UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 20549




FORM
      10-QSB





(Mark
      One)





[X]QUARTERLY
      REPORT UNDER
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





**FOR
      THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2007**





[  
      ]TRANSITION REPORT
      UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934 FOR THE





TRANSITION
      PERIOD FROM __________ to __________





Commission
      file number: 0-28560





BPO
      MANAGEMENT SERVICES, INC.


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




DELAWARE
            22-2356861(State
                or other jurisdiction ofincorporation or organization)
            (I.R.S.
                Employer
              Identification
                No.)




1290
      N
      HANCOCK STREET, ANAHEIM HILLS, CA 92807


(Address
      of principal executive offices)




(714)
      974-2670


(Issuer's
      telephone number, including area code)




NOT
      APPLICABLE


(Former
      name, former address and former fiscal year,


if
      changed since last report)





Check
      whether the issuer: (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the registrant was required to file such  reports), and (2) has
      been subject to such filing requirements for the past 90
      days.     Yes [X] No [   ]





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





The
      number of shares outstanding of the registrant's only class of common stock,
      $.01 par value, was 12,171,034 on November 14, 2007.Transitional Small Business
      Disclosure Format (Check one).     Yes [   ] No
      [X]







PART
      I


FINANCIAL
          INFORMATION


PageItem
                  1.  Financial Statements
              
              
              
              
              
              
              
              
              3Condensed
                  Consolidated Statements of Operations for the three and nine months
                  endedSeptember
                  30, 2007 and 2006 (unaudited)
              
              
              
              
              
              
              3Condensed
                  Consolidated Balance Sheet as of  September 30, 2007
                  (unaudited)
              
              
              4Condensed
                  Consolidated Statements of Cash Flows for the nine months ended
                  September
                  30,2007
                  and 2006 (unaudited)
              
              
              
              
              
              
              
              5Notes
                  to Condensed Consolidated Financial Statements (unaudited)
              
              
              
              7Item
                  2.  Management's Discussion and Analysis or Plan of
                  Operation
              
              
              
              
              23Item
                  3.  Controls and Procedures
              
              
              
              
              
              
              
              32
  PART
          II
 OTHER
            INFORMATION
 Item
                  1.  Legal Proceedings
              
              
              
              
              
              
              
              
              32Item
                  2.  Unregistered Sales of Equity Securities and Use of
                  Proceeds
              
              
              
              
              32Item
                  3.  Defaults Upon Senior Securities
              
              
              
              
              
              
              
              33Item
                  4.  Submission of Matters to a Vote of Security
                  Holders
              
              
              
              
              
              33Item
                  5.  Other Information
              
              
              
              
              
              
              
              
              33Item
                  6.  Exhibits
              
              
              
              
              
              
              
              
              
              33Signatures
              
              
              
              
              
              
              
              
              
              34Exhibits
                  Attached to this Quarterly Report on Form 10-QSB
              
              
              
              
              
              35




2




PART
        I -
        FINANCIAL INFORMATION
  ITEM
        1.
        FINANCIAL STATEMENTS
  BPO
        MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
 CONDENSED
          CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)


THREE
                  MONTHS ENDED
              
              
              NINE
                  MONTHS ENDEDSEPTEMBER
                  30,
              
              
              SEPTEMBER
                  30,2007
              
              
              2006
              
              
              2007
              
              
              2006Revenues:Enterprise
                  content management
              
              $
              3,504,953
              
              
              $
              492,908
              
              
              $
              5,866,997
              
              
              $
              2,290,238IT
                  outsourcing services
              
              
              880,978
              
              
              
              458,269
              
              
              
              2,861,891
              
              
              
              1,327,867Human
                  resource outsourcing servicing
              
              
              246,371
              
              
              
              10,114
              
              
              
              260,188
              
              
              
              232,795Total
                  revenues
              
              
              4,632,302
              
              
              
              961,291
              
              
              
              8,989,076
              
              
              
              3,850,900Operating
                  expenses:Cost
                  of services provided
              
              
              2,563,277
              
              
              
              376,438
              
              
              
              4,436,764
              
              
              
              1,341,553Selling,
                  general and administrative
              
              
              3,054,506
              
              
              
              1,003,089
              
              
              
              7,207,185
              
              
              
              3,949,307Research
                  and development
              
              
              168,371
              
              
              
              -
              
              
              
              261,738
              
              
              
              -Share-based
                  compensation
              
              
              112,118
              
              
              
              (4,439
              )
              
              
              258,861
              
              
              
              35,514Total
                  operating expenses
              
              
              5,898,272
              
              
              
              1,375,088
              
              
              
              12,164,548
              
              
              
              5,326,374Loss
                  from operations
              
              
              (1,265,970
              )
              
              
              (413,797
              )
              
              
              (3,175,472
              )
              
              
              (1,475,474
              )Interest
                  expense (income)Related
                  parties
              
              
              27,222
              
              
              
              -
              
              
              
              89,819
              
              
              
              -Amortization
                  of related party debt discount
              
              
              -
              
              
              
              -
              
              
              
              594,029
              
              
              
              -Other,
                  net
              
              
              (11,300
              )
              
              
              26,898
              
              
              
              76,045
              
              
              
              31,894Other
                  income
              
              
              (3,115
              )
              
              
              (911
              )
              
              
              (3,102
              )
              
              
              -Total
                  interest and other expense (income)
              
              $
              12,807
              
              
              $
              25,987
              
              
              $
              756,791
              
              
              $
              31,894Net
                  loss
              
              $
              (1,278,777
              )
              
              $
              (439,784
              )
              
              $
              (3,932,263
              )
              
              $
              (1,507,368
              )Basic
                  and diluted net loss per share
              
              $
              (0.14
              )
              
              $
              (0.04
              )
              
              $
              (0.45
              )
              
              $
              (0.15
              )Basic
                  and diluted weighted average commonshares
                  outstanding
              
              
              9,004,368
              
              
              
              9,927,174
              
              
              
              8,750,543
              
              
              
              9,894,091
   See
        accompanying notes to condensed consolidated financial
        statements.




3


BPO
        MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
 CONDENSED
          CONSOLIDATED BALANCE SHEET
 September
            30, 2007
 (Unaudited)


2007ASSETSCurrent
                  assets:Cash
                  and cash equivalents
              
              $
              6,102,487Restricted
                  cash
              
              
              922,888Accounts
                  receivable, net of allowance for doubtful accounts of
                  $138,934
              
              
              3,672,086Inventory
                  consisting of finished goods, net of reserves of $0
              
              
              184,220Prepaid
                  expenses and other current assets
              
              
              287,627Total
                  current assets
              
              
              11,169,309Equipment,
                  net of accumulated depreciation of $194,893
              
              
              1,058,555Goodwill
              
              
              10,179,091Intangible
                  assets, net of accumulated amortization of $266,194
              
              
              960,751Other
                  assets
              
              
              33,155$
              23,400,861LIABILITIES
                  AND STOCKHOLDERS' EQUITYCurrent
                  liabilities:Current
                  portion of long-term debt, net of discount of $3,367
              
              $
              141,943Current
                  portion of capital lease obligations
              
              
              132,263Accounts
                  payable
              
              
              2,327,226Accrued
                  expenses
              
              
              1,266,252Accrued
                  interest-related party
              
              
              9,450Accrued
                  dividend payable-related party
              
              
              11,392Amount
                  due former shareholders of acquired companies
              
              
              1,101,771Deferred
                  revenues
              
              
              1,655,185Related
                  party notes payable
              
              
              1,200,000Severance
                  obligations payable
              
              
              272,912Other
                  current liabilities (Income taxes payable)
              
              
              245,013Total
                  current liabilities
              
              
              8,363,407Long-term
                  debt, net of current portion and net of discount of $5,613
              
