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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-Q





(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended March 31, 2009

OR



| ̈ | 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: 001-33739





STREAM GLOBAL SERVICES, INC.

(Exact
name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 26-0420454                          
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)



|                                                      |  |           
|----------------------------------------------------- |  | ----------
|20 William Street, Suite 310 Wellesley, Massachusetts |  | 02481     
|(Address of Principal Executive Offices)              |  | (Zip Code)

(781) 304-1800

(Registrants Telephone Number, Including Area Code)

N/A

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





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities 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.    Yes  x    No   ̈

Indicate by check mark whether the registrant has
submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was required to submit and post such files) .     Yes   ̈    No   ̈

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





|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large Accelerated Filer |  |  ̈                                                |  | Accelerated Filer         |  | x
|                        |  |                                                  | 
|Non-accelerated Filer   |  |  ̈  (Do not check if a smaller reporting company) |  | Smaller reporting company |  |  ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes   ̈    No  x

There were 9,451,753 shares of the Registrants common stock, $0.001 par value per share, issued and outstanding as of April 27, 2009.









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##### Table of Contents

TABLE OF CONTENTS



|                              |  |                                                                                                                                                                            |  |     
|----------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|                              |  |                                                                                                                                                                            |  | Page
|PART I. FINANCIAL INFORMATION |  |                                                                                                                                                                           
|                              |  |                                                                                                                                                                           
|Item 1.                       |  | Financial Statements                                                                                                                                                       |  | 1   
|                              |  |                                                                                                                                                                           
|                              |  | Consolidated Balance Sheets as of March 31, 2009 and December 31, 2008                                                                                                     |  | 1   
|                              |  |                                                                                                                                                                           
|                              |  | Consolidated Statements of Operations for the three months ended March 31, 2009 and March 31, 2008, and for the three months ended March 
31, 2008 for Predecessor (SHC) |  | 2   
|                              |  |                                                                                                                                                                           
|                              |  | Consolidated Statements of Stockholders Equity for the three months ended March 31, 2009                                                                                   |  | 3   
|                              |  |                                                                                                                                                                           
|                              |  | Consolidated Statements of Cash Flows for the three months ended March 31, 2009 and March 31, 2008, and for the three months ended March 
31, 2008 for Predecessor (SHC) |  | 4   
|                              |  |                                                                                                                                                                           
|                              |  | Notes to Unaudited Consolidated Financial Statements                                                                                                                       |  | 5   
|                              |  |                                                                                                                                                                           
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                                                      |  | 19  
|                              |  |                                                                                                                                                                           
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                                                                                                                 |  | 28  
|                              |  |                                                                                                                                                                           
|Item 4.                       |  | Controls and Procedures                                                                                                                                                    |  | 28  
|                              | 
|PART II. OTHER INFORMATION    |  | 29                                                                                                                                                                        
|                              |  |                                                                                                                                                                           
|Item 1A.                      |  | Risk Factors                                                                                                                                                               |  | 29  
|                              |  |                                                                                                                                                                           
|Item 6.                       |  | Exhibits                                                                                                                                                                   |  | 39  
|                              | 
|SIGNATURES                    |  |                                                                                                                                                                           

Stream is a registered trademark of Stream Global Services, Inc.



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##### Table of Contents

PART IFINANCIAL INFORMATION

ITEM 1CONSOLIDATED FINANCIAL STATEMENTS

STREAM GLOBAL SERVICES, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)



|                                                                                                                                                                                                                            |  |                           |         |   |                  |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                                                                                                                                                            |  | March 31, 2009(unaudited) |         |   | December 31,2008 |  
|Assets                                                                                                                                                                                                                      |  |                           |         |   |                  |   |         |  
|Current assets:                                                                                                                                                                                                             |  |                           |         |   |                  |   |         |  
|Cash and cash equivalents                                                                                                                                                                                                   |  | $                         | 13,373  |   |                  | $ | 10,660  |  
|Accounts receivable, net of allowance for bad debts of $301 and $267 at March 31, 2009 and December 31, 2008                                                                                                                |  |                           | 109,736 |   |                  |   | 109,385 |  
|Income taxes receivable                                                                                                                                                                                                     |  |                           | 1,663   |   |                  |   | 1,559   |  
|Deferred income taxes                                                                                                                                                                                                       |  |                           | 16,945  |   |                  |   | 14,899  |  
|Prepaid expenses and other current assets                                                                                                                                                                                   |  |                           | 11,342  |   |                  |   | 10,353  |  
|                                                                                                                                                                                                                            |  |                           |         |   |                  |   |         |  
|Total current assets                                                                                                                                                                                                        |  |                           | 153,059 |   |                  |   | 146,856 |  
|                                                                                                                                                                                                                            |  |                          
|Equipment and fixtures, net                                                                                                                                                                                                 |  |                           | 40,503  |   |                  |   | 41,634  |  
|Deferred income taxes                                                                                                                                                                                                       |  |                           | 2,358   |   |                  |   | 2,698   |  
|Goodwill                                                                                                                                                                                                                    |  |                           | 51,819  |   |                  |   | 47,686  |  
|Intangible assets, net                                                                                                                                                                                                      |  |                           | 80,832  |   |                  |   | 83,319  |  
|Other assets                                                                                                                                                                                                                |  |                           | 7,882   |   |                  |   | 7,752   |  
|                                                                                                                                                                                                                            |  |                           |         |   |                  |   |         |  
|Total assets                                                                                                                                                                                                                |  | $                         | 336,453 |   |                  | $ | 329,945 |  
|                                                                                                                                                                                                                            |  |                           |         |   |                  |   |         |  
|                                                                                                                                                                                                                            |  |                          
|Liabilities and Stockholders Equity                                                                                                                                                                                        |  |                           |         |   |                  |   |         |  
|Current liabilities:                                                                                                                                                                                                        |  |                           |         |   |                  |   |         |  
|Accounts payable                                                                                                                                                                                                            |  | $                         | 9,040   |   |                  | $ | 9,058   |  
|Accrued employee compensation and benefits                                                                                                                                                                                  |  |                           | 39,370  |   |                  |   | 40,335  |  
|Other accrued expenses                                                                                                                                                                                                      |  |                           | 16,427  |   |                  |   | 15,550  |  
|Income taxes payable                                                                                                                                                                                                        |  |                           | 3,903   |   |                  |   | 3,449   |  
|Current portion of long-term debt                                                                                                                                                                                           |  |                           | 1,607   |   |                  |   | 2,614   |  
|Current portion of capital lease obligations                                                                                                                                                                                |  |                           | 2,255   |   |                  |   | 2,260   |  
|Other liabilities                                                                                                                                                                                                           |  |                           | 5,781   |   |                  |   | 6,126   |  
|                                                                                                                                                                                                                            |  |                           |         |   |                  |   |         |  
|Total current liabilities                                                                                                                                                                                                   |  |                           | 78,383  |   |                  |   | 79,392  |  
|                                                                                                                                                                                                                            |  |                          
|Long-term debt, net of current portion                                                                                                                                                                                      |  |                           | 71,260  |   |                  |   | 63,624  |  
|Capital lease obligations, net of current portion                                                                                                                                                                           |  |                           | 4,968   |   |                  |   | 5,484   |  
|Deferred income taxes                                                                                                                                                                                                       |  |                           | 19,475  |   |                  |   | 17,396  |  
|Other long-term liabilities                                                                                                                                                                                                 |  |                           | 15,757  |   |                  |   | 16,387  |  
|                                                                                                                                                                                                                            |  |                           |         |   |                  |   |         |  
|Total liabilities                                                                                                                                                                                                           |  |                           | 189,843 |   |                  |   | 182,283 |  
|                                                                                                                                                                                                                            |  |                           |         |   |                  |   |         |  
|                                                                                                                                                                                                                            |  |                          
|Series A Convertible Preferred Stock, par value $0.001 per share, which was redeemable by the holder, 150 shares authorized; 150 shares issued
and outstanding at December 31, 2008                                         |  |                           |        |   |                  |   | 145,911 |  
|Series B Convertible Preferred Stock, par value $0.001 per share, 2 shares authorized; 1 share issued and outstanding at March 31, 2009                                                                                     |  |                           | 703     |   |                  |   |        |  
|                                                                                                                                                                                                                            |  |                          
|Stockholders equity:                                                                                                                                                                                                       |  |                           |         |   |                  |   |         |  
|Series A Convertible Preferred Stock, par value $0.001 per share, 150 shares authorized; 150 shares issued and outstanding at March 31,
2009                                                                                |  |                           | 147,428 |   |                  |   |        |  
|Common stock, par value $0.001 per share, shares authorized149,000 shares and 119,000 authorized at March 31, 2009 and
December 31, 2008, respectively, issued and outstanding shares9,452 and 9,458 shares, respectively |  |                           | 9       |   |                  |   | 9       |  
|Additional paid-in-capital                                                                                                                                                                                                  |  |                           | 10,015  |   |                  |   | 11,330  |  
|Retained earnings (deficit)                                                                                                                                                                                                 |  |                           | 299     |   |                  |   | (1,399  | )
|Accumulated other comprehensive income (loss)                                                                                                                                                                               |  |                           | (11,844 | ) |                  |   | (8,189  | )
|                                                                                                                                                                                                                            |  |                           |         |   |                  |   |         |  
|Total stockholders equity                                                                                                                                                                                                  |  |                           | 145,907 |   |                  |   | 1,751   |  
|                                                                                                                                                                                                                            |  |                           |         |   |                  |   |         |  
|Total liabilities and stockholders equity                                                                                                                                                                                  |  | $                         | 336,453 |   |                  | $ | 329,945 |  
|                                                                                                                                                                                                                            |  |                           |         |   |                  |   |         |  

See accompanying notes to consolidated financial statements.



1



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Stream Global Services, Inc.

Consolidated Condensed Statements of Operations

(Unaudited)

(In thousands, except per share amounts)



|                                                                                   |  |                              |         |   |      |   |        |                        |  |   |         |  
|---------------------------------------------------------------------------------- |  | ---------------------------- | ------- | - | ---- | - | ------ | ---------------------- |  | - | ------- | -
|                                                                                   |  | Three Months Ended March 31, |        
|                                                                                   |  | 2009                         |         |   | 2008 |   |        | Predecessor(SHC)2008 | 
|Revenue                                                                            |  | $                            | 135,614 |   |      | $ |       |                        |  | $ | 140,372 |  
|Direct cost of revenue                                                             |  |                              | 78,613  |   |      |   |       |                        |  |   | 90,911  |  
|                                                                                   |  |                              |         |   |      |   |        |                        |  |   |         |  
|Gross profit                                                                       |  |                              | 57,001  |   |      |   |       |                        |  |   | 49,461  |  
|                                                                                   |  |                              |         |   |      |   |        |                        |  |   |         |  
|                                                                                   |  |                              |        
|Operating expenses:                                                                |  |                              |         |   |      |   |        |                        |  |   |         |  
|Selling, general and administrative expenses                                       |  |                              | 43,502  |   |      |   | 263    |                        |  |   | 42,094  |  
|Depreciation and amortization                                                      |  |                              | 6,665   |   |      |   | 4      |                        |  |   | 3,657   |  
|                                                                                   |  |                              |         |   |      |   |        |                        |  |   |         |  
|Total operating expenses                                                           |  |                              | 50,167  |   |      |   | 267    |                        |  |   | 45,751  |  
|                                                                                   |  |                              |         |   |      |   |        |                        |  |   |         |  
|Income (loss) from operations                                                      |  |                              | 6,834   |   |      |   | (267   | )                      |  |   | 3,710   |  
|                                                                                   |  |                              |        
|Other (income) expenses, net:                                                      |  |                              |         |   |      |   |        |                        |  |   |         |  
|Foreign currency transaction loss (gain)                                           |  |                              | (852    | ) |      |   |       |                        |  |   | (1,199  | )
|Other (income) expense, net                                                        |  |                              | 7       |   |      |   |       |                        |  |   | 603     |  
|Interest (income) expense, net                                                     |  |                              | 2,895   |   |      |   | (2,139 | )                      |  |   | 3,041   |  
|                                                                                   |  |                              |         |   |      |   |        |                        |  |   |         |  
|Total other (income) expenses, net                                                 |  |                              | 2,050   |   |      |   | (2,139 | )                      |  |   | 2,445   |  
|                                                                                   |  |                              |         |   |      |   |        |                        |  |   |         |  
|Income (loss) before income taxes                                                  |  |                              | 4,784   |   |      |   | 1,872  |                        |  |   | 1,265   |  
|                                                                                   |  |                              |        
|Provision (benefit) for income taxes                                               |  |                              | 3,086   |   |      |   | 670    |                        |  |   | 3,269   |  
|                                                                                   |  |                              |         |   |      |   |        |                        |  |   |         |  
|Net income (loss)                                                                  |  |                              | 1,698   |   |      |   | 1,202  |                        |  |   | (2,004  | )
|                                                                                   |  |                              |         |   |      |   |        |                        |  |   |         |  
|Accretion of trust account relating to common stock subject to possible conversion |  |                              |        |   |      |   | 30     |                        |  |   |        |  
|Cumulative convertible preferred stock dividends                                   |  |                              | 1,293   |   |      |   |       |                        |  |   |        |  
|Preferred Stock accretion                                                          |  |                              | 225     |   |      |   |       |                        |  |   |        |  
|                                                                                   |  |                              |         |   |      |   |        |                        |  |   |         |  
|Net income (loss) attributable to common shareholders                              |  | $                            | 180     |   |      | $ | 1,172  |                        |  | $ | (2,004  | )
|                                                                                   |  |                              |         |   |      |   |        |                        |  |   |         |  
|Net income (loss) attributable to common shareholders per share:                   |  |                              |         |   |      |   |        |                        |  |   |         |  
|Basic                                                                              |  | $                            | 0.02    |   |      | $ | 0.04   |                        |  |   | N/A     |  
|                                                                                   |  |                              |         |   |      |   |        |                        |  |   |         |  
|Diluted                                                                            |  | $                            | 0.02    |   |      | $ | 0.04   |                        |  |   | N/A     |  
|                                                                                   |  |                              |         |   |      |   |        |                        |  |   |         |  
|Shares used in computing per share amounts:                                        |  |                              |         |   |      |   |        |                        |  |   |         |  
|Basic                                                                              |  |                              | 9,456   |   |      |   | 29,688 |                        |  |   | N/A     |  
|                                                                                   |  |                              |         |   |      |   |        |                        |  |   |         |  
|Diluted                                                                            |  |                              | 9,456   |   |      |   | 29,688 |                        |  |   | N/A     |  
|                                                                                   |  |                              |         |   |      |   |        |                        |  |   |         |  

See accompanying notes to consolidated condensed financial statements.



2



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Stream Global Services, Inc.

Consolidated Condensed Statements of Stockholders Equity

For the Three Months Ended March 31, 2009

(Unaudited)

(In thousands)



|                                                              |  |                                     |  |              |         |        |       |   |          |   |                          |  |   |                           |   |  |                                            |        |   |       |   |         |   |  |   |         |  
|------------------------------------------------------------- |  | ----------------------------------- |  | ------------ | ------- | ------ | ----- | - | -------- | - | ------------------------ |  | - | ------------------------- | - |  | ------------------------------------------ | ------ | - | ----- | - | ------- | - |  | - | ------- | -
|                                                              |  | Series A ConvertiblePreferred Stock |  | Common Stock |         |        |       |   |          |   |                          |  |   |                           |   | 
|                                                              |  | Shares                              |  | ParValue     |         | Shares |       |   | ParValue |   | AdditionalPaid inCapital |  |   | RetainedEarnings(Deficit) |   |  | AccumulatedOtherComprehensiveIncome (Loss) |        |   | Total |  
|Balances at December 31, 2008                                 |  |                                    |  | $            |        |        | 9,458 |   |          | $ | 9                        |  | $ | 11,330                    |   |  | $                                          | (1,399 | ) |       | $ | (8,189  | ) |  | $ | 1,751   |  
|Net income                                                    |  |                                    |  |              |        |        |      |   |          |   |                         |  |   |                          |   |  |                                            | 1,698  |   |       |   |        |   |  |   | 1,698   |  
|Currency translation adjustment                               |  |                                    |  |              |        |        |      |   |          |   |                         |  |   |                          |   |  |                                            |       |   |       |   | (2,504  | ) |  |   | (2,504  | )
|Unrealized loss on derivatives, net of tax of $0              |  |                                    |  |              |        |        |      |   |          |   |                         |  |   |                          |   |  |                                            |       |   |       |   | (1,151  | ) |  |   | (1,151  | )
|                                                              |  |                                     |  |              |         |        |       |   |          |   |                          |  |   |                           |   |  |                                            |        |   |       |   |         |   |  |   |         |  
|Comprehensive loss                                            |  |                                    |  |              |        |        |      |   |          |   |                         |  |   |                          |   |  |                                            |       |   |       |   |        |   |  |   | (1,957  | )
|Cumulative dividends on preferred stock                       |  |                                    |  |              | 1,293   |        |      |   |          |   |                         |  |   | (1,293                    | ) |  |                                            |       |   |       |   |        |   |  |   |        |  
|Transfer of Preferred A Stock to equity from mezzanine equity |  | 150                                 |  |              | 145,910 |        |      |   |          |   |                         |  |   |                          |   |  |                                            |       |   |       |   |        |   |  |   | 145,910 |  
|Common shares issued under stock plans, net of cancellations  |  |                                     |  |              |        |        | (6    | ) |          |   |                         |  |   | (1                        | ) |  |                                            |       |   |       |   |        |   |  |   | (1      | )
|Stock-based compensation expense                              |  |                                     |  |              |         |        |       |   |          |   |                          |  |   | 204                       |   |  |                                            |       |   |       |   |         |   |  |   | 204     |  
|Accretion of preferred stock discount                         |  |                                    |  |              | 225     |        |      |   |          |   |                         |  |   | (225                      | ) |  |                                            |       |   |       |   |        |   |  |   |        |  
|                                                              |  |                                     |  |              |         |        |       |   |          |   |                          |  |   |                           |   |  |                                            |        |   |       |   |         |   |  |   |         |  
|Balances at March 31, 2009                                    |  | 150                                 |  | $            | 147,428 |        | 9,452 |   |          | $ | 9                        |  | $ | 10,015                    |   |  | $                                          | 299    |   |       | $ | (11,844 | ) |  | $ | 145,907 |  
|                                                              |  |                                     |  |              |         |        |       |   |          |   |                          |  |   |                           |   |  |                                            |        |   |       |   |         |   |  |   |         |  

See accompanying notes to consolidated condensed financial statements



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Stream Global Services, Inc.

