10QSB

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-QSB

QUARTERLY REPORT

x Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended November 30, 2005

o Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 000-31090

SYSTEMS EVOLUTION INC.

(Exact name of Small Business Issuer as specified in its charter)

Idaho	82-0291029
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

10777 Westheimer Road, Suite 810

Houston, Texas 77042

(Address of principal executive offices)

713-979-1600

Issuer's telephone number

None

(Former name, former address and former fiscal year, if changed since last report)

Check whether the issuer (1) has filed all documents and reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 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.

(1) x Yes o No

(2) x Yes o No

The number of shares of issuer's Common Stock outstanding as of January 17, 2006:

106,258,626 shares

SYSTEMS EVOLUTION INC.

INDEX

QUARTERLY REPORT ON FORM 10-QSB

FOR QUARTERLY PERIOD ENDED November 30, 2005

PART I. FINANCIAL INFORMATION

ITEM 1	Unaudited Consolidated Financial Statements
a.	Consolidated Balance Sheet as of November 30, 2005 (Unaudited)
b.	Consolidated Statements of Operations for the Three And Six Months Ended November 30, 2005 and 2004 (Unaudited)
c.	Consolidated Statements of Cash Flows for the Six Months Ended November 30, 2005 and 2004 (Unaudited)
d.	Notes to Consolidated Financial Statements (Unaudited)
ITEM 2	Management's Discussion and Analysis
ITEM 3	Controls and Procedures

PART II. OTHER INFORMATION

ITEM 6 - Exhibits      

SIGNATURES

EXHIBIT 31 - Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

EXHIBIT 32 - Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

PART I. FINANCIAL INFORMATION

ITEM 1 - Unaudited Consolidated Financial Statements

SYSTEMS EVOLUTION, INC.

CONSOLIDATED BALANCE SHEET

November 30, 2005

(Unaudited)

ASSETS
Current Assets
Cash	$	7,755
Accounts receivable, net of allowance for doubtful accounts of $23,341		493,286
Unbilled revenue		318,706
Prepaid expenses and other current assets		37,947
Total Current Assets		857,694
Deferred financing cost, net of $2,384,729 accumulated amortizaton		3,247,535
Other assets		10,639
Furniture and equipment, net of accumulated depreciation of $162,936		112,638
Goodwill		1,231,648
Intangibles, net of $919,115 amortization and $91,150 impairment		1,302,246
TOTAL ASSETS	$	6,762,400
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable	$	500,428
Accrued expenses		452,321
Unearned service revenues		3,198
Notes payable		79,193
Total Current Liabilities		1,035,140
Deferred rents		19,222
Convertible note, net		1,236,974
Long-term debt - related parties		131,509
Total Liabilities		2,422,845
STOCKHOLDERS' EQUITY
Common stock, no par value, 750,000,000 shares authorized, 106,258,626 shares issued and outstanding		16,202,520
Accumulated deficit		(11,862,965	)
Total Stockholders' Equity		4,339,555
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	6,762,400

SYSTEMS EVOLUTION, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended November 30, 2005 and 2004

	Three Months						Six Months
Ending November 30,		2005			2004			2005			2004
Revenues	$	1,049,601		$	839,047		$	2,404,989		$	1,083,503
Cost of Goods Sold		419,630			106,035			917,870			117,862
Gross Profit		629,971			733,012			1,487,119			965,641
Operating Expenses:
Payroll and related costs		890,449			1,161,312			1,900,275			1,465,177
General, administrative, and selling		320,602			353,034			479,659			2,003,170
Depreciation & amortization		194,997			223,009			389,993			251,159
Operating loss		(776,077	)		(1,004,343	)		(1,282,808	)		(2,753,865	)
Interest expense		(890,511	)		(610,622	)		(1,779,150	)		(628,064	)
Other Income		13,201			-			15,931			-
Other costs		(5,546	)		-			(8,773	)		-
Net loss	$	(1,658,933	)	$	(1,614,965	)	$	(3,054,800	)	$	(3,381,929	)
Basic and diluted loss per share	$	(0.02	)	$	(0.02	)	$	(0.03	)	$	(0.05	)
Basic and diluted weighted average shares outstanding		101,015,247			67,239,771			93,593,484			65,888,643

SYSTEMS EVOLUTION, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended November 30, 2005 and 2004