              
              28,058Capital
                  lease obligations, net of current portion
              
              
              415,776Total
                  liabilities
              
              
              8,807,241Commitments
                  and contingencies  (Note 9)Stockholders'
                  equityConvertible
                  preferred stock, Series A, par value $.01; authorized1,608,612
                  shares; 1,605,598 shares issued and outstanding
              
              
              16,056Convertible
                  preferred stock, Series B, par value $.01; authorized1,449,204
                  shares; 1,449,204 shares issued and outstanding
              
              
              14,492Non-convertible
                  preferred stock, Series C, par value $.01; authorized21,378,000
                  shares; 916,667 shares issued and outstanding
              
              
              9,167Convertible
                  preferred stock, Series D, par value $.01; authorized1,500,000
                  shares; 1,458,334 shares issued and outstanding
              
              
              14,583Convertible
                  preferred stock, Series D-2, par value $.01; authorized1,500,000
                  shares; 375,000 shares issued and outstanding
              
              
              3,750Common
                  stock, par value $.01; authorized 150,000,000 shares;9,004,368
                  shares issued and outstanding
              
              
              90,044Additional
                  paid-in capital
              
              
              22,916,997Accumulated
                  deficit
              
              
              (8,032,969
              )Accumulated
                  other comprehensive loss, foreign currency translation
                  adjustments
              
              
              (438,500
              )Total
                  stockholders' equity
              
              
              14,593,620$
              23,400,861


See
        accompanying notes to condensed consolidated financial
        statements.




4




BPO
        MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
 CONDENSED
          CONSOLIDATED STATEMENTS OF CASH FLOWS
 FOR
            THE
            NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
 (Unaudited)


2007
              
              
              2006Cash
                  flows from operating acitvities:Net
                  loss
              
              $
              (3,932,263
              )
              
              $
              (1,507,368
              )Adjustments
                  to reconcile loss from continuing operationsto
                  net cash provided by (used in) operating activities:Depreciation
              
              
              175,248
              
              
              
              263,501Amortization
                  of intangible assets
              
              
              153,947
              
              
              
              311,777Non-cash
                  compensation expense recognized on issuance of stock
                  options
              
              
              258,861
              
              
              
              35,514Amortization
                  of loan discount
              
              
              594,031
              
              
              
              -Changes
                  in operating assets and liabilities:Accounts
                  receivable
              
              
              (1,097,353
              )
              
              
              (244,889
              )Inventory
              
              
              (25,238
              )
              
              
              -Income
                  tax receivable
              
              
              250,000
              
              
              
              -Prepaid
                  expenses and other current assets
              
              
              (103,721
              )
              
              
              -Other
                  assets
              
              
              113,568
              
              
              
              (107,257
              )Accounts
                  payable
              
              
              (1,027,744
              )
              
              
              482,864Accrued
                  expenses
              
              
              614,748
              
              
              
              (67,401
              )Accrued
                  interest related parties
              
              
              90,119
              
              
              
              -Accrued
                  dividends related parties
              
              
              (69,870
              )
              
              
              -Deferred
                  revenues
              
              
              371,890
              
              
              
              226,231Amount
                  due former shareholders of acquired companies
              
              
              179,579
              
              
              
              -Income
                  tax payable
              
              
              7,782
              
              
              
              -Payments
                  of severance liability
              
              
              (500,841
              )
              
              
              (92,295
              )Net
                  cash used in operating activities
              
              
              (3,947,257
              )
              
              
              (699,323
              )Cash
                  flows from investing activities:Purchase
                  of property and equipment, net
              
              
              (516,847
              )
              
              
              (279,014
              )Purchase
                  obligation payment - Novus
              
              
              (962,571
              )
              
              
              -Purchase
                  obligation payment - DocuCom
              
              
              (917,338
              )
              
              
              -Restricted
                  deposit of purchase obligation - DocuCom
              
              
              (922,888
              )
              
              
              -Cash
                  paid for acquisitions, net of cash acquired
              
              
              (2,952,429
              )
              
              
              (2,050,071
              )Net
                  cash used in investing activities
              
              
              (6,272,073
              )
              
              
              (2,329,085
              )Cash
                  flows from financing activities:Proceeds
                  from bank loans
              
              
              -
              
              
              
              269,369Repayment
                  of bank loans
              
              
              (317,251
              )
              
              
              -Proceeds
                  (payment) of notes payable
              
              
              -
              
              
              
              902,386Repayment
                  of capital lease obligations
              
              
              (68,928
              )
              
              
              -Proceeds
                  from related party loans
              
              
              400,000
              
              
              
              516,693Acquisition
                  of capital leases
              
              
              435,666
              
              
              
              291,817Proceeds
                    from issuance of preferred stock, net of cash paidfor direct
                    costs
              
              
              15,737,910
              
              
              
              -Distributions
                  to related parties
              
              
              (240,598
              )
              
              
              -Issuance
                  of common stock in acquisition
              
              
              -
              
              
              
              148,285Net
                  cash provided by financing activities
              
              
              15,946,799
              
              
              
              2,128,550Effect
                  of exchange rate changes on cash and cash equivalents
              
              
              (331,178
              )
              
              
              -Net
                  increase (decrease) in cash
              
              
              5,396,290
              
              
              
              (899,858
              )Cash
                  and cash equivalents, beginning of period
              
              
              706,197
              
              
              
              1,232,169Cash
                  and cash equivalents, end of period
              
              $
              6,102,487
              
              
              $
              332,311




See
        accompanying notes to condensed consolidated financial statements.
  5




BPO
        MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
 CONDENSED
          CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
 FOR
            THE
            NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006


2007
              
              
              2006Supplemental
                  disclosure of cash flow information:Cash
                  paid for:Interest
              
              $
              114,132
              
              
              $
              47,771Supplemental
                    disclosure of non-cash investing and financingactivities:Acquisition
                  of equipment under capital leases
              
              $
              435,666
              
              
              $
              -Issuance
                  of warrants
              
              $
              185,187
              
              
              $
              -Preferred
                  Stock Series A dividend
              
              $
              957
              
              
              $
              757Acquisition
                  of a company:Net
                  assets acquired
              
              $
              2,236,115
              
              
              $
              1,243,927Net
                  liabilities assumed
              
              $
              3,138,627
              
              
              $
              524,925Common
                  stock issued as consideration for acquisition
              
              $
              400,000
              
              
              $
              5,000






See
        accompanying notes to condensed consolidated financial
        statements.




6




BPO
      MANAGEMENT SERVICES, INC. AND SUBSIDIARIES


NOTES
      TO
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


SEPTEMBER
      30, 2007


(Unaudited)





1.
      ORGANIZATION AND BASIS OF PRESENTATION





ORGANIZATION





BPO
      Management Services, Inc and Subsidiaries (the "Company") was
      incorporated in Delaware and commenced operations on July 26, 2005. On
      December 15, 2006, the Company entered into a merger agreement with
      netGuru, Inc. (netGuru). The shareholders of the Company received aggregate
      netGuru equity comprised of 7,336,575 shares of common stock, 1,567,095
      shares of Series A preferred stock, 1,449,200 shares of Series B preferred
      stock, and 916,666 shares of Series C preferred stock, which represented
      the majority of the outstanding shares after the merger. Therefore, the
      merger was treated as a "reverse merger" and the previously outstanding
      shares of netGuru were treated as an equity transaction by the Company. The
      Company is a provider of business process outsourcing services offering
      enterprise content management ("ECM") services, information technology
      outsourcing ("ITO") services and human resource outsourcing
      ("HRO") services to middle market enterprises located primarily in the
      United States and Canada.





For
      accounting purposes, the acquisition has been treated as a
      recapitalization of BPO Management Services, Inc., prior to the merger with
      netGuru (Former BPOMS) with Former BPOMS as the acquirer. The historical
      financial statements prior to December 15, 2006, are those of the Former
      BPOMS which began operations on July 26, 2005. All share-related data has
      been presented giving effect to the recapitalization resulting from the
      reverse merger.