Consolidated Condensed Statements of Cash Flows

(Unaudited)

(In thousands)



|                                                                                                   |  |                                 |         |   |                                 |   |        |                                                  |  |   |        |  
|-------------------------------------------------------------------------------------------------- |  | ------------------------------- | ------- | - | ------------------------------- | - | ------ | ------------------------------------------------ |  | - | ------ | -
|                                                                                                   |  | Three MonthsEnded March 31,2009 |         |   | Three MonthsEnded March 31,2008 |   |        | Predecessor(SHC)Three MonthsEndedMarch 31,2008 | 
|Operating activities:                                                                              |  |                                 |         |   |                                 |   |        |                                                  |  |   |        |  
|                                                                                                   |  |                                 |        
|Net income (loss)                                                                                  |  | $                               | 1,698   |   |                                 | $ | 1,202  |                                                  |  | $ | (2,004 | )
|                                                                                                   |  |                                 |        
|Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |  |                                 |         |   |                                 |   |        |                                                  |  |   |        |  
|Depreciation and amortization                                                                      |  |                                 | 6,665   |   |                                 |   | 4      |                                                  |  |   | 3,657  |  
|Amortization and write-off of debt issuance costs                                                  |  |                                 | 1,194   |   |                                 |   |       |                                                  |  |   | 351    |  
|Deferred taxes                                                                                     |  |                                 | 235     |   |                                 |   |       |                                                  |  |   | 680    |  
|Market lease reserve                                                                               |  |                                 |        |   |                                 |   |       |                                                  |  |   | (848   | )
|Noncash stock compensation                                                                         |  |                                 | 204     |   |                                 |   |       |                                                  |  |   | 145    |  
|Noncash interest (income) expense                                                                  |  |                                 |        |   |                                 |   | (2,139 | )                                                |  |   | 228    |  
|Changes in operating assets and liabilities, net of the effect of acquisitions:                    |  |                                 |         |   |                                 |   |        |                                                  |  |   |        |  
|Accounts receivable                                                                                |  |                                 | (3,548  | ) |                                 |   |       |                                                  |  |   | (160   | )
|Income taxes receivable                                                                            |  |                                 | (119    | ) |                                 |   |       |                                                  |  |   | (4     | )
|Prepaid expenses and other current assets                                                          |  |                                 | (1,199  | ) |                                 |   | (79    | )                                                |  |   | (1,307 | )
|Other assets                                                                                       |  |                                 | (1,955  | ) |                                 |   |       |                                                  |  |   | (364   | )
|Accounts payable                                                                                   |  |                                 | 215     |   |                                 |   |       |                                                  |  |   | 1,049  |  
|Accrued expenses and other liabilities                                                             |  |                                 | (2,482  | ) |                                 |   | (439   | )                                                |  |   | 4,321  |  
|                                                                                                   |  |                                 |         |   |                                 |   |        |                                                  |  |   |        |  
|Net cash provided by (used in) operating activities                                                |  |                                 | 908     |   |                                 |   | (1,451 | )                                                |  |   | 5,744  |  
|                                                                                                   |  |                                 |         |   |                                 |   |        |                                                  |  |   |        |  
|                                                                                                   |  |                                 |        
|Investing activities:                                                                              |  |                                 |         |   |                                 |   |        |                                                  |  |   |        |  
|                                                                                                   |  |                                 |        
|Decrease (increase) in restricted cash                                                             |  |                                 |        |   |                                 |   | 2,895  |                                                  |  |   | (22    | )
|Additions to equipment and fixtures, net                                                           |  |                                 | (4,052  | ) |                                 |   | (12    | )                                                |  |   | (2,247 | )
|                                                                                                   |  |                                 |         |   |                                 |   |        |                                                  |  |   |        |  
|Net cash provided by (used in) investing activities                                                |  |                                 | (4,052  | ) |                                 |   | 2,883  |                                                  |  |   | (2,269 | )
|                                                                                                   |  |                                 |         |   |                                 |   |        |                                                  |  |   |        |  
|                                                                                                   |  |                                 |        
|Financing activities:                                                                              |  |                                 |         |   |                                 |   |        |                                                  |  |   |        |  
|                                                                                                   |  |                                 |        
|Net borrowings (repayments) on line of credit                                                      |  |                                 | (15,823 | ) |                                 |   |       |                                                  |  |   | (3,968 | )
|Proceeds from issuance of long-term debt                                                           |  |                                 | 22,959  |   |                                 |   |       |                                                  |  |   |       |  
|Payments on long-term debt                                                                         |  |                                 | (508    | ) |                                 |   |       |                                                  |  |   | (355   | )
|Payment of capital lease obligations                                                               |  |                                 | (520    | ) |                                 |   |       |                                                  |  |   | (541   | )
|                                                                                                   |  |                                 |         |   |                                 |   |        |                                                  |  |   |        |  
|Net cash provided by (used in) financing activities                                                |  |                                 | 6,108   |   |                                 |   |       |                                                  |  |   | (4,864 | )
|Effect of exchange rates on cash and cash equivalents                                              |  |                                 | (251    | ) |                                 |   |       |                                                  |  |   | (597   | )
|                                                                                                   |  |                                 |         |   |                                 |   |        |                                                  |  |   |        |  
|Net increase (decrease) in cash and cash equivalents                                               |  |                                 | 2,713   |   |                                 |   | 1,432  |                                                  |  |   | (1,986 | )
|Cash and cash equivalents, beginning of period                                                     |  |                                 | 10,660  |   |                                 |   | 1,161  |                                                  |  |   | 12,577 |  
|                                                                                                   |  |                                 |         |   |                                 |   |        |                                                  |  |   |        |  
|Cash and cash equivalents, end of period                                                           |  | $                               | 13,373  |   |                                 | $ | 2,593  |                                                  |  | $ | 10,591 |  
|                                                                                                   |  |                                 |         |   |                                 |   |        |                                                  |  |   |        |  
|                                                                                                   |  |                                 |        
|Supplemental cash flow information                                                                 |  |                                 |         |   |                                 |   |        |                                                  |  |   |        |  
|Cash paid for interest                                                                             |  | $                               | 1,293   |   |                                 | $ |       |                                                  |  | $ | 2,565  |  
|                                                                                                   |  |                                 |         |   |                                 |   |        |                                                  |  |   |        |  
|Cash paid for income taxes                                                                         |  | $                               | 1,922   |   |                                 | $ |       |                                                  |  | $ | 811    |  
|                                                                                                   |  |                                 |         |   |                                 |   |        |                                                  |  |   |        |  
|                                                                                                   |  |                                 |        
|Non-cash financing activity:                                                                       |  |                                 |         |   |                                 |   |        |                                                  |  |   |        |  
|Capital lease financing                                                                            |  | $                               |        |   |                                 | $ |       |                                                  |  | $ | 333    |  
|                                                                                                   |  |                                 |         |   |                                 |   |        |                                                  |  |   |        |  

See accompanying notes to consolidated condensed financial statements.



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##### Table of Contents

Stream Global Services, Inc.

Notes to Consolidated Condensed Financial Statements

March 31, 2009

(Unaudited)

(In thousands, except per share amounts)

Note 1Our History and Summary of Various
Transactions

Stream Global Services, Inc. (formerly Global BPO Services Corp.), referred to herein as we, us,
Stream, or SGS, was incorporated under the laws of the State of Delaware on June 26, 2007. We were formed as a blank check company for the purpose of acquiring businesses in the business process outsourcing industry.

In July 2008, we acquired Stream Holdings Corporation (SHC or Predecessor) for $128,815 in cash (which
reflected the $200,000 purchase price less assumed indebtedness, transaction fees, professional fees, stock option payments and payments for working capital). Also in July 2008, holders of 8,947 shares of our common stock exercised their
conversion rights in connection with the acquisition, and we paid an aggregate of $70,590 to such holders. In connection with our acquisition of SHC, we changed our name from Global BPO Services Corp. to Stream Global Services, Inc. In connection
with this acquisition we exited the development stage of operations.

In August 2008, we issued and sold 150 shares of our Series A
Convertible Preferred Stock, $0.001 par value per share (the Series A Preferred Stock), in a private placement with Ares Corporate Opportunities Fund II, L.P. (Ares) for an aggregate purchase price of $150,000 and our
founders also sold their 7,500 warrants to Ares. Also in August 2008, we commenced a self-tender offer to purchase up to 20,757 shares of our common stock at a purchase price of $8.00 per share. In September 2008, we closed the self-tender and
accepted for purchase 20,757 shares of our common stock for a total cost of approximately $166,000 in cash, excluding fees and expenses related to the self-tender offer.

Note 2Our Business

We are a global provider of customer relationship management
(CRM) and other business process outsourcing services to companies in the technology, software, consumer electronics and communications industries. Our CRM solutions encompass a wide range of telephone, e-mail and internet based services
and technical support programs designed to maximize the long-term value of the relationships between our clients and their customers, or end-users. Technical support programs include technical troubleshooting (including game support), hardware and
warranty support, hosted services, data management, telecommunications services and professional services. Customer service programs consist of activities such as customer setup/activations, up-sell or cross-sell programs, revenue generation,
customer billing inquiries, win-back programs, and customer retention initiatives. We work closely with our clients to design and implement large-scale, tailored CRM programs that provide comprehensive solutions to their specific business needs. We
deliver services from our 33 service centers in 18 countries across the world. As of March 31, 2009, we had over 17,000 employees providing services to our clients customers and administrative services in our business.

Pro Forma Results of Operations

Following
are pro forma unaudited results of operations for the three months ended March 31, 2008 assuming the acquisition of SHC (Predecessor) occurred on January 1, 2008:

We derived the pro forma results of operations from (i) the unaudited consolidated financial statements of SHC for the three months ended
March 31, 2008 and (ii) our unaudited consolidated financial statements for the three months ended March 31, 2008. The pro forma results of operations are not necessarily indicative of results of operations that may have actually
occurred had the merger taken place on January 1, 2008, or the future financial position or operating results of SHC. The pro forma adjustments are based upon available information and assumptions that we believe are reasonable. The pro forma
adjustments include adjustments for interest expense, reversal of interest income for SGS, amortization of intangible assets, transaction costs, depreciation expense for assets written up and market lease amortization.



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##### Table of Contents

Stream Global Services, Inc.

Pro Forma Consolidated Statements of Operations

(unaudited)



|                                                |  |                                  |         |  
|----------------------------------------------- |  | -------------------------------- | ------- | -
|                                                |  | Three Months EndedMarch 31, 2008 |        
|Revenue                                         |  | $                                | 140,372 |  
|Direct cost of revenue                          |  |                                  | 90,911  |  
|                                                |  |                                  |         |  
|Gross profit                                    |  |                                  | 49,461  |  
|                                                |  |                                  |         |  
|                                                | 
|Operating expenses:                             |  |                                  |         |  
|Selling, general and administrative expenses    |  |                                  | 42,045  |  
|Stock based compensation expense                |  |                                  | 145     |  
|Depreciation and amortization expense           |  |                                  | 5,533   |  
|                                                |  |                                  |         |  
|Total operating expenses                        |  |                                  | 47,723  |  
|                                                |  |                                  |         |  
|Income (loss) from operations                   |  |                                  | 1,738   |  
|                                                |  |                                  |         |  
|                                                | 
|Other (income) expenses, net:                   |  |                                  |         |  
|Foreign currency transaction loss (gain)        |  |                                  | (1,199  | )
|Other (income) expense, net                     |  |                                  | 603     |  
|Interest expense, net                           |  |                                  | 2,129   |  
|                                                |  |                                  |         |  
|Total other (income) expenses, net              |  |                                  | 1,533   |  
|                                                |  |                                  |         |  
|Income (loss) before provision for income taxes |  |                                  | 205     |  
|Provision for income taxes                      |  |                                  | 2,933   |  
|                                                |  |                                  |         |  
|Net income (loss)                               |  | $                                | (2,728  | )
|                                                |  |                                  |         |  

Note 3Basis of Presentation

Our consolidated financial statements as of March 31, 2009, and for the three months ended March 31, 2009 and 2008, respectively, include our
accounts and those of our wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. In the opinion of management, all normal recurring adjustments considered necessary for a fair
presentation have been included.

On July 31, 2008, we consummated our initial business acquisition with the acquisition of SHC and
emerged from a development stage corporation. Prior to July 31, 2008, we were a blank check company formed for the purpose of acquiring an operating company. Accordingly, we had no revenues prior to July 31, 2008 because we were in the
development stage. SHC is deemed to be our predecessor. As a result, the statement of operations and statement of cash flows of SGS for the three months ended March 31, 2008 are presented for comparative purposes. The accompanying
consolidated statements of operations and cash flows of SGS present the results of operations and cash flows for (i) the three months ended March 31, 2008 preceding the acquisition of SHC on July 31, 2008, exclusive of SHC results of
operations and cash flows and (ii) for the periods succeeding the acquisition, the consolidated results of operations including SHC are included in these financial statements. The results of operations and cash flows on a consolidated basis
subsequent to the acquisition of SHC are not comparative to the predecessor SHC results of operations and cash flows because the basis for the acquired assets and liabilities of SHC has been adjusted to fair value pursuant to Statement of Financial
Accounting Standards (SFAS) No. 141, Business Combinations (SFAS No. 141) nor are they indicative of future results.

Note 4Summary of Significant Accounting Policies

Unaudited Interim Financial Information

The accompanying consolidated condensed financial statements as of March 31, 2009 and for the three months ended March 31, 2009 and 2008, are
unaudited. The unaudited interim financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to
present fairly our financial position and results of operations and cash flows. The results for the three months ended March 31, 2009 are not necessarily indicative of the results to be expected for the year ended December 31, 2009, or for
any other interim period or future year.



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##### Table of Contents

Use of Estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principles in the United States requires the appropriate application of accounting policies, many of which require
management to make estimates and assumptions about future events and their impact on amounts reported in our consolidated financial statements and related notes. Since future events and their impact cannot be determined with certainty, the actual
results could differ from estimates. Such differences may be material to the consolidated financial statements.

Foreign Currency Translation and
Derivative Instruments

We account for financial derivative instruments utilizing SFAS No. 133 (SFAS 133), Accounting for
Derivative Instruments and Hedging Activities, as amended. We generally utilize deliverable and non-deliverable forward contracts expiring within one to 24 months to reduce our foreign currency exposure due to exchange rate
fluctuations on forecasted cash flows denominated in non-functional foreign currencies. Upon proper qualification, these contracts are accounted for as cash-flow hedges, as defined by SFAS 133. These contracts are entered into to protect against the
risk that the eventual cash flows resulting from such transactions will be adversely affected by changes in exchange rates. In using derivative financial instruments to hedge exposures to changes in exchange rates, we expose ourselves to
counterparty credit risk.

All derivatives, including foreign currency forward contracts, are recognized in the balance sheet at fair
value. Fair values for our derivative financial instruments are based on quoted market prices of comparable instruments or, if none are available, on pricing models or formulas using current market and model assumptions. On the date the derivative
contract is entered into, we determine whether the derivative contract should be designated as a cash flow hedge. Changes in the fair value of derivatives that are highly effective and designated as cash flow hedges are recorded in Accumulated
other comprehensive income (loss), until the forecasted underlying transactions occur. Any realized gains or losses resulting from the cash flow hedges are recognized together with the hedged transaction within Other Income
(expense). Cash flows from the derivative contracts are classified within Cash flows from operating activities in the accompanying Consolidated Statement of Cash Flows. Ineffectiveness is measured based on the change in fair value
of the forward contracts and the fair value of the hypothetical derivatives with terms that match the critical terms of the risk being hedged. Hedge ineffectiveness is recognized within Other Income (expense).

The assets and liabilities of our foreign subsidiaries, whose functional currency is their local currency, are translated at the exchange rate in effect
on the reporting date, and income and expenses are translated at the average exchange rate during the period. The net effect of translation gains and losses is not included in determining net income (loss), but is reflected in accumulated other
comprehensive income (loss) as a separate component of stockholders equity until the sale or until the liquidation of the net investment in the foreign subsidiary. Foreign currency transaction gains and losses are included in determining net
income (loss), and are categorized as Other income (expense).

We formally document all relationships between hedging
instruments and hedged items, as well as our risk management objective and strategy for undertaking various hedging activities. This process includes linking all derivatives that are designated as cash flow hedges to forecasted transactions. We also
formally assess, both at the hedges inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items on a prospective and retrospective
basis. When it is determined that a derivative is not highly effective as a hedge or that it has ceased to be a highly effective hedge or if a forecasted hedge is no longer probable of occurring, we discontinue hedge accounting prospectively. At
March 31, 2009, all hedges for Canadian Dollars were determined to be highly effective.

Our hedging program has been effective and
the amount of hedge ineffectiveness has not been material. Hedge accounting is also discontinued prospectively when (1) the derivative is no longer effective in offsetting changes in cash flow of a hedged item; (2) the derivative expires
or is sold, terminated, or exercised; (3) it is no longer probable that the forecasted transaction will occur; (4) a hedged firm commitment no longer meets the definition of a firm commitment; or (5) the derivative as a hedging
instrument is no longer effective.

Changes in fair value of derivatives not qualifying as hedges are reported in income. Upon settlement
of the derivatives qualifying as hedges, a gain or loss is reported in income.

We use forward exchange contracts, generally purchased with
a maturity of 90 days or less, to manage our exposure to movements in foreign exchange rates between the United States and between Canada and the United States and India. We recognize the foreign exchange contracts in the financial statements at
fair value. We hedge these exposures considering current market conditions, future operating activities and the cost of hedging exposure in relation to the perceived risk of loss. The fair value of the derivatives is determined by reference to
market data related to the selected currency forward and spot rates. As of March 31, 2009 and December 31, 2008, we had approximately $9,429 and $20,704, respectively, of foreign exchange risk hedged using forward exchange contracts. As of
March 31, 2009 and 2008, the fair market value of these derivative instruments was a gain of $90 and zero, respectively, which is reflected in accumulated other comprehensive income (loss).



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Fair Value of Financial Instruments

Effective January 1, 2008, we implemented SFAS No. 157, Fair Value Measurement , for our financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and
non-financial assets and liabilities that are re-measured and reported at fair value at least annually.

The following table presents
information about our assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2009, and indicates the fair value hierarchy of the valuation techniques we utilized to determine such fair value. In general,
fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates
and yield curves. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and includes situations where there is little, if any, market activity for the asset or liability:



|                           |  |                |       |                                         |   |                                             |  |                                  |    |  |   |  
|-------------------------- |  | -------------- | ----- | --------------------------------------- | - | ------------------------------------------- |  | -------------------------------- | -- |  | - | -
|                           |  | March 31, 2009 |       | Quoted Prices inActive Markets(Level 1) |   | Significant OtherObservableInputs (Level 2) |  | SignificantUnobservable(Level 3)
|Description                |  |                |       |                                         |   |                                             |  |                                  |    |  |   |  
|Cash equivalents           |  | $              | 919   |                                         | $ | 919                                         |  | $                                |   |  | $ | 
|Forward exchange contracts |  |                | 90    |                                         |   |                                            |  |                                  | 90 |  |   | 
|                           |  |                |       |                                         |   |                                             |  |                                  |    |  |   |  
|Total                      |  | $              | 1,009 |                                         | $ | 919                                         |  | $                                | 90 |  | $ | 
|                           |  |                |       |                                         |   |                                             |  |                                  |    |  |   |  

The fair values of our cash equivalents and forward exchange contracts are determined through
market, observable and corroborated sources.

