory and other factors.  We undertake
      no obligation to publicly update or review any forward-looking information,
      whether as a result of new information, future developments or
      otherwise.




**The
      following discussion and analysis should be read in connection with the
      Company’s consolidated financial statements and related notes thereto, as
      included in this report, as well as the Company’s Annual Report filed on form
      10-KSB.**





**Overview**





SMS
      is
      comprised of its wholly owned subsidiary, SMS Envirofuels, Inc.
      (“SMSE”).





SMS
      Envirofuels began processing biodiesel in April 2005. Since then, the
      manufacturing facility has experienced a steady demand for its product and
      has
      continued to perfect its process to achieve both consistency and efficiency.
      This has attracted potential buyers and in late 2006, the Company placed the
      assets located at SMSE’s production facility located in Poteet, Texas, up for
      sale. On October 5, 2006, SMSE, the Company’s subsidiary, received a letter of
      intent (“LOI”) from Earth Biofuels, Inc. (“EBOF”) for the acquisition of these
      assets. One of terms of the LOI created a tolling arrangement in which EBOF
      would provide the soybean oil and methanol in sufficient quantities to operate
      the plant at the levels stated in the LOI. SMSE relied on this agreement and
      began production in accordance with the LOI. However, due to the inconsistent
      and insufficient levels of soybean oil purchased by EBOF for SMSE, the
      production goal levels, as outlined in the LOI, were not attained. EBOF ceased
      communication with SMSE in early December 2006 and the plant ceased the
      production of biodiesel. SMSE resumed pursuing buyers for its assets located
      at
      the Poteet plant with the intent to remain in control of its operations as
      third
      party management for the facility, offering it’s administrative and production
      personnel.





In
      the
      third quarter of 2007, key personnel left SMSE for other opportunities. With
      the
      lack of experienced employees, SMSE is no longer able to provide management
      of
      the Poteet facility to interested buyers. It was thus determined to discontinue
      the alternative fuels segment of the Company.


16


**First
      Quarter 2008 Compared to First Quarter 2007**





***Expenses.*** Our
      expenses for continuing operations increased substantially, when comparing
      2008
      to 2007 for the three month period ending March 31. The increase is attributed
      to two major factors: 1) expenses related to our exiting of the software
      business segment, and 2) expenses related to stock compensation granted to
      our
      new CEO and certain outside consultants. As of March 31, 2008 the Company had
      no
      full-time employees and was relying on contractors to meet if financial and
      regulatory reporting requirements.





**Results
      of Operation**





SMS
      incurred a net loss of approximately $540,000 for the three months ended March
      31, 2008, and had a working capital deficit of approximately $7,560,000 as
      of
      March 31, 2008. These conditions create an uncertainty as to SMS’s ability to
      continue as a going concern. It is not yet determined when, or if, SMS
      Envirofuels will resume production.





Cash
      used
      by continuing operations was approximately $56,000 for the quarter ended March
      31, 2008.  Cash used by discontinued operations was approximately $3,000
      for the same period.  The funds to cover these uses of cash were received
      against the note payable and advance agreement the company maintains from its
      majority shareholder.





SMS
      continues to rely on loans and advances principally from its major stockholder,
      United Managers Group, Inc., to fund operating shortfalls and does not foresee
      a
      change in this situation in the immediate future. There can be no assurance
      that
      SMS will continue to have such loans and advances available. SMS will not be
      able to continue operations without them. SMS is pursuing alternate sources
      of
      financing. This is reflected in the Letter of Intent received discussed above
      and the continuing effort to sell the alternative fuels segment of the
      Company.





**Critical
      Accounting Policies**


The
      financial reports for the period contained one critical accounting estimate
      and
      did not incorporate any initial adoptions of accounting policy that had a
      material impact. Below is a brief discussion of events that materially affected
      our financial statements and the basis in which the transactions were
      recorded.





At
      March
      31, 2008, an estimate was used to accrue for the expense to remove excess
      material from the production process from SMS Envirofuels, Inc. This estimate
      totaled $29,900 based on volume and vendor pricing.





**Internal
      Revenue Tax Lien**


During
      the second and third quarters of 2005, ASPECT, one of the Company’s
      subsidiaries, did not have the funds necessary to cover all the payroll taxes.
      In January 2006, the Internal Revenue Service (“IRS”) placed a lien on ASPECT
      assets. A third party accounting firm which represented ASPECT, in the due
      process hearing, negotiated an installment plan to settle the outstanding
      liability. Payments were tendered from this third party firm on behalf of the
      Company’s largest shareholder and holder of a line of credit with ASPECT. The
      balance due at March 31, 2008 is $36,886.