BASIS
      OF
      PRESENTATION





The
      accompanying unaudited condensed consolidated financial statements
      are prepared on a consistent basis in accordance with accounting
      principles generally accepted in the United States (GAAP) for interim
      financial information and with the instructions to Form 10-QSB and Item 10
      of Regulation SB. Accordingly, they do not include all of the information
      and footnotes required by GAAP for complete financial statements. In the
      opinion of management, all adjustments (consisting of normal recurring
      accruals and consolidation and elimination entries) considered necessary
      for a fair presentation have been included. Operating results for the three
      and nine month periods ended September 30, 2007 are not necessarily
      indicative of the results that may be expected for the year ending December
      31, 2007. The interim financial statements should be read in conjunction
      with the Company's consolidated financial statements and related footnotes
      included in our Annual Report on Form 10-KSB for the year ended December
      31, 2006.





2.
      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





PRINCIPLES
      OF CONSOLIDATION





The
      consolidated financial statements
      include the accounts of BPOMS and its wholly-owned subsidiaries. All
      significant intercompany accounts, transactions and profits among the
      consolidated entities have been eliminated upon consolidation. Each of the
      following entities is included in consolidation as of the Company's
      formation or the subsidiary's date of acquisition.




7


COMPANY
              
              
              INCEPTION/ACQUISITION
                  DATEBPO
                  Management Services, Inc. (the "Company")
              Inception
                  date:  July 26, 2005Adapsys
                  Document Management LP ("ADM")
              
              Acquired:  July
                  29, 2005Adapsys
                  LP ("ADP")
              
              
              
              Acquired:  July
                  29, 2005Digica,
                  Inc. ("Digica")
              
              
              
              Acquired:  January
                  1, 2006Novus
                  Imaging Solutions, Inc. ("Novus")
              
              Acquired:  September
                  30, 2006NetGuru
                  Systems, Inc. ("netGuru")
              
              
              Acquired:  December
                  15, 2006Research
                  Engineers, GmbH ("GmbH")
              
              Acquired:  December
                  15, 2006DocuCom
                  Imaging Solutions, Inc. ("DocuCom")
              
              Acquired:  June
                  21, 2007Human
                  Resource Micro-Systems, Inc. ("HRMS")
              Acquired:  June
                  29, 2007




USE
      OF
      ESTIMATES





The
      preparation of financial statements in conformity with accounting
      principles generally accepted in the United States requires us to make
      estimates and assumptions that affect the reported amounts of assets,
      liabilities, revenues and expenses and disclosure of contingent obligations
      in the financial statements and accompanying notes. Our most significant
      assumptions are employed in determining values for uncollectible accounts
      receivable, depreciation, intangible asset valuation and useful lives,
      goodwill impairments contingencies, determination of the remaining
      severance obligation, valuation of share based payments revenue recognition
      and the valuation of liabilities resulting from a business combination as
      well as estimates used in applying our revenue recognition policy.
      The
      estimation process requires assumptions to be made about future events and
      conditions, and,
      as such,
      is inherently subjective and uncertain. Actual results could differ
      materially from our estimates. In estimating the fair value of stock-based
      payments, we use the current quoted market price of our underlying common
      share for stock awards, and the Black-Scholes-Merton Option Pricing Model
      for stock options and warrants. We estimate our expected volatility of our
      common share based on the average volatilities of similar entities for an
      appropriate period following their going public; and we estimate the
      expected term of the option, taking into account both the contractual term
      of the option and the effects of employees' expected exercise and
      post-vesting employment termination behavior.





FAIR
      VALUE OF FINANCIAL INSTRUMENTS





Statement
      of Financial Accounting Standards ("SFAS") No. 107, "Disclosures About Fair
      Value Of Financial Instruments," requires management to disclose
      the estimated fair value of certain assets and liabilities defined by SFAS
      No. 107 as financial instruments. At September 30, 2007, management
      believed the carrying amounts of cash and cash equivalents, receivable and
      payable amounts, and accrued expenses approximated fair value because of
      the short maturity of these financial instruments. The Company also
      believed that the carrying amounts of its capital lease obligations
      approximated their fair value, as the interest rates approximated a rate
      that the Company could have obtained under similar terms at the balance
      sheet date.





FOREIGN
      CURRENCY TRANSLATION





The
      financial position and operating results of all foreign operations
      are consolidated using the local currencies of the countries in which the
      Company operates as the functional currency. Local currency assets and
      liabilities are translated at the rates of exchange on the balance sheet
      date, and local currency revenues and expenses are translated at average
      rates of exchange during the period. The resulting translation adjustments
      are recorded directly into a separate component of shareholders' equity.
      Gains and losses resulting from foreign currency transactions are included
      in operations and were not material for the three and nine months ended
      September 30, 2007 and 2006.





CASH
      AND
      CASH EQUIVALENTS





The
      Company considers all liquid investments with maturities of three months
      or less at the date of purchase to be cash equivalents. The Company
      maintains its cash balances at financial institutions that management
      believes possess high-credit quality. At September 30, 2007, the Company
      had $5,658,761 on deposit that exceeded the United States (FDIC) federal
      insurance limit. At September 30, 2007, the Company had no accounts on
      deposit that exceeded the Canadian (CDIC) insurable limit of $100,000 CDN
      per entity per bank. The Canadian funds insurance is limited to Canadian
      currency deposits only and does provide coverage to money master
      high interest savings accounts (money market accounts) but all accounts
      are considered in the overall limitation per entity per bank.





8




RESTRICTED
      CASH





CDN
      $900,000 is payable to the previous shareholders of DocuCom nine months from
      the
      date of the acquisition. This payment is guaranteed by a letter of credit for
      which the Company deposited as security a forward contract for the purchase
      of
      Cdn $900,000 purchased by the company at a cost of approximately $923,000 and
      shown on the balance sheet as restricted cash.  In addition, $500,000
      has been deposited in an escrow account for the benefit of the prior
      shareholders of HRMS and is subject to offsets in accordance with the Share
      Purchase Agreement.





REVENUE
      RECOGNITION





The
      Company recognizes revenue when the following criteria are met:
      (1) persuasive evidence of an arrangement, such as agreements, purchase
      orders or written or online requests, exists; (2) delivery of the product
      or service has been completed and no significant obligations remain; (3)
      the Company's price to the buyer is fixed or determinable; and (4)
      collection is reasonably assured. The Company's revenues arise from the
      following segments: ECM solutions including collaborative software products
      and services, ITO services and HRO services.





Revenue
      from software sales is recognized upon shipment if no
      significant post-contract support obligations remain outstanding and
      collection of the resulting receivable is reasonably assured. Customers may
      choose to purchase maintenance contracts that include telephone, e-mail and
      other methods of support, and the right to unspecified upgrades on a
      when-and-if available basis. Revenue from these maintenance contracts is
      deferred and recognized ratably over the life of the contract, usually
      twelve months.





In
      October 1997, the Accounting Standards Executive Committee ("AcSEC") of
      the AICPA issued Statement of Position ("SOP") 97-2, "Software Revenue
      Recognition." SOP 97-2 distinguishes between significant and insignificant
      vendor obligations as a basis for recording revenue, with a requirement
      that each element of a software licensing arrangement be separately
      identified and accounted for based on relative fair values of each element.
      The Company determines the fair value of each element in multi-element
      transactions based on vendor-specific objective evidence ("VSOE"). VSOE for
      each element is based on the price charged when the same element is sold
      separately.





In
      1998,
      the AICPA issued SOP 98-9, "Modification of SOP 97-2, Software
      Revenue Recognition, With Respect to Certain Transactions," which modifies
      SOP 97-2 to allow for use of the residual method of revenue recognition if
      certain criteria have been met. If evidence of fair value of all
      undelivered elements exists but evidence does not exist for one or more
      delivered elements, then revenue is recognized using the residual method.
      Under the residual method, the fair value of the undelivered elements is
      deferred and the remaining portion of the transaction fee is recognized as
      revenue.