The carrying amounts reflected in the consolidated balance sheets for other current assets,
accounts payable, and accrued expenses approximate fair value due to their short-term maturities. To the extent we have any outstanding borrowings under our revolving credit facility, the fair value would approximate its reported value because the
interest rate is variable and reflects current market rates.

Net Income (Loss) Per Share

We calculated net income (loss) per share in accordance with SFAS No. 128, Earnings Per Share, as clarified by Emerging Issues Task Force
(EITF) Issue No. 03-6, Participating Securities and the Two-Class Method under FASB Statement No. 128, which clarifies the use of the two-class method of calculating earnings per share as originally
prescribed in SFAS No. 128. EITF Issue No. 03-6 provides guidance on how to determine whether a security should be considered a participating security for purposes of computing earnings per share and how earnings per share
should be allocated to a participating security when using the two-class method for computing basic earnings per share. We have determined that our Preferred Stock represents a participating security and therefore have adopted the provisions of EITF
Issue No. 03-6.

Under the two-class method, basic net income (loss) per share is computed by dividing the net income (loss)
applicable to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted net income (loss) per share is computed using the more dilutive of (a) the two-class method or (b) the if-converted
method. We allocated net income first to preferred stockholders based on dividend rights under our certificate of incorporation and then to common and preferred stockholders based on ownership interests. Net losses are not allocated to preferred
stockholders. Diluted net income (loss) per share gives effect to all potentially dilutive securities.



|                                                 |  |                                   |      
|------------------------------------------------ |  | --------------------------------- | -----
|                                                 |  | Three Months Ended March 31, 2009
|Net income                                       |  | $                                 | 1,698
|Cumulative Convertible Preferred Stock dividends |  |                                   | 1,293
|Preferred Stock accretion                        |  |                                   | 225  
|                                                 |  |                                   |      
|Net income attributable for common stockholders  |  | $                                 | 180  
|                                                 |  |                                   |      



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The following common stock equivalents were excluded from computing diluted net loss per share
attributable to common stockholders because they had an anti-dilutive impact:



|                                                                                         |  |                                   
|---------------------------------------------------------------------------------------- |  | ----------------------------------
|                                                                                         |  | For The Period EndedMarch 31, 2009
|Options to purchase common stock at $6.00 per share                                      |  | 3,367                             
|Preferred stock convertible to common stock at $6.00 per share                           |  | 25,415                            
|Publicly held warrants at $6.00 per share                                                |  | 31,250                            
|Ares warrants to purchase common stock at $6.00 per share                                |  | 7,500                             
|                                                                                         |  |                                   
|Total preferred stock, options and warrants convertible or exercisable into common stock |  | 67,532                            
|                                                                                         |  |                                   

Diluted is the same as basic because the effect of the conversion on the Preferred Stock will be
anti-dilutive.

Accumulated other comprehensive income (loss) consists of the following:



|                                                     |  |                |         |   |                   |   |        |  
|---------------------------------------------------- |  | -------------- | ------- | - | ----------------- | - | ------ | -
|                                                     |  | March 31, 2009 |         |   | December 31, 2008 |  
|Unrealized (loss) gain on forward exchange contracts |  | $              | 90      |   |                   | $ | 1,241  |  
|Cumulative Translation adjustment                    |  |                | (11,934 | ) |                   |   | (9,430 | )
|                                                     |  |                |         |   |                   |   |        |  
|                                                     |  | $              | (11,844 | ) |                   | $ | (8,189 | )
|                                                     |  |                |         |   |                   |   |        |  

Recent Accounting Pronouncements

In December 2007, the FASB issued FAS No. 141R, Business Combinations (FAS 141R). FAS 141R replaces SFAS No. 141. FAS 141R
retains the fundamental requirements in SFAS No. 141 that the purchase method of accounting be used for all business combinations, that an acquirer be identified for each business combination and for goodwill to be recognized and measured as a
residual. FAS 141R expands the definition of transactions and events that qualify as business combinations to all transactions and other events in which one entity obtains control over one or more other businesses. FAS 141R broadens the fair value
measurement and recognition of assets acquired, liabilities assumed, and interests transferred as a result of business combinations. FAS 141R also increases the disclosure requirements for business combinations in the financial statements.
FAS 141R is effective for fiscal periods beginning after December 15, 2008. FAS No. 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period
beginning on or after December 15, 2008, with the exception of the accounting for valuation allowances on deferred taxes and acquired tax contingencies. FAS 141R amends SFAS 109, such that adjustments made to valuation allowances on deferred
income taxes and acquired income tax contingencies associated with acquisitions that closed prior to the effective date of SFAS 141R would apply the provisions of SFAS 141R. Given SFAS 141R relates to prospective and not historical business
combinations, the Company cannot currently determine the potential effects adoption of SFAS No. 141R may have on its consolidated financial statements.

In December 2007, the Financial Accounting Standards Board (FASB) issued FAS No. 160, Non-Controlling Interest in Consolidated Financial Statementsan Amendment of ARB No. 51
(FAS 160). FAS 160 requires that a non-controlling interest in a subsidiary be separately reported within equity and the amount of consolidated net income attributable to the non-controlling interest be presented in the statement of
operations. FAS 160 also calls for consistency in reporting changes in the parents ownership interest in a subsidiary and necessitates fair value measurement of any non-controlling equity investment retained in a deconsolidation. FAS 160 is
effective for fiscal periods beginning after December 15, 2008. Therefore, we were required to adopt FAS 160 on January 1, 2009. The adoption of FAS 160 did not have an impact on our financial position, results of operations or cash flow.

In March 2008, the FASB issued SFAS No. 161, Disclosures About Derivative Instruments and Hedging Activities (SFAS
161), which amends SFAS 133, Accounting for Derivative Instruments and Hedging Activities, by requiring increased qualitative, quantitative, and credit-risk disclosures about an entitys derivative instruments and hedging
activities. SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. The adoption of SFAS 161 did not have an impact on our financial position, results of operations or cash flow.

In April 2008, the FASB issued FASB Staff Position FSP No. FAS 142-3, Determination of the Useful Life of Intangible Assets (FSP No.
FAS 142-3). FSP No. FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142. The intent of FSP No. FAS
142-3 is to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the period of expected cash flows used to measure the fair value of the asset under FAS 141R and other U.S. generally accepted
accounting principles. FSP No. FAS 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008. The adoption of FSP No. FAS 142-3 did not have an impact on our financial position, results of operations
or cash flow



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In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting
Principles (SFAS 162). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented
in conformity with generally accepted accounting principles (the GAAP hierarchy). SFAS 162 will become effective 60 days following the Securities and Exchange Commissions approval of the Public Company Accounting Oversight Board
amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. We do not currently expect the adoption of SFAS 162 to have a material effect on our financial position,
results of operations, or cash flow.

Note 5Acquisitions

On July 31, 2008, we consummated the acquisition of SHC, pursuant to which we acquired all of the outstanding shares of capital stock of SHC and SHC became a wholly-owned subsidiary of SGS.

The amended and restated merger agreement dated June 2, 2008, by and among SGS, SHC, and River Acquisition Subsidiary Corp., stated that the
purchase price would be determined as $200,000 in cash less assumed indebtedness, transaction costs and payments for stock options and bonuses. The purchase price calculation is as follows:



|                                                                 |  |   |         |  
|---------------------------------------------------------------- |  | - | ------- | -
|Purchase price                                                   |  | $ | 200,000 |  
|Purchase adjustments for working capital items and cash acquired |  |   | 12,635  |  
|                                                                 |  |   |         |  
|Purchase price before liabilities                                |  |   | 212,635 |  
|Assumed indebtedness                                             |  |   | (89,221 | )
|                                                                 |  |   |         |  
|Net cash paid at closing                                         |  |   | 123,414 |  
|                                                                 |  |   |         |  
|SGS transaction-related costs                                    |  |   | 5,404   |  
|                                                                 |  |   |         |  
|Total allocable purchase price                                   |  | $ | 128,818 |  
|                                                                 |  |   |         |  

The acquisition was accounted for in accordance with the provisions of SFAS No. 141. The
transaction was valued for accounting purposes at $128,818. Included in the SGS transaction related costs are direct costs associated with investment banker fees and professional services for legal and accounting costs. Under the purchase method of
accounting, the assets and liabilities of SHC acquired are recorded as of the acquisition date at their respective fair values, and added to those of ours. The excess purchase price over those values is recorded as goodwill. The following table
summarizes the estimated fair value of assets acquired and the liabilities assumed and related deferred income taxes at the date of the acquisition.



|                                   |  |   |          |  
|---------------------------------- |  | - | -------- | -
|Current assets                     |  | $ | 131,172  |  
|Property and equipment             |  |   | 40,961   |  
|Goodwill                           |  |   | 51,819   |  
|Trade names                        |  |   | 16,100   |  
|Customer relationships             |  |   | 67,200   |  
|Technology-based intangible assets |  |   | 1,870    |  
|Other non-current assets           |  |   | 7,375    |  
|                                   |  |   |          |  
|Total assets acquired              |  |   | 316,497  |  
|                                   |  |   |          |  
|Current liabilities                |  |   | (76,351  | )
|Bank indebtedness                  |  |   | (75,555  | )
|Obligations under capital lease    |  |   | (7,745   | )
|Other liabilities                  |  |   | (28,028  | )
|                                   |  |   |          |  
|Total liabilities assumed          |  |   | (187,679 | )
|                                   |  |   |          |  
|Allocated purchase price           |  | $ | 128,818  |  
|                                   |  |   |          |  

The purchased intangibles and goodwill are not deductible for income tax purposes. However, for
accounting purposes deferred income tax liabilities on purchased intangibles (other than goodwill) will be charged to our future consolidated condensed statements of operations in proportion to and over the amortization period of related intangible
assets.



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##### Table of Contents

In accordance with EITF Issue No. 95-3, Recognition of Liabilities in Connection with
Purchase Business Combination (EITF 95-3) we accrued $1,428 of severance related costs incurred directly as a result of the acquisition. At March 31, 2009 the outstanding liability was $690.

At the time of the closing of the acquisition of SHC, $10,000 of the purchase price was placed into escrow with an escrow agent (the Escrow
Fund) to secure the indemnity obligations of the SHC stockholders and the holders of vested options under the merger agreement for damages sustained by SGS and its subsidiaries as a result of breaches of representation and warranties and
covenants by SHC. In certain instances, SGS may assert claims for indemnification against the Escrow Fund once its damages exceed a $500 threshold. In December 2008, SGS received $1,200 in payments from the Escrow Fund for claims related to working
capital adjustments. In April 2009, SGS received $1,200 for additional working capital claims, severance payments and earn-out payments related to our India operations. These amounts other than the earn-out payments, totaling approximately $2,000
were charged against the purchase price and reduced goodwill. We have until July 27, 2009 to make claims for breaches of representations against the Escrow Fund. We will continue to evaluate whether we have any other potential claims against
the Escrow Fund until that date. The Company will account for any recoveries under the indemnification agreement as a reduction to Goodwill when the proceeds are received.

In the first quarter 2009, we recorded an additional $4,133 to the purchase price of SHC resulting in an increase in goodwill to settle a contingent
liability that existed prior to our acquisition of SHC on July 31, 2008 related to a dispute concerning our Indian subsidiaries. This amount has been paid in the second quarter of 2009. We are in the process of assessing our pension obligations
related to SHC. Prior to the end of the one-year purchase price allocation period, if information becomes available that would indicate it is probable that such events had occurred and the amounts can be reasonably estimated, such items will be
included in the final purchase price allocation and may adjust goodwill.

Note 6Preferred Stock

On August 7, 2008, we issued and sold 150 shares of our Series A Preferred Stock for an aggregate purchase price of $150,000. As of March 31,
2009, Ares beneficially owned approximately 73% of the issued and outstanding shares of our common stock (assuming conversion of the outstanding Series A Preferred Stock and no exercise of any of the outstanding warrants to purchase 38,750 shares of
our common stock as of March 31, 2009). As of March 31, 2009 the Series A Preferred Stock is convertible at the option of Ares into 25,298 shares of our common stock at an initial conversion price of $6.00 per share, subject to adjustment
for stock dividends, subdivisions, reclassifications, combinations or similar type events; is redeemable at our option after August 7, 2015; and votes together with common stock, except on certain matters that affect the Series A Preferred
Stock, in which case the Series A Preferred Stock votes as a separate class.

On March 11, 2009, we filed an amendment to the
certificate of designations of Series A Preferred Stock (the Certificate of Amendment) with the Secretary of State of the State of Delaware which amended the terms of the Series A Preferred Stock as follows:

Dividends. The holders of the Series A Preferred Stock are entitled receive dividends at a rate of 5% per annum, an increase from 3% per
annum, commencing on March 11, 2009 or 10% per annum if we do not redeem at our option all of the then outstanding shares of Series A Preferred Stock prior to two business days after August 7, 2015 or all of the Series A Preferred
Stock has not been converted into our common stock. If an Acceleration Event (as defined in the Certificate of Amendment) occurs before August 7, 2015, then the Stated Value of each share of Series A Preferred Stock is automatically increased
by adding to the Stated Value all dividends that would otherwise be payable on a share of Series A Preferred Stock on each dividend payment date from the date on which the Acceleration Event occurs until August 7, 2015. The Stated
Value for each share of Series A Preferred Stock equals the sum of (i) $1 plus (ii) all accrued but unpaid dividends (including, without duplication, dividends added to Stated Value) on such Series A Preferred Stock as of the date of
calculation. In 2008, we accrued dividends of $1,790.

Liquidation Preference. In the event of a Liquidation Event (as defined in
the Certificate of Amendment) that is a sale of all or substantially all of our assets, if we distribute any of our assets or surplus funds to holders of our capital stock, we will distribute all of such assets or surplus funds to the extent legally
available for distribution. In the event of a Liquidation Event that is a merger or consolidation in which any shares of our capital stock are converted, exchanged or cancelled, all of the outstanding shares of capital stock will be converted,
exchanged or cancelled. The consideration payable to the holder of our capital stock will be determined in accordance with the terms of the Certificate of Amendment.

Conversion at our Option.We may request conversion of the Series A Preferred Stock into common stock only after August 7, 2011. In addition, the average closing price must exceed 150% or $9.00 per share
(this was previously $12.00 per share) of the conversion price for the 10 day period subsequent to our delivery of a notice of conversion. In addition, there must be outstanding at least 20,000 shares of our common stock (as adjusted for any stock
dividend, stock split, combination or other similar transaction) held by our non-affiliates, and certain other conditions must be satisfied or waived.



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Redemption. The holder of Series A Preferred Stock no longer has redemption rights. On the
issuance of the Series A Preferred Stock, we calculated the value of the beneficial conversion feature of our Series A Preferred Stock to be $49,503 and the value of warrants to be $3,253 and allocated the value of the discount on our Series A
Preferred Stock between the beneficial conversion feature and the related warrants. The beneficial conversion of Series A Preferred Stock was charged to retained earnings to the extent that retained earnings were available. The remaining amount of
excess of retained earnings was charged to additional paid-in capital. The amount allocated to the warrants will be accreted over 7 years.

The Company accounted for the amended terms of the Series A Preferred Stock at fair value on the date of the amendment. Consistent with the provisions of EITF D-42, we determined that the fair value of the modified security was equal to the
fair value of the initial security. Accordingly, we will not record any amount in earnings per share at the modification date and the increase in the dividend rate will be reflected in earnings per share as it is payable.

On March 20, 2009, we issued one share of our Series B Preferred Stock, $0.001 par value per share (the Series B Preferred Stock) to
Ares in consideration of Ares issuance of three letters of credit in an aggregate amount of $7,006 pursuant to our request under the Guarantee and Reimbursement Agreement dated March 2, 2009 among Stream and some of its subsidiaries and
Ares. We accounted for this preferred stock issuance as a guarantee and recorded at fair value as an asset and will amortize over one year into interest expense. As of March 31, 2009, the Series B Preferred Stock is convertible at the option of
Ares into 117 shares of our common stock at an initial conversion price of $6.00 per share, subject to adjustment for stock dividends, subdivisions, reclassifications, combinations or similar type events, and votes together with common stock, except
on certain matters that affect the Series B Preferred Stock, in which case the Series B Preferred Stock votes as a separate class. The terms of the Series B Preferred Stock are similar to the terms of the Series A Preferred Stock except as follows:

Dividends. Holders of the Series B Preferred Stock will be entitled to receive dividends at a rate of 5% per annum, payable
semi-annually in arrears every June 30 and December 31, commencing on the June 30, 2009. An amount equal to the sum of all accrued but unpaid dividends is also payable upon a Fundamental Transaction that the holders of Series B
Preferred Stock treat as a Liquidation Event (each as defined in the Certificate of Designations for the Series B Preferred Stock). Many of the events that would trigger a Fundamental Transaction are similar to those contained in the definition of
Acceleration Event in the Certificate of Amendment.

Conversion at our Option.Our ability to request conversion of the
Series B Preferred Stock is similar to our conversion rights with respect to the Series A Preferred Stock, except that we may also seek conversion if a Fundamental Transaction occurs that the holders of Series B Preferred Stock do not
treat as a Liquidation Event.

Redemption. Beginning on March 20, 2010, we may, at our option, redeem any of the Series B
Preferred Stock for a cash purchase price equal to the Stated Value (which has the same definition as for the Series A Preferred Stock).