17





**Liquidity
      and Capital Resources**


Cash
      used
      by operating activities was approximately $56,000 for the three months ended
      March 31, 2008. During the three months ended March 31, 2008 the Company and
      its
      Subsidiaries borrowed an additional approximately $40,000 from its largest
      shareholder.




**Risk
      Factors**


You
      should consider the following discussion of risks as well as other information
      regarding our common stock. The risks and uncertainties described below are
      not
      the only ones. Additional risks and uncertainties not presently known to us
      or
      that we currently deem immaterial also may impair our business operations.
      If
      any of the following risks actually occur, our business could be
      harmed.





**Competition**


SMSE
      business strategy is to be a leading supplier of Biodiesel for every market
      using petroleum based diesel fuels. SMSE believes the following to be the keys
      and risks to its success: marketing of Biodiesel through the fossil fuel market,
      achieving economies of scale, research and development of Biodiesel and other
      alternative fuels, and establishing a rapport with all distributors and jobbers
      interested in alternative fuels. The Biodiesel industry is relatively new,
      and a
      suitable customer base is not currently adequately defined. Given that the
      customer base may be narrow, it is possible that other producers of Biodiesel
      fuel may provide significant competition for these markets.





In
      order
      for SMSE to continue to produce the Biodiesel fuel, it must have a continuing
      supply of soybeans from which to make its product. It is possible that
      significant competition could arise for the raw material used to make the fuel.
      Additionally, competition for soybeans from other sources might provide
      competition for this material source.





**Reliance
      on Key Personnel**


While
      certain of SMSE’s officers have extensive experience in business management,
      none of them have any prior experience in advising or managing an enterprise
      such as SMS Envirofuels.





**Sales
      Channels**


Sales
      channels for the distribution of Biodiesel historically have been non-existent
      as Biodiesel has not been marketed on a state, regional or national level until
      just recently. There can be no assurance that distribution channels will grow
      large enough and financially strong enough to handle the production capacity
      of
      SMSE.





**Limited
      Operating History: Operating Losses**


Despite
      factors that indicate an increasing acceptance and desire to use Biodiesel
      in
      certain segments of the industry and government, SMSE cannot be assured of
      their
      continued demand. While SMSE believes that demand for such alternative fuels
      exists, SMSE cannot assure that it will have success in marketing its product
      to
      its customer groups. The inability of SMSE to successfully market and sell
      its
      product to these customer groups would have an adverse effect on SMSE’s
      profitability.




18




**Volatile
      Raw Material Prices**


At
      the
      current time, the main ingredient used to produce SMSE’s Biodiesel is soybean
      oil. Soybean oil is an international commodity for which a price is set on
      the
      international agricultural market. The price of soybean oil varies dramatically
      from month to month and year to year based on various complex factors at play
      on
      the world soybean oil market. There can be no assurance that SMSE will be
      successful in controlling such costs. Adverse pricing in the world market may
      have an adverse affect on SMSE’s profitability or ability to continue as a going
      concern.





**Going
      Concern**


The
      Company’s ability to continue as a going concern is an issue raised as a result
      of the significant operating losses incurred during the three months ended
      March
      31, 2008 and 2007 and its negative working capital. The Company continues to
      experience net operating losses. The ability to continue as a going concern
      is
      subject to the Company’s ability to obtain necessary funding from outside
      sources, including obtaining additional funding from the sale of securities,
      increasing sales or obtaining loans and grants from various financial
      institutions where possible.





**Additional
      Financing**


Additional
      financing is required to continue operations. Although actively searching for
      available capital, the Company does not have any current arrangements for
      additional outside sources of financing and cannot provide any assurance that
      such financing will be available.





**Limited
      Trading Market**


Currently
      only a very limited trading market exists for SMS common stock. The common
      stock
      trades on the OTCBB under the symbol "SSMG." The OTCBB is a limited market
      and
      subject to substantial restrictions and limitations in comparison to the NASDAQ
      system. Any broker/dealer that makes a market in the Company stock or other
      person that buys or sells the stock could have a significant influence over
      its
      price at any given time. The Company cannot assure its shareholders that a
      market for its stock will be sustained. There is no assurance that its shares
      will have any greater liquidity than shares that do not trade on a public
      market.




19


**ITEM
              3:**
            **QUANTITATIVE
                AND QUALITATIVE DISCLOSURES ABOUT MARKET
                RISKS**





As
      a
      smaller reporting company, we are not required to provide the information
      required by this Item.