The
      Company sells its collaborative software along with a maintenance
      package. This constitutes a multi-element arrangement. The price charged
      for the maintenance portion is the same as when the maintenance is sold
      separately. The fair values of the maintenance contracts sold in all
      multi-element arrangements are recognized over the terms of the maintenance
      contracts. The collaborative software portion is recognized when persuasive
      evidence of an arrangement exits, price is fixed and determinable, when
      delivery is complete, collection of the resulting receivable is reasonably
      assured and no significant obligations remain.





Revenues
      from providing IT services are recognized primarily on a time and materials
      basis, with time at a marked-up rate and materials and other reasonable
      expenses at cost, once the services are completed and no
      significant obligations remain. Certain IT services contracts are fixed
      price contracts where progress toward completion is measured by mutually
      agreed upon pre-determined milestones for which the Company recognizes
      revenue upon achieving such milestones. Fixed price IT contracts are
      typically for a short duration of one to nine months. Fees for certain
      services are variable based on an objectively determinable factor such as
      usage. Those factors are included in the written contract such that the
      customer's fee is determinable. The customer's fee is negotiated at the
      onset of the arrangement.




9


ALLOWANCE
      FOR DOUBTFUL ACCOUNTS





The
      Company sells its products and services to its customers on credit
      terms; granting credit to those who are identified credit worthy based on
      an analysis of the entities credit history. A provision is made for an
      allowance for doubtful accounts equal to the estimated uncollectible
      amounts. The Company's estimate is based upon its historical collection
      experience and a review of the current collectibility status of accounts
      receivable - trade. Specific accounts receivable that are eventually
      determined to be uncollectible are charged against the allowance for
      doubtful accounts when identified. It is reasonably possible that the
      Company's estimate of the allowance for doubtful accounts
      will change.





DEFERRED
      REVENUES





The
      Company defers revenues for its maintenance contracts and for
      its collaborative software sales that are not considered earned. The
      Company defers its maintenance revenues when the maintenance contracts are
      sold, and then recognizes the maintenance revenues over the term of the
      maintenance contracts. The Company defers its collaborative software sales
      revenues if it invoices or receives payment prior to the completion of a
      project, and then recognizes these revenues upon completion of the project
      when no significant obligations remain.





RESEARCH
      AND DEVELOPMENT





The
      Company's research and development ("R&D") costs consist mainly of
      software developers' salaries. The Company follows the provisions of SFAS
      No. 86 to capitalize software development costs when technological
      feasibility has been established and to stop capitalization when the
      product is available for general release to customers. The Company expenses
      development costs when they are related to enhancement of existing software
      products.





INCOME
      TAXES





The
      Company accounts for income taxes using the asset and liability
      method. Deferred tax assets and liabilities are recognized for the future
      tax consequences attributable to differences between the financial
      statement carrying amounts of existing assets and liabilities and their
      respective tax bases, and operating loss and tax credit carryforwards.
      Deferred tax assets and liabilities are measured using enacted tax rates
      expected to apply to taxable income in the years in which those temporary
      differences are expected to be recovered or settled.





SHARE-BASED
      COMPENSATION





The
      Company accounts for share-based compensation to employees pursuant to
      SFAS No.123(R), "Share Based Payment," which requires that all
      share-based compensation to employees, including grants of employee stock
      options, be recognized as expense in the Company's financial statements
      based on their respective grant date fair values. As SFAS No. 123(R)
      requires that share-based compensation expense be based on awards that are
      ultimately expected to vest, share based compensation for 2007 has been
      reduced by estimated forfeitures.





SFAS
      123(R) requires the use of a valuation model to calculate the fair value
      of share-based awards. The Company has elected to use the
      Black-Scholes-Merton option pricing model, which incorporates various
      assumptions including volatility, expected life, expected dividend and
      interest rates. As a private company, Former BPOMS did not have a history
      of market prices of its common stock, and as such, the Company used an
      estimated volatility in accordance with SAB No. 107 "Share Based Payment."
      In 2006, the Company used the volatility of the stock price of netGuru,
      BPOMS' predecessor company, adjusted to remove the effects of divestitures,
      cash distributions, and the reverse merger which BPOMS deems not
      representative of the events that would take place during expected term of
      the options that were valued. The expected life of awards was based on the
      simplified method as defined in SAB No. 107. The risk-free interest
      rate assumption was based on observed interest rates appropriate for the
      terms of the awards. The dividend yield assumption was based on the
      company's history and expectation of not paying any dividends in the
      foreseeable future. Forfeitures were estimated at the time of grant and
      will be revised, if necessary, in subsequent periods if actual forfeitures
      differ from those estimates. The Company uses the straight line
      amortization method to record expenses under this statement and recognized
      share-based compensation expense. The fair value of the Company's stock
      options granted to employees was estimated using the
      following assumptions:




Expected
                Dividend yield
            --Expected
                volatility
            124%Risk-free
                interest rate
            4.6%-5.03%Expected
                option lives (in years)
            7Estimated
                forfeiture rate
            7%





10




For
      the
      three months ended September 30, 2007 and 2006, the Company recognized
      $112,118,
      and
      $(4,439), respectively, in share-based compensation expense. For the nine months
      ended September 30, 2007 and 2006, the Company recognized $258,861 and $35,514,
      respectively, in share-based compensation expense. The Company may be
      required to accelerate, increase or cancel any remaining
      unearned share-based compensation expense if there are any modifications or
      cancellation of the underlying unvested securities. Future share-based
      compensation expense and unearned share-based compensation will increase to
      the extent that we grant additional equity awards to employees or we assume
      unvested equity awards in connection with acquisitions. Share-based
      compensation expense was recorded in selling, general and administrative
      expense.





VALUATION
      OF THE COMPANY'S COMMON SHARES AT THE TIME OF GRANT





The
      Company granted shares of its common stock as partial consideration for
      the acquisition of Digica Inc. in January 2006 and the acquisition of Human
      Resource Micro-Systems, Inc. in June of 2007. The fair values of these grants
      were determined based on recent sales of the Company's securities
      immediately preceding the dates of closing.





SEGMENT
      REPORTING





The
      Company applies the provisions of SFAS No. 131, "Disclosures about
      Segments   of an Enterprise and Related Information." SFAS No.
      131 requires segments to be determined and reported based on how management
      measures performance and makes decisions about allocating resources. See
      Note 10 "Segment and Geographic Data" for a description of and disclosures
      regarding the Company's significant reportable segments.





RETIREMENT
      PLANS





The
      Company and certain of its United States subsidiaries have qualified cash
      or deferred 401(k) retirement savings plans. The plans cover substantially
      all United States employees who have attained age 21 and have one year of
      service. Employees may contribute up to 15% of their compensation. The
      Company does not make matching contributions to the plan, except in one
      subsidiary, where it matches 100% of the employee contribution up to a
      maximum of 4% of the employee’s salary. For the quarters ended September 30,
      2007 and 2006, the Company contributions to the plan amounted to $6,559 and
      $6,149, respectively.  For the nine months ended September 30,2007
      and 2006, the Company contributions to the plan amounted to $19,660 and
      $20,667,
      respectively.  Certain of its Canadian subsidiaries have defined
      contribution pension plans whereby after a qualification period the company
      contributes an amount which vary from 2% to 8% of the employees annual
      earnings.  For the three months ended September 30, 2007 and 2006, the
      Company contributions to the plan amounted to $12,620 and $7,988,
      respectively.  For the nine months ended September 30, 2007 and 2006,
      the Company contributions to the plan amounted to $33,303 and $30,331,
      respectively.