		2005			2004
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(3,054,800	)	$	(3,381,929	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		389,993			823,129
Amortization of discount on notes payable		586,868			-
Amortization of deferred financing costs		989,313			-
Shares issued for services		292,058			162,050
Stock options and warrant expense		-			1,536,486
Bad debt expense		-			10,006
Gain on sale of fixed assets		-			1,392
Changes in:
Accounts receivable		(173,674	)		(12,600	)
Prepaid expenses and other assets		33,633			(69,501	)
Unbilled revenue		157,835			-
Other assets		(1,668	)		(3,040	)
Accounts payable		224,726			261,661
Unearned service revenue		(12,311	)		-
Accrued expenses		229,376			(111,711	)
NET CASH USED IN OPERATING ACTIVITIES		(338,651	)		(784,057	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of CMS		-			(10,000	)
Purchase of Duration Software		-			(450,000	)
Purchase of equipment		(2,500	)		(29,5446	)
NET CASH USED IN INVESTING ACTIVITIES		(2,500	)		(489,546	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable and long-term debt		25,714			82,527
Payments notes payable and long-term debt		(10,000	)		(419,240	)
Proceeds from convertible note		250,000			1,825,000
Deferred rent		17,132			-
Deferred financing cost		-			(286,616	)
Common stock issued for cash		-			127,091
NET CASH PROVIDED BY FINANCING ACTIVITIES		282,846			1,328,762
NET CHANGE IN CASH	$	(58,305	)	$	55,159
Cash, beginning of period		66,060			19,522
Cash, end of period	$	7,755		$	74,681
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid		-			3,287
Taxes paid		-			4,465
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued for acquisition of CMS		-			104,000
Common stock issued for acquisition of Duration		-			2,250,000
Common stock issued for acquisition of Next Hire		-			40,000
Common stock issued for computer equipment		-			52,070
Common stock issued for debt		175,400			-
Discount of notes payable		250,000			-

SYSTEMS EVOLUTION INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2005

(UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited interim financial statements of Systems Evolution Inc. ("SEVI") 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 the SEVI's Annual Report filed with the SEC on Form 10-KSB. 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 the 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 fiscal 2005 as reported in the 10-KSB have been omitted.

Impairment of Long-Lived Assets - SEVI reviews the carrying value of its long-lived assets annually or whenever events or changes in circumstances indicate that the historical cost-carrying value of an asset may no longer be appropriate. SEVI assesses recoverability of the carrying value of the asset by estimating the future net cash flows expected to result from the asset, including eventual disposition. If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset’s carrying value and fair value.

NOTE 2 - STOCK BASED COMPENSATION

SEVI accounts for stock-based compensation under the intrinsic value method. Under this method, SEVI recognizes no compensation expense for stock options granted when the number of underlying shares is known and exercise price of the option is greater than or equal to the fair market value of the stock on the date of grant. The following table illustrates the effect on net loss and net loss per share if SEVI had applied the fair value provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation for the three months ended November 30, 2005 and 2004:

	Three Months Ending November 30,
		2005			2004
Net loss as reported	$	(1,658,933	)	$	(1,619,817	)
Add: Intrinsic value expense recorded		-			148,936
Deduct: Total stock - based employee compensation expense determined under fair value based method		-			(312,010	)
Pro forma net loss	$	(1,658,933	)	$	(1,782,891	)
Basic and diluted net loss per common share:
As reported	$	(0.02	)	$	(0.02	)
Pro forma	$	(0.02	)	$	(0.03	)

The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: (1) 1.5% risk-free interest rate, (2) expected option life is the actual remaining life of the options as of each year end, (3) expected volatility is from 181% to 781% and (4) zero expected dividends.

NOTE 3 - CONVERTIBLE NOTES

During 2005, SEVI issued a total of $3,075,000 in convertible promissory notes pursuant to a private placement. Promissory notes for $1,825,000 are convertible at the holder’s option into SEVI common stock at $0.05 per share, accrue interest at 8% per annum, and have 36,500,000 warrants attached to them. During the second quarter of 2006 SEVI issued an additional $250,000 in convertible promissory notes pursuant to a private placement. Additionally, $150,000 of the promissory notes were converted into 3,000,000 shares of SEVI common stock during the second quarter of 2005. Interest on these notes is payable semi-annually, and the notes mature on August 31, 2007. The warrants were denominated as Series A, B, C, and D warrants. The following table summarizes each series.

