**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**Form
      10-KSB**





**ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934**




**For
      the fiscal year ended December 31, 2007**





**TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934**




**For
      the transition period from ________to _________**





Commission
      File Number 001-16173




**Systems
      Management Solutions, Inc.**


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





**Nevada**
            **88-0460457**(State
                or other jurisdiction of
              incorporation
                or organization)
            (I.R.S.
                Employer
              Identification
                No.)**4703
                Shavano Oak, Suite 104****San
                Antonio, Texas**
            **78249**(Address
                of principal
              executive
                offices)
            (Zip
                Code)Registrant's
                telephone number, including area code: (210)
                541-9100




---

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





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





Title
            
            Name
                of each exchange on which registeredCommon
                stock, $.0001 par value
            
            NASDAQ
                OTC





Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or 15(d) of the Exchange Act.


Yes o No
      þ





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months
      (or for such shorter period that the registrant was required to file such
      reports), and (2) has been subject to such filing requirements for the past
      90
      days.


Yes
þ  No o





Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-B is not contained herein, and will not 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.


Yes o No þ





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


Yes o No þ





State
      issuer’s revenues for its most recent fiscal year: $480,463





The
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates of the registrant, based on the average of the bid and ask prices
      on December 31, 2007, as reported by the Over the Counter Bulletin Board
      was approximately $230,470. Shares of common stock held by each officer and
      director and by each person who owns 5% **** or
      more
      of the outstanding Common Stock have been excluded in that such persons may
      be
      deemed to be affiliates. This determination of affiliate status is not
      necessarily a conclusive determination for other purposes.





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





Documents
      Incorporated by Reference: None













Systems
      Management Solutions, Inc.


TABLE
      OF
      CONTENTS


PagePART
                  I
              
              
              
              1Item
                  1
              
              Description
                  of Business
              
              1Item
                  2
              
              Description
                  of Properties
              
              3Item
                  3
              
              Legal
                  Proceedings
              
              3Item
                  4
              
              Submission
                  of Matters to a Vote of Security Holders
              
              4PART
                  II
              
              
              
              5Item
                  5
              
              Market
                  for Common Equity, Related Stockholder Matters and
                  Small Business Issuer Purchases of Equity
                  Securities
              
              5Item
                  6
              
              Management's
                  Discussion and Analysis or Plan of Operation
              
              7Item
                  7
              
              Financial
                  Statements
              
              11Item
                  8
              
              Changes
                  In and Disagreements with Accountants on Accounting and
                  Financial Disclosure
              
              12Item
                  8A
              
              Controls
                  and Procedures
              
              12Item
                  8B
              
              Other
                  Information
              
              13PART
                  III
              
              
              
              14Item
                  9
              
              Directors
                  and Executive Officers of the Company
              
              14Item
                  10
              
              Executive
                  Compensation
              
              15Item
                  11
              
              Security
                  Ownership of Certain Beneficial Owners and Management and
                  Related Stockholder Matters
              
              16Item
                  12
              
              Certain
                  Relationships and Related Transactions
              
              16Item
                  13
              
              Exhibits
              
              17Item
                  14
              
              Principal
                  Accountant Fees and Services
              
              18









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 as of December 31, 2007





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 2007, 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





Page
          1





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.





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 outsourcing 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 southwest 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.




Page
          2





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. As of December 31, 2007 the Company’s SMSE biodiesel production
      facility is shuttered and considered in the financials statements attached
      hereto as “Assets Held for Sale.”





**ITEM
      2 - PROPERTIES**





The
      Company ’s offices are located at 4703 Shavano Oak, Suite 104, San Antonio,
      Texas 78249. This rental space is approximately 1,500 square feet, the average
      monthly rent is $2,300 and is sub-leased on a month to month basis. The Company
      and the original bound tenant share a common 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 shareholder.





**ITEM
      3 - LEGAL PROCEEDINGS**





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. The Company is currently in default under the terms of the settlement
      agreement.As
      of
      December 31, 2007 the liability to WKB was approximately
      $307,500.





Page
          3


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





In
      June
      of 2007, Earthbiofuels, Inc (“EBOF”), posted in the Atascosa County Public Deed
      Records, a Notice of Substitute Trustee’s Foreclosure Sale on the property
      located at 8275 FM 476 West, Poteet, Texas in effort to collect on the
      promissory note made by SMS Envirofuels, Inc. (“SMSE”) as part of the agreement
      entered into in October 2006 (see Note 5 of the accompanying financial
      statements). SMSE is currently in default on this promissory note. The
      promissory note was secured by this property which is owned by Texian Land
      and
      Cattle (“Texian”), a related party to the Company, and leased to SMSE. In July
      of 2007 Texian filed for Chapter 11 bankruptcy protection (see Note 4 of the
      accompanying financial statements).





**ITEM
      4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**





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




Page
          4


PART
      II





**ITEM
      5 - MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND SMALL BUSINESS
      ISSUER PURCHASES OF EQUITY SECURITIES**





**Market
      Information**




Our
      common stock began
      trading on the "OTC Bulletin Board" of the National Association of Securities
      Dealers, Inc. ("NASD") on February 1, 2002 under the symbol “SUHO.” Upon the
      change of the corporate name to Systems Management Solutions, Inc. our symbol
      was changed to “SSMG.”
      The following table sets forth, for the respective periods indicated, the prices
      of the common stock in the over-the-counter market, as reported and summarized
      by the OTC Bulletin Board. Such prices are based on inter-dealer bid and asked
      prices, without markup, markdown, commissions, or adjustments and may not
      represent actual transactions.





High
            
            LowFiscal
                Year 2007First
                Quarter
            
            $
            0.30
            
            $
            0.18Second
                Quarter
            
            $
            0.23
            
            $
            0.12Third
                Quarter
            
            $
            0.30
            
            $
            0.07Fourth
                Quarter
            
            $
            0.10
            
            $
            0.04Fiscal
                Year 2006First
                Quarter
            
            $
            0.50
            
            $
            0.10Second
                Quarter
            
            $
            0.85
            
            $
            0.28Third
                Quarter
            
            $
            0.50
            
            $
            0.20Fourth
                Quarter
            
            $
            0.20
            
            $
            0.06Fiscal
                Year 2005First
                Quarter
            
            $
            2.25
            
            $
            0.28Second
                Quarter
            
            $
            1.10
            
            $
            0.31Third
                Quarter
            
            $
            0.30
            
            $
            0.15Fourth
                Quarter
            
            $
            0.30
            
            $
            0.20





**Common
      Stock**




The
      closing price of our common stock on December 31, 2007, as quoted by the NASD’s
      OTC Bulletin Board was $.04.





**Record
      Holders**




As
      of
      April 30, 2008 there were approximately 462 holders of record of our common
      stock.





**Dividends
      on Common Stock**




Since
      inception, no dividends have been paid on our common stock. We intend to retain
      any earnings for use in our business activities, so it is not expected that
      any
      dividends on our common stock will be declared and paid in the foreseeable
      future.





Any
      future dividends will be at the discretion of the Board of Directors, after
      taking into account various factors, including among others, operations, current
      and anticipated cash needs and expansion plans, the income tax laws then in
      effect, the requirements of Nevada law, and any restrictions that may be imposed
      by our future credit arrangements.