RECLASSIFICATIONS





Certain
      reclassifications have been made to the fiscal 2006 consolidated financial
      statements to conform to the fiscal 2007 presentation. The
      primary reclassifications relate to the presentation of the three business
      segments and the presentation of share and per share data giving effect to
      the one-for-fifteen reverse stock split, the reverse merger of BPOMS into
      netGuru, Inc. and the resulting recapitalization of equity.





BASIC
      AND
      DILUTED LOSS PER SHARE





In
      accordance with FASB Statement No. 128, Earnings Per Share, we
      calculate basic and diluted net loss per share using the weighted average
      number of common shares outstanding during the periods presented and adjust
      the amount of net loss, used in this calculation, for preferred stock
      dividends declared during the period.





We
      incurred a net loss in each period presented, and as such, did not
      include the effect of potentially dilutive common stock equivalents in the
      diluted net loss per share calculation, as their effect would be
      anti-dilutive for all periods. Potentially dilutive common stock
      equivalents would include the common stock issuable upon the conversion of
      preferred stock and the exercise of warrants and stock options that have
      conversion or exercise prices below the market value of our common stock at
      the measurement date. As of September 30, 2007 and 2006, all potentially
      dilutive common stock equivalents amounted to 133,344,209 and 5,853,371
      shares, respectively.




11


The
      following table illustrates the computation of basic and diluted net
      loss per share:





THREE
                  MONTHS ENDED
              
              
              NINE
                  MONTHS ENDEDSEPTEMBER
                  30,
              
              
              SEPTEMBER
                  30,2007
              
              
              2006
              
              
              2007
              
              
              2006Numerator:Net
                  loss
              
              
              $
              (1,278,777
              )
              
              $
              (439,784
              )
              
              $
              (3,932,263
              )
              
              $
              (1,507,368
              )Less:Preferred
                  dividends paid in stock
              
              
              32,754
              
              
              
              -
              
              
              
              96,348
              
              
              
              -Loss
                  and numerator used in computing basisand
                  diluted loss per share
              
              $
              (1,246,023
              )
              
              $
              (439,784
              )
              
              $
              (3,835,914
              )
              
              $
              (1,507,368
              )Denominator:Denominator
                  for basic and diluted net loss per share-weighted
                    average number of common sharesoutstanding
              
              
              
              9,004,368
              
              
              
              9,927,174
              
              
              
              8,750,543
              
              
              
              9,894,091Basic
                  and diluted net loss per share
              
              
              (0.14
              )
              
              
              (0.04
              )
              
              
              (0.44
              )
              
              
              (0.15
              )


The
      following table sets forth potential shares of common stock that are
      not included in the diluted net loss per share because to do so would
      be antidilutive since the company reported net losses in all the
      reporting periods:




THREE
                  MONTHS ENDED
              
              
              NINE
                  MONTHS ENDEDSEPTEMBER
                  30,
              
              
              SEPTEMBER
                  30,2007
              
              
              2006
              
              
              2007
              
              
              2006Options
                  to purchase shares of common stock
              
              
              2,487,002
              
              
              
              2,100,000
              
              
              
              2,487,002
              
              
              
              2,100,000Warrants
                  to purchase shares of common stock
              
              
              98,436,953
              
              
              
              253,371
              
              
              
              98,436,953
              
              
              
              253,371Shares
                  of convertible preferred stock - Series A
              
              
              1,637,710
              
              
              
              1,500,000
              
              
              
              1,637,710
              
              
              
              1,500,000Shares
                  of convertible preferred stock - Series B
              
              
              1,449,200
              
              
              
              2,000,000
              
              
              
              1,449,200
              
              
              
              2,000,000Shares
                  of convertible preferred stock - Series D
              
              
              23,333,344
              
              
              
              -
              
              
              
              23,333,344
              
              
              
              -Shares
                  of convertible preferred stock - Series D-2
              
              
              6,000,000
              
              
              
              -
              
              
              
              6,000,000
              
              
              
              -Total
              
              
              133,344,209
              
              
              
              5,853,371
              
              
              
              133,344,209
              
              
              
              5,853,371
  COMPREHENSIVE
      INCOME (LOSS)





The
      net
      loss reflected on our Consolidated Statements of Operations substantially
      represents the total comprehensive loss for the periods presented.




12


IMPACT
      OF
      RECENTLY ISSUED ACCOUNTING STANDARDS





ACCOUNTING
      FOR UNCERTAINTY IN INCOME TAXES





In
      June
      2006, the FASB issued Interpretation ("FIN") 48, "Accounting
      for Uncertainty in Income Taxes - an interpretation of FASB Statement No.
      109," which clarifies the accounting for uncertainty in income taxes
      recognized in an enterprise's financial statements in accordance with SFAS
      No. 109, "Accounting for Income Taxes." The interpretation prescribes a
      recognition threshold and measurement attribute for the financial statement
      recognition and measurement of a tax position taken or expected to be taken
      in a tax return. FIN 48 requires recognition of tax benefits that satisfy a
      greater than 50% probability threshold. FIN 48 also provides guidance on
      de-recognition, classification, interest and penalties, accounting in
      interim periods, disclosure, and transition. FIN 48 is effective for the
      Company beginning January 1, 2007. The Company believes that adoption of
      FIN 48 will not have a material effect on its financial position, results
      of operations or cash flows.





FAIR
      VALUE MEASUREMENTS





In
      September 2006, the FASB issued SFAS No. 157, "Fair Value
      Measurements," which defines fair value, establishes a framework for
      measuring fair value in generally accepted accounting principles, and
      expands disclosures about fair value measurements. SFAS No. 157 does not
      require any new fair value measurements, but provides guidance on how to
      measure fair value by providing a fair value hierarchy used to classify the
      source of the information. This statement is effective for us beginning
      January 1, 2008. Adoption of SFAS No. 157 did not have a material effect on
      our financial position, results of operations or cash flows.





3. 
      BUSINESS COMBINATIONS





On
      June
      21, 2007, the Company purchased 100% of the issued and outstanding capital
      stock
      of DocuCom Imaging Solutions Inc. a Canadian corporation (“DocuCom”) for a total
      purchase price of Cdn$2,761,097 (approximately US$2.58 million). The DocuCom
      results of operations have been included in the consolidated financial
      statements since the date of acquisition. In addition to adding the DocuCom
      data
      and document management solutions capability with its long term Canada-based
      customer relationships, the acquisition enhanced the Company’s ability to offer
      high quality, cost-effective service utilizing its near shore delivery model
      to
      its US customers.





The
      purchase price consisted of cash in
      the amount of Cdn$961,097 (approximately US$910,000), at closing on June 21,
      2007. The purchase agreement also provided that the Company pay the selling
      shareholders Cdn$900,000 (approximately US$840,000) three months after closing
      and Cdn$900,000 (approximately US$840,000) nine months after closing. The
      Company secured the subsequent payments through a bank-issued irrevocable
      standby letter of credit in favor of the selling shareholders in the aggregate
      amount of Cdn$1,800,000 (approximately US$1.68 million). The letter of credit
      was securitized by the deposit of $1,955,955 that is shown on the balance sheet
      as restricted cash.





On
      June
      29, 2007, the Company purchased 100% of the issued and outstanding capital
      stock
      of Human Resource Micro-Systems, Inc., a California corporation (“HRMS”). The
      aggregate purchase price was $2,000,000, of which amount the Company paid the
      selling shareholders $1,100,000 and issued them 384,968 shares of the Company’s
      restricted common stock valued at $400,000 (based upon the volume-weighted
      average closing bid price of the common stock during the ten consecutive trading
      days immediately preceding the closing). The Stock Purchase Agreement provided
      that the selling shareholders be paid the remaining $500,000 twelve months
      after
      closing through an escrow account, subject to offset with respect to any claims
      for indemnity by the Company under the terms of the Stock Purchase
      Agreement.





