SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 20549










FORM
      10-KSB





x
      Annual Report Pursuant
      to Section 13 or 15(d) of the Securities Exchange


Act of 1934





For
      the
      fiscal year ended December 31, 2006





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 No. 333-45210





SYSTEMS
      MANAGEMENT SOLUTIONS, INC.


(Name
      of
      Small Business Issuer in Its Charter)





Nevada
              88-0460457(State
                  or other jurisdiction of incorporation)
              (IRS
                  Employer Identification No.)4703
                  Shavano Oak, Suite 104San
                  Antonio, Texas
              78249(Address
                  of Principal Executive Offices)
              (Zip
                  Code)


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








Securities
      registered pursuant to Section 12(b) of the Act: None





Securities
      registered pursuant to Section 12(g) of the Act:


Common
      Stock, $0.0001 par value and Preferred Stock, $0.0001 par value





Check
      whether the issuer (1) 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.





x
      Yes o No





Check
      if
      disclosure of delinquent filers in response to Item 405 of Regulation S-B is
      not
      contained in this form, and no disclosure will be contained, to the best of
      registrant's knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB. o





The
      issuer's total revenues for the fiscal year ended December 31, 2006 were
      $3,621,242





As
      of
      March 22, 2007, there were 20,690,386 outstanding shares of the issuer's common
      stock, par value $.0001 per share ("Common Stock"), which is the only class
      of
      common stock of the issuer. As of March 22, 2007, the aggregate market value
      of
      the shares of Common Stock, held by non-affiliates of the
      issuer, based on the closing bid price of the Common Stock as quoted on the
      OTC
      Bulletin Board, was approximately $1,055,967





Documents
      Incorporated by Reference  None.





Transitional
      Small Business Disclosure Format: Yes o No x










TABLE
      OF
      CONTENTS


PagePARTI.
              
              
              
              1Item
                  1.
              
              Business
              
              1Item
                  2.
              
              Properties
              
              3Item
                  3.
              
              Legal
                  Proceedings
              
              3Item
                  4.
              
              Submission
                  of Matters to a Vote of Security Holders
              
              4PARTII
              
              
              
              4Item
                  5.
              
              Market
                  for Common Equity and Related Stockholder Matters
              
              4Item
                  6.
              
              Management’s
                  Discussion and Analysis or Plan of Operation
              
              5Item
                  7.
              
              Financial
                  Statements
              
              10Item
                  8.
              
              Changes
                  In and Disagreements With Accountants on Accounting and Financial
                  Disclosure
              
              10Item
                  8A.
              
              Controls
                  and Procedures
              
              10PARTIII
              
              
              
              11Item
                  9.
              
              Directors
                  and Executive Officers, Promoters and Control Person
              
              11Item
                  10.
              
              Executive
                  Compensation
              
              14Item
                  11.
              
              Security
                  Ownership of Certain Beneficial Owners and Management
              
              15Item
                  12.
              
              Certain
                  Relationships and Related Transactions
              
              16Item
                  13.
              
              Exhibits,
                  Financial Statements and Reports on Form 8-K
              
              16Item
                  14.
              
              Principal
                  Accountant Fees and Services
              
              17Report
                  of Independent Registered Public Accounting Firm
              
              F-1Consolidated
                  Financial Statements and Notes
              
              F-2










PART I




ITEM
      1.
      BUSINESS





Unless
      the context otherwise requires, “SMS”, “Company”, “we”, “us” and “our” refer to
      Systems Management Solutions, Inc. and its subsidiaries combined.





SMS
      is a
      diversified holding company with two subsidiaries. ASPECT Business Solutions,
      Inc. (“ASPECT”) provides business services, software and solutions primarily to
      the small and mid-sized business sector and SMS Envirofuels, Inc. (“SMSE”)
      produces and provides biodiesel to distributors.




Our
      Operating Subsidiaries





At
      the
      time of its acquisition by the Company, ASPECT’s main product was an
      internet-based, biometric time and attendance product using fingerprints to
      verify employee identity. In 2004, ASPECT’s management determined that the
      company needed to expand its focus in an attempt to improve revenues, and began
      providing a variety of products related to human resources and payroll. During
      2005 ASPECT moved away from providing payroll and human resources products
      and
      began to concentrate on reselling, implementing, and providing consulting
      services for Microsoft’s business products. ASPECT is concentrating on selling
      and implementing Microsoft’s Navision software.




ASPECT
      offers sales, implementation design, programming and project management for
      Microsoft’s Navision to its customers and to customers of other Navision
      resellers. ASPECT and its employees have developed a national reputation for
      project management and Navision implementation. In 2006, ASPECT has participated
      in implementing Microsoft’s Navision in Texas, Oklahoma, Florida, Minnesota,
      Rhode Island, North and South Carolina.





Microsoft’s
      Navision is a full function Enterprise wide Reporting Program (ERP) system.
      Navision granules are available to deliver integrated functionality in the
      following areas:





·
            Financial
                Budgeting





·
            Sales
                Order Management





·
            Purchase
                Order Management





·
            Human
                Resources





·
            Payroll





·
            Job
                Management





·
            Service
                Order Management





·
            Resource
                Management





·
            Fixed
                Asset Management





·
            Inventory
                Control





·
            Warehouse
                and Shipping Management





·
            Manufacturing





·
            MRP
                and Supply Chain Management




Navision’s
      granules are all fully integrated therefore entries made in one area create
      the
      entries, documents and postings for all Navision areas. A sales invoice will
      update the customer ledger, post to the general ledger, update inventory
      availability, and create the warehouse shipping documents for the transaction.




Page
          1




ASPECT’s
      implementation methodologies insure client implementations are properly planned
      and managed. The methodologies outline each person’s responsibilities and
      schedule each step of the implementation thereby insuring the implementation
      is
      managed properly and everyone involved understands what it takes to achieve
      a
      successful implementation. ASPECT’s team has the business experience and
      Navision knowledge to ensure Navision is implemented at each customer’s location
      to provide efficient and effective work flow for all processes. Whether it
      is a
      specialized billing and invoicing system, or a modification to Job Order
      Costing, ASPECT’s programmers can provide the functionality required.





ASPECT
      has also provides upgrade services in order to keep clients on the latest
      versions of Navision.




The
      market for ASPECT's products is highly competitive. Its products compete
      primarily on the basis of technology, delivered functionality and price.
      ASPECT's products are very similar to products offered by competitors.





ASPECT
      has 3 full-time employees. It is not subject to any significant government
      regulation of its business. ASPECT
      will contract experts trained in Navision, on a as needed basis, to augment
      its
      in-house staff. This out sourcing of Navision experts allows ASPECT to keep
      its
      overhead low, while enabling the company to compete nationwide in Navision
      installation and service opportunities.





SMSE
      is
      an alternative fuel processing company dedicated to producing safe, clean,
      and
      environmentally friendly fuels for the future. SMSE is located in the town
      of
      Poteet, approximately 25 miles south west of San Antonio, Texas. SMSE
      manufactures high quality and low cost biodiesel fuels for fuel distributors,
      jobbers and state and local governmental fleets. Biodiesel is a domestic
      renewable fuel for use in diesel engines that is derived from vegetable oils,
      such as soybean oil. Biodiesel can be mixed with petroleum-based diesel fuel,
      or
      used as a stand alone fuel for use in existing diesel engines.





The
      biodiesel industry is part of the broader alternative fuel industry. Alternative
      fuel is any fuel that can be substituted for traditional gasoline or diesel
      fuels. Compressed natural gas, methanol, ethanol, propane, electricity,
      biodiesel and hydrogen are all federally recognized alternative fuel sources.
      While there are vehicles that are currently designed to run on such alternative
      fuels, biodiesel has the advantage of working with unmodified diesel engines,
      eliminating modification costs that would ultimately be passed on to
      consumers.





Biodiesel
      contains no petroleum, but can be used in any concentration with petroleum
      based
      diesel fuel in existing diesel engines with no major modification. Biodiesel
      is
      produced by a simple refining process called transesterification which removes
      glycerin for the vegetable oil. The process leaves two products- methyl esters
      (the chemical used for biodiesel) and glycerin. Used in conventional engines
      pure biodiesel has been shown to reduce emissions of total unburned hydrocarbons
      by as much as 70%, total carbon monoxide and other particulate matter by almost
      50%. Sulfur emissions are essentially eliminated altogether.





Biodiesel
      has several advantages over traditional petroleum based diesel in addition
      to
      the fact that it is a cleaner burning fuel. Biodiesel has an extremely high
      flash point, making it safer to transport that petroleum diesel because it
      takes
      a higher temperature to flame. Biodiesel is also easier on engines, increasing
      engine life with its usage, as well as reducing the odor that petroleum based
      diesel produces. Biodiesel delivers similar torque, horsepower and
      miles-per-gallon as petroleum diesel with no need to make engine modification
      or
      changes in the fuel handling or delivery system.





The
      biodiesel industry in Texas and through out the United States remains in its
      infancy, with no single company possessing a dominant market position. There
      are
      only a few companies that currently produce and distribute biodiesel in Texas,
      The primary consumers and market for biodiesel include City Transit, Military,
      School Buses, Public Transit, Passenger Cars and Trucks, Marine, Farming and
      Heating Oil.




Page
          2




ITEM
      2.
      PROPERTIES





The
      Company shares offices with its principal subsidiary, ASPECT Business Solutions,
      Inc., located at 7550 IH10 West, 14 th Floor,
      San Antonio, Texas 78229. This rental space is approximately 16,000 square
      feet,
      the average monthly rent is $22,800 and the lease on this space expires on
      September 30, 2009. ASPECT is the primary obligor on the lease. The Company
      is
      not affiliated with this lessor. As a result of the reduction in force completed
      in 2005, ASPECT recognized that it’s currently facility was in excess of what
      was deemed necessary. In December 2006, ASPECT negotiated with the landlord,
      of
      the 7550 IH10 location, for early termination of its lease. The new expiration
      date is March 17, 2007. ASPECT has secured new office space of approximately
      1,500 square feet, with an average monthly rent of $2,300. The Company and
      the
      original bound tenant share a common owner/shareholder.





The
      Company, through SMSE, leases the land and building which contain the biodiesel
      manufacturing facility and offices. The lease includes approximately 11 acres
      located at 8275 FM 476W, Poteet, Texas 78065, which is just south of San
      Antonio. The monthly rent is $6,000 and the lease expires on April 14, 2013.
      The
      Company and the lessor do share a common owner/shareholder. The Company’s
      management believes that this facility while adequate for low to medium volumes
      of production will prove ineffective for the growth the Company is anticipating.
      As deemed necessary, a new location will be sought for any large or high volume
      expansion.