Series	Number of shares	Exercise Price	Expiration
A	9,125,000	$0.06	90 days from registration of underlying common shares
B	9,125,000	$0.07	180 days from registration of underlying common shares
C	9,125,000	$0.08	270 days from registration of underlying common shares
D	9,125,000	$0.15	August 31, 2009
	36,500,000

Promissory notes for $1,500,000 are convertible at the holders’ option into SEVI common stock at the lesser of 50% of the average of the three lowest trading prices 20 days prior to one day before the holder sends the conversion notice to SEVI or $0.13 per share, accrue interest at 8% per annum, and have 4,500,000 warrants attached to them. The exercise price of the warrants is $0.08 per share. Accrued interest and principal are due at maturity. $500,000 matures on December 30, 2006, $500,000 matures on January 14, 2007, $250,000 matures on April 28, 2007, and $250,000 matures on November 14, 2007. The warrants are exercisable for 5 years.

The notes have been discounted for the relative fair value of the warrants, the offering costs and beneficial conversion feature. As of November 30, 2005, the stock has not been issued to the investors. All discounts will be amortized over the life of the notes. The relative fair values were calculated using the Black-Scholes model. Variables used in the Black-Scholes model include (1) 2.0% risk-free interest rate, (2) expected volatility between 166% and 227% and (3) zero expected dividends.

A summary of the convertible notes at November 30, 2005 is as follows:
Gross proceeds from notes	$	3,325,000
Less: Relative value of warrants		(1,797,468	)
Less: Beneficial conversion feature		(1,386,118	)
Less: Retirement of debt for stock		(150,000	)
Add: Amortization of discounts		1,245,560
Carrying value of note on November 30, 2005	$	1,236,974

NOTE 4 - COMMON STOCK

During the three months ending August 31, 2005, SEVI issued the following shares:

 · In July 2005, SEVI issued 6,369,189 shares per a board resolution to offer restricted SEVI shares in exchange for all vested options in a one for one exchange (one vested option for one restricted SEVI share) as of May 31, 2005 and still employed by the company as of June 30^th, 2005. SEVI received a signed agreement from all option holders in order to receive the Share Grant that stipulates that the Holder agrees to give up all un-vested options; these agreements amended all employment contracts then in force as of May 31, 2005.

 · In July 2005, SEVI issued 300,000 shares to directors of the company as of December 2004.

During the three months ending November 30, 2005, SEVI issued the following shares:

 ·  In September 2005, SEVI issued 3,120,000 shares in exchange for the conversion of a $150,000 convertible promissory note held by Platinum Partners Value Arbitrage Fund LP and the associated accrued interest valued at $6,000.

 ·  In November 2005, SEVI issued 1,340,000 in exchange for interest accrued on the convertible notes issued September 2004. The shares were valued at $0.01 per share.

 ·  In November 2005, SEVI issued 4,000,000 shares in exchange for an executed release from an employment contract with an officer of the company. The shares were valued at $0.01 per share.

 ·  In November 2005, SEVI issued 4,500,000 shares, per board resolution, to individuals taking on new management positions with the company. The shares were valued at $0.01 per share.

 ·  In November 2005, SEVI issued 4,165,512 shares, per board resolution, to individuals for services. The shares were valued at $0.01 per share.

Note 5 - Segment Information

Reportable segments are based on internal organizational structure and are comprised of the Business & Technology division (“B&T”) or the Next Hire Consultants (“NHC”) division. The B&T division provides high-end, value-added software development services and the NHC division provides contract staff and permanent placement services.

Segment financial information is summarized as follows:

		B&T			NHC			Corporate and other			Total
Three Months ending November 30, 2005
Revenue	$	888,095		$	161,235		$	271		$	1,049,601
Depreciation and amortization		4,950			-			190,047			194,997
Interest expense		631			-			889,880			890,511
Net income (loss)		(244,022	)		(25,130	)		(1,389,781	)		(1,658,933	)
Total assets		1,264,165			38,081			5,460,154			6,762,400
Expenditures for long-lived assets		-			-			-			-
Three Months ending November 30, 2004
Revenue	$	732,169		$	99,832		$	7,046		$	839,047
Depreciation and amortization		3,865			-			219,144			223,009
Interest expense		1771			940			607,911			610,622
Net income (loss)		(404,828	)		(24,730	)		(1,185,407	)		(1,614,965	)
Expenditures for long-lived assets		29,546			-			-			29,546

ITEM 2 - Management's Discussion and Analysis

FORWARD LOOKING STATEMENTS

This quarterly report contains forward-looking statements that involve risks and uncertainties. We use words such as anticipate, believe, plan, expect, future, intend and similar expressions to identify such forward-looking statements. You should not place too much reliance on these forward-looking statements. Our actual results are likely to differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by us described in this section.