Note
7Equipment and Fixtures, Net

Equipment and fixtures, net, consists of the following:



|                                                 |  |                |         |   |                   |   |        |  
|------------------------------------------------ |  | -------------- | ------- | - | ----------------- | - | ------ | -
|                                                 |  | March 31, 2009 |         |   | December 31, 2008 |  
|Furniture and fixtures                           |  | $              | 6,101   |   |                   | $ | 6,221  |  
|Building improvements                            |  |                | 11,213  |   |                   |   | 10,820 |  
|Computer equipment                               |  |                | 11,967  |   |                   |   | 11,244 |  
|Software                                         |  |                | 2,828   |   |                   |   | 2,266  |  
|Telecom and other equipment                      |  |                | 17,432  |   |                   |   | 16,651 |  
|Equipment and fixtures not yet placed in service |  |                | 2,037   |   |                   |   | 1,695  |  
|                                                 |  |                |         |   |                   |   |        |  
|                                                 |  |                | 51,578  |   |                   |   | 48,897 |  
|Less: accumulated depreciation                   |  |                | (11,075 | ) |                   |   | (7,263 | )
|                                                 |  |                |         |   |                   |   |        |  
|                                                 |  | $              | 40,503  |   |                   | $ | 41,634 |  
|                                                 |  |                |         |   |                   |   |        |  

Depreciation and amortization expense consists of the following:



|             |  |                                 |       |                                 |   |                                                   |  |   |      
|------------ |  | ------------------------------- | ----- | ------------------------------- | - | ------------------------------------------------- |  | - | -----
|             |  | Three MonthsEndedMarch 31, 2009 |       | Three MonthsEndedMarch 31, 2008 |   | Three MonthsEndedMarch 31, 2008Predecessor(SHC)
|Depreciation |  | $                               | 4,186 |                                 | $ | 4                                                 |  | $ | 3,657
|Amortization |  |                                 | 2,479 |                                 |   |                                                  |  |   |     
|             |  |                                 |       |                                 |   |                                                   |  |   |      



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|                                    |  |                                 |       |                                 |   |                                                   |  |   |      
|----------------------------------- |  | ------------------------------- | ----- | ------------------------------- | - | ------------------------------------------------- |  | - | -----
|                                    |  | Three MonthsEndedMarch 31, 2009 |       | Three MonthsEndedMarch 31, 2008 |   | Three MonthsEndedMarch 31, 2008Predecessor(SHC)
|Total depreciation and amortization |  | $                               | 6,665 |                                 | $ | 4                                                 |  | $ | 3,657
|                                    |  |                                 |       |                                 |   |                                                   |  |   |      

Note 8Accrued Employee Compensation and Benefits

Accrued employee compensation and benefits consists of the following:



|                                  |  |                |        |                   |   |       
|--------------------------------- |  | -------------- | ------ | ----------------- | - | ------
|                                  |  | March 31, 2009 |        | December 31, 2008
|Compensation related amounts      |  | $              | 17,871 |                   | $ | 16,374
|Vacation liabilities              |  |                | 11,379 |                   |   | 10,091
|Medical and dental liabilities    |  |                | 590    |                   |   | 713   
|Employer taxes                    |  |                | 1,691  |                   |   | 2,838 
|Retirement plans                  |  |                | 5,668  |                   |   | 7,924 
|Other benefit related liabilities |  |                | 2,171  |                   |   | 2,395 
|                                  |  |                |        |                   |   |       
|                                  |  | $              | 39,370 |                   | $ | 40,335
|                                  |  |                |        |                   |   |       

Note 9Other Accrued Expenses and Other Liabilities

Other accrued expenses consists of the following:



|                                   |  |                |        |                   |   |       
|---------------------------------- |  | -------------- | ------ | ----------------- | - | ------
|                                   |  | March 31, 2009 |        | December 31, 2008
|Liabilities for government grants  |  | $              | 164    |                   | $ | 227   
|Value-added and sales taxes        |  |                | 692    |                   |   | 674   
|Deferred underwriting fees         |  |                |       |                   |   | 63    
|Settlement of contingent liability |  |                | 4,703  |                   |   | 1,460 
|Professional fees                  |  |                | 3,743  |                   |   | 3,631 
|Accrued interest                   |  |                | 537    |                   |   | 324   
|Occupancy expense                  |  |                | 1,666  |                   |   | 1,451 
|Technology expense                 |  |                | 1,965  |                   |   | 2,275 
|Other accrued expenses             |  |                | 2,957  |                   |   | 5,445 
|                                   |  |                |        |                   |   |       
|                                   |  | $              | 16,427 |                   | $ | 15,550
|                                   |  |                |        |                   |   |       

Other liabilities consists of the following:



|                            |  |                |        |                   |   |       
|--------------------------- |  | -------------- | ------ | ----------------- | - | ------
|                            |  | March 31, 2009 |        | December 31, 2008
|Lease exit reserve          |  | $              | 541    |                   | $ | 738   
|Deferred revenue            |  |                | 1,352  |                   |   | 1,480 
|Market lease reserves       |  |                | 3,488  |                   |   | 3,460 
|Other                       |  |                | 400    |                   |   | 448   
|                            |  |                |        |                   |   |       
|Total current               |  | $              | 5,781  |                   | $ | 6,126 
|                            |  |                |        |                   |   |       
|Deferred revenue            |  | $              | 665    |                   | $ | 1,049 
|Deferred rent               |  |                | 523    |                   |   | 183   
|Accrued income taxes        |  |                | 6,765  |                   |   | 6,245 
|Market value lease reserves |  |                | 7,804  |                   |   | 8,910 
|                            |  |                |        |                   |   |       
|Total long term             |  | $              | 15,757 |                   | $ | 16,387
|                            |  |                |        |                   |   |       

Note 10Long-Term Debt and Revolving Credit Facility

On July 31, 2008, we, as guarantor, entered into the Fourth Amended and Restated Revolving Credit Term Loan and Security Agreement (the Credit
Agreement) with PNC Bank, National Association (PNC, as Lender and as Agent), PNC



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Capital Markets LLC (as Lead Arranger), SHC (as Borrowing Agent), and the other Loan Parties signatory thereto (as Loan Parties). The Credit Agreement
amended and restated SHCs credit facility with PNC, providing for an increase in the revolving credit from $86,000 to $100,000, extending the maturity date by five years to 2013 and providing for SGS as a guarantor. The Credit Agreement
included a $10,000 collateral reserve. The Credit Agreement did not otherwise materially change the terms of SHCs credit facility. This financing comprised a $100,000 senior secured revolving credit facility under which borrowing availability
was based on, among other things, the Borrowers (as defined in the Credit Agreement) eligible billed and unbilled accounts receivable. The financing facilities had a five-year term. Outstanding balances under the revolving credit facility
incurred interest at either LIBOR plus a margin ranging from 200 to 250 basis points or at the base rate plus a margin ranging from 0 to 25 basis points. The term loans incurred interest at LIBOR plus a margin ranging from 275 to 325 basis points or
at the base rate plus a margin ranging from 25 to 75 basis points, in each case based on the combined fixed charge coverage ratio of SHC. The interest rate was subject to change under additional circumstances. The facility also required compliance
with certain financial covenants. On November 14, 2008, we amended the Credit Agreement to extend the date for delivery of an audited opening balance sheet of the borrowers to April 1, 2009. The obligations of the Borrowers under the
facility were secured by certain assets of the Borrowers and by certain assets of SHC. In connection with the financing we paid a fee of $2,316 to PNC. This amount was being amortized over the life of the facility of five years but $984 was
charged to interest expense in January 2009 in connection with the Amended Credit Agreement described below.

On January 8, 2009, we
(as Guarantor) entered into the Fifth Amended and Restated Revolving Credit, Term Loan and Security Agreement with PNC Bank, National Association (PNC as Lender and as Agent), Steel City Capital Funding, LLC (as Term B Lender and as Term
B Agent), PNC Capital Markets LLC (as Lead Arranger), SHC (as Borrowing Agent), and the other Loan Parties signatory thereto (as Loan Parties) (the Amended Credit Agreement).

The Amended Credit Agreement amended and restated the Fourth Amended and Restated Revolving Credit Facility and provides that the Term B Lenders (as
defined in the Amended Credit Agreement) will extend the Borrowers (as defined in the Amended Credit Agreement) an aggregate principal amount of $25,000 which will be used to reduce the senior secured revolving credit facility from $100,000 to
approximately $77,000 and to repay approximately $2,041 in outstanding loans made to certain Foreign Borrowers (as defined in the Amended Credit Agreement). This financing comprises (A) a senior secured revolving credit facility equal to the
sum of (i) $75,000 and (ii) the sum of (a) $2,041 minus (b) an amount equal to (i) $82 multiplied by (ii) the number of months elapsed from January 8, 2009 to such date of determination (but in no event less
than zero); (B) a Term Loan A (as defined in the Amended Credit Agreement) to the US Borrowers (as defined in the Amended Credit Agreement) in the aggregate principle amount of $4,531; and (C) Term B Loans (as defined in the Amended Credit
Agreement) in the aggregate principal amount of $22,960. At March 31, 2009, the balance of the financing consisted of a senior secured domestic term loan of approximately $4,264, and a senior secured foreign term loan of approximately $2,041.

Borrowing availability under the senior secured revolving credit facility is based on, among other things, the Borrowers (as defined
in the Amended Credit Agreement) eligible billed and unbilled accounts receivable. The financing facilities mature on July 30, 2011.

Outstanding balances under the revolving credit facility other than any loans under the Amortizing Availability (as defined in Amended Credit Agreement) will bear interest at either LIBOR plus a margin ranging from 300 to 350 basis points
or at the base rate plus a margin ranging from 200 to 250 basis points. The Term Loan A (as defined in the Amended Credit Agreement) and Term B Loans under the Amortizing Availability will bear interest at LIBOR plus a margin ranging from 350 to 400
basis points or at the base rate plus a margin ranging from 250 to 300 basis points, and the Term B Loan (as defined in the Amended Credit Agreement) will bear interest at LIBOR plus a margin of 950 basis points (but in no event will the LIBOR rate
be lower than 4%) or at the base rate plus a margin of 850 basis points (but in no event will the base rate be lower than 5%), in each case based on the fixed charge coverage ratio of SHC. The interest rate is subject to increase under additional
circumstances. The balance outstanding under the prior credit facility and term loans continued as part of the new revolving credit and term debt facility except that part of the existing Term A Loan to us was refinanced with part of the new Term B
Loans. The facility also requires compliance with certain financial covenants which are fully detailed in the Amended Credit Agreement. We are in compliance with the financial covenants as of March 31, 2009. The obligations of the Borrowers
under the facility are secured by certain assets of the Borrowers and by certain assets of SHC.



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Long-term borrowings consist of the following:



|                         |  |                |        |   |                   |   |        |  
|------------------------ |  | -------------- | ------ | - | ----------------- | - | ------ | -
|                         |  | March 31, 2009 |        |   | December 31, 2008 |  
|Revolving line of credit |  | $              | 43,603 |   |                   | $ | 59,425 |  
|Term loans               |  |                | 29,264 |   |                   |   | 6,789  |  
|Other                    |  |                |       |   |                   |   | 24     |  
|                         |  |                |        |   |                   |   |        |  
|                         |  |                | 72,867 |   |                   |   | 66,238 |  
|Less current portion     |  |                | (1,607 | ) |                   |   | (2,614 | )
|                         |  |                |        |   |                   |   |        |  
|Long-term debt           |  | $              | 71,260 |   |                   | $ | 63,624 |  
|                         |  |                |        |   |                   |   |        |  

Minimum principal payments on long-term debt subsequent to March 31, 2009, are as follows:



|                         |  |       |       
|------------------------ |  | ----- | ------
|Years ended December 31, |  | Total
|2009                     |  | $     | 1,205 
|2010                     |  |       | 1,607 
|2011                     |  |       | 70,055
|                         |  |       |       
|Total                    |  | $     | 72,867
|                         |  |       |       

PNCs alternate base rate (5.0% at March 31, 2009) is the higher of the PNCs base
commercial lending rate or the Federal Funds Open Rate plus 0.5%. Interest is payable monthly on U.S. advances. Interest is payable on Eurodollar advances at the end of their one, two, three or six-month terms. For unused portions of the revolving
line of credit, we pay a facility fee equal to 0.5% of the unused borrowing base.

Revolving credit advances are limited to the borrowing
base. The borrowing base is 85% of eligible accounts receivable (foreign and domestic subject to certain limitations) and eligible unbilled revenues less the outstanding amount of letters of credit (approximately $1,700 at March 31, 2009),
various other reserves, and any outstanding advances under the revolving line of credit. In connection with the financing we capitalized $981 of new fees associated with the debt financing. This amount was being amortized over the life of the
facility.

On March 2, 2009, we entered into an Amendment No. 1 and Waiver to the Amended Credit Agreement. In order to create
additional Undrawn Availability (as defined under the Amended Credit Agreement) under the Amended Credit Agreement, SHC, Stream Florida Inc., Stream International Inc., Stream New York Inc. (collectively, with SGS, the Stream Entities),
have entered into the Reimbursement Agreement (described below) which provides that Ares or one or more of its affiliates (each an Ares Affiliate and each Ares Affiliate and Ares being referred to collectively as the Ares
Guarantors) may elect to provide, or cause one or more financial institutions or other entities to provide certain letters of credit, or other guarantees or backstop arrangements for the benefit of the Stream Entities. The Amended Credit
Agreement restricts the ability of the Loan Parties to enter into certain of the transactions under the Reimbursement Agreement. The Loan Parties requested Agent, Term Loan B Agent and Lenders amend the Amended Credit Agreement and waive any failure
to comply with the Amended Credit Agreement, with respect to the entering into and performance under the Reimbursement Agreement. The Amendment provides such requested amendments and waivers.

Also on March 2, 2009, the Stream Entities entered into the Guarantee and Reimbursement Agreement, with Ares (the Reimbursement
Agreement). Under the Reimbursement Agreement, the Stream Entities may request that Ares provide certain letters of credit, guarantees or other form of credit to support obligations of the Stream Entities in order to create additional Undrawn
Availability under the Amended Credit Agreement. Upon the written request of one of the Stream Entities, an Ares Guarantor may, in its discretion, provide, or cause a financial institution or other entity to provide, such letters of credit or
guarantee or otherwise backstop (each of the foregoing, an LC Guarantee) obligations of the Stream Entities under one or more existing letters of credit for the benefit of one or more of the Stream Entities; provided, that such LC
Guarantees are subject to certain limitations described in the Reimbursement Agreement, including that the obligations (whether fixed or contingent) of the Ares Guarantors under the LC Guarantees shall not exceed $10,000 in the aggregate under any
circumstance whatsoever and that each LC Guarantee shall continue in full force and effect for a term of twelve months from its issuance; provided further, that such LC Guarantee may not extend to a date later than the twelve month anniversary of
the first date on which Ares consents to an LC Guarantee under the Reimbursement Agreement, subject to certain exceptions. Each of the Stream Entities agreed to reimburse the Ares Guarantors for any and all amounts drawn or paid under the LC
Guarantees, or otherwise payable by the Ares Guarantors in connection with such LC Guarantees (collectively, the Reimbursement Obligations) which Reimbursement Obligations shall be subject to interest accruing at 5% per annum or
7% per annum if payment is not timely made. The rights granted to the Ares Guarantors under the Reimbursement Agreement are subject to the Subordination Agreement (as described below).



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Upon the delivery and effectiveness of an LC Guarantee, we agreed to issue to Ares or other Ares
Guarantors a number of shares (the Shares) of our Series B Preferred Stock equal to (i) one share multiplied by(ii) (a) the aggregate maximum amount which may be drawn or paid under such LC Guarantee with respect
to the Letter(s) of Credit supported by such LC Guarantee divided by(b) $10,000, with any fractional shares being rounded up to the nearest whole share ; provided, that, subject to certain exceptions in no event shall the aggregate
number of Shares issued exceed one. As security for their obligations under the Reimbursement Agreement, each of the Stream Entities (other than SGS) granted to Ares (on behalf of itself and for the ratable benefit of the other Ares Guarantors) a
continuing security interest in substantially all of its right, title and interest in, to and under the Collateral (as defined in the Reimbursement Agreement). The rights granted to the Ares Guarantors under the Reimbursement Agreement are subject
to the Subordination Agreement (described below). The Company accounted for this preferred stock issuance as a guarantee and recorded at fair value as an asset that will amortize over one year into interest expense.

On March 18, 2009, in response to a request by Stream under the Reimbursement Agreement, Ares issued three letters of credit in an aggregate amount
of $7,006, and we issued one share of Series B Preferred Stock to Ares in consideration of such letters of credit.

On March 2, 2009,
we entered into the Subordination and Intercreditor Agreement with PNC Bank (as Agent), Steel City Capital Funding, LLC, (as agent for Term B Lenders and as Term B Agent), Ares and the other Loan Parties signatory thereto (as Loan Parties) (the
Subordination Agreement). Pursuant to the Subordination Agreement, the obligations of the Stream Entities under the Reimbursement Agreement, and the liens granted therein, are junior and subordinate to the obligations of the Stream
Entities under, and to liens granted in connection with, the Amended Credit Agreement.

The credit facility also places limits on the
amounts of annual capital expenditures and incremental operating lease obligations which can be entered into in any year, establishes dividend restrictions and limits payments to affiliates, as defined. At March 31, 2009, we had $9,626 of
undrawn availability under the credit facility.

We had $7.0 million LC Guarantees outstanding at March 31, 2009.

We have $181 and $160 of restricted cash as of March 31, 2009 and December 31, 2008.

Note 11Income Taxes

The Companys annual
projected effective tax rate is 71%. This varies to the federal rate due to unbenefited U.S. losses.

We file income tax returns in the
U.S. federal jurisdiction and various state jurisdictions. Currently, we are not under audit for any open year in any U.S. jurisdictions. We operate in a number of international tax jurisdictions and are subject to audits of income tax returns by
tax authorities in those jurisdictions. We have open audit periods after 2002 in India, Canada and Europe, including France, Italy, Ireland, the Netherlands and the United Kingdom.

We adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement
No. 109 (FIN 48) upon inception. Pursuant to the adoption of FIN 48, we recorded a reserve for unrecognized tax benefits of zero.



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As of March 31, 2009 and December 31, 2008, the liability for unrecognized tax benefits (including interest and
penalties) was $7,309 and $6,778 was recorded within other long term liabilities in our consolidated financial statements. Included in these amounts is approximately $1,091 of unbenefited tax losses, which would be realized if the related uncertain
tax positions were settled. As of January 1, 2009, we had reserved $1,958 for accrued interest and penalties, which had increased to $2,431 as at March 31, 2009 and is included in the $7,309 of liability. We recognize accrued interest and
penalties associated with uncertain tax positions as part of the tax provision. The total amount of net unrealized tax benefits that would affect the income tax expense, if ever recognized in our consolidated financial statements is $6,217. This
amount includes interest and penalties of $2,431. Within the next 12 months it is reasonably expected that a decrease in the liability for uncertain tax benefits of between $1,000 and $1,300, including penalties and interest of between $350 and $500
will occur as a result of audit settlements. During the year a reduction of $400, including interest and penalties of $140, in the liability for uncertain tax benefits due to the expiration of statute of limitations are expected to occur.

Note 12Stock Options

The 2008
Stock Incentive Plan (the Plan) provides for the grant of incentive and nonqualified stock options, stock appreciation rights, restricted stock and other stock-based awards. The Plan initially authorized grants of up to 5,000 shares of
common stock at an exercise price not less than 100% of the fair value of our common stock at the date of grant. The Plan provides that the term of the options shall not exceed ten years from the grant date.

During the three months ended March 31, 2009, we granted options to purchase 353 shares of our common stock to our employees with an exercise price
of $6.00 per share, representing a premium to the fair value of the underlying common stock at the date of grant. Generally, options vest over a five year period, however, acceleration of vesting in 2009 is possible if we achieve certain earnings
targets during the 2009 fiscal year that would accelerate between six and twelve months of vesting. At March 31, 2009, 248 of the stock option grants were vested.

The per share fair value of options granted was determined using the Black-Scholes-Merton model.

The
following assumptions were used for the option grants in the three months ended March 31, 2009:



|                                                          |  |                                  |           |  
|--------------------------------------------------------- |  | -------------------------------- | --------- | -
|                                                          |  | Three months endedMarch 31, 2009 |          
|Option term (years)                                       |  |                                  | 6.375     |  
|Volatility                                                |  |                                  | 43        | %
|Risk-free interest rate                                   |  |                                  | 1.91-2.16 | %
|Dividend yield                                            |  |                                  | 0         | %
|Weighted-average grant date fair value per option granted |  | $                                | 1.12      |  

The expected volatility assumption for each year indicated below was based upon the historical
volatility of comparable companies from a representative peer group selected based on industry and market capitalization. The risk-free interest rate assumption was based upon the implied yields from the U.S. Treasury zero-coupon yield curve with a
remaining term equal to the expected term in options. The expected term of employee stock options granted was based on our estimated life of the options at the grant date.