ITEM
      3.
      LEGAL PROCEEDINGS





In
      July
      of 2004, ARCOA, LLC, a Texas limited liability company, together with a related
      individual, filed three actions in the Judicial District Court of Harris County,
      Texas against Systems Management Solutions, Inc. and certain related companies
      and individuals, claiming damages in connection with certain loans made and
      services performed on behalf of YCO Holdings, Inc., a subsidiary of the Company.
      These lawsuits were dismissed in October, 2004 pursuant to a Comprehensive
      Settlement Agreement which required the Company to make payments to ARCOA and
      the related individual in the amount of $240,000. The payment schedule called
      for weekly payments to be made, and the final payment was paid on April 11,
      2005





In
      early
      2005, the landlord for the offices occupied by YCO Holdings, Inc. and its
      subsidiaries filed suit in the 295thDistrict
      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.





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. There have been no other
      payments on this payable. The liability to Cargill remains at $358,387. EBOF
      remains liable to Cargill for this, however Cargill has chosen to include SMSE
      in its lawsuit.




Page
          3





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





There
      were no matters brought to a vote of the security holders.




PART II




ITEM
      5.
      MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS





Number
      of
      Shareholders





The
      Company's authorized capitalization consists of 100,000,000 shares of $0.0001
      par value common stock, 5,000,000 shares of $0.0001 par value preferred stock,
      60,000 shares of $100.00 par value Series A Cumulative Convertible Preferred
      Stock (the "Series A Preferred Stock") and 50,000 shares of $100.00 par value
      Series B Cumulative Convertible Preferred Stock (the “Series B Preferred
      Stock”). As of the date of this report, there are 20,690,386 outstanding shares
      of common stock issued and outstanding held of record by approximately 549
      beneficial shareholders, no preferred stock issued and outstanding, 55,270
      shares of Series A Preferred Stock were issued and none are outstanding and
      23,103 shares of Series B Preferred Stock were issued and none are
      outstanding.





The
      Company's common stock is currently traded on the National Association of
      Securities Dealers Automated Quotation System Over The Counter Bulletin Board
      ("OTCBB") under the symbol "SSMG" and was previously traded under the symbols
      “SMSN” and "SUHO". There is limited trading activity in the stock of the
      Company. The Company began trading on the OTCBB on the National Association
      of
      Securities Dealers, Inc. ("NASD") on February 1, 2002 and was traded for a
      short
      time in 2004 on the "Pink Sheets".





The
      following table sets forth, for the periods indicated, the bid price range
      for
      the Company's common stock:


Quarter
                  Ended
              
              High
              
              LowMarch
                  31, 2005
              
              $
              2.25
              
              $
              0.28June
                  30, 2005
              
              $
              1.10
              
              $
              0.31September
                  30, 2005
              
              $
              0.30
              
              $
              0.15December
                  31, 2005
              
              $
              0.30
              
              $
              0.20March
                  31, 2006
              
              $
              0.50
              
              $
              0.10June
                  30, 2006
              
              $
              0.85
              
              $
              0.28September
                  30, 2006
              
              $
              0.50
              
              $
              0.20December
                  31, 2006
              
              $
              0.20
              
              $
              0.06





These
      market quotations reflect the high bid and low prices as reflected by the OTCBB
      or the "Pink Sheets", without retain mark-up, markdown or commissions and may
      not necessarily represent actual transactions.




Page
          4





Recent
      Sales of Unregistered Securities





On
      March
      21, 2005, the Board of Directors voted to approve the conversion of $2,310,304
      of debt owed by the Company and by ASPECT to United Manager’s Group into 23,103
      shares of Series B Convertible Preferred Stock in reliance on the exemption
      from
      registration provided by ss.4.2 of the Securities Act.





On
      March
      22, 2005, a majority shareholder converted all of the outstanding Series A
      and
      Series B Cumulative Preferred Stock into 34,250,000 shares of the Company’s
      common stock in accordance with the provisions of the Certificate Designation
      of
      Rights and Preferences for each such Series.





Dividend
      Policy





To
      date,
      the Company has not paid any cash dividends to holders of its common stock.
      The
      Company currently intends to retain all of its future earnings for use in its
      business and, therefore, does not expect to pay dividends in the near future.
      No
      dividend or distribution may be declared or paid or set aside for payment on
      the
      common stock or on any other junior stock, nor shall any common stock or any
      other junior stock be redeemed, purchased or otherwise acquired for any
      consideration by the Company unless, in each case, full cumulative dividends
      on
      all outstanding shares of the Series A Preferred Stock have been declared and
      paid through and including the most recent dividend payment date, as provided
      in
      the Certificate of Designation for the Series A Preferred Stock.




Disclosure
      of Equity Compensation Plans


Number
                  of securitiesto
                  be issued upon
              
              Weighted-average
              
              Number
                  of securitiesexercise
                  of
              
              exercise
                  price of
              
              remaining
                  available foroutstanding
                  options,
              
              outstanding
                  options,
              
              future
                  issuance underPlan
                  Category
              
              warrants
                  and rights (#)
              
              warrants
                  and rights ($)
              
              equity
                  compensation plansEquity
                  compensation plans
              
              
              N/A
              
              
              N/A
              
              
              N/Aapproved
                  by shareholdersEquity
                  compensation plans not
              
              
              N/A
              
              
              N/A
              
              
              N/Aapproved
                  by shareholdersTotal
              
              
              N/A
              
              
              N/A
              
              
              N/A




The
      Company has no equity compensation plans in place at the time of this
      filing.




ITEM
      6.
      MANAGEMENT’S PLAN OF OPERATIONS





The
      following discussion and analysis should be read in connection with the
      Company’s consolidated financial statements and related notes thereto, included
      elsewhere in this report.




ASPECT
      continued to experience operating losses during the period covered by this
      report. As previously reported, ASPECT has expanded its product line, which
      previously was focused on its biometric time and attendance product, to include
      the sales, installation and support of Microsoft Navision software. Recently,
      ASPECT became a Licensed Remarketer of certain corporate and personnel
      management systems developed by Microsoft Corporation (“Microsoft”). The focus
      on Microsoft systems has resulted in steady increases in Revenue from the sales,
      support and custom programming of the systems. Revenue increased 168% and 47%
      for the years 2005 and 2006, respectively, over the prior year. The Company
      looks forward to the continued expansion of ASPECT’s
      customer base, increases in Revenue and a reduction to the loss position of
      ASPECT. ASPECT took a number of expense reduction actions during the year 2005,
      including but not limited to headcount reductions. In December 2006, ASPECT
      successfully negotiated an early release from its office lease allowing for
      further reductions in expense for 2007. These expense reductions, coupled with
      the increase in Revenue reduced the operating loss experienced by ASPECT. The
      Company has yet to see operating profits from ASPECT, resulting from the change
      in focus, and although there can be no assurance that the change of focus will
      improve our results from operations, ASPECT is experiencing increases in revenue
      and reduction to on-going expenses.




Page
          5




SMSE
      in
      its first and second year of operations was able to attain over $2.0 and $3.0
      million, respectively, in sales. The market acceptance for its biodiesel has
      been established and an expansion was completed in 2006 effectively increasing
      its production capacity from 1.5 million gallons per year to 6 million allowing
      for the increase in revenue experienced in 2006. SMSE did and does utilize
      the
      subsidy programs offered by Federal and State departments. For 2005 and up
      to
      June 2006, SMSE received subsidy payments from the USDA Bioenergy Program.
      This
      subsidy program ended in June 2006. Beginning in August 2006, SMSE applied
      for
      and has received subsidy payments from the Texas Department of Agriculture.
      As
      of this filing, the program is still in existence. There is no assurance that
      the Texas program will continue. Currently, with the completed expansion and
      repairs underway, the Company is soliciting buyers for the plant. There is
      no
      assurance that the change in capacity, or the acceptance of Biodiesel will
      continue, or that the price of petroleum based diesel fuel will remain at its
      current levels. A drop in the price of diesel would have an adverse affect
      on
      the company’s ability to maintain its price for biodiesel. An increase in the
      cost of its primary raw material (Soy Oil) would also have an adverse impact
      on
      the company’s ability to produce and sell biodiesel at a profit.





SMS
      incurred a net loss of $1,441,988 for the twelve months ended December 31 2006,
      and had a working capital deficit of $6,102,250 as of December 31, 2006. These
      conditions create an uncertainty as to SMS’s ability to continue as a going
      concern.





The
      Company 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 the Company will continue to have such loans and advances
      available and will not be able to continue operations without them. The Company
      is aggressively pursuing outside investors and financing to provide additional
      capital into the company. In 2006, both the Company and SMSE, received capital
      through independent sources. In February 2006, the Company signed a short term
      promissory note with an independent lender for $500,000 secured by equipment
      recently purchased for SMSE, the Company’s subsidiary, plus the deposit placed
      on equipment that was being prepared for delivery. The note has an interest
      rate
      of 10%, a maturity date of August 1, 2006 and an interest rate of 18% for all
      past due monies. As of December 31, 2006, The Company is currently in default
      on
      this note. However, as of this filing, the Company has negotiated with the
      lender for the transfer of rights for the deposit place on the equipment for
      a
      reduction of this note. However, there remains a default balance due and the
      Company cannot assure a resolution will be reached to the lender’s
      satisfaction.





The
      initial positive market acceptance of SMSE and the successful production and
      sales of biodiesel have attracted much investor attention. In October 2006,
      SMSE
      received a letter of intent (“LOI”), from an independent party, for the purchase
      of assets associated with its production facility in Poteet, Texas (refer to
      “Recent Developments” below for details). The initial terms of the LOI enabled
      SMSE to sign a promissory note with the intended purchaser for a line of credit
      not to exceed $788,000. The expiration of this note was February 2 nd ,
      2007.
      As of the date of this filing, the terms of the LOI have not been met by the
      purchaser therefore the purchase did not take place. The balance on the line
      of
      credit at December 31, 2006 is $350,000.





Recent
      Developments




On
      October 5, 2006, SMSE, the Company’s subsidiary, received a letter of intent
      (“LOI”) from Earth Biofuels, Inc., (“EBOF”) for the acquisition of the assets
      associated with the biodiesel processing facility of SMSE. The terms of the
      LOI
      created the following: 1) a promissory note for monies paid directly to SMSE
      and
      for EBOF’s assumption of an account payable to SMSE’s largest vendor and 2) a
      tiered consideration payment based on SMSE’s ability to meet two levels of
      production. The letter stated that a tolling arrangement would be in effect
      during this production test in which EBOF would provide the soybean oil and
      methanol in sufficient quantities to operate the plant at both production
      levels; EBOF would purchase and take immediate delivery of all the finished
      product (biodiesel) with the exception of 1,500g per day, which SMSE would
      be
      allowed to sell to a third party; and EBOF would remit a price per gallon
      sufficient to cover SMSE’s operating expenses to process the materials to a
      finished product. SMSE relied
      on
      this agreement and began the production test. 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 LOI expired. Based on
      the
      information received as of this filing, the Company no longer considers this
      LOI
      as viable.




Page
          6




The
      balance currently due EBOF at December 31, 2007 on the Note payable above is
      $350,000. As noted in Part I, Item 3 Legal Proceedings (above), $250,000 was
      paid to Cargill. In addition, $100,000 was provided for working
      capital.