Page
          5




**Preferred
      Stock**




Our
      authorized preferred stock consists of 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 no shares
      of preferred stock outstanding. The Company’s preferred stock ranks senior to
      all other equity securities, including common stock. Dividends, when, as and
      if
      declared by the Board of Directors, shall be paid out of funds at the time
      legally available for such purpose.





**SECURITIES
      AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS**





The
      following table shows the number of shares of common stock that could be issued
      upon exercise of outstanding options and warrants, the weighted average exercise
      price of the outstanding options and warrants and the remaining shares available
      for future issuance as of December 31, 2007.





Plan
                category
            
            Number
                of securities to be issued upon exercise of outstanding options,
                warrants
                and rights
            
            Weighted
                average exercise price of outstanding options, warrants and
                rights
            
            Number
                of securities remaining available for future issuanceEquity
                compensation plans approved by security holders
            
            
            —
            
            
            —
            
            
            —Equity
                compensation plans not approved by security holders
            
            
            —
            
            
            —
            
            
            —Total
            
            
            —
            
            
            —
            
            
            —


Page
          6


**ITEM
      6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION**





**FORWARD
      LOOKING STATEMENTS**




Certain
      statements contained in this Annual Report on Form 10-KSB, including, without
      limitation, statements using words such as "believe", "expect", "anticipate",
      "intend", "estimate", "plan", and words and expressions of similar import,
      constitute "forward-looking statements" within the meaning of Section 27A of
      the
      Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
      These forward-looking statements involve risks and uncertainties, and our actual
      results could differ from those anticipated in such statements as a result
      of
      these risks and uncertainties. In addition to the uncertainties stated elsewhere
      in this report, the factors which could affect these forward-looking statements
      include, but are not limited to, adverse changes in general economic conditions,
      including adverse changes in the specific markets for our products, adverse
      business conditions, increased competition, pricing pressures, lack of success
      in marketing our products and services, and other factors. These forward-looking
      statements speak only as of the date of this report and readers are cautioned
      not to place undue reliance upon such statements.




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





**Overview**





SMS
      is
      comprised of two wholly owned subsidiaries, Aspect Business Solutions, Inc.
      (“ASPECT) and SMS Envirofuels, Inc. (“SMSE”).





ASPECT
      provides custom programming, support and Microsoft systems products to its
      customers. ASPECT is a Microsoft Certified Partner which enables it to remarket
      a specific line of software developed by Microsoft Corporation. For the year
      ended December 31, 2007, 64% of ASPECT’s revenue was generated from one customer
      who has contracted with ASPECT to upgrade its corporate and remote locations
      to
      the Microsoft software. The customer has both domestic and international
      locations. ASPECT expects this upgrade contract to continue into 2008. For
      the
      same period, 36% of revenue was generated from the maintenance and annual
      software license renewal sales of ASPECT’s remaining clients. ASPECT
      continuously seeks out new industries and customers that would be benefit from
      the Microsoft software.





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




Page
          7




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





**Results
      of Operation**





SMS
      incurred a net loss of approximately $1,450,000 for the twelve months ended
      December 31 2007, and had a working capital deficit of approximately $7,460,000
      as of December 31, 2007. These conditions create an uncertainty as to SMS’s
      ability to continue as a going concern. SMS has seen improvement in the
      operating results of ASPECT. However, it is not yet determined when, or if,
      SMS
      Envirofuels will resume production.





Cash
      used
      by continuing operations and provided by investing activities was approximately
      $932,000 and $2,000, respectively, for the year ended December 31, 2007. 
Cash used by discontinued operations was approximately $15,000 for the same
      period.  The funds to cover these uses of cash were received against the
      note payable and advance agreement the company maintains from its majority
      shareholder.





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





**Results
      of Operations for the years ended December 31, 2007 and
      2006**




***Total
      Revenue and Gross Profit*** .
      The
      comparative statements of operations for the year ended December 31, 2007 and
      2006, reflects an increase in revenue. Aspect increased its revenue by $134,400
      or 49% during the year ended December 31, 2007, due to securing larger contracts
      for installations and customizations.





***Expenses.*** Total
      expenses decreased by 15% when comparing 2007 to 2006 for the year ended
      December 31, 2007. The reduction is attributed to two major factors: 1) the
      lower rent in the new corporate office space. Aspect negotiated out of its
      $22,800 per month office lease and moved out in mid-March 2007. The new space
      is
      $2,300 per month resulting in a $20,500 reduction in monthly expenses and 2)
      reductions in personnel, sales and marketing. Aspect has been able to reduce
      its
      sales and marketing costs by 100% and rely on the Microsoft network and word
      of
      mouth for new customers. All companies have incurred small reductions in
      administrative and custodial personnel during the year ended December 31, 2007.





**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.




Page
          8





At
      December 31, 2007, an estimate was used to accrue for the expense to remove
      excess material from the production process from SMS Envirofuels, Inc. This
      estimate totaled $29,900 based on volume and vendor pricing.





**Internal
      Revenue Tax Lien**




During
      the second and third quarters of 2005, ASPECT, one of the Company’s
      subsidiaries, did not have the funds necessary to cover all the payroll taxes.
      In January 2006, the Internal Revenue Service (“IRS”) placed a lien on ASPECT
      assets. A third party accounting firm which represented ASPECT, in the due
      process hearing, negotiated an installment plan to settle the outstanding
      liability. The payments were tendered from this third party firm on behalf
      of
      the Company’s largest shareholder and holder of a line of credit with ASPECT.
      The balance due at December 31, 2007 is $35,686.





**Liquidity
      and Capital Resources**




Cash
      used
      by operating activities was approximately $932,000 for 2007. During the year
      ended December 31, 2007 the Company and its Subsidiaries borrowed an additional
      approximately $932,000 from its largest shareholder.




**Risk
      Factors**




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




**Competition**




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.




Page
          9





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.





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.





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.




Page
          10





**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 2006 and 2007 and its negative
      working capital. The Company continues to experience net operating losses.
      The
      ability to continue as a going concern is subject to the Company’s ability to
      obtain necessary funding from outside sources, including obtaining additional
      funding from the sale of securities, increasing sales or obtaining loans and
      grants from various financial institutions where possible.





**Additional
      Financing**




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





**Limited
      Trading Market**




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





**ITEM
      7 - FINANCIAL STATEMENTS**





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




Page
          11


**ITEM
      8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE**





On
      May 1,
      2008 the Company’s Board of Directors recommended that the Company dismiss
      Malone & Bailey, PC as its independent auditor. Additionally the Board of
      Directors recommended that the Company engage McElravy, Kinchen &
Associates, PC as its new independent auditors.





The
      change of independent auditors was not related to accounting principles or
      practices, financial statement disclosure, or auditing scope or procedure,
      as
      such disagreement(s), if not resolved to the satisfaction of Malone &
Bailey, PC, would have caused them to make reference to the subject matter
      of
      the disagreement(s) in connection with their reports on the Company's financial
      statements.