TheHRMS
      product delivers
      customizable software solutions for domestic and global mid-market organizations
      seeking to optimize their human resources service delivery and is being
      integrated with the Company’s existing human resources outsourcing services
      based in San Francisco, California in order to broaden the Company’s HRO
      offering to its customers. Since HRMS was purchased at the end of the reporting
      period, its results of operations have not been included in the condensed
      consolidated statements of operations of BPOMS.




13


The
      following table presents the preliminary allocation of the acquisition price,
      including professional fees and other related acquisition costs, to the assets
      acquired and liabilities assumed, based on their fair values as of the date
      of
      acquisition:





DocuCom
              
              
              HRMSCash
                  and cash equivalents
              
              $
              -
              
              
              $
              15,702Accounts
                  receivable
              
              
              1,579,611
              
              
              
              252,008Acquired
                  contracts
              
              
              -
              
              
              
              -Other
                  current assets
              
              
              172,888
              
              
              
              8,876Property,
                  plant and equipment
              
              
              204,419
              
              
              
              2,611Goodwill
              
              
              3,762,693
              
              
              
              2,351,587Identifiable
                  intangible assets
              
              
              -
              
              
              
              -Total
                  assets acquired
              
              
              5,719,611
              
              
              
              2,630,784Note
                  payable to bank
              
              
              420,610
              
              
              
              -Accounts
                  payable and other accrued liabilities
              
              
              2,247,173
              
              
              
              470,844Estimated
                  termination liability
              
              
              -
              
              
              
              -Total
                  liabilities assumed
              
              
              2,667,783
              
              
              
              470,844Net
                  assets acquired
              
              $
              3,051,828
              
              
              $
              2,159,940





Acquired
      identifiable intangible assets in the amount of $0 were assigned to customer
      contracts pending valuation. The
      purchase price and costs associated with the DocuCom and HRMS acquisitions
      exceeded the Company's preliminary allocation of the fair value of net assets
      acquired by $3,762,693 and $2,351,587, respectively, which was assigned to
      goodwill. The amount ultimately assigned to goodwill is not expected to be
      deductible for United States income tax, state income tax or Canadian income
      tax
      purposes.




The
      following unaudited pro forma financial
      information presents the combined results of operations of the Company, DocuCom
      and HRMS for the quarter ended September 30, 2007 and 2006 as if the
      acquisitions had occurred on July 1, 2007 and July 1, 2006,
      respectively.




14




Unaudited
        Pro Forma Statement of Operations For the Three Months Ended September 30,
        2007:





BPOMS
            
            
            DocuCom
            
            
            HRMS
            
            
            Pro
                FormaRevenues
            
            $
            1,666,560
            
            
            $
            2,719,666
            
            
            $
            246,076
            
            
            $
            4,632,302Net
                Income (Loss)
            
            $
            (1,285,811
            )
            
            $
            163,927
            
            
            $
            (156,893
            )
            
            $
            (1,278,777
            )Basic
                and diluted loss percommon
                share
            
            $
            (0.15
            )
            
            $
            -
            
            
            $
            (0.41
            )
            
            $
            (0.14
            )Basic
                and diluted weighted averagecommon
                shares outstanding
            
            
            8,619,400
            
            
            
            -
            
            
            
            384,968
            
            
            
            9,004,368




Unaudited
        Pro Forma Statement of Operations For the Three Months Ended September 30,
        2006:


BPOMS
            
            
            DocuCom
            
            
            HRMS
            
            
            Pro
                FormaRevenues
            
            $
            961,291
            
            
            $
            2,386,450
            
            
            $
            312,229
            
            
            $
            3,659,970Net
                Income (Loss)
            
            $
            (439,784
            )
            
            $
            (140,647
            )
            
            $
            15,935
            
            
            $
            (564,496
            )Basic
                and diluted loss percommon
                share
            
            $
            (0.04
            )
            
            $
            -
            
            
            $
            0.04
            
            
            $
            (0.05
            )Basic
                and diluted weighted averagecommon
                shares outstanding
            
            
            9,927,174
            
            
            
            -
            
            
            
            384,968
            
            
            
            10,312,142




15




The
      following unaudited pro forma financial
      information presents the combined results of operations of the Company, DocuCom
      and HRMS for the nine months ended September 30, 2007 and 2006 as if the
      acquisitions had occurred on January 1, 2007 and January 1, 2006,
      respectively.


Unaudited
        Pro Forma Statement of Operations For the Nine Months Ended September 30,
        2007:


BPOMS
            
            
            DocuCom
            
            
            HRMS
            
            
            Pro
                FormaRevenues
            
            $
            6,023,334
            
            
            $
            9,854,158
            
            
            $
            795,930
            
            
            $
            16,673,422Net
                Income (Loss)
            
            $
            (3,939,297
            )
            
            $
            127,637
            
            
            $
            (399,250
            )
            
            $
            (4,210,910
            )Basic
                and diluted loss percommon
                share
            
            $
            (0.47
            )
            
            $
            -
            
            
            $
            (1.04
            )
            
            $
            (0.48
            )Basic
                and diluted weighted averagecommon
                shares outstanding
            
            
            8,365,575
            
            
            
            -
            
            
            
            384,968
            
            
            
            8,750,543




Unaudited
        Pro Forma Statement of Operations For the Nine Months Ended September 30,
        2006:


BPOMS
              
              
              DocuCom
              
              
              HRMS
              
              
              Pro
                  FormaRevenues
              
              $
              3,850,900
              
              
              $
              9,856,986
              
              
              $
              900,781
              
              
              $
              14,608,667Net
                  Income (Loss)
              
              $
              (1,507,368
              )
              
              $
              71,109
              
              
              $
              67,450
              
              
              $
              (1,378,809
              )Basic
                  and diluted loss percommon
                  share
              
              $
              (0.16
              )
              
              $
              -
              
              
              $
              0.18
              
              
              $
              (0.14
              )Basic
                  and diluted weighted averagecommon
                  shares outstanding
              
              
              9,509,123
              
              
              
              -
              
              
              
              384,968
              
              
              
              9,894,091





Both
      acquisitions took place close to the end of the second quarter and the Company
      has not concluded its study of the valuation of the assets acquired and the
      liabilities assumed.




16


4. 
      DEBT





SHORT-TERM
      RELATED PARTY DEBT





Short-term
      related party debt consisted of the following at September 30,
      2007:




Notes
                  payable to 2 officers, who are also significantshareholders,
                  secured by all assets of the Company,bearing
                  an annual interest rate of 9%
              
              $
              1,200,000Long-term
                  debt, including capital lease obligations, consisted of the
                  followingat
                  September 30, 2007:a.
              Credit
                  facility from Royal Bank of Canada, stated interest at afloating
                  rate plus 1.05%, (totaling 7.3% at September 30, 2007),secured
                  by assets of the Company
              
              
              $
              120,972b.
              Loan
                  from Business Development Bank of Canada, statedinterest
                  at a floating rate plus 3.25%, (totaling 11.50% atSeptember
                  30, 2007), secured by assets and personal guarantees
              
              
              53,873of
                  the Company, expiring May 21, 2010c.
              Collateralized
                  loan payable to Chrysler Financial,expiring
                  March 2008, fixed interest rate of 13.9%
              
              
              4,136d.
              Capital
                  lease obligations maturing at dates rangingfrom
                  November 30, 2009 to December 31, 2011, securedby
                  the leased assets
              
              
              
              666,966Total
                  long-term debt before unamortized discountand
                  inputed interest
              
              
              