Drivers
      of Material Changes from period to period




The
      Company reported a 47% increase in Revenue over last year. SMSE did not
      stabilize production until the third quarter of 2005, therefore 2006 was SMSE’s
      first full year in operation producing 41% more biodiesel than in 2005. In
      addition, the average price per gallon of biodiesel was 4% higher and the cost
      of raw materials 7% lower in 2006 than in 2005. ASPECT continues to grow its
      customer base and subsequently revenues have increased however because of
      ASPECT’s more narrow focus, it has been able to reduce expenses related to the
      maintenance of the biometric time and attendance system significantly lowering
      its cost of sales.





There
      were two major factors that contributed to the Company’s reduction in General
      and Administrative expenses. In a continuing effort to reduce expenses and
      bring
      expenses more in line with operating revenues ASPECT was forced to reduce its
      employee base in July of 2005 by 7 people, which represented a reduction of
      over
      50 percent. ASPECT also eliminated all outside sales efforts, relying solely
      on
      customer recommendations and the Microsoft network available to all Remarketers
      of the Microsoft systems. In 2005, SMS recorded a $470,000 expense related
      to
      the settlement of suit filed by WKB Value Partners, LP (see Part I, Item 3
      above). Several other areas have shown a reduction





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
      December 31, 2006, 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.





In
      December of 2006, ASPECT reached an agreement with its landlord, SAOP Northwest,
      for an early termination of its lease for office space located at 7550 IH10
      West, 14 th Floor,
      San Antonio, Texas. The new termination date is March 17, 2007 as opposed
      September 30, 2009. ASPECT recognizes its lease expense based on FASB Technical
      bulletin 85-3, which states that the expense is to be recognized on a
      straight-line basis over the duration of the lease. Because the original lease
      provided an acceleration of rents each year, ASPECT recorded a liability account
      to offset the straight-line expense. The early termination required the expense
      and the liability to be recalculated resulting in a credit to the expense
      account of $70,000.





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 payroll taxes.
      Subsequently, in January of 2006, the Internal Revenue Service placed a lien
      on
      ASPECT assets. ASPECT responded by requesting a collection due process hearing
      and was able to negotiate an installment plan to settle the outstanding debt.
      The final payment on this agreement was confirmed on March 26, 2007. The lien
      will be lifted within the next 30 days.





Liquidity
      and Capital Resources




Cash
      used
      by operating and investing activities was $977,705 and $504,935, respectively
      for 2006. The funds for the year 2006 were obtained from 3 separate sources;
      Note payable from shareholder for $567,249, Note payable from an unrelated
      party
      for $500,000 and Note payable for $350,000 related to the Letter of Intent
      received by the Company to acquire certain assets of SMSE, the Company’s
      subsidiary, by a competitor Earth Biofuels, Inc. (see full discussion in Recent
      Developments above).




Page
          7




Cautionary
      Note Regarding Forward-looking Statements and Risk Factors




The
      Company’s Form 10-KSB, any Form 10-QSB or any Form 8-K of the Company or any
      other written or oral statements made by or on behalf of the Company may contain
      forward-looking statements which reflect the Company’s current views with
      respect to future events and financial performance. The words “believe,”
“expect,” “anticipate,” “intends,” “estimate,” “forecast,” “project,” and
      similar expressions identify forward-looking statements. All statements other
      than statements of historical fact are statements that could be deemed
      forward-looking statements, including any statements of the plans, strategies
      and objectives of management for future operations; any statements concerning
      proposed new products, services, developments or industry rankings; any
      statements regarding future economic conditions or performance; any statements
      of belief; and any statements of assumptions underlying any of the foregoing.
      Such “forward-looking statements” are subject to risks and uncertainties set
      forth from time to time in the Company’s SEC reports and include, among others,
      the Risk Factors below.





Readers
      are cautioned not to place undue reliance on such forward-looking statements
      as
      they speak only of the Company’s views as of the date the statement was made.
      The Company undertakes no obligation to publicly update or revise any
      forward-looking statements, whether as a result of new information, future
      events or otherwise.





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




ASPECT’s
      products and services compete directly or indirectly with products and services
      offered by many much larger companies, and ASPECT’s products and services are
      not proprietary or substantially different from those offered by competitors.
      Many of ASPECT’s competitors have longer operating histories and significantly
      greater financial, sales, marketing and other resources. Many competitors have
      greater name recognition, and larger customer bases and established sales
      distribution channels than ASPECT. As a result, these competitors may be able
      to
      respond more effectively to new pricing requirements, changes in customer
      requirements, withstand price decreases or devote greater resources to the
      development, promotion, sale and support of their services than
      ASPECT.





There
      can
      be no assurance that ASPECT will be able to compete successfully in the future
      or that competition will not have a material adverse effect on ASPECT’s
      business, results of operations and financial condition.





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




ASPECT’s
      future success will depend to a significant extent upon the continued service
      and performance of a relatively small number of key senior management, sales
      and
      marketing personnel. ASPECT’s success also depends upon its ability to attract,
      motivate and retain other highly qualified personnel, particularly personnel
      with industry related experience. ASPECT does not currently have executive
      management representation in all areas of its business. ASPECT is in the process
      of upgrading its internal financial and reporting systems to enhance
      management’s ability to obtain and better analyze information derived from its
      operations.




Page
          8




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




ASPECT’s
      future operating results will depend, upon other things, on its ability to
      develop long-term channel distribution relationships to penetrate different
      and
      wide-ranging end-user customers, particularly smaller businesses not using
      its
      institutional competitors’ products. ASPECT believes that the continuing growth
      of its business will require expansion of its sales and marketing activities.
      Such expansion will require significant resources and the time and attention
      of
      senior management.





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




ASPECT
      was incorporated in 1998 and did not begin substantive operations until 1999.
      ASPECT has incurred net losses in every period since its inception. There can
      be
      no assurance that ASPECT will attain profitability or, if profitability
      is attained, that ASPECT will sustain profitability on a quarterly or an annual
      basis.





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.





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.





Reliance
      on Government Subsidies for increased profitability




SMSE
      is
      eligible for certain federal and state subsidies to offset the cost of producing
      Biodiesel using soy oil. There is no assurance that SMSE will be able to
      continue to receive these subsidies, or that the programs that provide such
      subsidies will continue to exist throughout the life of SMS Envirofuels. The
      main federal subsidy program for which SMSE has applied for expired on September
      30, 2006. Congress has not renewed or extended this subsidy program, or enacted
      a replacement subsidy program.





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 in 2005 and 2006 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.




Page
          9




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.





Penny
      Stock Regulation




The
      Company’s common stock is subject to the provisions of Section 15(g) and Rule
      15g-9 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
      commonly referred to as the "penny stock" rule. Section 15(g) sets forth certain
      requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates
      the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act.
      The Commission generally defines penny stock to be any equity security that
      has
      a market price less than $5.00 per share, subject to certain exceptions. Rule
      3a51-1 provides that any equity security is considered to be penny stock unless
      that security is: registered and traded on a national securities exchange
      meeting specified criteria set by the Commission; authorized for quotation
      on
      The NASDAQ Stock Market; issued by a registered investment company; excluded
      from the definition on the basis of price (at least $5.00 per share) or the
      registrant's net tangible assets; or exempted from the definition by the
      Commission. Since our common stock is deemed to be "penny stocks", trading
      in
      the shares will be subject to additional sales practice requirements on
      broker-dealers who sell penny stocks to persons other than established customers
      and accredited investors.




ITEM
      7.
      FINANCIAL STATEMENTS





The
      information required by this Item is submitted as a separate section of this
      Form 10-KSB. See Item 13.




ITEM
              8.
            CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING ANDFINANCIAL
                DISCLOSURE





There
      have been no changes or disagreements with the accountants regarding accounting
      and financial disclosure.




ITEM
      8A.
      CONTROLS AND PROCEDURES





(a)
      Under
      the supervision and with the participation of our management, including our
      principal executive officer and principal financial officer, we conducted an
      evaluation of the design and operation of our disclosure controls and
      procedures, as such term is defined under Rules 13a-14(c) and 15d-14(c)
      promulgated under the Securities Exchange
      Act of 1934, as amended (the "Exchange Act"), within 90 days of the filing
      date
      of this report. Based on that evaluation, our principal executive officer and
      our principal financial officer concluded that the design and operation of
      our
      disclosure controls and procedures were effective in timely alerting them to
      material information required
      to be included in the Company's periodic reports filed with the SEC under the
      Securities Exchange Act of 1934, as amended. The design of any system of
      controls is based in part upon certain assumptions about the likelihood of
      future events, and there can be no assurance that any design will succeed in
      achieving its stated goals under
      all
      potential future conditions, regardless of how remote.





(b)
      In
      addition, there were no significant changes in our internal control over
      financial reporting identified in connection with the evaluation that occurred
      during the last fiscal year that have materially affected, or that are
      reasonably likely to materially affect, our internal control over financial
      reporting.




Page
          10





PARTIII





ITEM
      9.
      DIRECTORS AND EXECUTIVE OFFICERS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
      ACT





On
      July
      14, 2004, the Board of Directors of the Company voted to increase the number
      of
      directors from three to five. At December 31, 2004, the Directors included
      Bruce
      Culver, Clifford Hagler, Jim Karlak, Steve Goldberg and Jesse Whittenton. On
      February 8 th 2005,
      Steve Goldberg resigned. As of the filing of this report, Mr. Goldberg has
      not
      been replaced. The names of our directors and executive officers, their ages,
      and certain other information about them are set forth below:


Name
              
              Age
              
              Position
                  and TermClifford
                  A. Hagler
              
              54
              
              Director
                  - Since May 2003Bruce
                  Culver
              
              53
              
              Director
                  - Since May 2002Jesse
                  Whittenton
              
              52
              
              Director
                  - Since July 2004Jim
                  Karlak
              
              54
              
              President,
                  Chief Executive Officer and Director - Since July
                  2004Morris
                  Kunofsky
              
              55
              
              Chief
                  Financial Officer - Since October 2004Jenelle
                  Stehle
              
              42
              
              Secretary
                  and Treasurer - Since October 2004


Cliff
      Hagler has served on the Board of Directors of the Company since May 30, 2003.
      Mr. Hagler is the Co-founder, President and CEO of Aquilan, Inc. a proprietary
      software company in Austin, Texas. Mr. Hagler has over 25 years in the software
      and computer services industries with a primary focus in the life insurance
      and
      financial services sectors. Before joining Aquilan, Mr. Hagler served as Vice
      President & General Manager for US Operations at Cedar, Inc., a provider of
      complex data management solutions for the insurance industry. Prior to
      Cedar,
      Mr. Hagler served as Vice President of the Financial Services Division for
      Computer Sciences Corporation where he held responsibility for life insurance
      administration systems development and ongoing enhancements. Mr. Hagler is
      a
      frequent presenter at industry seminars and executive meetings and a regular
      contributor to leading industry publications.





Bruce
      Culver has been a member of the Board of Directors of Diamond C. Stables and
      Ranch since 2001. Mr. Culver is also presently the President of Speedway
      Erection Service Company, a position he has held since 1983. Mr. Culver has
      served on the Board of Directors of the Company since May 2002 and has served
      on
      the Board of Directors of System Builders Association, Erectors
      Division.