**ITEM
      8-A - CONTROLS AND PROCEDURES**




**Evaluation
      of Disclosure Controls and Procedures**




We
      carried out an evaluation, under the supervision and with the participation
      of
      our management, including our principal executive officer and principal
      financial officer, of the effectiveness of our disclosure controls and
      procedures (as defined in Exchange Act Rules 13a-15(e) and
      15d-15(e)).  Based upon that evaluation, our principal executive
      officer and principal financial officer concluded that, as of the end of the
      period covered in this report, our disclosure controls and procedures were
      not
      effective to ensure that information required to be disclosed in reports filed
      under the Securities Exchange Act of 1934 is recorded, processed, summarized
      and
      reported within the required time periods and is accumulated and communicated
      to
      our management, including our principal executive officer and principal
      financial officer, as appropriate to allow timely decisions regarding required
      disclosure.




Our
      management, including our principal executive officer and principal financial
      officer, does not expect that our disclosure controls and procedures or our
      internal controls will prevent all error or fraud.  A control system,
      no matter how well conceived and operated, can provide only reasonable, not
      absolute, assurance that the objectives of the control system are
      met.  Further, the design of a control system must reflect the fact
      that there are resource constraints and the benefits of controls must be
      considered relative to their costs.  Due to the inherent limitations
      in all control systems, no evaluation of controls can provide absolute assurance
      that all control issues and instances of fraud, if any, have been detected.
      To
      address the material weaknesses, we performed additional analysis and other
      post-closing procedures in an effort to ensure our consolidated financial
      statements included in this annual report have been prepared in accordance
      with
      generally accepted accounting principles. Accordingly, management believes
      that
      the financial statements included in this report fairly present in all material
      respects our financial condition, results of operations and cash flows for
      the
      periods presented.





Page
          12


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




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





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





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





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





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




No
      change
      in the Company’s internal control over financial reporting occurred during the
      quarter ended December 31, 2007, that materially affected, or is reasonably
      likely to materially affect, the Company’s internal control over financial
      reporting.





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





Corrective
      Action




None.





**ITEM
      8-B - OTHER INFORMATION**





None.


Page
          13


PART
      III





**ITEM
      9 - DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY**





The
      Directors and Executive Officers of the Company and certain information
      concerning them are set forth below as of April 30, 2008:





Name
            
            Position
            
            AgeEddie
                Austin, Jr.
            
            Chairman/CEO
            
            57Principal
                Financial Officer




Mr.
      Eddie
      Austin, Jr. has served as Chairman and CEO of Systems Management Solutions,
      Inc.
      since January 18, 2008.  Mr. Austin joined the Board of Directors in
      January 2008, for a term of one year or until such time as a successor is
      elected by our shareholders. For the past 15 years Mr. Austin has managed a
      successful, multi-dimensional law practice in Lake Charles, La. Additionally,
      Mr. Austin has been involved in various private and public business ventures.
      Mr. Austin received his undergraduate degree from McNeese State University
      in
      1975 and juris doctorate from Louisiana State University in 1989.





**COMPLIANCE
      WITH SECTION 16(a) OF THE EXCHANGE ACT**




Based
      solely upon review of Forms 3, 4, and 5 furnished to us during the most recent
      fiscal year, we believe that all persons required to file reports pursuant
      to
      Section 16(a) of the Exchange Act have done so in a timely manner.





Section
      16(a) of the Securities Exchange Act of 1934 requires our Directors and
      Executive Officers, and persons who own beneficially more than ten percent
      of
      our common stock, to file reports of their stock ownership and changes of their
      stock ownership with the Securities and Exchange Commission. Based solely on
      the
      reports we have received and on written representations from certain reporting
      persons, we believe that the directors, executive officers, and our greater
      than
      ten percent beneficial owners have complied with all applicable filing
      requirements for the fiscal year ended December 31, 2007.





**CODE
      OF ETHICS**




Our
      Board
      of Directors has discussed the adoption of a code of business conduct and ethics
      for directors, officers and employees but has not yet adopted a Code of Ethics.
      It is anticipated that the Board of Directors will adopt a Code of Ethics in
      the
      near future. Upon adoption of a Code of Ethics, we will comply with all SEC
      reporting requirements.





**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:





Systems
      Management Solutions, Inc.


Attn:Corporate
      Secretary


4703
      Shavano Oak, Suite 104


San
      Antonio, Texas 78249


Page
          14


**ITEM
      10 - EXECUTIVE COMPENSATION**





The
      following table sets forth, for the years ended December 31, 2007, 2006 and
      2005
      all compensation awarded to, earned by or paid to all individuals serving as
      the
      Company's Chief Executive Officer and President or acting in a similar capacity
      and all Officers of the Company who earned more than $100,000 annually.





**SUMMARY
      COMPENSATION TABLE**





Name
                and
              Principal
                Position
            
            
            Year
            
            Salary
            
            Other
              Compensation
            
            Securities
                Underlying Options**Eddie
                Austin, Jr.**
            
            (1
            )
            
            —
            
            
            —
            
            
            —
            
            
            —Chairman/CEO**James
                Karlak**
            
            (2
            )
            
            2007
            
            $
            213,333
            
            
            —
            
            
            —Former
            
            
            
            
            2006
            
            $
            260,000
            
            
            —
            
            
            —CEO
            
            
            
            
            2005
            
            $
            260,000
            
            $
            5,000
            
            
            —**Morris
                Kunofsky**
            
            (3
            )
            
            2007
            
            $
            120,750
            
            
            —
            
            
            —Former
            
            
            
            
            2006
            
            $
            126,000
            
            
            —
            
            
            —CFO
            
            
            
            
            2005
            
            $
            126,000
            
            $
            2,400
            
            
            —**Jenelle
                Stehle**
            
            (4
            )
            
            2007
            
            $
            80,367
            
            
            —
            
            
            —Former
            
            
            
            
            2006
            
            $
            85,200
            
            $
            127,500
            
            
            —Corp.
                Secretary
            
            
            
            
            2005
            
            $
            80,800
            
            
            —
            
            
            —





(1)
            Mr.
                Austin became the Company’s Chairman and CEO effective January 18,
                2008.





(2)
            Mr.
                Karlak became the Company’s CEO and President effective on November 13,
                2007. Mr. Karlak resigned from the Company effective January 18,
                2008.





(3)
            Mr.
                Kunoksky became the Company’s CFO in October 2004. Mr. Kunofsky resigned
                from the Company effective January 18,
                2008.





(4)
            Ms.
                Stehle became the Company’s Secretary and Treasurer in October 2004. Mr.
                Stehle resigned from the Company effective January 18,
                2008.





In
      accordance with the rules of the SEC, other compensation in the form of
      perquisites and other personal benefits has been omitted for the named executive
      officers because the aggregate amount of these perquisites and other personal
      benefits was less than the lesser of $50,000 or 10% of annual salary and bonuses
      for the named executive officers.





**EMPLOYMENT
      AGREEMENTS**





We
      do not
      currently have any employment agreements.





**DIRECTOR
      COMPENSATION**





We
      do not
      currently pay any cash directors' fees.




Page
          15


**ITEM
      11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
      MANAGEMENT**





The
      following table sets forth certain information as of April 30, 2008 with respect
      to the beneficial ownership of shares of the Company’s common stock by (i) each
      person known to us who owns beneficially more than 5% of the outstanding shares
      of the Company’s common stock, (ii) each of our Directors, (iii) each of our
      Executive Officers and (iv) all of our Executive Officers and Directors as
      a
      group. Unless otherwise indicated, each stockholder has sole voting and
      investment power with respect to the shares shown. As of April 30, 2008, there
      were 30,690,386 shares of the Company’s common stock issued and
      outstanding.