Stock options under the Plan during three months ended March 31, 2009 were as follows:



|                                 |  |                                               |   |  |                              |      |                                                |     
|-------------------------------- |  | --------------------------------------------- | - |  | ---------------------------- | ---- | ---------------------------------------------- | ----
|                                 |  | Number of sharesunderlying outstandingoptions |   |  | WeightedAverageExercisePrice |      | WeightedAverageRemainingContractualTerm(Years)
|Outstanding at December 31, 2008 |  | 3,210                                         |   |  | $                            | 6.00 |                                                | 9.74
|Granted                          |  | 353                                           |   |  |                              | 6.00 |                                                |    
|Exercised                        |  |                                              |   |  |                              |     |                                                |    
|Forfeited or canceled            |  | (195                                          | ) |  |                              | 6.00 |                                                |    
|                                 |  |                                               |   |  |                              |      |                                                |     
|Outstanding at March 31, 2009    |  | 3,368                                         |   |  | $                            | 6.00 |                                                | 9.53
|                                 |  |                                               |   |  |                              |      |                                                |     

We have stock options to purchase 248 shares of our common stock exercisable at March 31,
2009.

For the three months ended March 31, 2009 and 2008, we recognized net stock compensation expense of $158 and zero for the stock
options in the table above.



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As of March 31, 2009, the aggregate intrinsic value (i.e., the difference in the estimated fair
value of our common stock and the exercise price to be paid by the option holder) of stock options outstanding, excluding the effects of expected forfeitures, was zero. The aggregate intrinsic value of the shares of exercisable stock at that time
was zero. The intrinsic value of options exercised for the three months ended March 31, 2009 and 2008 was zero.

As of March 31,
2009 and December 31, 2008, there was $2,377 and $1,312, respectively, of unrecognized compensation cost related to the unvested portion of time-based arrangements granted under the Plan. That cost is expected to be recognized over a
weighted-average period of 4.5 years from issue date.

Restricted stock award activity during the year ended March 31, 2009 was as
follows:



|                              |  |                 |   |  |                                       |     
|----------------------------- |  | --------------- | - |  | ------------------------------------- | ----
|                              |  | Number ofShares |   |  | Weighted averageGrant-Date Fair Value
|Outstanding December 31, 2008 |  | 92              |   |  | $                                     | 7.85
|Granted                       |  |                |   |  |                                       |    
|Vested                        |  | (6              | ) |  |                                       | 7.85
|Forfeited                     |  | (5              | ) |  |                                       | 7.85
|                              |  |                 |   |  |                                       |     
|Outstanding March 31, 2009    |  | 81              |   |  | $                                     | 7.85
|                              |  |                 |   |  |                                       |     

For the three months ended March 31, 2009 and 2008, we recognized net compensation expense of
$46 and zero for the restricted stock awards. Restricted stock awards vest quarterly over four years on a straight line basis.

Note 13Geographic
Operations and Concentrations

We operate in one operating segment, but provide services primarily in two regions: Americas,
which includes United States, Canada, Philippines, India, Costa Rica, Dominican Republic and El Salvador; and EMEA, which includes Europe, Middle East, and Africa.

The following table presents geographic information regarding our operations:



|         |  |                                |         |                                |   |                                                   |  |   |        
|-------- |  | ------------------------------ | ------- | ------------------------------ | - | ------------------------------------------------- |  | - | -------
|         |  | Three MonthsEndedMarch 31,2009 |         | Three MonthsEndedMarch 31,2008 |   | Three MonthsEndedMarch 31, 2008Predecessor(SHC)
|Revenues |  |                                |         |                                |   |                                                   |  |   |        
|Americas |  | $                              | 81,787  |                                | $ |                                                  |  | $ | 79,907 
|EMEA     |  |                                | 53,827  |                                |   |                                                  |  |   | 60,465 
|         |  |                                |         |                                |   |                                                   |  |   |        
|         |  | $                              | 135,614 |                                | $ |                                                  |  | $ | 140,372
|         |  |                                |         |                                |   |                                                   |  |   |        



|              |  |                |         |                   |   |        
|------------- |  | -------------- | ------- | ----------------- | - | -------
|              |  | March 31, 2009 |         | December 31, 2008
|Total assets: |  |                |         |                   |   |        
|Americas      |  | $              | 267,723 |                   | $ | 259,432
|EMEA          |  |                | 68,730  |                   |   | 70,513 
|              |  |                |         |                   |   |        
|              |  | $              | 336,453 |                   | $ | 329,945
|              |  |                |         |                   |   |        

We derive significant revenues from three clients. At March 31, 2009, two of our largest
clients are global computer companies and the other client is a communications content provider.



|           |  |                                  |   |  |                                  |  |                                                    |  
|---------- |  | -------------------------------- | - |  | -------------------------------- |  | -------------------------------------------------- | -
|           |  | Three Months EndedMarch 31, 2009 |   |  | Three Months EndedMarch 31, 2008 |  | Three Months EndedMarch 31, 2008Predecessor(SHC) |  
|Customer A |  | 18                               | % |  |                                 |  | 16                                                 | %
|Customer B |  | 16                               | % |  |                                 |  | 13                                                 | %
|Customer C |  | 11                               | % |  |                                 |  | 11                                                 | %

Related accounts receivable from these three clients were 22%, 13% and 8%, respectively, of our
total accounts receivable at March 31, 2009.



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|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|------- | --------------------------------------------------------------------------------------

This Report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended, or the Exchange Act. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown
risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied
by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as may, should, could, would, expect, plan,
anticipate, believe, estimate, continue, or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those
described in Item 1A, Risk Factors, of this Report and in our other Securities and Exchange Commission filings.

Overview

Stream Global Services, Inc. (we, us, Stream, or SGS) was incorporated under the laws
of the State of Delaware on June 26, 2007. We were formed as a blank check company for the purpose of acquiring, through a merger, capital stock exchange, asset or stock acquisition, exchangeable share transaction or other similar business
combination with one or more domestic or international operating businesses.

In August 2008, we issued and sold 150,000 shares of our
Series A Convertible Preferred Stock, $0.001 par value per share (the Series A Preferred Stock), in a private placement with Ares Corporate Opportunities Fund II, L.P. (Ares) for an aggregate purchase price of $150.0 million,
and our founders also sold their 7,500,000 warrants to Ares. Also in August 2008, we commenced a self-tender offer to purchase up to 20,757,000 shares of our common stock at a purchase price of $8.00 per share. In September 2008, we closed the
self-tender and accepted for purchase 20,757,000 shares of our common stock, for a total cost of approximately $166.0 million, excluding fees and expenses related to the offer.

We are a global provider of customer relationship management, or CRM, and other business process outsourcing, or BPO, services to companies in the
technology, software, consumer electronics and communications industries. Our CRM solutions encompass a wide range of telephone, e-mail and internet based services and technical support programs designed to maximize the long-term value of the
relationships between our clients and their customers, or end-users. Technical support programs include technical troubleshooting, hardware and warranty support, win-back programs, hosted services, data management, telecommunications services and
professional services. Customer service programs consist of activities such as customer setup/activations, up-sell or cross-sell programs, revenue generation, customer billing inquiries and customer retention or initiatives. We work closely with our
clients to design and implement large-scale, tailored CRM programs that provide comprehensive solutions to their specific business needs. We deliver services from our 33 service centers in 18 countries. As of March 31, 2009, we had over 17,000
employees providing services to our clients customers and administrative services throughout our business.

We are subject to
quarterly fluctuations in our revenues and earnings, based on the timing of new and expiring client programs and seasonality in certain client programs. From time to time clients seek to shift their CRM programs to lower cost providers, which may
interrupt or decrease our results of operations as we seek to shift personnel and other resources to the CRM and other BPO services provided to our higher margin clients.

Critical Accounting Policies

Use of Estimates

The preparation of consolidated condensed financial statements in conformity with generally accepted accounting principles in the United States requires
the appropriate application of accounting policies, many of which require management to make estimates and assumptions about future events and their impact on amounts reported in our consolidated condensed financial statements and related notes.
Since future events and their impact cannot be determined with certainty, the actual results may differ from estimates. Such differences may be material to the consolidated condensed financial statements.



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Equipment and Fixtures

Equipment and fixtures are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets. Furniture and
fixtures are depreciated over a five-year life, software over a three- to five-year life and equipment generally over a three- to five-year life. Leasehold improvements are depreciated over the shorter of their estimated useful life or the remaining
term of the associated lease. Assets held under capital leases are recorded at the lower of the net present value of the minimum lease payments or the fair value of the leased asset at the inception of the lease. Amortization expense is computed
using the straight-line method over the shorter of the estimated useful lives of the assets or the period of the related lease and is recorded in depreciation and amortization expense. Repair and maintenance costs are expensed as incurred.

The carrying value of equipment and fixtures to be held and used is evaluated for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable in accordance with Statement of Financial Accounting Standards, or SFAS, No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. An asset is considered to be
impaired when the sum of the undiscounted future net cash flows expected to result from the use of the asset and its eventual disposition does not exceed its carrying amount. The amount of the impairment loss, if any, is measured as the amount by
which the carrying value of the asset exceeds its estimated fair value, which is generally determined based on appraisals or sales prices of comparable assets. Occasionally, we redeploy equipment and fixtures from underutilized centers to other
locations to improve capacity utilization if it is determined that the related undiscounted future cash flows in the underutilized centers would not be sufficient to recover the carrying amount of these assets.

Goodwill and Other Intangible Assets

In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, or SFAS No. 142, goodwill is reviewed for impairment annually and on an interim basis if events or changes in circumstances between annual tests
indicate that an asset might be impaired. Impairment occurs when the carrying amount of goodwill exceeds its estimated fair value. The impairment, if any, is measured based on the estimated fair value of the reporting unit. We operate in one
reporting unit, which is the basis for impairment testing and the allocation of acquired goodwill.

Intangible assets with a finite life
are recorded at cost and amortized using their projected cash flows over their estimated useful life. Client lists and relationships are amortized over ten and one half years, market adjustments related to facility leases are amortized over the term
of the respective lease and developed software is amortized over five years. Brands and trademarks are not amortized as their life is indefinite. In accordance with SFAS 142, indefinite lived intangible assets are reviewed for impairment annually
and on an interim basis if events or changes in circumstances between annual tests indicate that an asset might be impaired.

The carrying
value of intangibles is evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable in accordance with SFAS No. 144. An asset is considered to be impaired when the sum of the
undiscounted future net cash flows expected to result from the use of the asset and its eventual disposition does not exceed its carrying amount. The amount of the impairment loss, if any, is measured as the amount by which the carrying value of the
asset exceeds its estimated fair value, which is generally determined based on appraisals or sales prices of comparable assets.

Stock-Based Compensation

At March 31, 2009, we had a stock-based compensation plan for employees and directors.

We adopted the fair value recognition provisions of SFAS No. 123(R), Share-Based Payment at our inception. For share-based
payments, the fair value of each grant, including both the time-based grants and the performance-based grants, is estimated on the date of grant using the Black-Scholes-Merton option valuation model and assumes the performance goals will be
achieved. If such goals are not met, no compensation cost is recognized and any previously recognized cost is reversed. Stock compensation expense is recognized on a straight-line basis over the vesting term, net of an estimated future forfeiture
rate. The forfeiture rate assumption 19.5% as of March 31, 2009) is based on the predecessors historical experience.

Income
Taxes

We account for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes, which requires recognition
of deferred assets and liabilities for the future income tax consequence of transactions that have been included in



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the consolidated financial statements or tax returns. Under this method deferred tax assets and liabilities are determined based on the difference between
the carrying amounts of assets and liabilities for financial reporting purposes, and the amounts used for income tax, using the enacted tax rates for the year in which the differences are expected to reverse. We provide valuation allowances against
deferred tax assets whenever we believe it is more likely than not, based on available evidence, that the deferred tax asset will not be realized.

We adopted Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 (FIN 48) at our inception.
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in financial statements and requires the impact of a tax position to be recognized in the financial statements if that position is more likely than not of being sustained by
the taxing authority. We recognize accrued interest and penalties associated with uncertain tax positions as part of the tax provision.

Recent
Accounting Pronouncements

In December 2007, the FASB issued FAS No. 141R, Business Combinations (FAS 141R). FAS
141R replaces SFAS No. 141. FAS 141R retains the fundamental requirements in SFAS No. 141 that the purchase method of accounting be used for all business combinations, that an acquirer be identified for each business combination and for
goodwill to be recognized and measured as a residual. FAS 141R expands the definition of transactions and events that qualify as business combinations to all transactions and other events in which one entity obtains control over one or more other
businesses. FAS 141R broadens the fair value measurement and recognition of assets acquired, liabilities assumed, and interests transferred as a result of business combinations. FAS 141R also increases the disclosure requirements for business
combinations in the financial statements. FAS 141R is effective for fiscal periods beginning after December 15, 2008. FAS No. 141R applies prospectively to business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after December 15, 2008, with the exception of the accounting for valuation allowances on deferred taxes and acquired tax contingencies. FAS 141R amends SFAS 109, such that
adjustments made to valuation allowances on deferred income taxes and acquired income tax contingencies associated with acquisitions that closed prior to the effective date of SFAS 141R would apply the provisions of SFAS 141R. An entity may not
apply SFAS 141R before that date. Given SFAS 141R relates to prospective and not historical business combinations, the Company cannot currently determine the potential effects adoption of SFAS No. 141R may have on its consolidated
financial statements.

In December 2007, the Financial Accounting Standards Board (FASB) issued FAS No. 160,
Non-Controlling Interest in Consolidated Financial Statementsan Amendment of ARB No. 51, or FAS 160. FAS 160 requires that a non-controlling interest in a subsidiary be separately reported within equity and the amount of
consolidated net income attributable to the non-controlling interest be presented in the statement of operations. FAS 160 also calls for consistency in reporting changes in the parents ownership interest in a subsidiary and necessitates fair
value measurement of any non-controlling equity investment retained in a deconsolidation. FAS 160 is effective for fiscal periods beginning after December 15, 2008. Therefore, we are required to adopt FAS 160 on January 1, 2009. The
adoption of FAS 160 did not have an impact on our financial position, results of operations, or cash flow.

In March 2008, the FASB issued
SFAS No. 161, Disclosures About Derivative Instruments and Hedging Activities,or SFAS 161, which amends SFAS 133, Accounting for Derivative Instruments and Hedging Activities, by requiring increased qualitative, quantitative, and
credit-risk disclosures about an entitys derivative instruments and hedging activities. FAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. The adoption of SFAS 161 did not have an impact on our
financial position, results of operations, or cash flows.

In April 2008, the FASB issued FASB Staff Position FSP No. FAS 142-3,
Determination of the Useful Life of Intangible Assets, or FSP No. FAS 142-3. FSP No. FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized
intangible asset under SFAS No. 142. The intent of FSP No. FAS 142-3 is to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the period of expected cash flows used to measure the
fair value of the asset under FAS 141R and other U.S. generally accepted accounting principles. FSP No. FAS 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008. The adoption of FSP
No. FAS 142-3 did not have an impact on our financial position, results of operations, or cash flows.

In May 2008, the FASB issued
SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles, or SFAS 162. SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial
statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (the GAAP hierarchy). SFAS 162 will become effective 60 days following the Securities and Exchange



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Commissions approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles. We do not currently expect the adoption of SFAS 162 to have a material effect on our financial position, results of operations, or cash flow.

Pro Forma and Adjusted Pro Forma Financial Information

The acquisition of SHC was our first business combination and, accordingly, we do not believe a historical comparison of the results of operations and cash flows for the three months ended March 31, 2009 compared to March 31,
2008 is beneficial to our stockholders. In order to assist readers to better understand the changes in our business between the periods ended March 31, 2009 and 2008, we are presenting the managements discussion and analysis section below
on the pro forma results of operations for SGS and SHC for the three months ended March 31, 2009 and 2008 as if the acquisition of SHC occurred on January 1, 2008. We derived the pro forma results of operations from (i) the
consolidated financial statements of SHC for the period from January 1, 2008 to July 31, 2008 (the date of the SHC acquisition), and (ii) our consolidated financial statements for the three months ended March 31, 2009 and 2008.
We are presenting the pro forma information in order to provide a more meaningful comparison of our operating results with prior periods. The pro forma results of operations are not necessarily indicative of results of operations that may have
actually occurred had the merger taken place on the dates noted, or the future financial position or operating results of SHC. The pro forma adjustments are based upon available information and assumptions that we believe are reasonable and provide
useful information to the reader of this section. The pro forma adjustments include adjustments for interest expense, reversal of interest income for SGS, amortization of intangible assets, transaction costs, depreciation expense for assets written
up and market lease amortization.



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The following are actual unaudited results of operations for the three months ended March 31, 2009
and pro forma unaudited results for the three months ended March 31, 2008 assuming the acquisition of SHC occurred on January 1, 2008:

Stream Global Services, Inc.

