Sunrise Solar (SSLR) 10QSB 2007 Q3 Quarterly report (small business)

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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FORM 10-QSB

Quarterly Report of Small Business Issuers under Section 13 or 15(d) of the

Securities Exchange Act of 1934 for the quarterly period ended September 30, 2007

Commission File No. 333-45210

SYSTEMS MANAGEMENT SOLUTIONS, INC.

(Name of Small Business Issuer in Its Charter)

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Nevada	88-0460457
(State or other jurisdiction of	(IRS Employer Identification No.)
incorporation)

4703 Shavano Oak, Suite 104	78249
San Antonio, Texas
(Address of Principal Executive Offices)	(Zip Code)

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

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

Number of shares outstanding of each of the issuer's classes of common equity:

Class	Outstanding as of November 09, 2007
Common stock, $0.0001 par value	20,690,386

The issuer is not using the Transitional Small Business Disclosure format.

TABLE OF CONTENTS

	Page
PART I. FINANCIAL INFORMATION	1
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS	1
ITEM 2. MANAGEMENT'S PLAN OF OPERATIONS	9
ITEM 3. CONTROLS AND PROCEDURES	10
PART II - OTHER INFORMATION	11
ITEM 1. LEGAL PROCEEDINGS	11
ITEM 2. EXHIBITS AND REPORTS ON FORM 8-K	12
SIGNATURES	13

CERTIFICATIONS (attached as exhibits)

EXHIBIT NO, 31.1 - CERTIFICATION PRESIDENT AND CHIEF EXECUTIVE OFFICER

EXHIBIT NO. 31.2 - CERTIFICATION CHIEF FINANCIAL OFFICER

EXHIBIT NO. 32.1 - CERTIFICATION PURSUANT TO SECTION 906 OF SARBANES OXLEY ACT - PRESIDENT

AND CHIEF EXECUTIVE OFFICER

EXHIBIT NO. 32.1 - CERTIFICATION PURSUANT TO SECTION 906 OF SARBANES OXLEY ACT - CHIEF

FINANCIAL OFFICER

PART 1. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

SYSTEMS MANAGEMENT SOLUTIONS, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

		September 30,			December 31,
		2007			2006
ASSETS
Current Assets
Cash	$	6,428		$	33,077
Accounts receivable		48,650			78,586
Other		12,865			12,686
Total Current Assets		67,943			124,349
Property and equipment, net of accumulated depreciation of
$68,935 & $448,932 respectively		3,293			7,202
Assets held for sale, net of accumulated depreciation of
$74,014 & $74,014 respectively		574,619			574,619
Deposits		85,000			255,000
Total Assets	$	730,855		$	961,170
LIABILIITES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable	$	317,216		$	438,705
Accounts payable - related parties		136,716			81,000
Accrued interest and expense		277,509			191,635
Accrued interest and expense - related parties		694,897			517,036
Deferred liability		70,000			-
Litigation settlement liability		90,000			90,000
Notes payable - other		610,000			850,000
Notes payable - shareholder		4,787,636			4,058,477
Total Current Liabilities		6,983,974			6,226,853
Long-Term Liabilities
Litigation settlement liability		225,000			292,500
Total Liabilities		7,208,974			6,519,353
Commitments and Contigencies
Stockholders' Deficit
Preferred stock, $.0001 par value, 5,000,000 shares authorized, no
shares issued and outstanding		-			-
Common stock, $.0001 par value, 100,000,000 shares authorized,
20,690,386 shares issued and outstanding		2,069			2,069
Additional paid-in capital		19,756,183			19,602,968
Accumulated deficit		(26,236,371	)		(25,163,220	)
Total Stockholders' Deficit		(6,478,119	)		(5,558,183	)
Total Liabilities and Stockholders' Deficit	$	730,855		$	961,170

Page 1

SYSTEMS MANAGEMENT SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Three and Nine Months Ended September 30, 2007 and 2006

(unaudited)