Name
                and address of beneficial owner
            
            Relationship
                to Registrant
            
            Number
                of Shares of Common Stock
            
            Percentage
                of Common Stock(1)Eddie
                Austin, Jr.
              4703
                Shavano Oak, Ste 104
              San
                Antonio, TX 78249
            
            Chairman/CEO
            
            2,500,000
            
            8.15%United
                Managers Group, Inc.
              4703
                Shavano Oak, Ste 104
              San
                Antonio, TX 78249
            
            Shareholder
            
            7,928,644
            
            25.83%**All
                Officers and Directors as a group (total of 1)**
            
            
            
            **2,500,000**
            
            **8.15%**





(1)
            Under
                Rule 13d-3 promulgated under the Exchange Act, a beneficial owner
                of a
                security includes any person who, directly or indirectly, through
                any
                contract, arrangement, understanding, relationship, or otherwise
                has or
                shares: (i) voting power, which includes the power to vote, or to
                direct
                the voting of shares; and (ii) investment power, which includes the
                power
                to dispose or direct the disposition of shares. Certain shares may
                be
                deemed to be beneficially owned by more than one person (if, for
                example,
                persons share the power to vote or the power to dispose of the shares).
                In
                addition, shares are deemed to be beneficially owned by a person
                if the
                person has the right to acquire the shares (for example, upon exercise
                of
                an option) within 60 days of the date as of which the information
                is
                provided. In computing the percentage ownership of any person, the
                amount
                of shares is deemed to include the amount of shares beneficially
                owned by
                such person (and only such person) by reason of these acquisition
                rights.
                As a result, the percentage of outstanding shares of any person as
                shown
                in this table does not necessarily reflect the person’s actual ownership
                or voting power with respect to the number of shares of common stock
                actually outstanding on April 30,
                2008.





**ITEM
      12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**





Except
      as
      described below, none of the following persons has any direct or indirect
      material interest in any transaction to which we were or are a party during
      the
      past two years, or in any proposed transaction to which we propose to be a
      party:





(A)
            any
                of our directors or executive
                officers;





(B)
            any
                nominee for election as one of our
                directors;





(C)
            any
                person who is known by us to beneficially own, directly or indirectly,
                shares carrying more than 5% of the voting rights attached to our
                common
                stock; or





(D)
            any
                member of the immediate family (including spouse, parents, children,
                siblings and in-laws) of any of the persons named in paragraph (A),
                (B) or
                (C) above.





Page
          16




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.





At
      December 31, 2007, the notes promised by the Company and SMSE were renewed
      and
      extended to February 28, 2009.





At
      December 31, 2007, the balance owed United Manager’s Group on the above
      instruments are:


The
                  Company
              
              $
              688,000SMS
                  Envirofuels, Inc.
              
              $
              2,719,000Aspect
                  Business Solutions, Inc.
              
              $
              2,343,000


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**





The
      following documents are included or incorporated by reference as exhibits to
      this report:





3.1
            Amended
                and Restated Articles of Incorporation (incorporated by reference
                from the
                Company's Definitive Proxy Statement filed with the Commission on
                June 24,
                2004).





3.2
            Ammended
                and Retated Bylaws (incorporated by reference from the Company's
                Definitive Proxy Statement filed with the Commission on June 24,
                2004).





21.1
            Subsidiaries
                of the Registrant*





31.1
            Certification
                of Mr. Austin as required by Rule 13a - 14(1) or Rule 15d - 14(a)
                of the
                Securities Exchange Act of1934, as adopted pursuant to Section 302
                of the
                Sarbanes-Oxley Act of 2002.*





32.1
            Certification
                of Mr. Austin pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002
                and Section 1350 of 18 U.S.C. 63.*




Filed
      herewith.





Page
          17




**ITEM
      14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES**





The
      following is a summary of the fees billed to the Company by its independent
      accountants for the year ended December 31, 2007:





**Fee
                Category**
            
            **McElravy,
                Kinchen & Associates, PC**
              **FY2007**(1)
            
            **Malone
                & Bailey PC FY2007**(1)
            
            **Malone
                & Bailey PC FY2006**(1)Audit
                Fees
            
            $
            13,000
            
            $
            48,500
            
            $
            41.697Audit-Related
                Fees(2)
            
            
            —
            
            
            —
            
            
            —Tax
                Fees(3)
            
            
            —
            
            
            4,550
            
            
            7,113All
                Other Fees(4)
            
            
            —
            
            
            —
            
            
            450Total
                Fees
            
            $
            13,000
            
            $
            53,400
            
            $
            46,260





Notes
      to
      the Accountants Fees Table:





(1)
            SMS
                filed a Current Report on Form 8-K on May 6, 2008 announcing the
                termination of Malone & Bailey, PC as our independent auditors. At the
                same time the Company announced the appointment of McElravy, Kinchen
&
                Associates, PC as our new independent
                auditors.





(2)
            Consists
                of fees for assurance and related services by our principal accountants
                that are reasonably related to the performance of the audit or review
                of
                the Company's financial statements and are not reported under "Audit
                fees."





(3)
            Consists
                of fees for professional services rendered by our principal accountants
                for tax related services.





(4)
            Consists
                of fees for products and services provided by our principal accountants,
                other than the services reported under "Audit fees," "Audit-related
                fees"
                and "Tax fees" above.





**AUDITOR'S
      TIME ON TASK**





All
      of
      the work expended by McElravy, Kinchen & Associates, PC on our December 31,
      2007 audit was attributed to work performed by McElravy, Kinchen &
Associates, PC’s full-time, permanent employees.





Page
          18


SIGNATURES





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


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




Date:
      May
      15, 2008





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





SIGNATURE
            
            TITLE
            
            DATE/s/
              Eddie D. Austin, Jr.
            
            Chairman
&
CEOEddie
                D. Austin, Jr.
            
            (Principal
                Executive Officer and Principal Accounting Officer)
            
            May
                15, 2008








Page
          19


SYSTEMS
      MANAGEMENT SOLUTIONS, INC.


AND
      SUBSIDIARIES




CONTENTS








PageREPORT
                OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
            
            
            F-1REPORT
                OF PRIOR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
            
            
            F-2CONSOLIDATED
                FINANCIAL STATEMENTSConsolidated
                Balance Sheet as of December 31, 2007
            
            
            F-3
                - F-4Consolidated
                Statements of Operationsfor
                the years ended December 31, 2007 and 2006
            
            
            F-5Consolidated
                Statements of Changes in Stockholders’ Deficitfor
                the years ended December 31, 2007 and 2006
            
            
            F-6Consolidated
                Statements of Cash Flowsfor
                the years ended December 31, 2007 and 2006
            
            
            F-7NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS
            
            
            F-8
                - F-23










**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**




To
      the
      Board of Directors and Stockholders


Systems
      Management Solutions, Inc.