The Company, previously known as Wallace Resources Inc., was organized in the State of Idaho on August 26, 1968. Systems Evolution Inc., our Texas operating company was acquired by the Company on September 9, 2003, and after the acquisition, the Company's current directors and management took control of the Company. We generate revenue from professional services performed for our end-user customers and the end-user customers of our software partners.

Revenue is derived primarily from professional services provided on a time and materials basis, with the remaining revenue provided from fixed fee engagements. For time and material contracts, revenue is recognized and billed by multiplying the number of hours expended by our professionals in the performance of the contract by the established billing rates. For fixed fee projects, revenue is generally recognized using the proportionate performance method. Provisions for estimated losses on uncompleted contracts are made on a contract-by-contract basis and are recognized in the period in which such losses are determined. Billings in excess of costs plus earnings are classified as deferred revenues. On many projects we are also reimbursed for out-of-pocket expenses such as airfare, lodging and meals. These reimbursements are included as a component of revenue.

Our revenue and operating results are subject to substantial variations based on our customers' expenditures and the frequency with which we are chosen to perform services for our customers. Revenue from any given customer will vary from period to period.

Our gross margins are affected by trends in the utilization rate of our professionals (defined as the percentage of our professionals' time billed to customers, divided by the total available hours in the respective period), the salaries we pay our consulting professionals, and the average rate we receive from our customers. If a project ends earlier than scheduled or we retain professionals in advance of receiving project assignments, our utilization rate will decline and adversely affect our gross margins.

Recent Developments

In October 2005, SEVI entered into a teaming agreement with The Project Group Inc. (“TPG”), a company currently in Chapter 11 Bankruptcy and publicly traded on the Pink Sheets with the symbol PJTGQ. TPG is an integrator of Microsoft Project software and a Microsoft Gold Partner. This teaming agreement provides SEVI and TPG the ability to increase market penetration by cross marketing our services (software development) to TPG clients and TPG’s services (Microsoft Project implementation) to our clients, increase operating efficiencies by integrating our physical Houston offices, and gain Microsoft Gold Partner status (achieved October 2005).

Furthermore, on October 4, 2005, SEVI and TPG entered into a non-binding term sheet that provides a plan of reorganization of TPG in bankruptcy court and the corporate integration of the two companies after TPG emerges from bankruptcy. “The entire transaction and relevant terms are subject to approval by the respective Board of Directors of SEVI and TPG, our respective shareholders as required, by the SEVI convertible note holders as required, by the creditors of TPG, and the Bankruptcy Court.”

SEVI discontinued the $1,500,000 factoring facility with Allied Capital Partners, LP on the anniversary of the facility as provided in the original agreement with no costs associated with its discontinuance. SEVI signed a term sheet with a lender to provide a $500,000 “Accounts Receivable Factoring Line of Credit” with a maximum of 75% of the current accounts receivable with an immediate advance of $50,000. Since SEVI has not been able to amend the security agreement with previous Convertible Note holders to provide the lender with the first lien on accounts receivable in a timely fashion, SEVI has entered into a payment plan to re-pay the advance to the lender within 30 days.

Results of Operations for the three month period ending November 30, 2005

Total gross revenue increased from $839,047 for the three month period ended November 30, 2004 to $1,049,601 for the three month period ended November 30, 2005, an increase of 25%. The increase in revenue resulted from increased sales in the B&T division along with increase placement fees generated in the NHC division.

Net loss from operations increased from $1,614,965 for the three month period ended November 30, 2004 to $1,658,933 for the three month period ended November 30, 2005. The increase in the loss is attributable services paid by stock within the period.

Operating Expenses

Payroll and related costs make up the majority of our cost of revenue. Total payroll and related costs decreased from $1,161,312 for the three month period ended November 30, 2004 to $890,449 for the three month period ended November 30, 2005, a decrease of 23%. This decrease is attributed to reduction in operations related staff.

General and administrative expenses consist of salaries and benefits for sales, executive and administrative employees, training, marketing activities, investor relations, recruiting, non-reimbursable travel costs and expenses and miscellaneous expenses. General and administrative expenses decreased from $353,034 for three month period ended November 30, 2004 to $320,034 for the three month period ended November 30, 2005. This decrease is related to retaining a small administrative management team and little ongoing professional services.