	Three Months Ended						Nine Months Ended
	2007			2006			2007			2006
Revenue	$	76,616		$	109,006		$	408,959		$	274,556
Cost of sales		7,321			21,754			69,164			99,869
Gross margin		69,295			87,252			339,795			174,687
General and administrative		197,588			279,993			730,688			850,055
Depreciation		1,523			2,174			5,251			7,713
Amortization		-			5,917			-			35,500
(Gain)/Loss on disposal of equipment		-			-			(3,216	)		-
Total operating expenses		199,111			288,084			732,723			893,268
Net operating loss from continuing
operations		(129,816	)		(200,832	)		(392,928	)		(718,581	)
Interest expense		(154,381	)		(118,339	)		(429,657	)		(335,759	)
Net loss from continuing
operations		(284,197	)		(319,171	)		(822,585	)		(1,054,340	)
Discontinued operations (Note 8)
Loss from discontinued operations of
alternative fuels segment		(101,676	)		6,063			(250,566	)		51,285
Net loss	$	(385,873	)	$	(313,108	)	$	(1,073,151	)	$	(1,003,055	)
Basic and diluted loss per share	$	(0.01	)	$	(0.02	)	$	(0.04	)	$	(0.05	)
Basic and diluted loss per share
for discontinued operations	$	(0.00	)	$	0.00		$	(0.01	)	$	0.00
Total basic and diluted loss per share	$	(0.02	)	$	(0.02	)	$	(0.05	)	$	(0.05	)
Weighted average shares outstanding		20,690,386			20,690,386			20,690,386			20,684,708

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SYSTEMS MANAGEMENT SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30, 2007 and 2006

(unaudited)

	2007			2006
Cash Flows From Operating Activities
Net loss	$	(1,073,151	)	$	(1,003,055	)
Loss/(Income) from discontinued operations		250,566			(51,285	)
Loss from continuing operations		(822,585	)		(1,054,340	)
Adjustments to reconcile net loss to net cash used in
operating activities:
Imputed Interest		153,216			122,684
Depreciation		5,251			7,713
Amortization		-			35,500
(Gain)/Loss on disposal of equipment		(3,216	)		-
Changes in:
Accounts receivable		29,936			(18,070	)
Accounts receivable - related parties		(176,001	)		(45,250	)
Inventory		-			-
Other current assets		(55	)		(283,574	)
Accounts payable		(35,221	)		4,494
Accounts payable - related parties		(95,899	)		310,602
Accrued expenses		93,914			(123,948	)
Accrued expenses - related parties		177,860			174,814
Litigation settlement		(67,500	)		(65,000	)
Net Cash Used in Operating Activities		(740,300	)		(934,375	)
Cash Flows From Investing Activities
Purchase of fixed assets		(1,726	)		-
Proceeds from sale of equipment		3,600			-
Net Cash Provided by Investing Activities		1,874			-

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SYSTEMS MANAGEMENT SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

Nine Months Ended September 30, 2007 and 2006

(unaudited)

	2007			2006
Cash Flows From Financing Activities
Proceeds from notes payable - shareholder		729,159			404,600
Proceeds from notes payable - other		-			500,000
Net Cash Provided by Financing Activities		729,159			904,600
Discontinued Operations
Discontinued operating activities		(17,382	)		235,606
Discontinued investing activities		-			(203,839	)
Discontinued financing activities					-
Net Cash Provided by (Used In) Discontinued Operations		(17,382	)		31,767
Net change in cash		(26,649	)		1,992
Cash
Beginning of Period - Continuing Operations		15,380			44,776
Beginning of Period - Discontinued Operations		17,697			53,692
End of Period - Continuing Operations	$	6,113		$	15,001
End of Period - Discontinued Operations	$	315		$	85,459
Supplemental disclosures:
Income Tax Paid	$	-		$	-
Interest Paid		-			9,775
Non-cash operating and financing activities:
Transfer of deposit rights for partial release of notes payable		170,000			-
Common Stock issued as loan discount for Note Payable		-			5,500

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SYSTEMS MANAGEMENT SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited interim financial statements of Systems Management Solutions, Inc. (“SMS”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission ("SEC"), and should be read in conjunction with the audited financial statements and notes thereto contained in SMS's financial statements filed with the SEC on Form 10-KSB for the year ended December 31, 2006. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year 2006 as reported in Form 10-KSB have been omitted.

NOTE 2 - GOING CONCERN

SMS incurred a net loss of $385,873 and $1,073,151 for the three and nine months ended September 30, 2007 and has a working capital deficit of $6,916,031 as of September 30, 2007. These conditions create an uncertainty as to SMS’ ability to continue as a going concern. Management is trying to raise additional capital through sales of common stock and assets. The financial statements do not include any adjustments that might be necessary if SMS is unable to continue as a going concern.

NOTE 3 - 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 these assets. The terms of the LOI created a tiered consideration payment based on SMSE’s ability to meet two levels of production; the minimum consideration was $2.7 million and the maximum was $4.7 million. EBOF did not meet the terms of the LOI and it expired with no sale transaction occurring. The Company will continue to pursue buyers for these assets.