San
      Antonio, Texas




We
      have
      audited the accompanying consolidated balance sheet of Systems Management
      Solutions, Inc. as of December 31, 2007 and the related consolidated statements
      of operations, stockholders' equity (deficit) and cash flows for the year then
      ended. These financial statements are the responsibility of the Company’s
      management. Our responsibility is to express an opinion on these financial
      statements based on our audit. The financial statements for the period January
      1, 2006 through December 31, 2006, were audited by other auditors whose reports
      expressed unqualified opinions on those statements.




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. The Company is
      not
      required to have, nor were we engaged to perform, an audit of its internal
      control over financial reporting. Our audit included consideration of internal
      control over financial reporting as a basis for designing audit procedures
      that
      are appropriate in the circumstances, but not for the purpose of expressing
      an
      opinion on the effectiveness of the Company’s internal control over financial
      reporting. Accordingly, we express no such opinion. 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 audit provides
      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 Systems Management Solutions,
      Inc
      as of December 31, 2007 and the results of its operations and cash flows for
      the
      periods described above in conformity with accounting principles generally
      accepted in the United States of America.




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




/s/
      McElravy, Kinchen & Associates, P.C.




www.mkacpas.com


Houston,
      Texas




May
      14,
      2008




F-1




Report
      of Independent Registered Public Accounting Firm




To
      the
      Board of Directors and Stockholders


Systems
      Management Solutions, Inc.





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 flow for the year ended
      December 31, 2006. These financial statements are the responsibility of SMS’
management. Our responsibility is to express an opinion on these financial
      statements based on our audit.





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. The Company is not required to
      have, nor were we engaged to perform, an audit of its internal control over
      financial reporting. Our audit included consideration of internal control over
      financial reporting as a basis for designing audit procedures that are
      appropriate in the circumstances, but not for the purpose of expressing an
      opinion on the effectiveness of the Company’s internal control over financial
      reporting. Accordingly, we express no such opinion. 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





May
      14,
      2007





F-2


SYSTEMS
            MANAGEMENT SOLUTIONS, INC.
 AND
            SUBSIDIARIES
 
 CONSOLIDATED
              BALANCE SHEET
 December
                  31,
                2007ASSETSCURRENT
                  ASSETSCash
              
              $
              19,776Accounts
                  receivable, less allowance for doubtfulaccounts
                  of $59,925
              
              
              -Prepaid
                  Expenses
              
              
              11,310Total
                  Current Assets
              
              
              31,086ASSETS
                  HELD FOR SALE, Net
              
              
              577,438OTHER
                  ASSETSDeposits
              
              
              85,000Total
                  Other Assets
              
              
              85,000TOTAL
                  ASSETS
              
              $
              693,524


*The
        accompanying notes are an integral part of these consolidated financial
        statements.*
  F-3


SYSTEMS
            MANAGEMENT SOLUTIONS, INC.
 AND
            SUBSIDIARIES
 
 CONSOLIDATED
              BALANCE SHEET
 December
                  31,
                2007LIABILITIES
                  AND STOCKHOLDERS' DEFICITCURRENT
                  LIABILITIESAccounts
                  Payable
              
              $
              278,409Accounts
                  Payable, Related Parties
              
              
              154,716Deferred
                  Liability
              
              
              70,000Litigation
                  Settlement Liability
              
              
              307,500Notes
                  Payable and Accrued Interest
              
              
              805,993Notes
                  Payable to Stockholders and Accrued Interest
              
              
              5,750,942Other
                  Current Liabilities
              
              
              119,566Total
                  Current Liabilities
              
              
              7,487,126TOTAL
                  LIABILITIES
              
              
              7,487,126COMMITMENTS
                  AND CONTINGENCIES
              
              
              -STOCKHOLDERS'
                  DEFICITPreferred
                  Stock, $.0001 par value, 5 million sharesauthorized;
                  no shares issued and outstanding
              
              
              -Common
                  Stock, $.0001 par value, 100 million sharesauthorized;
                  20,690,386 shares issued and outstanding
              
              
              2,069Additional
                  Paid-in Capital
              
              
              19,813,836Accumulated
                  Deficit
              
              
              (26,609,507
              )TOTAL
                  STOCKHOLDERS' DEFICIT
              
              
              (6,793,602
              )TOTAL
                  LIABILITIES AND STOCKHOLDERS' DEFICIT
              
              $
              693,524


The
        accompanying notes are an integral part of these consolidated financial
        statements.
  F-4
 SYSTEMS
              MANAGEMENT SOLUTIONS, INC.
 AND
              SUBSIDIARIES
  Year
                    Ended
                
                Year
                    EndedDecember
                    31,
                  2007
                
                December
                    31,
                  2006REVENUES
                
                $
                480,463
                
                $
                346,241COST
                    OF REVENUES
                
                
                72,075
                
                
                111,804GROSS
                    PROFIT
                
                
                408,388
                
                
                234,437EXPENSESPayroll,
                    contract labor and consultants
                
                
                708,020
                
                
                699,761Selling,
                    general and administrative expenses
                
                
                219,262
                
                
                382,552OPERATING
                    LOSS FROM CONTINUING OPERATIONS
                
                
                (518,894
                )
                
                (847,876
                )Interest
                    expense
                
                
                (589,757
                )
                
                (461,031
                )NET
                    LOSS FROM CONTINUING OPERATIONS
                
                
                (1,108,651
                )
                
                (1,308,907
                )DISCONTINUED
                    OPERATIONS (Note 12)Loss
                    from discontinued operations
                
                
                (337,636
                )
                
                (133,081
                )NET
                    LOSS
                
                $
                (1,446,287
                )
                $
                (1,441,988
                )NET
                    LOSS PER SHARE:Common
                    Stock:Basic
                    and Diluted Net Loss Per Share
                
                $
                (0.05
                )
                $
                (0.06
                )Basic
                    and Diluted Net Loss Per Sharefor
                    Discontinued Operations
                
                $
                (0.02
                )
                $
                (0.01
                )Total
                    Basic and Diluted Net Loss Per Share
                
                $
                (0.07
                )
                $
                (0.07
                )Denominator
                    for Basic and Diluted Net Loss Per ShareWeighted
                    Average Number ofCommon
                    Shares Outstanding
                
                
                20,690,000
                
                
                20,686,000
 The
          accompanying notes are an integral part of these consolidated financial
          statements.
  F-5
 SYSTEMS
                MANAGEMENT SOLUTIONS, INC.
 AND
                SUBSIDIARIES
 
 CONSOLIDATED
                        STATEMENTS OF CHANGES IN STOCKHOLDERS'
                        DEFICIT
  DeficitAccumulatedAdditional
                  
                  During
                      the
                  
                  TotalCommon
                      Stock
                  
                  Paid-In
                  
                  Development
                  
                  Stockholders'Shares
                  
                  Amount
                  
                  Capital
                  
                  Stage
                  
                  Deficit**BALANCE
                      —
                      December 31, 2005**
                  
                  
                  **20,640,386**
                  
                  **$**
                  **2,064**
                  
                  **$**
                  **19,429,420**
                  
                  **$**
                  **(23,721,232**
                  **)**
                  **$**
                  **(4,289,748**
                  **)**Shares
                      Issued for Loan Incentive
                  
                  
                  50,000
                  
                  
                  5
                  
                  
                  5,495
                  
                  
                  —
                  
                  
                  5,500Interest
                      Imputed on Non-Interest Bearing Notes Payable
                  