Liquidity and Capital Resources

Net cash used by operating activities was $338,651 for the three month period ended November 30, 2005 compared to $784,057 used by operating activities for the three month period ended November 30, 2004.

Net cash provided by financing activities was $282,846 for the three month period ended November 30, 2005 compared to $1,328,762 for three month period ended November 30, 2004.

On August 31, 2004, the Company executed a Purchase Agreement with certain institutional and accredited investors under which the Company agreed to sell and the purchasers agreed to purchase convertible promissory notes due August 31, 2007 (the "Notes") in the aggregate principal amount of up to $2,500,000 bearing interest at the rate of 8% per annum and convertible into shares of our Common Stock at a conversion price of $0.05 per share. On September 9, 2004, the Company completed the sale of an aggregate of $1,825,000 in Notes and accompanying Warrants under the Purchase Agreement which resulted in net proceeds to the Company of $1,542,417. The Notes are initially convertible into 36,500,000 shares of Common Stock, and an additional 36,500,000 shares of Common Stock are reserved for issuance upon exercise of the Warrants issued to the note holders.

On December 30, 2004, we executed a securities purchase agreement with certain institutional and accredited investors for the sale of 8% Callable Secured Promissory Notes and accompanying Warrants. Under this agreement, on December 30, 2004, we completed the sale of an aggregate of $500,000 of these Notes, which resulted in net proceeds to SEVI of $408,148; on January 14, 2005, completed the sale of an additional $500,000 of these Notes, with net proceeds to SEVI of $497,500; on April 29, 2005 completed the sale of an additional $250,000 principal amount of these notes with net proceeds to SEVI of $230,000; and on November 14, 2005 completed the sale of an additional $250,000 principal amount of these notes with net proceeds to SEVI of $250,000.

The Company estimates that our requirements for additional capital over the next 12 months will be in the range of $1,354,604 or four times our net cash used in operating activities. There can be no assurance we will be able to raise this additional required capital on satisfactory terms, or at all. In the event we are unable to obtain such additional capital or to obtain it on acceptable terms or in sufficient amounts, the impact thereof would have a material adverse effect on our business, operating results, financial condition and may affect our ability to carry on as a Company.

Critical Accounting Policies

Consulting revenues are comprised of revenue from professional services fees recognized primarily on a time and materials basis as performed. For fixed fee engagements, revenue is recognized using the proportionate performance method (based on the ratio of hours expended to total estimated hours). Provisions for estimated losses on uncompleted contracts are made on a contract-by-contract basis and are recognized in the period in which such losses are determined. Billings in excess of costs plus earnings are classified as deferred revenues. Our normal payment terms are net 30 days. We record an expense for the expected losses on uncollectible accounts receivable each period based on known facts and circumstances for the respective period.

Deferred Financing Costs

Deferred financing costs relate to the cost incurred in the arrangement of Systems Evolution Inc.'s debt agreement and are being amortized using the straight-line method over the terms of the related debt.

ITEM 3 - Controls and Procedures

Disclosure Controls and Procedures. The Company's management, with the participation of the Company's Chief Executive Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on such evaluation, the Company's Chief Executive Officer has concluded that, as of the end of such period, the Company's disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act.

Internal Control Over Financial Reporting. There have not been any changes in the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 6 - Exhibits and Report on Form 8-K

(a) Exhibits.

Ex 31  Certification of Chief Executive Officer and Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Ex 32 Certification of Chief Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, as amended, the Company caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Systems Evolution Inc.

Dated: January 17, 2006

/s/ Robert C. Rhodes

Robert C. Rhodes

Chief Executive Officer

/s/ Robert C. Rhodes

Robert C. Rhodes

Chief Financial Officer

EX-31

Exhibit 31

CERTIFICATIONS

I, Robert C. Rhodes, Chief Executive Officer of Systems Evolution Inc., certify that:

1.   I have reviewed this quarterly report on Form 10-QSB of Systems Evolution Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a.   designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b.   designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.   evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.   disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.   The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a.   all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.   any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: January 17, 2006

/s/ Robert C. Rhodes

Robert C. Rhodes

Chief Executive Officer

/s/ Robert C. Rhodes

Robert C. Rhodes

Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Systems Evolution Inc. (the "Company") on Form 10-QSB for the quarter ended November 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robert C. Rhodes, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1)   The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)   The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Robert C. Rhodes

Robert C. Rhodes

Chief Executive Officer

/s/ Robert C. Rhodes

Robert C. Rhodes

Chief Financial Officer

January 17, 2006