Jesse
      L.
      Whittenton graduated from Rice University in December of 1976 with a Bachelor
      of
      Commerce degree.
      Mr. Whittenton graduated from the University of Texas School of Law in December
      1979 and was admitted to
      the
      Texas Bar in 1980. From 1993 until March 2000, Mr. Whittenton was a partner
      of
      Walker, Bright & Whittenton, P.C. in Austin, Texas. Mr. Whittenton was one
      of three managing partners who supervised personnel, budget development and
      management, project development and objectives, and client development. Mr.
      Whittenton specialized in defending municipal and county officials primarily
      in
      law enforcement federal civil rights and employment law litigation in Texas,
      Indiana, Tennessee and Mississippi. From March 2000 until the present, Mr.
      Whittenton has been a managing partner of Whittenton & Hurst, L.L.P. in
      Austin, Texas.




Page
          11




Jim
      Karlak comes to the Company with over 20 years of finance, operations and senior
      executive experience, most recently as Chief Operating Officer of Applied
      Science Fiction. Mr. Karlak created and implemented operating and financial
      processes for this young start-up company and led internal operations. With
      an
      annual budget of $30M, 160 employees and as Board Secretary, he directed the
      company to the creation of sustainable outsourced manufacturing and service
      operations. Mr. Karlak successfully raised $13 million in bridge financing,
      resulting in a successful acquisition of the company by Eastman Kodak
      Corporation. Mr. Karlak began his career with Texas Instruments ("TI") and
      held
      a number of key financial positions at TI. Mr. Karlak left TI in 1985 and joined
      Shared Resource Exchange, Inc. as Chief Financial Officer. In 1991, Mr. Karlak
      joined Image Data Corporation ("IDC") as Vice President of Operations. Under
      his
      leadership, IDC was sold to E-Systems Corporation which merged with a second
      medical imaging company purchased earlier by E-Systems and an internal software
      group to form the new company E-Systems Medical Electronics ("EMED"). Karlak
      led
      EMED as President into the high-end hospital imaging network market, as well
      as
      military medical applications including systems aboard several aircraft carriers with
      one
      stationed in Antarctica. In 2000, Mr. Karlak, as CEO of DynaTouch Corp., moved
      the company to a higher level through the development and launch of a new
      medical product line to augment the company's existing leadership position
      as
      one of the largest providers of kiosk information systems to the federal
      government. Mr. Karlak is a graduate of the University of Texas at Austin,
      where
      he received a Bachelor of Arts in Economics, with honors. He received his
      Masters of Business Administration, also from the University of Texas at Austin,
      in 1978.





Morris
      Kunofsky most recent experience was with Computer Business Solutions, Inc.,
      a
      Microsoft Certified systems reseller and computer consulting company. Mr.
      Kunofsky was the Director of Consulting. As Director of consulting he has
      received Microsoft Navision Certifications in Distribution, Implementation,
      Programming, HR, Payroll and was a Product Specialist in Navision. Mr. Kunofsky
      was President and founder of Kay Sign Company, a billboard sign rental company
      in the Dallas, Texas area. Previously he was employed at Deloitte Touche a
      world
      wide audit company as Audit Manager. Mr. Kunofsky received his CPA certificate
      in 1980 and is a graduate of the University of North Texas where he received
      a
      Bachelor’s of Business Administration in 1978.





Jenelle
      Stehle has over 15 years of Accounting, Finance, Payroll, Human Resource and
      Management experience, in both publicly traded and privately held organizations.
      Prior to her employment with SMS and ASPECT, Ms. Stehle filled the Controller’s
      position for a $30m distribution company with domestic and international
      customers, manufactures in China and office locations in the US., Puerto Rico,
      Hong Kong and China. During her tenure, the company opened multiple locations,
      doubled revenue in three years and gained over 75 customers in Canada.
      Previously, Ms. Stehle was employed and held key management/finance positions
      in
      two of the largest real estate investment trusts in the United States, Archstone
      (formerly Security Capital) and Equity Residential-Southwest Region. Ms. Stehle
      is a graduate of the University of Texas at Austin, where she received a
      Bachelor’s of Business Administration in Accounting in 1988. She received her
      CPA certificate in 1998. She has received Microsoft Certification in the
      Navision Financial Series.





Board
      Committees, Meetings and Compensation





The
      Company's business affairs are managed by the Board. During the fiscal year
      ending December 31, 2006, the Board of Directors held 1 meeting at which time
      no
      director then in office attended fewer than 100% of the aggregate number of
      meetings of the Board of Directors. None of the Directors currently receive
      any
      compensation for
      their
      service on the Board. The Company does not currently have any standing
      committees. As of the date of this filing, the entire Board fulfills the
      functions of the Audit Committee. The Company does not have a nominating
      committee, and the Board believes such a committee is not necessary due to
      the
      small size of the Board and the absence to date of any director candidates
      recommended by shareholders. Currently, the entire Board participates in the
      consideration of director nominees. The Board of Directors does not have a
      formal policy
      with regard to the consideration of any director candidates recommended by
      stockholders, the minimum qualification of director candidates or the process
      for identifying and evaluating director nominees. To date, the Company has
      not
      received any director candidates recommended by its stockholders and
      consequently the Board of Directors has believed that it could appropriately
      address any such recommendations received without a formal policy.
      The Board has determined that none of the directors are "audit committee
      financial experts" as such term is defined in Item 401(e) of Regulation S-B.
      Due
      to the small size of the Company, the Board believes an audit committee
      financial expert is not necessary, but the Board may seek an audit committee
      financial expert for the Board
      in
      the future if the Company's needs change. Although the Company does not have
      a
      formal policy regarding attendance by members of the Board of Directors at
      annual meetings of stockholders, directors are encouraged to attend annual
      meetings.




Page
          12




Stockholder
      Communications with the Board of Directors





Stockholders
      may communicate with the full Board, or any individual directors, by sending
      such written communication to the following address:





Corporate
      Secretary


4703
      Shavano Oak, Suite 104


San
      Antonio, Texas 78249





Any
      written communications received by the Corporate Secretary will be forwarded
      to
      the appropriate directors.





Code
      of
      Ethics





The
      Company has not yet established a code of ethics comprising written standards
      that are reasonably designed to deter wrongdoing and to promote the behavior
      described in Item 406 of Regulation S-B promulgated by the Securities and
      Exchange Commission. The Board does not believe such a code is necessary at
      this
      stage in the Company's development.





Section
      16(a) Beneficial Ownership Reporting Compliance





Section
      16(a) of the Exchange Act requires the Company's directors, executive officers
      and persons who own more than 10% of the Company's Stock (collectively,
      "Reporting Persons") to file with the SEC initial reports of ownership
      and changes in ownership of the Company's Common Stock. Reporting Persons are
      required by SEC regulations to furnish the Company with copies of all Section
      16(a) reports they file. To the Company's knowledge, based solely on its review
      of the copies of such reports received or written representations from certain
      Reporting Persons that no other reports were required, the Company believes
      that
      during its fiscal year ended December 31, 2006, all Reporting Persons complied
      with all applicable filing requirements except as follows: United Manager’s
      Group, Inc. - one Form 4 and one Form 5 however these will be filed by March
      15,
      2006.




Page
          13




ITEM
      10.
      EXECUTIVE COMPENSATION





Summary
      of Cash and Certain Other Compensation





The
      following table provides certain summary information concerning the compensation
      earned by the Company's Executive Officers for services rendered in all
      capacities to the Company and its subsidiaries for the fiscal years ended
      December 31, 2006, and December 31, 2005. The following information includes
      the
      dollar value of base salaries, bonus awards, the number of stock options granted
      and certain other compensation, if any, whether
      paid or deferred. The listed individuals shall be hereinafter referred to as
      the
      "Named Officers."


SUMMARY
          COMPENSATION TABLE
  Annual
                  Compensation
              
              Long
                  Term CompensationAwards
              
              PayoutsRestricted
              
              SecuritiesUnderlyingStock
              
              Options/
              
              LTIP
              
              All
                  OtherYear
              
              Salary
              
              Bonus
              
              Awards
              
              SAR's
              
              Payouts
              
              CompensationName
                    and PrincipalPosition
              
              End
              
              ($)
              
              ($)
              
              ($)
              
              (#)
              
              ($)
              
              ($)James
                  KarlakCurrent
                  Chief Executive Officer,and
                  President, Current President
              
              
              12/31/05
              
              
              260,000
              
              
              5,000
              
              
              0
              
              
              0
              
              
              0
              
              
              0of
                  ASPECT and SMSE(1)
              
              
              12/31/06
              
              
              260,000
              
              
              -
              
              
              0
              
              
              0
              
              
              0
              
              
              0Morris
                  KunofskyCurrent
                  Chief Financial Officer,and
                  Current Chief Financial
              
              
              12/31/05
              
              
              126,000
              
              
              2,400
              
              
              0
              
              
              0
              
              
              0
              
              
              0Officer
                  of ASPECT(2)
              
              
              12/31/06
              
              
              126,000
              
              
              -
              
              
              0
              
              
              0
              
              
              0
              
              
              0Jenelle
                  StehleCurrent
                  Secretary/Treasurer(3)
              
              
              12/31/05
              
              
              80,800
              
              
              1,600
              
              
              0
              
              
              0
              
              
              0
              
              
              012/31/06
              
              
              85,200
              
              
              -
              
              
              0
              
              
              0
              
              
              0
              
              
              0




(1)
      Mr.
      Karlak became CEO and President of the Company in July 2004. He has served
      as
      CEO of ASPECT since February, 2004. He has served as President of SMSE since
      July 2005.





(2)
      Mr.
      Kunofsky became CFO of the Company in October 2004. He has served as CFO of
      ASPECT since March 200 **4.**





(3)
      Ms.
      Stehle became Secretary and Treasurer in October 2004.





The
      Company does not have any employment agreements with the individuals listed
      in
      the table above, or other executive officers of the Company.




Page
          14




ITEM
              11.
            SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                STOCKHOLDER MATTERS





There
      were 20,690,386 common shares outstanding as of the date of this filing. The
      following tabulates holdings of shares of SMS by each person who, subject to
      the
      above, as of December 31, 2006, holds of record or is known by management to
      own
      beneficially more than 5.0% of the common shares and, in addition, by all
      directors and officers of SMS individually and as a group. Except as indicated
      by footnotes to the following table, to the Company’s knowledge, the persons
      named in the table have sole voting and investment power with respect to all
      shares of stock beneficially owned by them.


Name
                  & Address
              
              
              
              PercentageTitle
                  of Class
              
              of
                  Beneficial Owner (1)
              
              Amount
                    of Shares Owned
              
              of
                  Class (2)Common
                  Stock
              
              
              United
                  Managers Group, Inc.
              