**ITEM
              4T:**
            **CONTROLS
                AND PROCEDURES**





**Management’s
      Report on Internal Control Over Financial Reporting.**


Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting as defined in Rule 13a-15(f) under the
      Securities Exchange Act, as amended.  Our management assessed the
      effectiveness of our internal control over financial reporting as of December
      31, 2007 as seen in our 10KSB. In making this assessment, our management used
      the criteria set forth by the Committee of Sponsoring Organizations of the
      Treadway Commission (“COSO”) in Internal Control-Integrated
      Framework.  A material weakness is a deficiency, or a combination of
      deficiencies, in internal control over financial reporting, such that there
      is a
      reasonable possibility that a material misstatement of the company's annual
      or
      interim financial statements will not be prevented or detected on a timely
      basis.  We identified the following material weaknesses.





1.
            As
                of December 31, 2007, we did not maintain effective controls over
                the
                control environment.  Specifically, we have not formally adopted
                a written code of business conduct and ethics that governs to the
                Company’s employees, officers and directors.  Additionally, we
                have not developed and effectively communicated to our employees
                its
                accounting policies and procedures.  This has resulted in
                inconsistent practices.  Further, the Board of Directors does
                not currently have any independent members and no director qualifies
                as an
                audit committee financial expert as defined in Item 407(d)(5)(ii)
                of
                Regulation S-B.  Since these entity level programs have a
                pervasive effect across the organization, management has determined
                that
                these circumstances constitute a material
                weakness.





2.
            As
                of December 31, 2007 we did not maintain effective controls over
                financial
                statement disclosure.  Specifically, controls were not designed
                and in place to ensure that all disclosures required were originally
                addressed in our financial statements.   Accordingly, management
                has determined that this control deficiency constitutes a material
                weakness.





Because
      of these material weaknesses, management has concluded that the Company did
      not
      maintain effective internal control over financial reporting as of December
      31,
      2007, based on the criteria established in "Internal Control-Integrated
      Framework" issued by the COSO.





20


**Changes
      in Internal Control Over Financial
      Reporting.**


No
      change
      in the Company’s internal control over financial reporting occurred during the
      quarter ended March 31, 2008, that materially affected, or is reasonably likely
      to materially affect, the Company’s internal control over financial
      reporting.





This
      annual report does not include an attestation report of the Company’s registered
      public accounting firm regarding internal control over financial
      reporting.  Management’s report was not subject to attestation by the
      Company’s registered public accounting firm pursuant to temporary rules of the
      Securities and Exchange Commission that permit the Company to provide only
      management’s report in this annual report.





Corrective
      Action


None.





21


**PART
      II. OTHER INFORMATION**





**ITEM
              1:**
            **LEGAL
                PROCEEDINGS**





Other
      than as disclosed below, we know of no material, existing or pending legal
      proceedings against our company, nor are we involved as a plaintiff in any
      material proceeding or pending litigation.  There are no proceedings in
      which any of our directors, officers or affiliates, or any registered or
      beneficial shareholder, is an adverse party or has a material interest adverse
      to our interest.





In
      early 2005, the landlord for the offices occupied by YCO Holdings, Inc. and
      its
      subsidiaries filed suit in the 295 th District Court of Harris County, Texas Cause No. 2005-04423 captioned WKB Value
      Partners, LP vs. Systems Management Solutions, Inc., alleging that the Company
      was obligated on the lease even though no authorized officer of the Company
      had
      signed the same. This lawsuit was dismissed in February, 2006 pursuant to a
      Comprehensive Settlement Agreement which required the Company to make payments
      to WKB Value Partners, LP in the amount of $470,000. The payment schedule called
      for $20,000 initial payment, followed by monthly payments of $7,500 for 60
      months. The Company is currently in default under the terms of the settlement
      agreement. As
      of
      March 31, 2008 the liability to WKB was approximately $307,500.