                  
                  —
                  
                  
                  —
                  
                  
                  168,053
                  
                  
                  —
                  
                  
                  168,053Net
                      loss
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (1,441,988
                  )
                  
                  (1,441,988
                  )**BALANCE
                      — December 31, 2006**
                  
                  
                  **20,690,386**
                  
                  
                  **2,069**
                  
                  
                  **19,602,968**
                  
                  
                  **(25,163,220**
                  **)**
                  
                  **(5,558,183**
                  **)**Interest
                      Imputed on Non-Interest Bearing Notes Payable
                  
                  
                  —
                  
                  
                  —
                  
                  
                  210,868
                  
                  
                  —
                  
                  
                  210,868Net
                      loss
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (1,446,287
                  )
                  
                  (1,446,287
                  )**BALANCE
                      — December 31, 2007**
                  
                  
                  **20,690,386**
                  
                  **$**
                  **2,069**
                  
                  **$**
                  **19,813,836**
                  
                  **$**
                  **(26,609,507**
                  **)**
                  **$**
                  **(6,793,602**
                  **)**
 The
            accompanying notes are an integral part of these consolidated financial
            statements.
  F-6
 SYSTEMS
                  MANAGEMENT SOLUTIONS, INC.
 AND
                  SUBSIDIARIES
  Year
                        Ended
                    
                    Year
                        EndedDecember
                        31,
                      2007
                    
                    December
                        31,
                      2006CASH
                        FLOWS FROM OPERATING ACTIVITIESNet
                        Loss
                    
                    $
                    (1,446,287
                    )
                    $
                    (1,441,988
                    )Loss
                        from Discontinued Operations
                    
                    
                    337,636
                    
                    
                    133,081Loss
                        from Continuing Operations
                    
                    
                    (1,108,651
                    )
                    
                    (1,308,907
                    )Adjustments
                        to reconcile net loss to netcash
                        used in operating activities:Depreciation
                        & Amortization
                    
                    
                    5,726
                    
                    
                    45,290Loss
                        on Disposal of Office Equipment
                    
                    
                    (3,215
                    )
                    
                    -Interest
                        Imputed on Non-Interest Bearing Notes Payable
                    
                    
                    210,868
                    
                    
                    168,052Changes
                        in operating assets and liabilities:Accounts
                        Receivable
                    
                    
                    (194,935
                    )
                    
                    (451,634
                    )Other
                        Current Assets
                    
                    
                    111
                    
                    
                    (283,401
                    )Accounts
                        Payable
                    
                    
                    (135,869
                    )
                    
                    427,716Accrued
                        Expenses
                    
                    
                    369,361
                    
                    
                    49,373Litigation
                        Settlement
                    
                    
                    (75,000
                    )
                    
                    (87,500
                    )NET
                        CASH USED IN OPERATING ACTIVITIES
                    
                    
                    (931,604
                    )
                    
                    (1,441,011
                    )CASH
                        FLOWS FROM INVESTING ACTIVITIESPurchases
                        of Fixed Assets
                    
                    
                    (1,729
                    )
                    
                    (1,975
                    )Proceeds
                        from Sale of Equipment
                    
                    
                    3,600
                    
                    
                    -NET
                        CASH PROVIDED/(USED) IN INVESTING ACTIVITIES
                    
                    
                    1,871
                    
                    
                    (1,975
                    )CASH
                        FLOWS FROM FINANCING ACTIVITIESNote
                        Proceeds from Stockholders
                    
                    
                    931,568
                    
                    
                    563,590Note
                        Proceeds from Others
                    
                    
                    -
                    
                    
                    850,000NET
                        CASH PROVIDED BY FINANCING ACTIVITIES
                    
                    
                    931,568
                    
                    
                    1,413,590DISCONTINUED
                        OPERATIONSDiscontinued
                        Operating Activities
                    
                    
                    (15,136
                    )
                    
                    211,965Discontinued
                        Investing Activities
                    
                    
                    -
                    
                    
                    (247,960
                    )NET
                        CASH USED IN DISCONTINUED OPERATIONS
                    
                    
                    (15,136
                    )
                    
                    (35,995
                    )NET
                        DECREASE IN CASH
                    
                    
                    (13,301
                    )
                    
                    (65,391
                    )CASH–
                        Beginning
                    
                    
                    33,077
                    
                    
                    98,468CASH–
                        Ending
                    
                    $
                    19,776
                    
                    $
                    33,077SUPPLEMENTAL
                        DISCLOSURES OF CASH FLOW INFORMATIONCash
                        paid for:Interest
                    
                    $
                    304
                    
                    $
                    9,775Income
                        Taxes
                    
                    $
                    -
                    
                    $
                    -Non-cash
                        investing and financing activities:Offset
                        of Related Receivable with Note Payable
                    
                    $
                    -
                    
                    $
                    37,469Offset
                        of Related Payable with Note Payable
                    
                    $
                    -
                    
                    $
                    41,428Transfer
                        of Deposit Rights to Note Holder
                    
                    $
                    170,000
                    
                    $
                    -Common
                        Stock Issued as Loan Inducement
                    
                    $
                    -
                    
                    $
                    5,500
 The
              accompanying notes are an integral part of these consolidated financial
              statements.


F-7




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


NOTE
      1 - Description
      of Company





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.





The
      accompanying consolidated financial statements include the accounts of SMS
      and
      its wholly-owned subsidiaries. All significant intercompany accounts and
      transactions have been eliminated.





The
      accompanying financial statements do not include any adjustments to reflect
      the
      possible future effects on the recoverability and classification of assets
      or
      the amounts and classifications of liabilities that may result from the possible
      inability of the Company to continue as a going concern.





NOTE
      2 - Management
      Plans and Going Concern





The
      Company sustained a substantial operating loss of approximately $1,450,000
      during the year ended December
      31 , 2007,
      and
      as of December
      31 ,
      2007,
      had an accumulated deficit of approximately $26,610,000. In addition, the
      Company had negative cash flows from operations of approximately $932,000 during
      the year ended December
      31 ,
      2007.





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




F-8


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


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




F-9


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


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





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




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




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




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




NOTE
      3 - Summary
      of Significant Accounting Policies





PRINCIPLES
      OF CONSOLIDATION - The
      accompanying consolidated financial statements include the accounts of the
      Company and its wholly owned subsidiaries, Aspect Business Solutions, Inc and
      SMS Envirofuels, Inc.; both subsifdiaries are Texas corporations. All
      intercompany transactions and balances have been eliminated upon
      consolidation.




F-10


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


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, 2007.





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. At December 31, 2007 there is an allowance for doubtful accounts
      totaling $59,925.





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. 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.





PROPERTY,
      PLANT, AND EQUIPMENT -
      Property, plant, 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.





LONG-LIVED
      ASSETS - Long-lived
      assets consist of property and equipment. Long-lived assets are reviewed for
      impairment whenever events or circumstances indicate their carrying value may
      not be recoverable. When such events or circumstances arise, an estimate of
      the
      future undiscounted cash flows produced by the asset, or the appropriate
      grouping of assets, is compared to the asset's carrying value to determine
      if
      impairment exists pursuant to the requirements of SFAS No. 144, “Accounting for
      the Impairment or Disposal of Long-Lived Assets”. If the asset is determined to
      be impaired, the impairment loss is measured based on the excess of its carrying
      value over its fair value. Assets to be disposed of are reported at the lower
      of
      their carrying value or net realizable value.