              
              14,928,644
              
              
              72.15
              %12001
                  NetworkBuilding
                  F, Suite 200San
                  Antonio, TX 78249Common
                  Stock
              
              
              American
                  Continental Management Inc. (3) c/o United Manager’s Group, Inc. 3027
                  Marina Bay Drive, Suite 105
              
              
              200,000
              
              
              0.97
              %League
                  City, TX 77573Common
                  Stock
              
              
              Bruce
                  Culver (4)
              
              
              200,000
              
              
              0.97
              %Common
                  Stock
              
              
              James
                  Karlak (4)
              
              
              0
              
              
              n/aCommon
                  Stock
              
              
              Morris
                  Kunofsky (4)
              
              
              0
              
              
              n/aCommon
                  Stock
              
              
              Jenelle
                  Stehle (4)
              
              
              0
              
              
              n/aCommon
                  Stock
              
              
              All
                  directors and executive officers as a group
                  (5 persons)
              
              
              200,000
              
              
              0.97
              %





(1)
      Unless otherwise indicated, the address for each of these individuals is c/o
      Systems Management Solutions, Inc., 4703 Shavano Oak, Suite 104, San Antonio,
      Tx
      78249





(2)
      The
“Percentage Beneficially Owned” is calculated by dividing the “Number of Shares
      Beneficially Owned” by the sum of the total outstanding shares of stock of the
      class listed in the Company.





(3)
      The
      shares held by American Continental Management Inc. are beneficially owned
      by
      United Manager’s Group





(4) Indicates
      shares beneficially owned by a director or executive officer of the
      Company.




Page
          15




ITEM
      12.
      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS





United
      Managers Group, Inc., the major shareholder of the Company, continues to fund
      substantial sums to the Company and its subsidiaries pursuant to the terms
      of
      two promissory notes; one to the Company and one to SMSE, the Company’s
      subsidiary. The notes bear interest at ten percent and are unsecured. In
      addition, United Manager’s Group advances money to ASPECT, the Company’s
      subsidiary on an as-needed basis. The advances are due on demand, bear no
      interest and have no collateral. Imputed interest expense at ten percent was
      added as a contribution to capital each year.





In
      March
      2005, United Manager’s Group agreed to convert $601,032 and $1,709,727 due at
      December 31, 2004, by the Company and ASPECT, respectively, into 23,103 shares
      of Series B Preferred Stock of the Company and to continue to make advances
      under the note promised by the Company and to ASPECT.





At
      December 31, 2006, the notes promised by the Company ($1,000,000) and SMSE
      ($2,500,000) were renewed and extended to February 28, 2008.





At
      December 31, 2006, the balance owed United Manager’s Group on the above
      instruments are:


The
                  Company
              
              $
              417,100SMS
                  Envirofuels, Inc.
              
              $
              1,815,700Aspect
                  Business Solutions, Inc.
              
              $
              1,825,700





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.
      Annual Rents equate to $72,000. Certain stockholders of the Company hold an
      interest in Texian Land and Cattle.




ITEM
      13.
      EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K





(a)
      The
      following documents are filed as part of this report:


Page
                  Number1.
              Financial
                  Statements:Report
                  of Independent Registered Public Accounting Firm
              
              F-1Consolidated
                  Balance Sheet
              
              F-2Consolidated
                  Statements of Operations
              
              F-3Consolidated
                  Statements of Stockholders' Deficit
              
              F-4Consolidated
                  Statements of Cash Flows
              
              F-6Notes
                  to Consolidated Financial Statements
              
              F-8Exhibits
                  included or incorporated herein: See Exhibit Index.





Page
          16




(b)
      Reports on Form 8-K:




1.
            On
                April 2, 2004, the Company filed a Current Report on Form 8-K announcing
                the bankruptcy filing of YCH Holdings, Inc., a subsidiary of the
                Company.





2.
            On
                August 20, 2004, the Company filed a Current Report on Form 8-K announcing
                the change of the Company's name to Systems Management Solutions,
                Inc.





3.
            On
                February 8, 2005, the Board of Directors of the Company voted to
                change
                its fiscal year end from June 30 to December 31. The Company last
                changed
                its fiscal year to correspond to the fiscal year of a subsidiary
                that has
                since discontinued operations.





4.
            On
                March 22, 2005, the Board of Directors of the Company voted to reduce
                the
                number of shares outstanding of the Company’s $0.0001 par value common
                stock by reverse split to exchange one (1) new share for each two
                and one
                half (2 1⁄2) old shares. Any fractional shares created by this reverse split
                were truncated to the nearest whole share and no cash was paid for
                any
                such fractional share.




5.
            On
                April 6, 2005, the Registrant established a wholly owned subsidiary
                named
                SMSN Merger Sub, Inc., a Texas corporation which such corporation
                then
                entered into an Agreement and Plan of Merger between itself, SMS
                Envirofuels, Inc., a Texas corporation, and the Registrant. Under
                the
                terms of such Plan of Merger, SMS Envirofuels, Inc. was merged into
                SMSN
                Merger Sub, Inc., the name of SMSN
                Merger Sub, Inc. was changed to SMS Envirofuels, Inc., and the shares
                of
                SMS Envirofuels, Inc. were exchanged for 1,444,444 shares of the
                $0.0001
                common stock of registrant. SMS Envirofuels, Inc. has developed a
                plant to
                produce bio-diesel from soybean oil and markets such bio-diesel to
                distributors and retailers. The Registrant plans to continue this
                business
                with the operating assets of SMS Envirofuels, Inc. and to expand
                the
                production and marketing of the bio-diesel product.





6.
            On
                August 19, the Company filed the results of the audit of the Years
                Ended
                December 31, 2003 and 2004 and the review of the Quarter Ended March
                31,
                2005 for SMS Envirofuels, Inc.





7.
            On
                February 20, 2006, the Company filedItem
                4.02 Non-Reliance on Previously Issued Financial Statements or a
                Related
                Audit Report or Completed Interim Reviewon
                Form 8-K, as a result of the restatement of the financial statements
                for
                the Year Ending December 31, 2002.




ITEM
      14.
      PRINCIPAL ACCOUNTANT FEES AND SERVICES





The
      following table presents fees for professional services rendered by Malone
&
Bailey, PC for the audit of the Company's annual consolidated financial
      statements for fiscal 2006 and 2005 and fees billed for other services rendered
      by Malone & Bailey, PC.


2006
              
              
              2005Audit
                  Fees
              
              $
              41,697
              
              $
              69,975Audit
                  related fees
              
              $
              0
              
              $
              0Tax
                  fees
              
              $
              7,113
              
              $
              6,150All
                  other fees
              
              $
              450
              
              $
              1,325Total
                  fees
              
              $
              49,260
              
              $
              77,450




The
      Board
      pre-approves all auditing and permitted non-audit services to be performed
      for
      the Company by its independent auditor, including the fees and terms of those
      services.




Page
          17




SIGNATURES





In
      accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized.




Dated:
                April 13, 2007SYSTEMS
                MANAGEMENT SOLUTIONS, INC.,
              a
                  Nevada corporationBy:
            /s/
              James KarlakJames
                Karlak, President and Chief Executive
                Officer


By:
            /s/
              Morris KunofskyMorris
                Kunofsky, Chief Financial Officer





POWER
      OF
      ATTORNEY





KNOW
      ALL
      PERSONS BY THESE PRESENTS, that each person whose signature appears below
      constitutes and appoints James Karlak, his/her attorney-in-fact, with the power
      of substitution, for him/her in any and all capacities, to sign any amendments
      to this Report on Form 10-K, and to file the same, with Exhibits thereto and
      other documents in connection therewith with the Securities and Exchange
      Commission, hereby ratifying and confirming all that said attorney-in-fact,
      or
      substitute or substitutes may do or cause to be done by virtue
      hereof.





Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the Registrant and in the
      capacities and on the dates indicated:


Signature
              
              Title
              
              Date/s/
                  James Karlak
              
              Chief
                  Executive Officer, President and
              
              April
                  13, 2007James
                  Karlak/s/
                  Clifford Hagler
              
              Director
              
              April
                  13, 2007Clifford
                  Hagler/s/
                  Bruce Culver
              
              Director
              
              April
                  13, 2007Bruce
                  Culver/s/
                  Jesse Whittenton
              
              Director
              
              April
                  13, 2007Jesse
                  Whittenton









EXHIBIT
      INDEX


Exhibit
                  No.
              
              Description3.4(1)
              
              Amended
                  and Restated Articles of Incorporation3.5(1)
              
              Amended
                  and Restated Bylaws2.1(4)
              
              Letter
                  of Intent received from Woodhill Group on behalf of Earth BioFuels,
                  Inc.
                  for the purchase of certain assets of SMS Envirofuels,
                  Inc.4.1(2)
              
              Certificate
                  of Designation of Rights and Preferences Relating to Series A Cumulative
                  Convertible Preferred Stock, dated February 16, 20044.2(2)
              
              Certificate
                  of Designation of Rights and Preferences Relating to Series A Cumulative
                  Convertible Preferred Stock, dated April 23, 200410.1(4)
              
              Promissory
                  Note between Systems Management Solutions, Inc. and United Managers
                  Group,
                  Inc., dated December 31, 200610.2(4)
              
              Promissory
                  Note between SMS Envirofuels, Inc. and United Managers Group, Inc.,
                  dated
                  December 31, 200610.3(4)
              
              Promissory
                  Note between Systems Management Solutions, Inc. and Jaime
                  Halegoua10.4(4)
              
              Promissory
                  Note between SMS Envirofuels, Inc. and Earth Biofuels,
                  Inc.21.1(4)
              
              Subsidiaries
                  of the Company24.1(3)
              
              Power
                  of Attorney (see signature page of this Annual Report on Form
                  10-KSB)31.1(4)
              
              Rule
                  13a-14(a)/15d-14(a) Certification of Principal Executive
                  Officer31.2(4)
              
              Rule
                  13a-14(a)/15d-14(a) Certification of Principal Financial
                  Officer32.1(4)
              
              Section
                  1350 Certification of CEO32.2(4)
              
              Section
                  1350 Certification of CFO99.1(2)
              
              Plaintiff's
                  Initial Petition for ARCOA, LLC v. American Continental Management,
                  LLC,
                  Supreme Holdings, Inc., Charles Pircher, RMS Groups, Inc. and Mike
                  Solis -
                  filed in the 11th Judicial District Court of Harris County, Texas
                  on June
                  17, 200499.2(2)
              
              Plaintiff's
                  Initial Petition for ARCOA, LLC v. American Continental Management,
                  LLC,
                  Supreme Holdings, Inc., Charles Pircher, RMS Groups, Inc. and Mike
                  Solis -
                  filed in the 190th Judicial District Court of Harris County, Texas
                  on June
                  17, 200499.3(2)
              
              Plaintiff's
                  Initial Petition for Crawford v. American Continental Management,
                  LLC,
                  Supreme Holdings, Inc., Charles Pircher, RMS Groups, Inc. and Mike
                  Solis -
                  filed in the 113th Judicial District Court of Harris County, Texas
                  on June
                  17, 200499.4(4)
              
              Plantiff’s
                  Initial Petition for Cargill Incorporated, v. SMS Envirofuels,
                  Inc.,
                  Meadow Springs, Inc. d/b/a Earth Biofuels, Inc. and Charles E Pircher.
                  -
                  filed in the 225th Judicial District Court of Bexar County, Texas
                  on
                  December 20, 2006




(1)
      Incorporated by reference, filed with the Company's Definitive Proxy Statement
      on June 29, 2004.