Pro Forma Consolidated Statements of Operations

(unaudited)

(in thousands)



|                                                |  |                                  |         |   |                                  |   |         |   
|----------------------------------------------- |  | -------------------------------- | ------- | - | -------------------------------- | - | ------- | --
|                                                |  | Three Months EndedMarch 31, 2009 |         |   | Three Months EndedMarch 31, 2008 |  
|Revenue                                         |  | $                                | 135,614 |   |                                  | $ | 140,372 |   
|Direct cost of revenue                          |  |                                  | 78,613  |   |                                  |   | 90,911  |   
|                                                |  |                                  |         |   |                                  |   |         |   
|Gross profit                                    |  |                                  | 57,001  |   |                                  |   | 49,461  |   
|                                                |  |                                  |         |   |                                  |   |         |   
|Operating expenses:                             |  |                                  |         |   |                                  |   |         |   
|Selling, general and administrative expenses    |  |                                  | 43,298  |   |                                  |   | 42,045  |   
|Stock based compensation expense                |  |                                  | 204     |   |                                  |   | 145     |   
|Depreciation and amortization expense           |  |                                  | 6,665   |   |                                  |   | 5,533   |   
|                                                |  |                                  |         |   |                                  |   |         |   
|Total operating expenses                        |  |                                  | 50,167  |   |                                  |   | 47,723  |   
|                                                |  |                                  |         |   |                                  |   |         |   
|Income (loss) from operations                   |  |                                  | 6,834   |   |                                  |   | 1,738   |   
|                                                |  |                                  |         |   |                                  |   |         |   
|Other (income) expenses, net:                   |  |                                  |         |   |                                  |   |         |   
|Foreign currency transaction loss (gain)        |  |                                  | (852    | ) |                                  |   | (1,199  | ) 
|Other (income) expense, net                     |  |                                  | 7       |   |                                  |   | 603     |   
|Interest expense, net                           |  |                                  | 2,895   |   |                                  |   | 2,129   |   
|                                                |  |                                  |         |   |                                  |   |         |   
|Total other (income) expenses, net              |  |                                  | 2,050   |   |                                  |   | 1,533   |   
|                                                |  |                                  |         |   |                                  |   |         |   
|Income (loss) before provision for income taxes |  |                                  | 4,784   |   |                                  |   | 205     |   
|Provision for income taxes                      |  |                                  | 3,086   |   |                                  |   | 2,933   |   
|                                                |  |                                  |         |   |                                  |   |         |   
|Net income (loss)                               |  | $                                | 1,698   |   |                                  | $ | (2,728  | ) 
|                                                |  |                                  |         |   |                                  |   |         |   
|                                                |  |                                 
|Amounts as a percentage of revenue              |  |                                  |         |   |                                  |   |         |   
|                                                |  |                                 
|                                                |  | Three Months EndedMarch 31, 2009 |         |   | Three Months EndedMarch 31, 2008 |  
|Revenue                                         |  |                                  | 100     | % |                                  |   | 100     | % 
|Direct cost of revenue                          |  |                                  | 58.0    |   |                                  |   | 64.8    |   
|                                                |  |                                  |         |   |                                  |   |         |   
|Gross profit                                    |  |                                  | 42.0    |   |                                  |   | 35.2    |   
|                                                |  |                                  |         |   |                                  |   |         |   
|Operating expenses:                             |  |                                  |         |   |                                  |   |         |   
|Selling, general and administrative expenses    |  |                                  | 31.9    |   |                                  |   | 29.9    |   
|Stock based compensation expense                |  |                                  | 0.2     |   |                                  |   | 0.1     |   
|Depreciation and amortization expense           |  |                                  | 4.9     |   |                                  |   | 3.9     |   
|                                                |  |                                  |         |   |                                  |   |         |   
|Total operating expenses                        |  |                                  | 37.0    |   |                                  |   | 33.9    |   
|                                                |  |                                  |         |   |                                  |   |         |   
|Income (loss) from operations                   |  |                                  | 5.0     |   |                                  |   | 1.3     |   
|                                                |  |                                  |         |   |                                  |   |         |   
|Other (income) expenses, net:                   |  |                                  |         |   |                                  |   |         |   
|Foreign currency transaction loss (gain)        |  |                                  | (0.6    | ) |                                  |   | (0.8    | ) 
|Other (income) expense, net                     |  |                                  | 0.0     |   |                                  |   | 0.4     |   
|Interest expense, net                           |  |                                  | 2.1     |   |                                  |   | 1.5     |   
|                                                |  |                                  |         |   |                                  |   |         |   
|Total other (income) expenses, net              |  |                                  | 1.5     |   |                                  |   | 1.1     |   
|                                                |  |                                  |         |   |                                  |   |         |   
|Income (loss) before provision for income taxes |  |                                  | 3.5     |   |                                  |   | 0.2     |   
|Provision for income taxes                      |  |                                  | 2.3     |   |                                  |   | 2.1     |   
|                                                |  |                                  |         |   |                                  |   |         |   
|Net income (loss)                               |  |                                  | 1.2     | % |                                  |   | (1.9    | )%
|                                                |  |                                  |         |   |                                  |   |         |   



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Revenues

We derive the majority of our revenues by providing CRM services such as technical support, warranty support and game support, hosted services, data management, telecommunication services, professional services and
customer care services. Our services are typically bundled together to include our work provided by our service professionals, our hosted technology, our data management and reporting and other professional services. We bill monthly for our services
in a variety of manners, including per minute, per contact, per hour and per full-time employee equivalent. Revenues also include reimbursement of certain expenses including direct telecom, training and miscellaneous costs for certain customers.

Direct Cost of Revenue

We record the costs specifically associated with client programs as direct cost of revenues. These costs include direct labor wages and benefits of service professionals as well as reimbursable expenses such as telecommunication charges.
Telecommunication charges that are directly reimbursable are included in direct cost of revenue, while telecommunication charges that are not directly reimbursed are included in operating expenses. The most significant portion of our direct cost of
revenue is attributable to employee compensation, benefits and payroll taxes. These costs are expensed as they are incurred. Direct costs are affected by prevailing wage rates in the countries in which they are incurred and are subject to the
effects of foreign currency fluctuations.

Operating Expenses

Our operating expenses consist of all expenses of operations other than direct costs of revenue, such as information technology, telecommunications sales
and marketing costs, finance, human resource management and other functions and service center operational expenses such as facilities, operations and training and depreciation and amortization.

Other (Income) Expenses, net

Other
expenses consist of the foreign currency transaction gains or losses, other income, interest income and interest expense. Interest expense includes interest expense and amortization of debt issuance costs associated with our indebtedness under our
credit lines, term loans, and capitalized lease obligations.

We generate revenue and incur expenses in several different currencies. We do
not operate in any countries subject to hyper-inflationary accounting treatment. Our most common transaction currencies are the U.S. Dollar, the Euro, the Canadian Dollar, the British Pound, and the Indian Rupee. Our customers are most commonly
billed in the U.S. Dollar or the Euro. We report our operating results using the average actual exchange rates in effect during the accounting period.

Provision for Income Taxes

We account for income taxes in accordance with SFAS No. 109 which
requires recognition of deferred assets and liabilities for the future income tax consequence of transactions that have been included in the consolidated financial statements or tax returns. Under this method, deferred tax assets and liabilities are
determined based on the difference between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax, using the enacted tax rates for the year in which the differences are expected to
reverse. We provide valuation allowances against deferred tax assets whenever we believe it is more likely than not, based on available evidence, that the deferred tax asset will not be realized.

We adopted FIN 48, at our inception. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in financial statements and requires
the impact of a tax position to be recognized in the financial statements if that position is more likely than not of being sustained by the taxing authority. We recognize accrued interest and penalties associated with uncertain tax positions as
part of the tax provision.



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Results of Operations

Three months ended March 31, 2009 compared with three months ended March 31, 2008

Revenues. Revenues decreased $4.7 million, or 3.4%, to $135.6 million for the three months ended March 31, 2009, compared to $140.4 million for the three months ended March 31, 2008. The decrease is primarily attributable
to three clients that terminated or reduced their contracts with us after the three months ended March 31, 2008 and before the acquisition date of July 31, 2008.

Revenues for services performed in our U.S. and Canada service centers decreased $7.6 million, or 11.7%, for the three months ended March 31, 2009,
as a result of customer losses, representing approximately $14.9 million of revenues in the three months ended March 31, 2009, that occurred prior to our acquisition of SHC on July 31, 2008. Revenues for services performed in European
service centers decreased $8.1 million, or 14.2%. The majority of this decrease is attributable to decreased volumes from lost clients and re-priced contracts totaling $3.6 million that occurred prior to the acquisition on July 31, 2008,
coupled with the effect of a lower Euro value relative to the U.S. dollar in 2009 as compared to 2008. Revenues for services performed in offshore service centers in Philippines, India, El Salvador, Costa Rica, the Dominican Republic and Tunisia
increased $10.9 million, or 58.4%, due to additional volume from existing and new clients plus the effect of a full quarter of operations in our El Salvador site, which we acquired in October 2008. Revenues in our offshore service centers
represented 21.9% of consolidated revenues for the three months ended March 31, 2009, compared to 13.3% in the same period in 2008. Over the past several months we have sold several new contracts in various segments such as telecommunications,
software and computing and have expanded our business with certain existing clients that will begin to ramp during the second quarter of 2009. We expect to experience the effect of increased revenues and cost associated with these ramps primarily in
the second half of 2009.

Direct Cost of Revenue. Direct cost of revenue (exclusive of depreciation and amortization) decreased
$12.3 million, or 13.5%, to $78.6 million for the three months ended March 31, 2009, compared to $90.9 million for the three months ended March 31, 2008. This decrease is primarily attributable to decreased labor costs of $12.0 million or
13.8%. Our labor costs decreased due to an effort to improve the performance of our operations by eliminating unnecessary positions and better utilizing existing service professionals. After excluding the $7.9 million favorable Canadian and Euro
currency exchange impact, direct labor costs decreased by $4.1 million or 4.7%.

Gross Profit. Gross profit increased $7.5 million,
or 15.2%, to $57.0 million for the three months ended March 31, 2009 from $49.5 million for the three months ended March 31, 2008. Gross profit as a percentage of revenue increased from 35.2% to 42.0%. Gross profit percentage increased
primarily due to increased revenue in offshore locations and stronger management of our costs in connection with services performed by focusing on key operating metrics such as average handle time, utilization, productivity and attrition of our
service professionals. We expect to ramp a significant number of new clients in the second quarter of 2009. As a result we will incur and expense various costs related to these ramps for recruiting, training, infrastructure and technology expenses
and lower productivity in the initial phase of the contract. As a result we expect that our gross profit percentage of revenues may be lower in the second quarter of 2009.

Operating Expenses. Operating expenses increased $2.4 million, or 5.1%, to $50.2 million for the three months ended March 31, 2009, compared
to $47.7 million for the three months ended March 31, 2008, primarily due to an increase in selling, general and administrative expense, which grew from $42.0 million to $43.3 million, or 3.0%. The increase in selling, general and
administrative expense was due to a $1.1 million increase in labor costs due to incremental management, operations and administrative staff. Depreciation and amortization increased $1.1 million as a result of additions to equipment and fixtures
totaling $19.2 million including capital leases during the twelve months ended March 31, 2009. The additions to equipment and fixtures were to support new business, open new service centers in locations like the Philippines, Tunisia, Egypt and
El Salvador and maintain and upgrade our technology infrastructure and applications. Amortization increased due to our acquisition of the El Salvador operations in October 2008. Operating expenses as a percentage of revenues increased to 37.0% for
the three months ended March 31, 2009 compared to 34.0% for the three months ended March 31, 2008.

Other (Income) Expenses,
Net. Other (income) expenses, net increased $0.5 million, or 33.7%, to $2.1 million for the three months ended March 31, 2009, compared to $1.5 million for the three months ended March 31, 2008. This increase is primarily due to
interest expense of $2.9 million for the three months ended March 31, 2009 as compared to $2.1 million for the three months ended March 31, 2008 due to a write-down of $984 deferred issuance costs associated with reduced borrowing capacity
related to the line of credit.

Provision for Income Taxes. Income taxes increased $0.2 million, or 5.2%, to $3.1 million for the
three months ended March 31, 2009 compared to $2.9 million for the three months ended March 31, 2008. Foreign tax expense comprised $2.9



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million for the three months ended March 31, 2009 and 2008 and the effective foreign tax rate decreased from 38.1% to 32.8%. We operate in a number of
countries outside the U.S. that are generally taxed at lower rates and this can have a significant impact on the effective tax rate.

Net Income (Loss). Net income for the three months ended March 31, 2009 was $1.7 million as compared to a net loss for the three months ended March 31, 2008 of $3.4 million. This increase is primarily due to increased
margins offset by increased interest expense and depreciation and amortization expense.

Liquidity and Capital Resources

Our primary liquidity needs are for financing working capital associated with the expenses we incur in performing services under our client contracts and
capital expenditures for the opening of new service centers, including the purchase of computers and related equipment. We have in place a credit facility that includes term loans and a revolving line of credit that allow us to manage our cash
flows. Our ability to make payments on the credit facility, to replace our indebtedness, and to fund working capital and planned capital expenditures will depend on our ability to generate cash in the future. We have secured our working capital
facility through our accounts receivable and therefore, our ability to continue servicing debt is dependent upon the timely collection of those receivables.

We made capital expenditures of $4.1 million in the three months ended March 31, 2009 as compared to $2.2 million in the three months ended March 31, 2008 for SHC. We expect to continue to make capital
expenditures to build new service centers in the Philippines, Cairo and Tunisia, meet new contract requirements and maintain and upgrade our technology. We expect to continue to expand into new facilities in 2009 such as in the Philippines, Egypt,
Tunisia, China, and South and Latin America. We also expect to invest in technology initiatives such as At Home Agents, unified communications and enabling technology, business continuity and data security, web based solutions and
applications and distributed collaboration networking. The convergence of voice and data as well as the demand for real time diagnostics and analytics by our clients are requiring us to make substantial future investments in technology and solutions
that will require additional capital investments. During the second quarter of 2009, we settled a dispute related to our Indian subsidiaries related to a preacquisition contingency totaling $4.0 million in cash. This will reduce our liquidity in the
second quarter of 2009.

In January 2009, we (as Guarantor) entered into the Fifth Amended and Restated Revolving Credit, Term Loan
and Security Agreement with PNC Bank, National Association (PNC as Lender and as Agent), Steel City Capital Funding, LLC (as Term B Lender and as Term B Agent), PNC Capital Markets LLC (as Lead Arranger), SHC (as Borrowing Agent), and
the other Loan Parties signatory thereto (as Loan Parties) (the Amended Credit Agreement).

The Amended Credit Agreement amends
and restates the Fourth Amended and Restated Revolving Credit Facility with PNC entered into in July 2008 and as further amended. The Amended Credit Agreement provides that the Term B Lenders (as defined in the Amended Credit Agreement) will
extend the Borrowers (as defined in the Amended Credit Agreement) an aggregate principal amount of $25.0 million which will be used to reduce the senior secured revolving credit facility from $100.0 million to approximately $77.0 million and to
repay approximately $2.0 million in outstanding loans made to certain Foreign Borrowers (as defined in the Amended Credit Agreement). This financing comprises (A) a senior secured revolving credit facility equal to the sum of (i) $75.0
million and (ii) the sum of (a) $2.0 million minus (b) an amount equal to (i) $82.0 million multiplied by (ii) the number of months elapsed from January 8, 2009 to such date of determination (but in no event less
than zero); (B) a Term Loan A (as defined in the Amended Credit Agreement) to the US Borrowers (as defined in the Amended Credit Agreement) in the aggregate principle amount of $4.5 million; and (C) Term B Loans (as defined in the Amended
Credit Agreement) in the aggregate principal amount of $25.0 million.

Borrowing availability under the senior secured revolving credit
facility is based on, among other things, the Borrowers (as defined in the Amended Credit Agreement) eligible billed and unbilled accounts receivable. The financing facilities mature on July 30, 2011.

Outstanding balances under the revolving credit facility other than any loans under the Amortizing Availability (as defined in Amended Credit Agreement)
will bear interest at either LIBOR plus a margin ranging from 300 to 350 basis points or at the base rate plus a margin ranging from 200 to 250 basis points. The Term Loan A (as defined in the Amended Credit Agreement) and Term B Loans under the
Amortizing Availability will bear interest at LIBOR plus a margin ranging from 350 to 400 basis points or at the base rate plus a margin ranging from 250 to 300 basis points, and the Term B Loan (as defined in the Amended Credit Agreement) will bear
interest at LIBOR plus a margin of 950 basis points (but in no event will the LIBOR rate be lower than 4%) or at the base rate plus a margin of 850 basis points (but in no event will the base rate be lower than 5%), in each case based on the fixed
charge coverage ratio of SHC. The interest rate is subject to increase under additional circumstances. The balance outstanding under the prior credit facility and term loans continued as part of the



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new revolving credit and term debt facility except that part of the existing Term A Loan to us was refinanced with part of the new Term B Loans. The facility
also requires compliance with certain financial covenants which are fully detailed in the Amended Credit Agreement. At March 31, 2009, we were in compliance with these covenants. The obligations of the Borrowers under the facility are secured by
certain assets of the Borrowers and by certain assets of SHC. The guarantee provided by us is unsecured.

On March 2, 2009, we entered
into an Amendment No. 1 and Waiver to the Amended Credit Agreement. In order to create additional Undrawn Availability (as defined under the Amended Credit Agreement) under the Amended Credit Agreement, SHC, Stream Florida Inc., Stream
International Inc., Stream New York Inc. (collectively, with SGS, the Stream Entities), have entered into the Reimbursement Agreement (described below) which provides that Ares or one or more of its affiliates (each an Ares
Affiliate and each Ares Affiliate and Ares being referred to collectively as the Ares Guarantors) may elect to provide, or cause one or more financial institutions or other entities to provide certain letters of credit, or other
guarantees or backstop arrangements for the benefit of the Stream Entities. The Amended Credit Agreement restricts the ability of the Loan Parties to enter into certain of the transactions under the Reimbursement Agreement. The Loan Parties
requested Agent, Term Loan B Agent and Lenders amend the Amended Credit Agreement and waive any failure to comply with the Amended Credit Agreement, with respect to the entering into and performance under the Reimbursement Agreement. The Amendment
provides such requested amendments and waivers. Also on March 2, 2009, the Stream Entities entered into the Guarantee and Reimbursement Agreement, with Ares (the Reimbursement Agreement). Under the Reimbursement Agreement, the
Stream Entities may request that Ares or one or more of its affiliates (together with Ares, the Ares Guarantors) provide certain letters of credit, guarantees or other form of credit to support obligations of the Stream Entities in order
to create additional Undrawn Availability under the Amended Credit Agreement. Upon the written request of one of the Stream Entities, an Ares Guarantor may, in its discretion, provide, or cause a financial institution or other entity to provide,
such letters of credit or guarantee or otherwise backstop (each of the foregoing, an LC Guarantee) obligations of the Stream Entities under one or more existing letters of credit for the benefit of one or more of the Stream Entities;
provided, that such LC Guarantees are subject to certain limitations described in the Reimbursement Agreement, including that the obligations (whether fixed or contingent) of the Ares Guarantors under the LC Guarantees shall not exceed $10.0 million
in the aggregate under any circumstance whatsoever and that each LC Guarantee shall continue in full force and effect for a term of twelve months from its issuance; provided further, that such LC Guarantee may not extend to a date later than the
twelve month anniversary of the first date on which Ares consents to an LC Guarantee under the Reimbursement Agreement, subject to certain exceptions. Each of the Stream Entities agreed to reimburse the Ares Guarantors for any and all amounts drawn
or paid under the LC Guarantees, or otherwise payable by the Ares Guarantors in connection with such LC Guarantees (collectively, the Reimbursement Obligations) which Reimbursement Obligations shall be subject to interest accruing at
5% per annum or 7% per annum if payment is not timely made. The rights granted to the Ares Guarantors under the Reimbursement Agreement are subject to the Subordination Agreement (as described below).

Upon the delivery and effectiveness of an LC Guarantee, we agreed to issue to Ares or other Ares Guarantors a number of shares (the Shares)
of our Series B Preferred Stock, $0.001 par value per share, equal to (i) 1,000 shares multiplied by(ii) (a) the aggregate maximum amount which may be drawn or paid under such LC Guarantee with respect to the Letter(s) of
Credit supported by such LC Guarantee divided by(b) $10.0 million, with any fractional shares being rounded up to the nearest whole share; provided, that, subject to certain exceptions in no event shall the aggregate number of Shares
issued exceed 1,000. As security for their obligations under the Reimbursement Agreement, each of the Stream Entities (other than SGS) granted to Ares (on behalf of itself and for the ratable benefit of the other Ares Guarantors) a continuing
security interest in substantially all of its right, title and interest in, to and under the Collateral (as defined in the Reimbursement Agreement). The rights granted to the Ares Guarantors under the Reimbursement Agreement are subject to the
Subordination Agreement (described below).

On March 18, 2009, in response to a request by Stream under the Reimbursement Agreement,
Ares issued three letters of credit in an aggregate amount of $7.0 million, and we issued 702 shares of Series B Preferred Stock to Ares in consideration of such letters of credit.