F-11




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


FAIR
      VALUE OF FINANCIAL INSTRUMENTS - Accounting
      principles generally accepted in the United States of America require disclosing
      the fair value of financial instruments to the extent practicable for financial
      instruments, which are recognized or unrecognized in the balance sheet. The
      fair
      value of the financial instruments disclosed herein is not necessarily
      representative of the amount that could be realized or settled, nor does the
      fair value amount consider the tax consequences of realization or settlement.
      In
      assessing the fair value of these financial instruments, the Company uses a
      variety of methods and assumptions, which were based on estimates of market
      conditions and risks existing at that time. For certain instruments, including
      cash, accounts receivable, accounts payable, accrued interest and promissory
      notes payable, it was estimated that the carrying amount approximated fair
      value
      for the majority of these instruments because of their short maturity. The
      fair
      value of the Company's property and equipment is estimated to approximate their
      net book values.





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 expense was approximately $590,000 and approximately
      $461,000 for the years ended December 31, 2007 and December 31, 2006
      respectively.





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
      2007
      or 2006.





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.




F-12




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


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.





IMPACT
      OF
      RECENTLY ISSUED ACCOUNTING STANDARDS





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.





In
      December 2007, the Financial Accounting Standard Board (“FASB”) issued SFAS No.
      160, "Noncontrolling Interests in Consolidated Financial Statements-an amendment
      of ARB No.51" which clarifies that a noncontrolling interest in a subsidiary
      is
      an ownership interest in the consolidated entity that should be reported as
      equity in the consolidated financial statements. This statement also changes
      the
      way the consolidated income statement is presented. It requires consolidated
      net
      income to be reported at amounts that include the amounts attributable to both
      the parent and the noncontrolling interest. In addition, it requires disclosure,
      on the face of the consolidated statement of income, of the amounts of
      consolidated net income attributable to the parent and to the noncontrolling
      interest. SFAS No. 160 is effective for fiscal years, and interim periods within
      those fiscal years beginning on or after December 15, 2008 (that is, January
      1,
      2009, for entities with calendar year-ends). Earlier adoption is prohibited.
      The
      Company is currently in the process of evaluating the effect, if any, the
      adoption of SFAS No. 160 will have on its consolidated results of operations,
      financial position, and financial disclosure.




F-13


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


In
      December 2007, the Financial Accounting Standard Board (“FASB”) issued SFAS No.
      141R (revised 2007), “Business Combinations” which replaces FASB Statement No.
      141, “Business Combinations”. The Statement 141R retains the fundamental
      requirements in Statement 141 that the acquisition method of accounting (which
      Statement 141 called the purchase method) be used for all business combinations
      and for an acquirer to be identified for each business combination. The
      Statement 141R defines the acquirer as the entity that obtains control of one
      or
      more businesses in the business combination and establishes the acquisition
      date
      as date that the acquirer achieves control. Statement 141 did not define the
      acquirer, although it included guidance on identifying the acquirer, as does
      in
      Statement 141R. The scope of Statement 141R is broader than that of Statement
      141, which applied only to business combinations in which control was obtained
      by transferring consideration. By applying the same method accounting - the
      acquisition method- to all transactions and other events in which on entity
      obtains control over one or more other businesses, the Statement 141R improves
      the comparability of the information about business combinations provided in
      financial reports. SFAS No.141R applies prospectively to business combinations
      for which that acquisition date is on or after the beginning of the first annual
      reporting period beginning on or after December 15, 2008. An entity may not
      apply it before that date. The Company is currently in the process of evaluating
      the effect, if any, for the future acquisition and
      combinations.





NOTE
      4 - Property
      and Equipment





Property
      and equipment consist of the following at December 31 , 2007:





Est.
              Life
              Years
            
            Acquisition
              ValueComputers
                & Electronics
            
            
            3
            
            $
            34,604Office
                Equipment & Furniture
            
            
            5
            
            
            40,949Plant
                Equipment
            
            
            7
            
            
            15,895Leasehold
                Improvements
            
            
            10
            
            
            60,055Production
                System
            
            
            10
            
            
            509,691Plant
                Storage Tanks
            
            
            20
            
            
            59,669$
            720,863Accumulated
                Depreciation
            
            
            
            
            
            (143,425
            )Total
            
            
            
            
            $
            577,438





F-14




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


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, 2007 of $577,438
      with
      no corresponding liabilities. On April 8, 2008 the Company singed a non-binding
      Letter of Intent with an unrelated third-party to begin discussions relating
      to
      the SMSE facility. These discussions have included the possibility of selling
      the plant equipment of SMSE, as well a potential joint-venture to re-open the
      facility in its current location. Based upon these discussions and an expected
      sales price similar to the previously discussed EBOF LOI the Company believes
      that the fair value of this facility’s assets exceeds its net book
      value.





NOTE
      6 - Notes
      Payable to Others





On
      February 3, 2006, SMS borrowed $500,000 from an independent lender. The security
      pledged for this note is equipment recently purchased plus the deposit placed
      on
      equipment currently being prepared for delivery in the future. The interest
      is
      10% and the note matured on August 1, 2006. The interest rate on the unpaid
      balance is 18%. The Company is in default on this note. On February 8, 2007,
      an
      agreement to transfer deposit rights and partial release of promissory note
      was
      signed by the Company and the independent note holder. In the agreement, the
      Company has transferred the rights to the deposit placed by the Company on
      4
      pieces of equipment that were to be used by its subsidiary SMSE, a value of
      $170,000, in exchange for a release and discharge of $240,000 of the promissory
      note. In addition, the Company has the right to further release of $15,000
      for
      any future transfer to note holder of the rights in the deposits of 2 additional
      pieces of equipment, a value of $85,000. At December 31, 2007, the deferred
      liability is $70,000 and the principal balance on the note is $260,000 with
      interest accrued of $134,228.





On
      October 5, 2006, SMSE received a LOI, from EBOF, for the purchase of assets
      associated with its production facility in Poteet (See Note 5). The initial
      terms of the LOI enabled SMSE to sign a promissory note with EBOF for a line
      of
      credit not to exceed $788,000. The expiration date of this note was February
      2,
      2007. SMSE is in default on this note. The terms of the LOI were not met by
      the
      purchaser and the LOI expired with no sale. The interest rate on the unpaid
      balance is 18%. At December 31, 2007, the principal balance on the note is
      $350,000 and interest accrued is $61,765.





F-15




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


NOTE
      7 - Notes
      Payable to Stockholders





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. On February 28, 2008
      the
      note was extended until February 28, 2009. The note bears 10% interest, is
      payable on demand and has no collateral. As of December 31, 2007, the principal
      balance was $568,905 and accrued interest was $118,644.





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. On February
      28,
      2008 the note was extended until February 28, 2009. The line of credit bears
      10%
      interest, is payable on demand and has no collateral. As of December 31, 2007,
      the principal balance was $2,077,728 and accrued interest was $642,253.