The assets held for sale have a net book value at September 30, 2007 of $574,619 with no corresponding liabilities. Based on the LOI referenced above and communications with new interested purchasers, the Company believes that the fair value of this facility’s assets exceeds its net book value.

NOTE 4 - 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

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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. Interest expense for the nine months ended September 30, 2007 and 2006, is $51,561 and $40,418, respectively. Amortization expense for the same periods is $0 and $35,500, respectively. At September 30, 2007, the deferred liability is $70,000 and the principal balance on the note is $260,000 with interest accrued of $116,870.

On October 5, 2006, SMSE received a LOI, from EBOF, for the purchase of assets associated with its production facility in Poteet (See Note 3). 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%. Interest expense for the nine months ended September 30, 2007 and 2006, is $43,825 and $0, respectively. At September 30, 2007, the principal balance on the note is $350,000 and interest accrued is $43,825.

NOTE 5 - NOTES PAYABLE TO SHAREHOLDERS

SMS and its subsidiaries have various promissory notes and advance agreements with its majority shareholder. The promissory notes bear a 10% interest rate. The advances bear no interest, however imputed interest at 10% is added as a contribution to capital each period. During the nine months ended September 30, 2007, SMS and its subsidiaries received proceeds of $729,159 from the shareholder under these agreements. Interest expense for the nine months ended September 30, 2007 and 2006, is $331,076 and $278,209, respectively. At September 30, 2007, the principal balances on the above instruments are $4,787,636 and the accrued interest balances at September 30, 2007 are $694,867.

NOTE 6- EQUITY

On February 1, 2006, SMS issued 50,000 shares of common stock to an independent lender as additional incentive to make the $500,000 loan described in Note 5.

NOTE 7 - DISCONTINUED OPERATIONS

SMSE, a subsidiary of the Company, ceased production in Dec 2006 and its assets located in Poteet, Tx. were classified as Held for Sale at December 31, 2006 (see Note 3). The Company sought out arrangements in which the assets would be purchased but SMSE would retain management of the facility. Therefore, SMSE maintained the current staff which consisted of managerial, operational and custodial personnel. This provided a “ready” management team which made the purchase more attractive to potential buyers. However, in September and October, key managerial personnel employed by SMSE have resigned. The Company is no longer able to provide management of the facility and has therefore recognized this segment of its operations as discontinued.

SMSE’s activity represents the entirety of the Company’s alternative fuels segment (see Note 9). SMSE’s sales, reported in discontinued operations, for the nine months ended September 30, 2007 and 2006 are $10,200 and $3,221,553, respectively. SMSE’s pretax (loss)/profit from operations, reported in discontinued operations, for the nine months ended September 2007 and 2006 were $(250,566) and $51,285 respectively. Prior year

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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 September 30, 2007 and December 31, 2006. Below is a table of all assets and liabilities for the discontinued operations:

	At		At
	September 30,		December 31,
	2007		2006
Assets of discontinued operations:
Cash		315		17,697
Accounts Receivable		11,448		11,448
Inventory		-		-
Property and equipment, net		574,619		574,619
Other Assets		10,782		10,657
Total Assets	$	597,164	$	614,421
Liabilities of discontinued operations:
Accounts payable		298,338		384,607
Accounts payable - related parties		136,716		81,000
Accrued expense		44,974		53,015
Total Liabilities	$	480,028	$	518,622

NOTE 8 - 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 September 30, 2007 is $34,536.

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NOTE 9 - OPERATING SEGMENTS AND RELATED REPORTING

	Software Sales,			(Discontinued)
	Programming, Data			Alternative
	Capturing & Storage			Fuels			All Other			Total
9 Months Ended September 30, 2007
Revenues from external customers	$	408,959		$	-		$	-		$	408,959
Net operating loss from operations		(53,883	)		-			(339,045	)		(392,928	)
Income/(loss) from discontinued operations					(250,566	)					(250,566	)
Identifiable assets		3,293			0			-			3,293
Assets held for sale					574,619						574,619
Capital Expenditures		1,726			-			-			1,726
Depreciation		5,251			-			-			5,251
9 Months Ended September 30, 2006
Revenues from external customers	$	274,556		$	-		$	-		$	274,556
Net operating income/(loss) from operations		(438,849	)		-			(279,732	)		(718,581	)
Income/(loss) from discontinued operations					51,285						51,285
Identifiable assets		7,304			0			-			7,304
Assets held for sale					546,079						546,079
Capital Expenditures		-			478,339			-			478,339
Depreciation		7,713			-			-			7,713

In the third quarter of 2007, due to the loss of key managerial personnel in the alternative fuels segment and the continued price increases in soy oil, the Company has determined to discontinue this segment (see Note 7). The assets of this segment are currently identified as “held for sale” on the balance sheet at September 30, 2007.