On March 2, 2009, we entered into the Subordination and Intercreditor Agreement with PNC Bank (as Agent), Steel City Capital Funding, LLC, (as agent
for Term B Lenders and as Term B Agent), Ares and the other Loan Parties signatory thereto (as Loan Parties) (the Subordination Agreement). Pursuant to the Subordination Agreement, the obligations of the Stream Entities under the
Reimbursement Agreement, and the liens granted therein, are junior and subordinate to the obligations of the Stream Entities under, and to liens granted in connection with, the Amended Credit Agreement.

Letters of Credit. We have certain standby letters of credit for the benefit of landlords of certain sites in the United States and Canada. As of
March 31, 2009, we had approximately $1.7 million of these letters of credit in place under our Amended Credit Agreement and approximately $7.0 million of letters of credit under the Reimbursement Agreement with Ares described above in this
Liquidity and Capital Resources section.



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Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.



|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
|------- | -----------------------------------------------------------

We are exposed to a variety of market risks, including the effects of changes in foreign currency exchange rates and interest rates. Market risk is the potential loss arising from adverse changes in market rates and
prices. Our risk management strategy includes the use of derivative instruments to reduce the effects on our operating results and cash flows from fluctuations caused by volatility in currency exchange and interest rates. In using derivative
financial instruments to hedge exposures to changes in exchange rates we exposes ourselves to counterparty credit risk.

Interest Rate Risk

We are exposed to interest rate risk primarily through our debt facilities since some of those instruments bear interest at variable
rates, including capital leases. At March 31, 2009, we had outstanding borrowings under variable debt agreements that totaled approximately $72.9 million. A hypothetical 1.0% increase in the interest rate would have increased interest expense
by approximately $0.4 million and would have decreased annual cash flow by a comparable amount; however, actual effects might differ materially from this hypothetical analysis. The carrying amount of our borrowings reflects fair value due to their
short-term and variable interest rate features.

There were no outstanding interest rate swaps covering interest rate exposure at
March 31, 2009.

Foreign Currency Exchange Rate Risk

We serve many of our U.S.-based clients using our service centers in Canada, India, the Dominican Republic and Costa Rica. Although the contracts with these clients are typically priced in U.S. dollars, a substantial
portion of the costs incurred to render services under these contracts are denominated in the local currency of the country in which the contracts are serviced which creates foreign exchange exposure. We expect to begin incurring costs in the
Philippine peso in 2009. We are evaluating our hedging strategy related to the peso. Given the significance of our foreign operations and the potential volatility of the Canadian dollar and Indian rupee versus the U.S. dollar, we use forward
purchases of Canadian dollars and Indian rupees to minimize the impact of currency fluctuations. As of March 31, 2009, we had entered into forward contracts with two financial institutions to acquire a total of 12.0 million in Canadian
dollars at prices ranging from .78545 to .78637 USD/CAD that settle in less than 90 days.

Market Risk

Market risk is the sensitivity of income to changes in interest rates, foreign exchanges, commodity prices, equity prices, and other market-driven rates
or prices.

Changes in market rates may impact the banks LIBOR rate or prime rate. For instance, if either the LIBOR or prime rate
were to increase or decrease by 1.0%, our annual interest expense would change by approximately $0.4 million based upon the amounts outstanding as of March 31, 2009; however, actual effects might differ materially from this hypothetical
analysis.



|ITEM 4. | CONTROLS AND PROCEDURES.
|------- | ------------------------

Our management, with the
participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2009. The term disclosure controls and procedures, as defined in Rules
13a-15(e) and 15d-15(e) under the Exchange Act means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commissions rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the companys management, including its principal executive and principal financial
officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable



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assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and
procedures. Based on the evaluation of our disclosure controls and procedures as of March 31, 2009, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective
at the reasonable assurance level.

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act) occurred during the fiscal quarter ended March 31, 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART IIOTHER INFORMATION



|ITEM 1A. | RISK FACTORS.
|-------- | -------------

Our business is subject to
numerous risks. We caution you that the factors listed below and in Part I, Item 1A Risk Factors of our Annual Report on Form 10-K for the fiscal year ended December 31, 2008, among others, could cause our actual
results to differ materially from those expressed in forward-looking statements made by us or on our behalf in filings with the Securities and Exchange Commission, press releases, communications with investors and oral statements. All of our
forward-looking statements in this Report and in any other public statements we make may turn out to be wrong. They may be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Many factors mentioned in the
discussion below will be important in determining future results. Consequently, no forward-looking statement can be guaranteed. Actual future results may vary materially from those anticipated in forward-looking statements. We undertake no
obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosure we make in our reports filed with the Securities and Exchange
Commission.

We have a history of losses and there can be no assurance that we will become or remain profitable or that losses will not continue
to occur.

On a pro forma combined consolidated basis, SGS and SHC had a net loss of $11.7 million and $14.7 million for the fiscal
years ended December 31, 2008 and 2007, respectively, and income of $1.7 million for the three months ended March 31, 2009. We may continue to incur reported losses for the foreseeable future. To support growth in the fourth quarter of
2008, we increased our spending levels on sales, operations and administration and our investments in new solution centers and technology. As a result, we will need to significantly increase revenues or profit margins to achieve profitability. If
our revenues or gross margins do not increase to support the higher levels of operating expenses and if new service offerings are not successful, our business, results of operations and financial condition will be materially and adversely affected.

A substantial portion of our revenue is generated from a limited number of clients, and the loss of one or more of these clients would materially
reduce our revenue and cash flow and adversely affect our business.

We have derived and believe that we will continue to derive in
the near term most of our revenue from a few major clients. Two of our largest clients are global computer companies, and the other client is a satellite radio provider. Revenues from these three clients comprised 18%, 16% and 11%, respectively, of
our revenues for the three months ended March 31, 2009. Although we generally enter into long-term contracts with our clients, our contracts generally allow our clients to terminate earlier. There can be no assurance that we will be able to
retain these major clients or that, if we were to lose one or more of our major clients, we would be able to replace such clients with clients that generate a comparable amount of revenues. A number of factors could cause us to lose business or
revenue from a client, and some of these factors are not predictable and are beyond our control. For example, a client may demand price reductions, change its outsourcing strategy, move work in-house or reduce previously forecasted demand. In
addition, the volume of work we perform for specific clients may vary from year to year. In most cases, if a client terminates its contract with us or does not meet its forecasted demand, we have no contractual recourse even if we have hired and
trained service professionals to provide services to the client. Thus, a major client in one year may not provide the same level of revenue in any subsequent year. Consequently, the loss of one or more of our major clients, or the inability to
generate anticipated revenues from them, would have a material adverse effect on our business, results of operations and financial condition. Our operating results for the foreseeable future will continue to depend on our ability to effect sales to
a small number of clients and any revenue growth will depend on our success selling additional services to our large clients and expanding our client base.



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Our revenue is highly dependent on a few industries and any decrease in demand for outsourced business processes in
these industries could reduce our revenue and seriously harm our business.

Most of our clients are concentrated in the technology,
computing, software consumer product and communications industries. The success of our business largely depends on continued demand for our services from clients in these industries, as well as on trends in these industries to outsource business
processes on a global basis. A downturn in any of the industries we serve, a slowdown or reversal of the trend to outsource business processes in any of these industries or the introduction of regulations that restrict or discourage companies from
outsourcing could result in a decrease in the demand for our services, which in turn could materially harm our business, results of operations and financial condition.

Other developments may also lead to a decline in the demand for our services in these industries. For example, the industries we primarily serve, particularly the communications industry, have experienced a
significant level of consolidation in recent years. Consolidation in any of these industries or acquisitions, particularly involving our clients, may decrease the potential number of buyers of our services. Many of our existing and new clients have
begun or plan to consolidate or reduce the number of service providers that they use for various services in various geographies. To the extent that we are not successful in becoming the recipient of the consolidation of services by these clients
our business and revenues will suffer. Any significant reduction in, or the elimination of, the use of the services we provide within any of these industries would reduce our revenue and cause our profitability to decline. Our clients may experience
rapid changes in their prospects, substantial price competition and pressure on their results of operations. This may result in increasing pressure on us from clients in these key industries to lower our prices, which could negatively affect our
business, results of operations and financial condition.

Our business may not develop in ways that we currently anticipate due to negative public
reaction to outsourcing and recently proposed legislation.

We have based our growth strategy on certain assumptions regarding our
industry, services and future demand in the market for our services. However, the trend to outsource business processes may not continue and could reverse. Outsourcing is a politically sensitive topic in the U.S. and elsewhere. For example, many
organizations and public figures in the U.S. have publicly expressed concern about a perceived association between outsourcing providers and the loss of jobs in the U.S. In fact the recent stimulus package announced by the Federal government of the
United States of America under President Obama has indicated that it will strive to generate new jobs for Americans. It has also indicated that the stimulus package may limit income tax credits for companies that offshore American jobs. This may
also have a significant effect on government regulated companies or financial institutions or other businesses that have recently received financial aid from the U.S. Federal government.

There has been recent publicity about some negative experiences that organizations have had with outsourcing, such as theft and misappropriation of
sensitive client data. Current or prospective clients may elect to perform such services themselves or may be discouraged from transferring these services from onshore to off-shore providers to avoid negative perceptions that may be associated with
using an off-shore provider. Any slowdown or reversal of existing industry trends towards off-shore outsourcing would seriously harm our ability to compete effectively with competitors that operate solely out of facilities located in the United
States or Canada.

A variety of U.S. federal and state legislation has been proposed that, if enacted, could restrict or discourage U.S.
companies from outsourcing services outside the U.S. For example, legislation has been proposed that would require off-shore providers of services requiring direct interaction with clients customers to identify to clients customers where
the off-shore provider is located. Because most of our clients are located in the U.S., any expansion of existing laws or the enactment of new legislation restricting off-shore outsourcing could harm our business, results of operations and financial
condition. It is possible that legislation could be adopted that would restrict U.S. private sector companies that have federal or state government contracts from outsourcing their services to off-shore service providers. This would also affect our
ability to attract or retain clients that have these contracts.

We may have difficulty obtaining financing.

We have incurred debt in connection with the acquisition of SHC. In addition, we have historically needed financing to support growth in our business.
Although we believe that we have adequate financing to support our current internal initiatives, there can be no assurance that we will continue to have adequate financing to do so. We believe that the current access to new debt markets in the
United States is very limited due to the volatility in the global financial markets and the current economic recession. In addition, there can be no assurance that we will be in compliance with the terms of our credit facility during the course of
2009. If we are not, our bank lenders may require that we immediately repay all amounts



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outstanding, which we may be unable to do, or may impose additional terms and conditions or higher pricing upon us that may reduce our future profitability
and liquidity. If that occurs, there can be no assurance that we will be able to obtain additional debt or equity financing on terms that would be acceptable to us.

Our financial results may be impacted by significant fluctuations in foreign currency exchange rates.

A substantial amount of our operating costs is incurred in foreign currencies. In recent periods, the U.S. dollar has dropped in value relative to other currencies and therefore our cost of providing services has increased accordingly. In
many cases we bill our clients in U.S. dollar denominated amounts and incur costs in the host country in local currency. Any continued significant fluctuations in the currency exchange rates between the U.S. dollar and the currencies of countries in
which we operate may affect our business, results of operations and financial condition. With the exception of certain hedging relating to the Canadian dollar and the Indian rupee, we are not currently engaged in other currency hedging transactions.
We are also beginning to do business in other countries in Latin America and in the Philippines. We do not yet hedge currencies from these countries for costs incurred. To the extent that in the future we do not hedge these currencies and the
exchange rate relative to the U.S dollar fluctuates, our results from operations could suffer or benefit from such fluctuation.

The loss of key
executives could adversely affect our ability to operate our business.

The success of our ongoing business will be dependent upon
the continued service of a relatively small group of our key executives. We believe that we have assembled a group of industry veterans to lead our company. This group in most cases has entered into employment contracts with us that provide various
protections related to non-solicitation of employees and clients, non-competition and confidentiality with our business in the event that their employment is terminated.

These executives, including our Chairman and Chief Executive Officer, Scott Murray, are critical to our future success. In the event that we are not able to enforce the provisions of these employment contracts and
these executives choose to compete with us, we may suffer material harm in our ability to generate future revenue and profitability. The loss of one or more of these key employees or failure to recruit, hire, train and retain other highly qualified
personnel in the future could have a material adverse effect on our business, results of operations and financial condition.

Our business may be
impacted by the performance of our clients.

The current economic environment and global recession is having a negative impact on
the revenue of many of our clients. Our revenue and call volume is often highly correlated with units sold, renewals from our clients customers, and revenue of our clients. In addition, many of our clients are seeking to consolidate their
current group of multiple service providers to a smaller more manageable group that is able to provide integrated service offerings on a global basis. In some cases we do not currently offer or have service locations in those geographic locations
where our clients are seeking services. Our ability to sustain growth and our profitability in the current environment is very dependent upon our ability to maintain and/or gain a greater share of the business within our clients, and to attract new
clients. There can be no assurance that we will be able to do so in the future. Moreover, we are exposed to additional risks related to our customers ability to pay and the non-payment of our accounts receivables. The economic slowdown,
coupled with tightened credit availability, could adversely affect our customers liquidity and cause them to delay or reduce their payments to us. Such delays or reductions or the non-payment by our customers of receivables owed to us may
require us to incur a bad debt expense. To the extent that one of our major clients should file for bankruptcy protection or otherwise fail, it could have a material effect on our future business, results of operations and financial condition.

We may not be able to achieve incremental revenue growth or increased profitability.

Our strategy calls for us to achieve incremental revenue growth and increased profitability through initiatives, such as opening new off shore service
locations in places like China, Eastern Europe, Russia, Japan, South Africa and South America, the addition or expansion of services, such as sales services, warranty services, credit and collection services, data management and hosting, and
language translation and interpretation services, the introduction of front-end technology-driven service solutions for self-help, home-shoring of agents and other technology driven solutions, and operational improvements in areas such as employee
attrition, site capacity utilization, centralization of certain administrative services, productivity rates, use of technology and other operating metrics. However, there can be no assurance that we will not encounter difficulties or delays in
implementing these initiatives, and any such difficulties or delays would adversely affect our future operating results.



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We may not be able to manage our growth effectively, which could adversely affect our results of operations.

SHC has experienced rapid growth over the past several years, and we anticipate future expansion. With such expansion, we may not
be able to continue to effectively manage our operations. Management of a rapidly growing business depends on a number of factors, including our ability to (i) initiate, develop and maintain client relationships and marketing operations,
(ii) recruit, motivate and retain qualified management and hourly personnel, (iii) rapidly identify, acquire or lease suitable service center facilities on acceptable terms and complete build-outs of such facilities in a timely and
economic fashion, (iv) maintain the quality of the services and products that we provide to our clients, and (v) deploy appropriate technology. We expect that rapid growth will continue to place a significant strain on our management,
operations, employees and resources. There can be no assurance that we will be able to effectively manage our expanding operations or achieve planned growth on a timely or profitable basis. If we were unable to manage our business effectively, our
business, results of operations and financial condition would be materially adversely affected.

Our success may be affected by our ability to
complete and integrate new service centers on a timely and cost effective basis.

We are actively pursuing a growth strategy of
opening new service centers, including our recent establishment of service centers in El Salvador, the Philippines, Egypt and Tunisia. Some of our new service centers are or may be located in jurisdictions like China, Eastern Europe, Russia, Japan,
South Africa and South America where we have not done business in the past. We are also beginning to work with various state and local governments in the United States of America to establish new on-shore service locations. The partnership with
state and local governments may also include other technology and communication partners. To the extent that this program is successful and receives support under the U.S. governments proposed stimulus package it may allow us to create a
substantial number of new jobs over the next several years in the United States of America. This in turn could require us to open new centers in the United States. The rate and success of new service center openings is subject to various
contingencies, many of which are beyond our control. These contingencies include, among others, our ability to secure suitable sites on a timely basis and on satisfactory terms, our ability to hire, train and retain qualified personnel, the
availability of adequate capital resources and the successful integration of new service centers into existing operations and local regulatory matters and customs. A new service center involves significant capital expenditures for both the
acquisition and improvement of the site. Each service center must ramp up in utilization to become profitable, which can typically take 6-12 months to achieve. There can be no assurance that we can open new service centers on a timely or cost
effective basis or that once opened, the service centers will be profitable.

Our operating results are subject to fluctuation because our contracts
are primarily short term and subject to early termination by our clients.

We typically enter into one- to three-year contracts
with our clients, most of which are typically renewable on an annual basis and may be terminated by the client at any time for convenience. Although some of our contracts require the client to pay a contractually agreed amount based on a minimum
level of expected call volume, the contracts do not assure us a specific level of revenues and they generally do not designate us as the clients exclusive service provider. There can be no assurance that we can renew or extend our contracts
with our clients. Although some of these contracts require the client to pay a contractually agreed upon amount in the event of early termination, there can be no assurance that we will be able to collect such amount or that such amount, if
received, will sufficiently compensate us for the significant investment often times we have made to support the cancelled program or for the revenues we may lose as a result of the early termination.

We may be unable to cost-effectively attract and retain qualified personnel, which could materially increase our costs.

Our business will also be dependent on our ability to recruit, hire, train and retain highly qualified technical and managerial personnel, including
individuals with significant experience in the industries that we have targeted. The CRM industry is labor intensive and is characterized by high monthly employee turnover. Any increase in our employee turnover rate would increase our recruiting and
training costs, decrease our operating effectiveness and productivity and delay or deter us from taking on additional business. Also, the introduction of significant new clients or the implementation of new large-scale programs may require us to
recruit, hire and train personnel at an accelerated rate. In addition, some of our facilities are located in geographic areas with relatively low unemployment rates, thus potentially making it more difficult and costly to attract and retain
qualified personnel. There can be no assurance that we will be able to continue to hire, train and retain sufficient qualified personnel to adequately staff our business.



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We may not be able to compete effectively against competitors with greater resources or capabilities and may lose
business if clients decide to reduce the amount of services outsourced.

The market in which we compete is highly competitive and
fragmented. We expect competition to persist and intensify in the future. Our competitors include small firms offering specific applications, divisions of large entities, large independent firms and, most significantly, the in-house operations of
clients or potential clients. A number of our competitors have greater financial, technological and other capabilities and resources than we do. Moreover, there can be no assurance that additional competitors with greater resources will not enter
the market.

Because we compete with the in-house operations of existing or potential clients, our business, results of operations and
financial condition could be adversely affected if our existing clients decide to provide in-house CRM and other BPO solutions that currently are outsourced or if potential clients retain or increase their in-house customer service and product
support capabilities. In addition, competitive pressures from current or future competitors or in-house operations could cause our services to lose market acceptance or result in significant price erosion, which would have a material adverse effect
upon our business, results of operations and financial condition. Some of our customers may in the future seek to consolidate services that we provide, which may in turn reduce the amount of work we perform for them.

Some of these existing and future competitors have greater financial, human and other resources, longer operating histories, greater technological
expertise, more recognizable brand names and more established relationships than we do in the industries that we currently serve or may serve in the future. Some of our competitors may enter into merger, strategic or commercial relationships among
themselves or with larger, more established companies in order to increase their ability to address client needs. Increased competition, pricing pressure or loss of market share could reduce our operating margin, which could harm our business,
results of operations and financial condition.