In
      December of 2006, Cargill Incorporated (“Cargill”), a Delaware corporation,
      filed suit in the Judicial District Court of Bexar County, Texas Cause No.
      2006-CI-19096, against subsidiary SMS Envirofuels, Inc., and certain related
      and
      unrelated companies and individuals, claiming non payment for amounts due
      Cargill by SMSE. The SMSE payable to Cargill as of October 5, 2006 is
      $608,387, which included $528,387 for material received and $80,000 for the
      hedge loss incurred by cancellation of the open physical contracts. On that
      same
      date, SMSE entered into an agreement to sell certain assets located at its
      production plant in Poteet, Texas. The purchaser, Earth Biofuels, Inc. (“EBOF”),
      as part of the agreement, expressly agreed to assume this debt to Cargill and
      provide additional working capital to SMSE. In return, SMSE signed a promissory
      note to EBOF for a line of credit not to exceed $788,000. Cargill agreed to
      this
      arrangement with EBOF but reserved the right to pursue any and all claims
      against SMSE upon failure of EBOF to adhere to the terms outlined in the
      agreement between EBOF and Cargill. EBOF subsequently made partial payments
      totaling $250,000 to Cargill, leaving a balance of $358,387. As of this filing,
      the purchase of the certain assets by EBOF has not occurred and there is not
      an
      expectation that a sale will occur in the future. Cargill was awarded a
      declaratory judgment in its favor. In July of 2007, Cargill reached a payout
      agreement with SMSE and certain related individuals. The balance, which includes
      interest and legal fees, totaled $380,000. The agreement required one payment
      of
      $75,000 due July 27, 2007 and monthly payments of $25,000 due the 1st of every
      month until the balance is paid in full, beginning with September 1, 2007.
      If in
      the event that SMSE or its certain related individual defaults on this
      agreement, Cargill will file and execute its judgment as it was awarded. During
      2007 the Company and its affiliates made net payments of $128,000 towards the
      Cargill obligation. The
      Company is currently in default under the terms of the settlement
      agreement. As of
      March 31, 2008 the liability to Cargill was $230,000.




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In
      June
      of 2007, Earthbiofuels, Inc (“EBOF”), posted in the Atascosa County Public Deed
      Records, a Notice of Substitute Trustee’s Foreclosure Sale on the property
      located at 8275 FM 476 West, Poteet, Texas in effort to collect on the
      promissory note made by SMS Envirofuels, Inc. (“SMSE”) as part of the agreement
      entered into in October 2006 (see Note 5 of the accompanying financial
      statements). SMSE is currently in default on this promissory note. The
      promissory note was secured by this property which is owned by Texian Land
      and
      Cattle (“Texian”), a related party to the Company, and leased to SMSE. In July
      of 2007 Texian filed for Chapter 11 bankruptcy protection (see Note 12 of the
      accompanying financial statements).





On
      May
      14,  2008
      the
      former CEO of the Company was served with a lawsuit, on behalf of the Company,
      relating to an unpaid Promissory Note between the Company and a shareholder.
      Current management has not received a copy of this lawsuit and can therefore
      make no statement as to the potential liability related thereto.




**ITEM
              2:**
            **UNREGISTERED
                SALES OF EQUITY SECURITIES AND USE OF
                PROCEEDS**





During
      the three months ended March
      31,
      2008 ,
      we completed the following transactions in reliance upon exemptions from
      registration under the Securities Act of 1933, as amended (the "Act") as
      provided in Section 4(2) thereof. All certificates issued in connection with
      these transactions were endorsed with a restrictive legend confirming that
      the
      securities could not be resold without registration under the Act or an
      applicable exemption from the registration requirements of the Act. None of
      the
      transactions involved a public offering, underwriting discounts or sales
      commissions. We believe that each person was a "qualified" investor within
      the
      meaning of the Act and had knowledge and experience in financial and business
      matters, which allowed them to evaluate the merits and risks of our securities.
      Each person was knowledgeable about our operations and financial
      condition.





During
      the three months ended March 31, 2008 the Company issued 2,500,000 shares of
      its
      common stock to its new Chairman and CEO for services rendered valued at
      $100,000 based on the quoted market price of the Company’s common stock on the
      date of issuance.





Additionally,
      the Company issued 7,500,000 shares of its common stock to four consultants
      for
      services rendered during the Company’s transition valued at $300,000 based on
      the quoted market price of the Company’s common stock on the date of
      issuance.





**ITEM
              6:**
            **EXHIBITS
                AND REPORTS ON FORM
                8-K**




(a)
              Exhibits:


Exhibit
                No.
            Description31.1
            Section
                302 Certification – Eddie Austin, Jr.32.1
            Section
                906 Certification – Eddie Austin,
                Jr.





(b)
            Reports
                on Form 8-K:





None.




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SIGNATURES





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the Company has duly caused this report to be signed on its behalf by
      the
      undersigned, thereunto duly authorized.





Systems
                Management Solutions, Inc.By:
            /s/
                Eddie Austin, Jr.Eddie
                Austin, Jr.Chairman
                & CEO(Principal
                Executive Officer andPrincipal
                Accounting Officer)




Date:
      May
      20, 2008




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