NOTE 10 - RELATED PARTY

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.

NOTE 11 - RECENT ACCOUNTING PRONOUNCEMENTS

In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109” (FIN 48). This Interpretation provides guidance on recognition, classification and disclosure concerning uncertain tax liabilities. The evaluation of a tax position requires recognition of a tax benefit if it is more likely than not it will be sustained upon examination. We adopted this Interpretation effective January 1, 2007. The adoption did not have a material impact on our consolidated financial statements.

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NOTE 12 - RECLASSIFICATION

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

ITEM 2. MANAGEMENT'S PLAN OF OPERATIONS

The following discussion and analysis should be read in connection with SMS's consolidated financial statements and related notes thereto, included elsewhere 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 nine month period ending September 30, 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 the remainder of this year and carry 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. During 2006, SMSE was able to maintain its sales prices and levels of production and as a result was able to complete an expansion of its production capabilities. 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. With the price of soybean oil continually on the rise, it remains difficult to resume operations at sufficient margins to sustain operations. SMSE resumed pursuing buyers for its assets located at the Poteet plant with the intent to remain in control of its operations as third party management for the facility, offering it’s administrative and production personnel.

In the third quarter of 2007, key personnel have 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.

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Results of Operation

The Company incurred a net loss of $385,873 and $1,073,151 for the three months and nine months ended September 30, 2007, respectively and had a working capital deficit of $6,916,031, as of September 30, 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 SMS Envirofuels will resume production.

Cash used by continuing operations and provided by investing activities was $757,683 and $1,874, respectively, for the nine month period ending September 30, 2007. Cash used by discontinued operations was $17,382 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 (see Note 6).

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 in October 2006 as discussed in Note 4 and Note 5 above and the continuing effort to sell the alternative fuels segment of the Company.

Third Quarter and Year to Date 2007 Compared to Third Quarter and Year to Date 2006

Total Revenue and Gross Profit. The comparative statements of operations for the three and nine month periods ending September 30, 2007 and 2006, reflects a decrease for the quarter but still maintains an increase year to date in revenue. ASPECT increased its revenue by $134,400 or 49% during the nine month period ending September 30, 2007, due to securing larger contracts for installations and customizations.

General and Administrative costs. The general and administrative costs have decreased by 29% and 14%, respectively, when comparing 2007 to 2006 for the three and nine month period ending September 30. 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 $2,700 per month resulting in a $20,100 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 in the second and third quarters of 2007.

ITEM 3. CONTROLS AND PROCEDURES

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

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

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In early 2005, the landlord for the offices occupied by YCO Holdings, Inc. and its subsidiaries filed suit in the 295^th District Court of Harris County, Texas Cause No. 2005-04423 captioned WKB Value Partners, LP vs. Systems Management Solutions, Inc., alleging that SMS was obligated on the lease even though no authorized officer of SMS had signed the same. This lawsuit was dismissed in February, 2006 pursuant to a Comprehensive Settlement Agreement which required SMS 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 final payment will be due in March 2011. The balance due at September 30, 2007 is $315,000.

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 1^st of every month until the balance is paid in full, beginning with September 1, 2007. The balance due at September 30, 2007 is $280,000. As of this filing, all payments have been made in a timely manner. 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.

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). 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, as previously discussed in Note 10, Texian filed for Chapter 11 bankruptcy protection.

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ITEM 2. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

31.1 Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer

31.2 Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer

32.1 Section 1350 Certification of Principal Executive Officer

32.2 Section 1350 Certification of Principal Financial Officer

(b) Reports on Form 8-K:

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

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

3.   On March 22, 2005, the Board of Directors of SMS voted to reduce the number of shares outstanding of SMS’s $0.0001 par value common stock by reverse split to exchange one (1) new share for each two and one half (2 ½) old shares. Any fractional shares created by this reverse split were truncated to the nearest whole share and no cash was paid for any such fractional share.

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

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

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

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SIGNATURES

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

Dated: November 13, 2007

SYSTEMS MANAGEMENT SOLUTIONS, INC.,

a Nevada corporation

By: /s/ Jim Karlak                                                             

James Karlak, President and Chief Executive Officer

By: /s/ Morris Kunofsky                                               

Morris Kunofsky, Chief Financial Officer

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