              845,947Less:  Imputed
                  interest and unamortized discount
              
              
              (127,907
              )Long-term
                  debt
              
              
              718,040Less: current
                  portion
              
              
              274,206$
              443,834


RELATED
      PARTY NOTES PAYABLE





In
      August
      2006 the Company entered into an agreement with two individuals who are
      officers, directors, and significant shareholders for a bridge loan not to
      exceed $3,000,000.  From the inception of that agreement through
      January 30, 2007 a total of $2,740,000 was advanced to the
      Company.  The loan agreement provided for principal and accrued and
      unpaid interest were due and payable April 30, 2007.  The loan
      agreement is unsecured.  The unpaid principal of $1,200,000 and
      accrued and unpaid interest of $9,450 as of September 30, 2007 are due and
      payable on demand. The amount due under the loan agreement has both a face
      and
      stated value of $1,200,000 as of September 30, 2007.  The stated fixed
      interest rate is 9.00% per annum for the three and nine month periods ended
      September 30, 2007.  For financial reporting purposes the effective
      interest rate yield was 9% and 64% per annum for the three and nine month
      periods ended September 30, 2007.  The loan agreement was not in
      effect during either the three or nine month periods ending September 30,
      2006





Common
      share purchase warrants (collectively the Warrants) to purchase one share of
      the
      Company’s common stock, par value $0.01 per share (the Common Stock), at an
      exercise price of $0.035 per share that are exercisable on issuance were granted
      in conjunction with the loan agreement. The total funds borrowed from the
      related parties amounted $2,740,000.  The associated Warrants are
      exercisable for 707,704 shares of common stock. The Warrants, which expire
      seven
      years after issuance, were assigned a value of $834,717, estimated using the
      Black-Scholes-Merton valuation model. The following assumptions were used to
      determine the fair value of the Warrants using the Black-Scholes-Merton
      valuation model: a term of seven years, risk-free rate range of 4.16% - 5.03%,
      volatility of 125%, and dividend yield of zero. In accordance with EITF No.
      00-27, *Application of Issue No. 98-5 to Certain Convertible
      Instruments*, the values assigned to the Warrants was allocated based on
      their relative fair values. The discount on the loan agreement for the Warrants
      was accreted to interest expense, using the effective interest method, over
      the
      initial term of the loan agreement (original loan agreement due date was April
      30, 2007) Total interest expense recognized relating to the accretion of the
      Warrants discount for the three and nine month periods ending September 30,
      2007
      was $0 and $594,030, respectively.  There was no interest expense
      related to the accretion of the Warrant discount for the three and nine month
      periods ending September 30, 2006.




17


The
      loan
      agreement provided that if the Company required additional equity in order
      to
      meet certain surplus requirements needed to accomplish the reverse merger with
      netGuru; it could offer  the related parties the opportunity to
      convert  a  portion of  the outstanding loan
      agreement amount then payable at an aggregate conversion price equal to 50%
      of
      the fair value of the common stock at the adjusted closed market price on the
      day immediately preceding the conversion of the loan agreement
      amounts.  A total of $1,540,000 was converted into 916,667 shares of
      the Company’s Series C preferred stock in December 2006 (conversion price of
      $1.68 per share of Series C preferred stock is based on an adjusted closing
      price of the common stock on the day immediately preceding the conversion of
      $3.36).  The Company incurred an $82,200 loan fee of 3% of the total
      amount borrowed under the loan agreement which was paid to the related
      parties.





Under
      the loan agreement, the Company
      was required to pay an amount equal to an amount not less than 25% of the net
      proceeds it received from all subsequent debt and equity financings towards
      the
      retirement of the then outstanding principal and accrued and unpaid interest
      (Note 5).  Any unwaived failure by the Company to make any such
      payment would constitute a material breach of the loan agreement. In connection
      with the consummation of the Series D preferred stock equity financing on June
      13, 2007, the two individuals waived this loan agreement
      covenant.  The waiver related solely to the Series D preferred stock
      financing.





A. 
      CREDIT FACILITY FROM THE ROYAL BANK OF CANADA





Docucom
      Imaging Solutions Inc. (“DocuCom”) has a revolving Operating Line with the Royal
      Bank of Canada with a maximum availability of $1,000,000 and carries an
      annual interest rate of the Royal Bank of Canada prime rate plus 1.05%, which
      amounted to 7.30% at September 30, 2007.  The credit facility is
      secured by a General Security Agreement signed by DocuCom as well as a guarantee
      and postponement of claim for $500,000 in the name of Novus Imaging Solutions
      Inc. (“Novus”) which is also supported by a General Security Agreement signed by
      Novus.  The Borrowing Limit on the credit facility is 75% of the good
      accounts receivable of the company.  At September 30, 2007, DocuCom
      had an outstanding balance of approximately $120,972 which did not exceed the
      borrowing limit.





B. 
      TERM LOAN FROM BUSINESS DEVELOPMENT BANK OF CANADA





Adapsys
      Document Management LP (“ADM”) has a term loan with the Business Development
      Bank of Canada that expires on May 21, 2010. The interest rate on this loan
      is bank's floating rate plus 3.25% and monthly principal re-payments are
      approximately $1,433. At September 30, 2007, the annual rate of interest on
      this loan was 11.50% and the balance outstanding was approximately $53,984.
      The loan is secured by a general security agreement from ADM and joint and
      several personal guarantees in the amount of approximately $43,000 by two
      former principals of ADM who were also the Company's 5% shareholders. The
      Company issued a 7-year warrant to purchase 5,435 shares of the Company's
      common stock at an exercise price of $0.03 per share to each of these
      shareholders in return for their loan guarantees. The warrants, valued at
      approximately $11,049, were recorded as a discount to the term loan. The
      value of the warrants is being amortized to interest expense over the
      term of the loan. Unamortized discount at September 30, 2007 was
      approximately $8,980.





C. 
      LOAN PAYABLE TO CHRYSLER FINANCIAL





Digica
      Inc. has a loan payable to Chrysler Financial collateralized by a vehicle
      with a net book value of $9,750. The loan has a fixed annual interest rate
      of 13.9% and matures in March 2008. At September 30, 2007, the loan balance
      was $4,136.





D. 
      CAPITAL LEASES





Capital
      leases consist primarily of equipment leases for the U.S. entities.
      The Company added approximately $360,090 to capital leases in the first
      quarter of fiscal 2007.




18


Long-term
      debt, excluding unamortized discount, and capital lease obligations mature
      in each of the following years ending September 30:





Long-Term
              
              
              Capital
                  LeaseDebt
              
              
              Obligations2008
              
              $
              141,942
              
              
              $
              184,8352009
              
              
              16,834
              
              
              
              179,9952010
              
              
              11,225
              
              
              
              134,5432011
              
              
              -
              
              
              
              134,2562012
              
              
              -
              
              
              
              33,338Thereafter
              
              
              -
              
              
              
              -Total
                  minimum payments
              
              $
              170,001
              
              
              $
              666,966Less:  amount
                  representing interest
              
              
              
              
              
              
              (118,927
              )Present
                  value of minimum capital lease payments
              
              
              
              
              
              $
              548,039





5. 
      CAPITAL STOCK





In
      January 2006 the Company issued 362,300 common shares as part of the purchase
      consideration for Digica, Inc.





In
      September 2006 the Company issued 144,920 common shares as part of the purchase
      consideration for Novus Imaging Solutions, Inc.





In
      December 2006 the Company issued 916,666 Series C Convertible Preferred Stock
      to
      two individuals that are officers and significant shareholders for
      $1,540,000.





In
      December 2006 the Company issued 1,282,820 common shares in exchange for the
      shares of NetGuru, Inc. in the reverse merger transaction.





In
      June
      2007 the Company issued 384,968 common shares as part of the purchase
      consideration for Human Resource Micro-Systems, Inc.