(2)
      Incorporated by reference, filed with the Company’s Form 10-KSB , on October 13,
      2004.




(3)
      Filed
      herewith in body.




(4)
      Filed
      herewith as separate attachment.









REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To
      the
      Board of Directors


Systems
      Management Solutions, Inc.


San
      Antonio, Texas





We
      have
      audited the accompanying consolidated balance sheet of Systems Management
      Solutions, Inc. (“SMS”) as of December 31, 2006 and the related consolidated
      statements of operations, stockholders’ deficit and cash flows for the years
      ended December 31, 2006 and 2005. These financial statements are the
      responsibility of SMS’ management. Our responsibility is to express an opinion
      on these financial statements based on our audits.





We
      conducted our audit in accordance with standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. An audit includes examining,
      on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements. An audit also includes assessing the accounting principles used
      and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audits provide a
      reasonable basis for our opinion.





In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the financial position of SMS as of December 31, 2006 and
      the
      results of its operations and its cash flows for the periods described in
      conformity with accounting principles generally accepted in the United States
      of
      America.





The
      accompanying financial statements have been prepared assuming that SMS will
      continue as a going concern. As discussed in Note 2 to the financial statements,
      SMS has suffered recurring losses from operations and has a negative working
      capital, which raises substantial doubt about its ability to continue as a
      going
      concern. Management’s plans regarding those matters are described in Note 2. The
      financial statements do not include any adjustments that might result from
      the
      outcome of this uncertainty.




MALONE
      & BAILEY, PC


www.malone-bailey.com


Houston,
      Texas





April
      13,
      2007




F-1


PART
                  1. FINANCIAL INFORMATIONITEM
                  1. CONSOLIDATED FINANCIAL STATEMENTSSYSTEMS
                  MANAGEMENT SOLUTIONS, INC.CONSOLIDATED
                  BALANCE SHEET




December
                  31,2006ASSETSCurrent
                  AssetsCash
              
              $
              33,077Accounts
                  receivable
              
              
              78,586Other
              
              
              12,686Total
                  Current Assets
              
              
              124,349Property
                  and equipment, net of accumulated depreciation of$
                  448,931
              
              
              7,202Assets
                  held for sale, net of accumulated depreciation of$
                  74,014
              
              
              574,619Deposits
              
              
              255,000Total
                  Assets
              
              $
              961,170LIABILIITES
                  AND STOCKHOLDERS' DEFICITCurrent
                  LiabilitiesAccounts
                  payable
              
              $
              438,705Accounts
                  payable - related parties
              
              
              81,000Accrued
                  interest and expense
              
              
              191,635Accrued
                  interest and expense - related parties
              
              
              517,036Litigation
                  settlement liability
              
              
              90,000Notes
                  payable - other
              
              
              850,000Notes
                  payable - shareholder
              
              
              4,058,477Total
                  Current liabilities
              
              
              6,226,853Long-Term
                  LiabilitiesLitigation
                  settlement liability
              
              
              292,500Total
                  Liabilities
              
              
              6,519,353Commitments
                  and ContigenciesStockholders'
                  DeficitPreferred
                  stock, $.0001 par value, 5,000,000 shares authorized, noshares
                  issued and outstanding
              
              
              -Common
                  stock, $.0001 par value, 100,000,000 sharesauthorized,
                  20,690,386 shares issued and outstanding
              
              
              2,069Additional
                  paid-in capital
              
              
              19,602,968Accumulated
                  deficit
              
              
              (25,163,220
              )Total
                  Stockholders' Deficit
              
              
              (5,558,183
              )Total
                  Liabilities and Stockholders' Deficit
              
              $
              961,170
  See
                  accompanying summary of accounting policies and notes to the financial
                  statements
 F-2




SYSTEMS
        MANAGEMENT SOLUTIONS, INC.
 CONSOLIDATED
        STATEMENTS OF OPERATIONS


Years
        Ended December 31, 2006 and December 31, 2005


2006
              
              
              2005Revenue
              
              $
              3,621,242
              
              $
              2,463,677Cost
                  of sales
              
              
              2,786,940
              
              
              2,136,225Gross
                  margin
              
              
              834,302
              
              
              327,452General
                  and administrative
              
              
              1,689,086
              
              
              2,925,026Depreciation
              
              
              61,741
              
              
              71,272Amortization
              
              
              35,500
              
              
              -Loss
                  on disposal of equipment
              
              
              28,932
              
              
              17,792Total
                  operating expenses
              
              
              1,815,259
              
              
              3,014,090Net
                  Operating Loss
              
              
              (980,957
              )
              
              (2,686,638
              )Interest
                  expense
              
              
              (461,031
              )
              
              (346,767
              )NET
                  LOSS
              
              $
              (1,441,988
              )
              $
              (3,033,405
              )Basic
                  and diluted loss per share
              
              $
              (0.07
              )
              $
              (0.17
              )Weighted
                  average shares outstanding
              
              
              20,686,139
              
              
              17,428,789


See
        accompanying summary of accounting policies and notes to the financial
        statements
  F-3


SYSTEMS
        MANAGEMENT SOLUTIONS, INC.
 CONSOLIDATED
        STATEMENTS OF STOCKHOLDER'S DEFICIT
 Year
        Ended December 31, 2006 and December 31, 2005





Preferred
                Stock
            
            Series
                A
              Preferred
                Stock
            
            Series
                B
              Preferred
                StockShares
            
            Amount
            
            Shares
            
            Amount
            
            Shares
            
            AmountBalances,December
                31, 2004
            
            
            -
            
            
            -
            
            
            55,271
            
            
            6
            
            
            -
            
            
            -Stock
                Dividend on Preferredshares
                Series A
            
            
            -
            
            
            -
            
            
            -
            
            
            1
            
            
            -
            
            
            -Conversion
                of debt forpreferred
                stock
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            23,103
            
            
            2Common
                shares issuedin
                exchange forpreferred
                sharesseries
                A & B
            
            
            -
            
            
            -
            
            
            (55,271
            )
            
            (7
            )
            
            (23,103
            )
            
            (2
            )Reclass
                to adjust parvalue
                of commonshares
                after 1:2.5reverse
                stock split
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Additional
                cash contributionby
                COO and CEO of Aspect
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Shares
                issued forpurchase
                of SMSEnvirofuels
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Imputed
                Interest
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Net
                Loss
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Balances,December
                31, 2005
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Shares
                issued for loanincentiveImputed
                InterestNet
                LossBalances,December
                31, 2006
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -





See
      accompanying summary of accounting policies and notes to the financial
      statements




F-4




SYSTEMS
        MANAGEMENT SOLUTIONS, INC.
 CONSOLIDATED
        STATEMENTS OF STOCKHOLDER'S DEFICIT
 Year
        Ended December 31, 2006 and December 31, 2005




Common
                Stock
            
            Additional
                Paid-in
            
            AccumulatedShares
            
            Amount
            
            Capital
            
            (Deficit)
            
            TotalBalances,December
                31, 2004
            
            
            6,094,542
            
            
            1,524
            
            
            16,487,981
            
            
            (20,177,527
            )
            
            (3,688,016
            )Stock
                Dividend on Preferredshares
                Series A
            
            
            -
            
            
            -
            
            
            510,300
            
            
            (510,300
            )
            
            -Conversion
                of debt forpreferred
                stock
            
            
            -
            
            
            -
            
            
            2,310,298
            
            
            -
            
            
            2,310,300Common
                shares issuedin
                exchange forpreferred
                sharesSeries
                A & B
            
            
            13,101,400
            
            
            1,310
            
            
            (1,302
            )
            
            -
            
            
            -Reclass
                to adjust parvalue
                of commonshares
                after 1:2.5reverse
                stock split
            
            
            -
            
            
            (915
            )
            
            915
            
            
            -
            
            
            -Additional
                cash contributionby
                COO and CEO of Aspect
            
            
            -
            
            
            -
            
            
            10,000
            
            
            -
            
            
            10,000Shares
                issued forpurchase
                of SMSEnvirofuels,
                Inc.
            
            
            1,444,444
            
            
            144
            
            
            (144
            )
            
            -
            
            
            -Imputed
                Interest
            
            
            -
            
            
            -
            
            
            111,373
            
            
            -
            
            
            111,373Net
                Loss
            
            
            -
            
            
            -
            
            
            
            
            
            (3,033,405
            )
            
            (3,033,405
            )Balances,December
                31, 2005
            
            
            20,640,386
            
            
            2,064
            
            
            19,429,420
            
            
            (23,721,232
            )
            
            (4,289,748
            )Shares
                issued for loanincentive
            
            
            50,000
            
            
            5
            
            
            5,495
            
            
            
            
            
            5,500Imputed
                Interest
            
            
            
            
            
            
            
            
            168,053
            
            
            
            
            
            168,053Net
                Loss
            
            
            
            
            
            
            
            
            
            
            
            (1,441,988
            )
            
            (1,441,988
            )Balances,December
                31, 2006
            
            
            20,690,386
            
            
            2,069
            
            
            19,602,968
            
            
            (25,163,220
            )
            
            (5,558,183
            )





See
      accompanying summary of accounting policies and notes to the financial
      statements




F-5


SYSTEMS
        MANAGEMENT SOLUTIONS, INC.
 CONSOLIDATED
        STATEMENTS OF CASH FLOWS
 Years
        Ended December 31, 2006 and 2005





2006
            
            2005Cash
                Flows From Operating ActivitiesNet
                loss
            
            
            (1,441,988
            )
            $
            (3,033,405
            )Adjustments
                to reconcile net loss to net cash used inoperating
                activities:Imputed
                Interest
            
            
            168,052
            
            
            111,373Depreciation
            
            
            61,741
            
            
            71,272Amortization
            
            
            35,500
            
            
            -Loss
                on disposal of equipment
            
            
            28,932
            
            
            67,792Changes
                in:Accounts
                receivable
            
            
            18,636
            
            
            (92,107
            )Accounts
                receivable - related parties
            
            
            33,389
            
            
            (17,904
            )Inventory
            
            
            81,687
            
            
            (59,665
            )Other
                current assets
            
            
            (25,596
            )
            
            (1,772
            )Accounts
                payable
            
            
            141,960
            
            
            228,443Accounts
                payable - related parties
            
            
            27,000
            
            
            (2,000
            )Accounts
                payable - settlement
            
            
            (87,500
            )
            
            470,000Accrued
                expenses
            
            
            (184,350
            )
            
            129,791Accrued
                expenses - related parties
            
            
            164,832
            
            
            197,719Net
                Cash Used in Operating Activities
            
            
            (977,705
            )
            
            (1,930,463
            )Cash
                Flows From Investing ActivitiesPurchase
                of fixed assets
            
            
            (269,435
            )
            
            (274,956
            )Deposit
                on equipment
            
            
            (255,000
            )
            
            -Proceeds
                from sale of equipment
            
            
            19,500Net
                Cash Used in Investing Activities
            
            
            (504,935
            )
            