Our international operations and sales subject us to risks associated with unexpected events.

We conduct business various countries outside of the United States, including Canada, the Netherlands, the United Kingdom, Italy,
Ireland, Spain, Sweden, France, Germany, Poland, Bulgaria, India, the Philippines, El Salvador, Egypt, Tunisia, the Dominican Republic and Costa Rica. Our international operations accounted for approximately 77.0% and 74.8% of our pro forma revenues
for the years ended December 31, 2008 and 2007. A key component of our growth strategy is our continued international expansion, especially in lower-cost labor markets, such as China, Eastern Europe, Russia, Japan, South Africa and South
America. There can be no assurance that we will be able to successfully market, sell and deliver our services in these markets, or that we will be able to successfully expand international operations. The global reach of our business could cause us
to be subject to unexpected, uncontrollable and rapidly changing events and circumstances. The following factors, among others, could adversely affect our business and earnings:



| |  |  | failure to properly comply with foreign laws and regulations applicable to our foreign activities including, without limitation, employment law requirements;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | compliance with multiple and potentially conflicting regulations in the countries where we operate, including employment laws, intellectual property requirements,
and the Foreign Corrupt Practices Act and other anti-corruption laws;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | difficulties in managing foreign operations and appropriate levels of staffing;
| | - |  | -------------------------------------------------------------------------------



| |  |  | longer collection cycles;
| | - |  | -------------------------



| |  |  | seasonal reductions in business activities, particularly throughout Europe;
| | - |  | ---------------------------------------------------------------------------



| |  |  | proper compliance with local tax laws which can be complex and may result in unintended adverse tax consequences;
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | anti-American sentiment due to the war in Iraq and other American policies that may be unpopular in certain countries;
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | difficulties in enforcing agreements through foreign legal systems;
| | - |  | -------------------------------------------------------------------



| |  |  | fluctuations in exchange rates that may affect product demand and may adversely affect the profitability in U.S. dollars of services we provide in foreign markets
where payment for our products and services is made in the local currency and revenues are earned in U.S. dollars or other currency;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in general economic and political conditions in countries where we operate;
| | - |  | -----------------------------------------------------------------------------------



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| |  |  | restrictions on downsizing operations in Europe and other jurisdictions (i.e. regulatory or union restrictions) and expenses and delays associated with any such
activities; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes to or elimination of the international tax holiday for companies doing business in India.
| | - |  | -------------------------------------------------------------------------------------------------

As we continue to expand our business globally, our success will depend, in large part, on our ability to anticipate and effectively manage these and
other risks associated with our international operations. Our failure to manage any of these risks successfully could harm our global operations and reduce our global sales, adversely affecting our business.

Our revenues and costs are subject to quarterly variations that may adversely affect quarterly financial results.

We have experienced, and in the future could experience, quarterly variations in revenues as a result of a variety of factors, many of which are outside
our control, including:



| |  |  | the timing of new client contracts;
| | - |  | -----------------------------------



| |  |  | the timing of new service offerings or modifications in client strategies;
| | - |  | --------------------------------------------------------------------------



| |  |  | our ability to attract and retain and increase sales to existing customers;
| | - |  | ---------------------------------------------------------------------------



| |  |  | the timing of acquisitions of businesses and products by us and our competitors;
| | - |  | --------------------------------------------------------------------------------



| |  |  | our ability to effectively build and start-up new solution centers;
| | - |  | -------------------------------------------------------------------



| |  |  | product and price competition;
| | - |  | ------------------------------



| |  |  | our ability to build an integrated service offering on a common technology platform;
| | - |  | ------------------------------------------------------------------------------------



| |  |  | changes in our operating expenses;
| | - |  | ----------------------------------



| |  |  | software defects or other product quality problems;
| | - |  | ---------------------------------------------------



| |  |  | the ability to implement new technologies on a timely basis;
| | - |  | ------------------------------------------------------------



| |  |  | the expiration or termination of existing contracts;
| | - |  | ----------------------------------------------------



| |  |  | the timing of increased expenses incurred to obtain and support new business;
| | - |  | -----------------------------------------------------------------------------



| |  |  | currency fluctuations; and
| | - |  | --------------------------



| |  |  | changes in our revenue mix among our various service offerings.
| | - |  | ---------------------------------------------------------------

In addition, our planned staffing levels, investments and other operating expenditures are based on revenue forecasts provided by our clients. If actual revenues are below these forecasts or our own expectations in
any given quarter, our business, results of operations and financial condition would likely be materially adversely affected for that quarter and thereafter.

Our financial results may be adversely affected by increases in labor-related costs.

Because a significant portion
of our operating costs relate to labor costs, an increase in U.S. or foreign wages, costs of employee benefits or taxes could have a material adverse effect on our business, results of operations and financial condition. For example, over the past
several years, healthcare costs have increased at a rate much greater than that of general cost or price indices. In addition, we fund payroll and payroll related expenses in local currencies, many of which have recently increased in value relative
to the U.S. dollar. Increases in our pricing may not fully compensate us for increases in labor and other costs incurred in providing services. Some of our facilities are located in jurisdictions, such as France, Italy and Germany, where the labor
laws make it difficult or expensive to temporarily or permanently lay off hourly workers. Such laws will make it more expensive for us to respond to adverse economic conditions. There can be no assurance that we will be able to increase our pricing
or reduce our workforce to fully compensate for the increases in the costs to provide services.

Our profitability will be adversely affected if we
do not maintain sufficient capacity utilization.

Our profitability is influenced significantly by our capacity utilization of our
service centers. Because our business consists of inbound contacts from end-users, we have no control of when or how many end user customer contacts are made. Moreover, we have significantly higher utilization during peak (weekday) periods than
during off-peak (night and weekend) periods and therefore we need to reserve capacity at our service centers to anticipate peak periods. In the future, we may consolidate or close under-performing service centers in order to maintain or improve
targeted utilization and margins. If we close service centers in the future due to insufficient customer demand, we may be required to record restructuring or



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impairment charges, which could adversely impact our business, results of operations and financial condition. These may also negatively effect our compliance
with our debt covenants with our banks. There can be no assurance that we will be able to achieve or maintain optimal service center capacity utilization.

A decline in end-user acceptance of our clients products will decrease demand for our services and could have a material adverse effect on our business.

We typically charge our clients based on the number of inbound calls that we provide, or the amount of time our service professionals spend with
end-users relating to our clients products. In some cases we provide in-bound sales services to our clients, whereby we are paid based on our level of sales success. To the extent there is a decline in spending for our clients products,
whether as a result of a decline in product acceptance, the technology, consumer electronics or communications industries, or the economy in general, our business will be adversely affected. There are a number of factors relating to discretionary
consumer and business spending, including economic conditions affecting disposable income (such as employment, business conditions, taxation and interest rates) and the ability of our clients to sell their products, most of which are outside of our
control. There can be no assurance that spending for our clients products will not be affected by adverse economic conditions, thereby affecting our business, results of operations and financial condition.

We may engage in future acquisitions that could disrupt our business, cause dilution to our stockholders and harm our financial position and operating results.

We intend to pursue acquisitions of companies or assets in order to enhance our market position and/or expand the types of BPO
services that we offer to our clients. We may also acquire minority interest in certain companies or enter into joint venture arrangements with other parties, which may include existing clients. We may also pursue certain acquisitions on an
unsolicited basis, which may cause management distractions and increased legal costs. We may not be able to find suitable acquisition candidates and we may not be able to consummate such acquisitions on favorable terms, if at all. If we do complete
acquisitions, we cannot be sure that they will ultimately strengthen our competitive position, or that our clients, employees or investors will not view them negatively. Acquisitions may disrupt our ongoing operations, divert management from
day-to-day responsibilities, increase our expenses and harm our operating results or financial condition. We may not be able to successfully integrate these acquisitions into our operations and may lose key clients, management or not achieve the
synergies expected from the acquisition or investment. Future acquisitions may reduce our cash available for operations and other uses and could result in an increase in amortization expense, potentially dilutive issuances of equity securities or
the incurrence of debt, which could harm our business, financial condition and operating results.

A system failure could cause delays or
interruptions of service, which could cause us to lose clients.

Our operations are dependent upon our ability to protect our
service centers, computer and telecommunications equipment and software systems against damage from fire, power loss, telecommunications interruption or failure, natural disaster and other similar events. If we experience a temporary or permanent
interruption at one or more of our service centers and/or datacenters, through casualty, operating malfunction or otherwise, our business could be materially adversely affected and we may be required to pay contractual damages to some clients or
allow some clients to terminate or renegotiate their contracts with us. While we maintain property and business interruption insurance, such insurance may not adequately compensate us for all losses that we may incur.

To be successful, we will need to continue to provide our clients with reliable service. Some of the events that could adversely affect our ability to
deliver reliable service include physical damage to our network operations centers, disruptions beyond our control, sabotage or terrorist attacks, power surges or outages, and software defects.

Although we maintain general liability insurance, including coverage for errors and omissions, there can be no assurance that our existing coverage will
continue to be available on reasonable terms or will be available in amounts sufficient to cover one or more large claims, or that the insurer will not disclaim coverage as to any future claim. The occurrence of errors could result in a loss of data
to us or our clients, which could cause a loss of revenues, failure to achieve product acceptance, increased insurance costs, product returns, legal claims, including product liability claims, against us, delays in payment to us by clients,
increased service and warranty expenses or financial concessions, diversion of resources, injury to our reputation, or damages to our efforts to build brand awareness, any of which could have a material adverse effect on our market share and, in
turn, our business, results of operations and financial condition.



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We depend on third-party technology that, if it should become unavailable, contain defects, or infringe on another
partys intellectual property rights, could result in increased costs or delays in the production and improvement of our products or result in liability claims.

We license critical third-party software that we incorporate into our services on a non-exclusive basis. If our relations with any of these third-party
software providers are impaired or the third-party software infringes upon another partys intellectual property rights, our business could be harmed. The operation of our business would also be impaired if errors occur in the third-party
software that it utilizes. It may be more difficult for us to correct any defects in third-party software because the software is not within our control. Accordingly, our business could be adversely affected in the event of any errors in this
software. There can be no assurance that these third parties will continue to invest the appropriate levels of resources in their products and services to maintain and enhance the capabilities of their software. If the cost of licensing any of these
third-party software products increases, our gross margin levels could significantly decrease.

Our outstanding warrants may be exercised in the
future, which would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.

At March 31, 2009, we had outstanding warrants to purchase an aggregate of 38,750,000 shares of common stock, all of which are currently exercisable. All of these outstanding warrants have an exercise price of
$6.00 per share, expire on October 17, 2011 and may be redeemed at a price of $0.01 per warrant if the last sales price of our common stock on NYSE Amex is at least $11.50 per share for any 20 days in a 30-trading day period. In addition, under
the Preferred Stock Purchase Agreement between us and Ares, we are obligated to use our best efforts to exchange 7,500,000 of the warrants held by Ares for new warrants that do not expire until August 2018 and are not redeemable.

As of April 27, 2009, the closing price of our shares traded on the NYSE Amex, was $3.50 per share. If the warrants held by Ares or our other
investors are exercised, sales of the underlying common shares if sold in the public market could adversely affect the market price of our existing common stock and reduce shareholder value.

Common stock held by some of our founders becomes unrestricted on July 31, 2009.

Our founding stockholders, including some of our executives and members of our board of directors, hold more than 7 million shares of our common
stock. These shares are currently being held in escrow and are restricted from trading in the market until July 31, 2009, which is the first anniversary of the closing of our acquisition of SHC. On July 31, 2009 these shares will be
released from escrow, at which time the founders may begin to trade them. Should the founders decide to sell their shares of common stock, it could create excess supply of stock in the public market and cause the price of our common stock and our
public warrants to decline.

We must comply with Section 404 of the Sarbanes-Oxley Act of 2002.

Section 404 of the Sarbanes-Oxley Act of 2002 requires us to document and test the effectiveness of our internal controls over financial reporting
in accordance with an established control framework and to report on our managements conclusion as to the effectiveness of these internal controls over financial reporting beginning with the fiscal year ending December 31, 2009. We will
be required to have an independent registered public accounting firm test the internal controls over financial reporting and report on the effectiveness of such controls for the fiscal year ending December 31, 2009 and subsequent years. Any
delays or difficulty in satisfying these requirements could adversely affect future results of operations and our stock price.

We are
likely to incur significant costs to comply with these requirements. We may in the future discover areas of internal controls over financial reporting that need improvement, particularly with respect to any businesses acquired in the future. There
can be no assurance that remedial measures will result in adequate internal controls over financial reporting in the future. Any failure to implement the required new or improved controls, or difficulties encountered in their implementation, could
materially adversely affect our results of operations or could cause us to fail to meet our reporting obligations. If we are unable to conclude that we have effective internal controls over financial reporting, or if our auditors are unable to
provide an unqualified report regarding the effectiveness of internal controls over financial reporting as required by Section 404, investors may lose confidence in the reliability of our financial statements, which could result in a decrease
in the value of our securities. In addition, failure to comply with Section 404 could potentially subject us to sanctions or investigation by the Securities Exchange Commission or other regulatory authorities.



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There can be no assurance that NYSE Amex will continue to list our securities on its exchange, and any delisting
could limit investors ability to make transactions in our securities and subject us to additional trading restrictions.

Our
units, common stock and warrants are listed on NYSE Amex, a national securities exchange. We cannot assure you that our securities will continue to be listed on NYSE Amex in the future. If NYSE Amex delists our securities from trading on its
exchange and we are unable to list our securities on another exchange, our securities could be quoted on the OTC Bulletin Board, or pink sheets. As a result, we could face significant adverse consequences, including but not limited to
the following:



| |  |  | a limited availability of market quotations for our securities;
| | - |  | ---------------------------------------------------------------



| |  |  | a determination that our common stock is a penny stock which will require brokers trading in our common stock to adhere to more stringent rules and
possibly resulting in a reduced level of trading activity in the secondary trading market for our securities;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a reduced liquidity for our securities;
| | - |  | ---------------------------------------



| |  |  | a decreased ability to obtain new financing or issue new securities on favorable terms in the future;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | a decreased ability to issue additional securities or obtain additional financing in the future; and
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | a decreased ability of our security holders to sell their securities in certain states.
| | - |  | ---------------------------------------------------------------------------------------

Stockholders interests in us will be diluted significantly by the conversion of our Series A Preferred Stock and Series B Preferred Stock, which could
affect the market price of our common stock.

Our Series A Preferred Stock and Series B Preferred Stock (collectively, our
Preferred Stock) are convertible into shares of our common stock at a conversion price of $6.00 per share. As of March 31, 2009 the Series A Preferred Stock may be converted into an aggregate of 25.3 million shares of our
common stock, and the Series B Preferred Stock may be converted into an aggregate of 117,000 shares of our common stock. The Preferred Stock has an annual dividend rate of 5%, subject to an increase to 10% upon the occurrence of certain events,
calculated semi-annually. We may pay accrued dividends, at our option, by increasing the stated value of the Preferred Stock by an equal amount, which amount is convertible into shares of our common stock at the conversion price of $6.00. To the
extent the Preferred Stock is converted into shares of our common stock, the issuance of substantial numbers of shares of common stock would increase the number of outstanding shares of our common stock and could have an adverse effect on the market
price for our securities and on our ability to obtain future public or private financing. We may also seek to modify the terms of the Preferred Stock in the future and any alteration of terms could have a dilutive effect on our common stockholders
and warrant holders

The Preferred Stock ranks senior to our common stock and warrants with respect to distributions upon our liquidation.

As long as Preferred Stock is outstanding, no distributions upon liquidation may be made to the holders of our common stock unless the
holders of our Preferred Stock have received distributions equal to their liquidation preference, which is the greater of the stated value, initially $1,000 per share, plus accrued dividends, and the amount payable to such holders had all of the
Preferred Stock been converted into our common stock. As a result, it is possible that, upon liquidation, all of the amounts available for distribution to our equity holders would be paid to the holders of the Preferred Stock and our other
stockholders and warrant holders would not receive any payment.

Ares is our largest stockholder and has significant influence and control over our
management and affairs.

Ares owns approximately 73% of our common stock on an as converted basis, based on our outstanding shares
as of March 10, 2009 and assuming (i) conversion of all of the Preferred Stock and (ii) no exercise of any of our outstanding warrants to purchase 38,750,000 shares of our common stock. Ares is entitled to appoint to our board of
directors a number of directors proportional to its ownership percentage attributable to its Series A Preferred Stock. In addition, in certain circumstances, we are obligated to issue to Ares additional shares of our Series B Preferred
Stock that would further increase Ares ownership of our company by less than 1%. As a result, Ares has significant influence and control over our management and affairs.

Ares could make it more difficult or even impossible for a third party to acquire us without its consent.

The holders of our Preferred Stock have the right to approve mergers, consolidations, or sale of all or substantially all of our assets unless the consideration payable with respect to each share of Preferred Stock is
an amount in cash that is more than 150% of the applicable conversion price. This right continues for so long as 30% or more of the number of shares of



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Series A Preferred Stock or Series B Preferred Stock first issued to Ares remain outstanding, or for so long as the outstanding shares of
Series A Preferred Stock or Series B Preferred Stock represent, in the aggregate, 20% or more of our equity on an as-converted basis.

Holders of Preferred Stock have registration rights, and the exercise of these rights could adversely affect the market price of our common stock.

The holders of the Preferred Stock have registration rights, subject to certain conditions, to require us to use best efforts on up to four occasions to register under the Securities Act of 1933 shares of common stock
issued upon the conversion of the Preferred Stock and upon exercise of the certain warrants held by Ares to acquire up to 7,500,000 shares of our common stock at an exercise price of $6.00 per share. Any sale of a significant number of shares of
common stock by holders of the Preferred Stock could cause the market price of our common stock to decline.



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|ITEM 6. | EXHIBITS.
|------- | ---------

We are filing as part of this Report the
Exhibits listed in the Exhibit Index following the signature page to this Report.



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



|            |  |                              |  |                                                                                                  
|----------- |  | ---------------------------- |  | -------------------------------------------------------------------------------------------------
|            |  | STREAM GLOBAL SERVICES, INC.
|            |  |                             
|May 7, 2009 |  | By:                          |  | /s/ R. Scott Murray                                                                              
|            |  |                              |  | R. Scott Murray                                                                                  
|            |  |                              |  | Chairman, Chief Executive Officer and President (Principal Executive Officer)                    
|            |  |                             
|May 7, 2009 |  | By:                          |  | /s/ Stephen C. Farrell                                                                           
|            |  |                              |  | Stephen C. Farrell                                                                               
|            |  |                              |  | Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)



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Exhibit Index



|            |  |                                                                                                       
|----------- |  | ------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                           
|            | 
|31.1        |  | Principal Executive Officer  Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|            | 
|31.2        |  | Principal Financial Officer  Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|            | 
|32.1        |  | Principal Executive Officer  Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|            | 
|32.2        |  | Principal Financial Officer  Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.