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% in the amount of $210,068 and $168,053 for the years
      ended December 31, 2007 and 2006 respectively was added as a contribution to
      capital each year. As of December 31, 2007, the balance of these advances
      totaled $2,343,412.





Total
      principal amounts due at December 31, 2007 are $4,990,045.





NOTE
      8 - Income
      Taxes





Deferred
      income taxes reflect the net tax effects of temporary differences between the
      carrying amounts of assets and liabilities for financial reporting purposes
      and
      the amounts used for income tax purposes. Significant components of the
      Company’s deferred tax assets and liabilities, at December 31, 2007, were as
      follows:


Deferred
                  tax assets:Net
                  operating loss carry-forwards
              
              $
              5,283,816Total
                  deferred tax assets
              
              
              5,283,816Valuation
                  allowance
              
              
              (5,283,806
              )Net
                  deferred tax asset
              
              $
              —
  F-16




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


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,
      the 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. The Company is currently in default
      under the terms of the Settlement Agreement. At December 31, 2007, the remaining
      balance is $307,500.





WKB
                SettlementYear
            
            Annual
                Expense2008
            
            $
            90,0002009
            
            $
            90,0002010
            
            $
            90,0002011
            
            $
            37,500





The
      Company’s offices are located in sub-leased space on a month to month basis.
      SMSE lease payments for the biodiesel production facilityof $6,000 per month
      are
      made to a related party (see Note 14). Below are the contractual minimum annual
      lease payments for the next 5 years and thereafter





Year
            
            Annual
                Expense2008
            
            $
            72,0002009
            
            $
            72,0002010
            
            $
            72,0002011
            
            $
            72,0002012
            
            $
            72,000Thereafter
            
            $
            72,000Total
            
            $
            432,000





During
      the second and third quarters of 2005, ASPECT, one of the Company’s
      subsidiaries, did not have the funds necessary to cover all the payroll taxes.
      In January 2006, the Internal Revenue Service (“IRS”) placed a lien on ASPECT
      assets. A third party accounting firm which represented ASPECT, in the due
      process hearing, negotiated an installment plan to settle the outstanding
      liability. The payments were tendered from this third party firm on behalf
      of
      the Company’s largest shareholder and holder of a line of credit with ASPECT.
      The balance due at December 31, 2007 is $35,686.




F-17


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


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. Cargill was awarded a declaratory
      judgment in its favor. In July of 2007, Cargill reached a payout agreement
      with
      SMSE and certain related individuals. The balance, which includes interest
      and
      legal fees, totaled $380,000. The agreement required one payment of $75,000
      due
      July 27, 2007 and monthly payments of $25,000 due the 1st of every month until
      the balance is paid in full, beginning with September 1, 2007. If in the event
      that SMSE or its certain related individual defaults on this agreement, Cargill
      will file and execute its judgment as it was awarded. During 2007 the Company
      and its affiliates made net payments of $128,000 towards the Cargill obligation.
      The Company is currently in default under the terms of the settlement agreement.
      As of December 31, 2007 the liability to Cargill was $230,000.





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 - Stockholders’
      Deficit





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.




F-18


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


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 valued at $5,500
      to a
      lender as an incentive to make provide a loan to the Company.





There
      were no issuances of common or preferred stock during the year ended December
      31, 2007.





F-19




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


NOTE
      12 - Discontinued
      Operations





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





SMSE’s
      activity represents the entirety of the Company’s alternative fuels segment.
      SMSE’s sales, reported in discontinued operations, for the years ended December
      31, 2007 and 2006 are $10,200 and $3,621,000, respectively. SMSE’s pretax
      (loss)/profit from operations, reported in discontinued operations, for the
      years ended December 31, 2007 and 2006 were $(337,636) and $(133,081)
      respectively. Prior year financial statements have been restated to present
      the
      operations of SMSE as a discontinued operation. The fixed assets of the
      discontinued operation are listed as “Assets Held for Sale” in the accompanying
      Balance Sheets at December 31, 2007 and 2006. Below is a table of all assets
      and
      liabilities for the discontinued operations:





At
            
            AtDecember
                31,
            
            December
                31,Assets
                of discontinued operations:
            
            2007
            
            2006Cash
            
            $
            2,561
            
            $
            17,697Accounts
                Receivable
            
            
            -
            
            
            11,448Inventory
            
            
            -
            
            
            -Property
                and equipment, net
            
            
            574,619
            
            
            574,619Other
                Assets
            
            
            9,392
            
            
            10,657Total
                Assets
            
            $
            586,572
            
            $
            614,421Liabilities
                of discontinued operations:Accounts
                payable
            
            
            252,281
            
            
            384,607Accounts
                payable - related parties
            
            
            154,716
            
            
            81,000Accrued
                expense
            
            
            51,438
            
            
            53,015Total
                Liabilities
            
            $
            458,435
            
            $
            518,622





F-20




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


NOTE
      13 - Operating
      Results and Segment Information





Software
                      Sales,
                    Programming,
                      Data
                    Capturing
                      & Storage
            
            (Discontinued)
                    Alternative
                    Fuels
            
            All
                Other
            
            Total12
                Month Ended December 31, 2007Revenues
                from operations
            
            $
            408,388
            
            $
            —
            
            $
            —
            
            $
            408,388Net
                operating loss from operations
            
            
            (89,691
            )
            
            —
            
            
            (429,203
            )
            
            (518,894
            )Loss
                from discontinued operations
            
            
            
            
            
            (337,636
            )
            
            —
            
            
            (337,636
            )Assets
                held for sale
            
            
            2,819
            
            
            574,619
            
            
            —
            
            
            577,438Capital
                Expenditures
            
            
            —
            
            
            —
            
            
            —
            
            
            —Depreciation
            
            
            5,726
            
            
            —
            
            
            —
            
            
            5,72612
                Month Ended December 31, 2006Revenues
                from external customers
            
            $
            346,241
            
            $
            —
            
            $
            —
            
            $
            346,241Net
                operating loss from operations
            
            
            (466,076
            )
            
            —
            
            
            (381,800
            )
            
            (847,876
            )Loss
                from discontinued operations
            
            
            
            
            
            (133,081
            )
            
            —
            
            
            (133,081
            )Assets
                held for sale
            
            
            7,202
            
            
            574,619
            
            
            —
            
            
            581,821Capital
                Expenditures
            
            
            1,975
            
            
            267,460
            
            
            25,500
            
            
            294,935Depreciation
            
            
            9,790
            
            
            51,950
            
            
            —
            
            
            61,740





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 2007, these new services provide
      99% of this segments revenue.





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




F-21


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


NOTE
      14 - 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.





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





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




NOTE
      15 - Reclassification





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





NOTE
      16 - Subsequent
      Events





Share
      Issuances


Subsequent
      to December 31, 2007 the Company issued 2,500,000 shares of its common stock
      to
      its new Chairman and CEO for services rendered valued at $100,000 based on
      the
      quoted market price of the Company’s common stock on the date of
      issuance.





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





F-22


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


On
      January 15, 2008, the Company reached an agreement with certain related parties
      to sell its Aspect subsidiary. The sale will be accounted for during the quarter
      ended March 31, 2008 and will be disclosed fully in the Company’s quarterly
      filing for the period ended March 31, 2008.





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





F-23