            (274,956
            )


See
        accompanying summary of accounting policies and notes to the financial
        statements
  F-6




SYSTEMS
        MANAGEMENT SOLUTIONS, INC.
 CONSOLIDATED
        STATEMENTS OF CASH FLOWS
 Years
        Ended December 31, 2006 and 2005 (continued)




2006
            
            2005Cash
                Flows From Financing ActivitiesProceeds
                from shareholder note payable
            
            
            567,249
            
            
            2,288,740Proceeds
                from other note payable
            
            
            850,000
            
            
            -Contributions
                from related parties
            
            
            -
            
            
            10,000Net
                Cash Provided by Financing Activities
            
            
            1,417,249
            
            
            2,298,740Net
                change in cash
            
            
            (65,391
            )
            
            93,321Cash
                at beginning of period
            
            
            98,468
            
            
            5,147Cash
                at end of period
            
            $
            33,077
            
            $
            98,468Supplemental
                disclosures:Income
                Tax Paid
            
            $
            -
            
            $
            -Interest
                Paid
            
            
            9,775
            
            
            18,409Non-cash
                operating and financing activities:Common
                stock issued for conversion of note payable andaccrued
                interest to equity
            
            $
            -
            
            $
            2,310,304Preferred
                stock dividend
            
            
            -
            
            
            510,300Offset
                of related party receivable with note payable dueto
                shareholder
            
            
            37,469
            
            
            75,232Offset
                of related party payable with note payable dueto
                shareholder
            
            
            41,128Conversion
                of preferred stock to common stock
            
            
            -
            
            
            1,310Stock
                issued for subsidiary
            
            
            -
            
            
            144Common
                stock issued as loan discount for note payable
            
            
            5,500
            
            
            -




See
        accompanying summary of accounting policies and notes to the financial
        statements
  F-7




SYSTEMS
      MANAGEMENT SOLUTIONS, INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


(audited)





NOTE
      1 -
      SUMMARY OF ACCOUNTING POLICIES





Supreme
      Hospitality ("Supreme"), was incorporated in Nevada on November 10, 1997. On
      September 8, 2002, Supreme changed its total authorized common stock and
      preferred stock to 100,000,000 and 5,000,000, respectively, both with par values
      of $.0001. On November 6, 2002, Supreme changed its name from Supreme
      Hospitality, Inc. to Supreme Holdings, Inc. ("SUHO"). On July 14, 2004, the
      name
      was changed from Supreme Holdings, Inc. to Systems Management Solutions,
      Inc.("SMS").





SMS
      acquired 100% of SMS Envirofuels, Inc. ("SMSE"), on April 6, 2005 (see Note
      10).
      SMSE has developed a plant to produce bio-diesel (a biodegradable alternative
      fuel) from soybean oil. The SMSE plant has the capacity to produce up to
      6,000,000 gallons of bio-diesel per year. The Company operates the bio-diesel
      plant through SMS Envirofuels, Inc. its wholly owned subsidiary as a part of
      its
      Environmental Solutions Division. This division is a compliment to the Company’s
      Business Solutions Division, which includes its wholly owned subsidiary, Aspect
      Business Systems, Inc.





Cash
      Equivalents. Highly
      liquid investments with original maturities of three months or less are
      considered cash equivalents. There were no cash equivalents as of December
      31,
      2006.





Revenue
      Recognition. ASPECT
      recognizes revenue from sales of hardware and software when the earning process
      is complete and the risks and rewards of ownership have transferred to the
      customer. Service revenues are recognized as services are provided. SMSE
      recognizes sales at point of delivery, which is FOB Poteet, Texas.





Allowance
      for Doubtful Accounts. SMS
      analyzes current accounts receivable for an allowance for doubtful accounts
      based on historical bad debt, customer credit-worthiness, the current business
      environment and historical experience with the customer. The allowance includes
      specific reserves for accounts where collection is deemed to be no longer
      probable. There is currently no allowance for doubtful accounts.





Inventory. SMSE is
      the only entity presented herewith that carries Inventory. Inventories are
      valued at the lower of cost or market using the First In First Out (FIFO)
      method. Raw Materials are procured and processed flowing from storage into
      Work
      in Process and then into the Finished Goods. The entire process takes
      approximately 12-13 hours. Finished Goods are produced in approximately 72
      hours, therefore the need for estimated inventory valuation allowances for
      excess, slow moving or obsolete inventory is not necessary.





Long-lived
      Assets. Property
      and equipment are stated on the basis of historical cost less accumulated
      depreciation. Depreciation is provided using the straight-line method over
      the
      estimated useful lives of the assets. Major renewals and improvements are
      capitalized, while minor replacements, maintenance, and repairs are charged
      to
      current operations.





Income
      Taxes. Income
      tax expense is based on reported earnings before income taxes. Deferred income
      taxes reflect the impact of temporary differences between assets and liabilities
      recognized for financial reporting purposes and such amounts recognized for
      tax
      purposes, and are measured by applying enacted tax rates in effect in years
      in
      which the differences are expected to reverse. During the periods presented,
      the
      Company has not been required to pay federal income taxes.





Interest. Interest
      expense is based on the varying instruments and their stated or imputed rates
      of
      interest. Interest paid was $9,775 and $18,409 for the years ended December
      31,
      2006 and December 31, 2005 respectively. In 2005, conversions of note payables
      and the interest accrued there upon had been converted to capital. As part
      of
      this conversion, $99,282 of interest accrued had been converted to capital
      for
      the year ended December 31, 2005.





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 during
      2006
      or 2005.




F-8




Use
      of
      Estimates in Financial Statement Preparation. The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities, the disclosure of contingent assets and liabilities at the date
      of
      the financial statements, and the reported amounts of revenues and expenses
      during the reporting period. Actual results could differ from those
      estimates.





Stock
      Options and Warrants. In
      December 2004, the Financial Accounting Standards Board ("FASB") issued
      Statement of Financial Accounting Standards ("SFAS") No. 123 (revised),
      "Share-Based Payment" ("SFAS 123(R)"). SFAS 123(R) eliminates the alternative
      to
      use the intrinsic value method of accounting, which generally resulted in no
      compensation expense recorded in the financial statements related to the
      issuance of equity awards to employees. SFAS 123(R) requires that the cost
      resulting from all share based payment transactions be recognized in the
      financial statements. SFAS 123(R) establishes fair value as the measurement
      objective in accounting for share based payment arrangements and requires all
      companies to apply a fair value based measurement method in accounting for
      generally all share based payment transactions with employees





Principles
      of consolidation. The
      consolidated financial statements include the accounts of SMS and its
      subsidiaries. All significant inter-company transactions have been
      eliminated.





Recently
      Issued Accounting Pronouncements .
      In June
      2006, the FASB issued FASB Interpretation No. 48, “Accounting for
      Uncertainty in Income Taxes, an interpretation of FASB Statement 109” (“FIN
      48”), which clarifies the accounting for uncertainty in income tax positions.
      This interpretation prescribes that the Company recognize in its financial
      statements the impact of a tax position that is more likely than not to be
      sustained upon examination based upon the technical merits of the position,
      including resolution of any appeals. The interpretation provides guidance on
      derecognition, classification, interest and penalties, accounting in interim
      periods, disclosure and transition. The provisions of FIN 48 are effective
      for
      fiscal years beginning after December 15, 2006. The Company is currently
      evaluating the impact of adopting FIN 48 on its consolidated financial
      statements.





In
      September 2006, the FASB issued FASB Statement 157 “Fair Value Measurements”
(“SFAS No. 157”) which defines and measures fair value and expands
      disclosures about fair value measurements. The statement emphasizes that fair
      value is a market-based measurement and not an entity-specific measurement.
      The
      provisions of SFAS No. 157 are effective for fiscal years beginning after
      November 15, 2007. The Company is currently evaluating the impact of
      adopting SFAS No. 157 on its consolidated financial statements.





In
      February 2007, the FASB issued SFAS No. 159, *The
      Fair Value Option for Financial Assets and Financial
      Liabilities* ,
      which
      permits entities to choose to measure many financial instruments and certain
      other items at fair value.  The objective is to improve financial reporting
      by providing entities with the opportunity to mitigate volatility in reported
      earnings caused by measuring related assets and liabilities differently without
      having to apply complex hedge accounting provisions.  SFAS No. 159 applies
      to all entities and is effective for fiscal years beginning after November
      15,
      2007.  The Company is currently determining the impact, if any, that SFAS
      No. 159 will have on its financial statements.




NOTE
      2 -
      GOING CONCERN





SMS
      incurred a net loss of $1,441,988 for the twelve months ended December 31,
      2006
      and has a working capital deficit of $6,102,504 as of December 31, 2006. These
      conditions create an uncertainty as to SMS’ ability to continue as a going
      concern. Management is trying to raise additional capital through sales of
      common stock as well as seeking financing from third parties. The financial
      statements do not include any adjustments that might be necessary if SMS is
      unable to continue as a going concern.




F-9




NOTE
      3 -
      INVENTORY





In
      October 2006, SMSE entered into a tolling arrangement in which the customer
      provides the raw materials and SMSE converts to Biodiesel. The customer is
      invoiced only for the act of conversion. At December 31, 2006, SMSE had no
      ownership rights to the inventory located on its premises and therefore recorded
      no inventory value.




NOTE
      4 -
      PROPERTY & EQUIPMENT


DepreciationLivesComputer
                  and other electronics
              
              
              3
              
              $
              245,991Furniture,
                  office equipment and fixtures
              
              
              5
              
              
              210,142$
              456,133Less:
                  accumulated depreciation
              
              
              
              
              
              (448,931
              )$
              7,202




NOTE
      5 -
      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 subsidiary’s, 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 the
      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 with 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 December 31, 2006 of $574,619
      with
      no corresponding liabilities. Based on the LOI referenced above and
      communications with new interested purchasers, the Company believes that the
      fair value of this facility’s assets exceeds its net book value.




F-10




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. As incentive
      to
      make this loan, the lender was issued 50,000 shares of SMS’ common stock. The
      interest is 10% and the note matured on August 1, 2006. Interest on unpaid
      balance an interest is 18%. SMS is in default on this note. In February of
      2007,
      the Company has negotiated with the lender for the transfer of rights for the
      deposit place on the equipment for a reduction of this note. However, there
      remains a default balance due and the Company cannot assure a resolution will
      be
      reached to the lender’s satisfaction.





On
      October 5, 2006, SMSE received a letter of intent (“LOI”), from an independent
      party, for the purchase of assets associated with its production facility in
      Poteet, Texas (refer to “Recent Developments” in Management Discussion of
      Operations above for details). The initial terms of the LOI enabled SMSE to
      sign
      a promissory note with the intended purchaser for a line of credit not to exceed
      $788,000. The expiration of this note was February 2 nd ,
      2007.
      As of the date of this filing, the terms of the LOI have not been met by the
      purchaser therefore the purchase did not take place. The balance on the line
      of
      credit at December 31, 2006 is $350,000.




NOTE
      7-
      NOTES PAYABLE TO SHAREHOLDER





On
      April
      15, 2003, SMS signed a one-year promissory note 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. The note bears 10 percent interest, is payable on demand and
      it
      has no collateral. As of December 31, 2006, the principal balance was $417,077
      and accrued interest was $66,065.





On
      February 24, 2003, SMSE signed a one-year promissory note 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. The line of
      credit bears 10 percent interest, is payable on demand and it has no collateral.
      As of December 31, 2006, the principal balance was $1,815,654 and accrued
      interest was $450,971.





The
      majority stockholder of SMS also advances money to ASPECT on an as-needed basis.
      The advances are due on demand, bear no interest and have no collateral. Imputed
      interest expense at 10% was added as a contribution to capital each year. For
      the years ending December 31, 2006 and 2005, imputed interest was $168,052
      and
      $111,373, respectively. As of December 31, 2006, the balance of these advances
      totaled $1,825,747.





Total
      principal amounts due at December 31, 2006 are $4,058,477.




NOTE
      8 -
      INCOME TAXES





The
      tax
      effects of temporary differences that give rise to significant portions of
      the
      deferred tax assets and deferred tax liabilities at December 31, 2006 as
      follows:


2006Deferred
                  tax assets:Net
                  operating loss carry forward
              
              $
              3,887,653Less:
                  valuation allowance
              
              
              (3,887,653
              )Net
                  current deferred tax assets
              
              $
              -




F-11




NOTE
      9 -
      COMMITMENTS AND CONTINGENCIES





YCO
      Holdings, Inc., a dissolved subsidiary of the Company, was a party to an office
      space operating lease agreement with an unrelated party for a term expiring
      on
      January 31, 2007. Although this contract was subject to the bankruptcy filing,
      t he
      lawsuit was dismissed in February, 2006 pursuant to a Comprehensive Settlement
      Agreement which required the Company to make payments 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. At
      December 31, 2006, the remaining balance is $382,500.


12
                  Months Ending
              
              Settlement
                Payments
                  DueDecember
                  31, 2006
              
              $
              87,500December
                  31, 2007
              
              
              90,000December
                  31, 2008
              
              
              90,000December
                  31, 2009
              
              
              90,000December
                  31, 2010
              
              
              90,000December
                  31, 2011
              
              
              22,500$
              470,000




ASPECT
      and SMSE currently lease the space they occupy. In December 2006, ASPECT
      negotiated an early termination of its existing lease. The termination date
      is
      March 15, 2007. A new office will be occupied by ASPECT and a sublease has
      been
      entered into effective March 15, 2007 and with an end date of August 31, 2007.
      The new rent amount will be $2,300. The SMSE lease payments of $6,000 per month
      are made to a related party (see Note 15). Below are the combined contractual
      minimum annual lease payments for the next 5 years and thereafter


12
                  Months Ending
              
              Lease
                Payments
                  DueDecember
                  31, 2007
              
              $
              145,167December
                  31, 2008
              
              
              72,000December
                  31, 2009
              
              
              72,000December
                  31, 2010
              
              
              72,000December
                  31, 2011
              
              
              72,000Thereafter
              
              
              165,000$
              598,167




In
      July
      2004, three lawsuits were brought against SMS for damages in connection with
      loans made and services performed for YCO Holdings, Inc. The lawsuits were
      settled for $240,000 with weekly payments which began in November 2004 and
      ended
      in April 2005.





In
      January 2006, the Internal Revenue placed a tax lien on the assets of ASPECT,
      one of the Company’s subsidiaries. The principal balance due of $106,000 is
      related to the payroll taxes due for second and third quarters of 2005. ASPECT
      requested a collection due process hearing and was able to secure an installment
      plan with the Internal Revenue Service. ASPECT has recognized $41,106 in 2006
      and 2005 for accrued interest At December 31, 2006, the remaining amount due
      the
      Internal Revenue for both principal and interest was $31,948. On March 26,
      2007
      it was confirmed that the final payment on this installment plan was applied.
      The Company expects the release of the lien to occur within the next 30
      days.




F-12




In
      December 2006, Cargill Incorporated (“Cargill”) brought a lawsuit against SMS
      Envirofuels in connection with the nonpayment of soy oil shipped by Cargill
      to
      SMSE’s production facility in Poteet, Texas. The liability due Cargill at
      December 31, 2006 is $358,387 and is recorded as a trade payable in the
      financials. At the time of this filing, SMSE is unaware of any other damages
      that Cargill may be seeking in addition to the payment for goods.




NOTE
      10 -
      PURCHASE OF SMS ENVIROFUELS, INC.





On
      April
      6, 2005, SMS acquired all of the outstanding stock of SMS Envirofuels, Inc.
      in
      exchange for 1,444,444 shares of its common stock. The acquisition was accounted
      for under the pooling method due to the fact that a majority
      shareholder of SMS Envirofuels is also a majority shareholder of SMS. All of
      the
      assets, liabilities, profit and loss of SMS Envirofuels are combined with SMS
      as
      if the companies have been consolidated from their inception.




NOTE
      11 -
      EQUITY





On
      March
      18, 2005, SMS authorized 50,000 shares of Series B Cumulative Convertible
      Preferred Stock (“Series A Stock”) with an aggregate face value of $5,000,000
      ($100 per share face value). Each share is convertible, at the option of the
      holder, into shares of Common Stock. In the event of conversion, the number
      of
      shares of Common Stock to be issued on account of each share of Series B Stock
      shall be determined by dividing the number of shares plus the amount of any
      accrued unpaid dividends thereon by the fixed rate of $.90, (the same as the
      price quoted on the NASDAQ:BB at March 18, 2005). SMS may, at its option, at
      any
      time commencing two years after the initial date of issuance of the Series
      B
      Stock, redeem all or any portion of the outstanding shares of Series B Stock.
      The holders of record of the Series B Stock shall be entitled to receive
      cumulative dividends at a rate of ten percent
      per annum on the face value. Dividends that have not been redeemed or converted
      shall be payable quarterly in arrears when and as declared by the Board. Each
      share of Series B Stock shall be entitled to one vote for each share of Common
      Stock into which the Series B Stock is convertible.





During
      March 2005, 23,103 shares of Series B Cumulative Convertible Preferred Stock
      were issued in exchange for $2,310,300 of debt from related
      parties.





On
      March
      22, 2005, a majority shareholder converted all of the outstanding Series A
      and
      Series B Cumulative Preferred Stock into 13,101,400 shares of the Company’s
      common stock in accordance with the provisions of the Certificate Designation
      of
      Rights and Preferences for each such Series.





On
      March
      22, 2005, SMS authorized a reverse split of the Company’s common stock by an
      exchange of one (1) new share for each two and one half (2.5) existing shares.
      Any fractional shares created by this split shall be truncated to the nearest
      whole share so that no cash will be paid for any such fractional shares. This
      effectively reduced the number of common shares outstanding to 19,195,942.
      All
      references to common stock in these financials reflect the effect of the reverse
      split.





On
      February 1, 2006, SMS issued 50,000 shares of common stock to a lender as an
      incentive to make provide a loan to the Company (see Note 6).




NOTE
      12 -
      STOCK OPTIONS & WARRANTS FOR ASPECT





All
      outstanding options and warrants of Aspect were cancelled as part of the
      acquisition by SMS.




F-13




NOTE
      13 -
      OPERATING SEGMENTS AND RELATED INFORMATION


Software
                  Sales,
                Programming,
                  Data Capturing & Storage
              
              Alternative
                  Fuels
              
              All
                  Other
              
              Total12
                  Month Ended December 31, 2006Net
                  Sales
              
              $
              346,241
              
              $
              3,275,001
              
              $
              -
              
              $
              3,621,242Profit
                  from Operations
              
              
              (466,076
              )
              
              (53,081
              )
              
              (381,800
              )
              
              (900,957
              )Identifiable
                  assets
              
              
              7,202
              
              
              574,619
              
              
              -
              
              
              581,821Capital
                  Expenditures
              
              
              1,975
              
              
              267,460
              
              
              255,000
              
              
              524,435Depreciation
              
              
              9,790
              
              
              51,950
              
              
              -
              
              
              61,74112
                  Month Ended December 31, 2005Net
                  Sales
              
              $
              234,753
              
              $
              2,228,924
              
              $
              -
              
              $
              2,463,677Profit
                  from Operations
              
              
              (1,672,908
              )
              
              (408,482
              )
              
              (605,248
              )
              
              (2,686,638
              )Identifiable
                  assets
              
              
              15,017
              
              
              407,542
              
              
              -
              
              
              422,559Capital
                  Expenditures
              
              
              50,950
              
              
              224,006
              
              
              -
              
              
              274,956Depreciation
              
              
              44,283
              
              
              26,989
              
              
              -
              
              
              71,272





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 plus the payroll
      of the Company’s President and Controller under the corporate segment labeled
“All Other”.





ASPECT’s
      revenues are generated from software sales, programming, and data capturing
      and
      storage. ASPECT operates only in the United States. Prior to 2005, ASPECT’s main
      product was an internet-based, biometric time and attendance product using
      fingerprints to verify employee identity. In 2005, ASPECT expanded its services
      and began to concentrate on reselling, implementing and providing consulting
      services for Microsoft business products. For 2006, these new services provide
      99% of this segments revenue.





SMSE’s
      revenues are 100% generated from the sale of alternative fuels. SMSE has
      concentrated on the production of a high quality and low cost biodiesel for
      fuel
      distributors, jobbers and state and local governmental fleets. Biodiesel is
      a
      domestic renewable fuel for use in diesel engines that is derived from vegetable
      oils, such as soybean oil. All of the revenue generated in 2006 and 2005 was
      from sales to Texas based customers.




NOTE
      14 -
      MAJOR CUSTOMERS AND SUPPLIERS





It
      is in
      the Company’s subsidiaries that identifiable major customers and suppliers
      exist. Since its inception, SMSE has had one major customer that accounted
      for
      91% and 88% of its revenue for 2006 and 2005, respectively. For SMSE there
      is
      one major supplier of raw material that accounted for 90% of its purchases
      of
      raw material for both years. The production of biodiesel requires that its
      main
      input of raw material be the vegetable oil being used to convert to fuel.
      ASPECT’s customer base is varied and changing however, both in 2006 and 2005,
      about 44% of the revenue was the result of implementations or upgrade projects
      for a limited number of new and existing customers. This is the nature of the
      services provided by ASPECT and can be expected to continue. ASPECT has no
      major
      suppliers as 90% of the services sold are provided by in house
      staff.




F-14




NOTE
      15 -
      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. (see Note 10)





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.




The
      Company, along with the administrative personnel of ASPECT and SMSE, will
      sublease new office space on March 16, 2007. This space is approximately 1,500
      square feet, with an average monthly rent of $2,300. The Company and the
      original bound tenant share a common owner/shareholder.




NOTE
      17 -
      SUBSEQUENT EVENTS





On
      February 8, 2007, an agreement to transfer deposit rights and partial release
      of
      promissory note was signed by the Company and note holder Jaime Halegoua. 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 (see Note 6). In addition, the Company has the right to further
      release of only $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.




F-15