In
      June
      2007 the Company privately placed shares of Series D Convertible Preferred
      Stock
      and various common stock and Series D-2 preferred stock purchase warrants to
      a
      limited number of institutional investors for gross proceeds of approximately
      $14,000,000. The shares of Series D Convertible Preferred Stock are convertible
      into approximately 23.3 million shares of our common stock. The three-year
      Series A Warrants (initial exercise price of $.90 per share) are exercisable
      for
      the purchase of up to approximately 11.7 million shares of our common stock.
      The
      five-year Series B Warrants (initial exercise price of $1.25 per share) are
      exercisable for the purchase of up to approximately 23.3 million shares of
      common stock. If exercised in full, the aggregate Series A Warrant and Series
      B
      Warrant proceeds will be approximately $40 million.





The
      investors were also granted a one-year option (in the form of Series J Warrants)
      to purchase up to $21 million of Series D-2 Convertible Preferred Stock, which
      is convertible into approximately 23.3 million shares of common stock. At the
      closing and in connection with such option, the Company granted the investors
      three-year Series C warrants (initial exercise price of $1.35 per share), which
      are exercisable for the purchase of up to approximately 11.7 million shares
      of
      common stock, and five-year Series D Warrants (initial exercise price of $1.87
      per share), which are exercisable for the purchase of up to approximately 23.3
      million shares of common stock. The Series C Warrants and the Series D warrants
      vest only upon the exercise of the Series J Warrants. If exercised in full,
      the
      aggregate Series C Warrant and Series D Warrant proceeds will be approximately
      $60 million.





Through
      amendments to each of the Series J Warrants to Purchase Shares of Preferred
      Stock issued to the investors who purchased shares of the Company’s Series D
      Convertible Preferred Stock on June 13, 2007 (which Series J Warrants were
      issued in connection with such share purchases), the Company voluntarily reduced
      the per-share warrant exercise price payable upon exercise of its Series J
      Warrant from $14.40 to $9.60, effective only for exercises thereof during the
      period between September 28, 2007 and October 10, 2007.  This reduced
      warrant exercise price only applied for up to seventy-five percent (75%) of
      the
      Series J Warrants then held by each investor and the original exercise price
      of
      $14.40 per share was automatically re-applied to any Series J Warrants not
      exercised at the reduced price.




19




The
      Company also amended each of the Series C Warrants to purchase shares of Common
      Stock and Series D Warrants to purchase shares of Common Stock, all of which
      were also issued in connection with the purchases of the Series D Convertible
      Preferred Stock on June 13, 2007, to provide that, in the event that an investor
      exercised any portion of the Series J Warrants at the reduced exercise price,
      the per-share warrant exercise price payable upon exercise of its Series C
      Warrant was reduced from $1.35 to $0.01 and the per-share warrant exercise
      price
      payable upon exercise of its Series D Warrant was reduced from $1.87 to $1.10
      for the same percentage of the investor’s Series C Warrants and Series D
      Warrants as the percentage of Series J Warrants then exercised by such investor
      during the reduced warrant price period.   Any applicable reduced
      warrant exercise price for the Series C Warrants and Series D Warrants applies
      for the remainder of their respective terms.





As
      of
      September 30, 2007, the period end of this Current Report, an investor had
      exercised certain of their Series J Warrants at the reduced exercise price
      and acquired an aggregate of 375,000 shares of the Company Series
      D-2 Convertible Preferred Stock for an aggregate of approximately $3.6 million.
      The anti-dilution provisions of the investors' agreements were waived for such
      reduced exercise prices.





6. 
      CONCENTRATION OF SALES AND CREDIT RISK





The
      Company is subject to credit risk primarily through its accounts
      receivable balances. The Company does not require collateral for its
      accounts receivable balances. None of the Company's customers accounted for
      more than 10% of the Company's consolidated net sales during the three
      months ended September 30, 2007.





7. 
      DEFERRED REVENUES





The
      Company defers revenues for its maintenance contracts and for
      its collaborative software sales that are not considered earned. The
      Company defers its maintenance revenues when the maintenance contracts are
      sold, and then recognizes the maintenance revenues over the term of the
      maintenance contracts. The Company defers its collaborative software sales
      revenues if it invoices or receives payment prior to the completion of a
      project, and then recognizes these revenues upon completion of the project
      when no significant obligations remain.





8. 
      SEGMENT AND GEOGRAPHIC DATA





The
      Company is a business process outsourcing services provider. The
      Company's operating segments are:




oEnterprise
      content
      management (ECM)


oInformation
      Technology
      services outsourcing (ITO) and


oHuman
      resources
      outsourcing (HRO)





The
      Company applies the provisions of SFAS No. 131, "Disclosures about
      Segments of an Enterprise and Related Information." SFAS No. 131 requires
      segments to be determined and reported based on how management measures
      performance and makes decisions about allocating resources. The Company's
      management monitors unallocable expenses related to the Company's corporate
      activities in a separate "Corporate," which is reflected in the tables
      below.




20


The
      significant components of worldwide operations by reportable
      operating segment are:





Three
                  Months Ended
              
              
              Nine
                  Months EndedSeptember
                  30,
              
              
              September
                  30,2007
              
              
              2006
              
              
              2007
              
              
              2006Net
                  revenuesECM
              
              $
              3,504,953
              
              
              $
              492,908
              
              
              $
              5,866,997
              
              
              $
              2,290,238ITO
              
              
              880,978
              
              
              
              458,269
              
              
              
              2,861,891
              
              
              
              1,327,867HRO
              
              
              246,371
              
              
              
              10,114
              
              
              
              260,188
              
              
              
              232,795Consolidated
              
              $
              4,632,302
              
              
              $
              961,291
              
              
              $
              8,989,076
              
              
              $
              3,850,900Operating
                  lossECM
              
              $
              (361,629
              )
              
              $
              (274,161
              )
              
              $
              (865,350
              )
              
              $
              (615,644
              )ITO
              
              
              (1,384
              )
              
              
              (52,302
              )
              
              
              (187,168
              )
              
              
              (252,536
              )HRO
              
              
              (339,551
              )
              
              
              (45,854
              )
              
              
              (488,061
              )
              
              
              (503,065
              )Corporate
              
              
              (563,406
              )
              
              
              (41,480
              )
              
              
              (1,634,893
              )
              
              
              (104,229
              )Consolidated
              
              $
              (1,265,970
              )
              
              $
              (413,797
              )
              
              $
              (3,175,472
              )
              
              $
              (1,475,474
              )Depreciation
                  and amortization expenseECM
              
              $
              45,859
              
              
              $
              11,651
              
              
              $
              39,168
              
              
              $
              25,977ITO
              
              
              31,591
              
              
              
              74,380
              
              
              
              64,962
              
              
              
              111,790HRO
              
              
              2,580
              
              
              
              -
              
              
              
              5,159
              
              
              
              -Corporate
              
              
              62,227
              
              
              
              2,598
              
              
              
              115,355
              
              
              
              7,795Consolidated
              
              $
              142,257
              
              
              $
              88,629
              
              
              $
              224,644
              
              
              $
              145,562





The
      Company's operations are based in foreign and domestic subsidiaries
      and branch offices in the U.S., Canada and Germany. The following are
      significant components of worldwide operations by geographic
      location:





Three
                  Months Ended
              
              
              Nine
                  Months EndedSeptember
                  30,
              
              
              September
                  30,2007
              
              
              2006
              
              
              2007
              
              
              2006Net
                  revenuesNorth
                  America
              
              $
              4,367,847
              
              
              $
              961,291
              
              
              $
              8,496,025
              
              
              $
              3,850,900Europe
              
              
              264,455
              
              
              
              -
              
              
              
              493,051
              
              
              
              -Consolidated
              
              $
              4,632,302
              
              
              $
              961,291
              
              
              $
              8,989,076
              
              
              $
              3,850,900At
              
              
              AtSeptember
                  30,
              
              
              December
                  31,Long-Lived
                  Assets
              
              2007
              
              
              2006North
                  America
              
              $
              12,207,230
              
              
              $
              5,829,298Europe
              
              
              24,322
              
              
              
              25,874Consolidated
              
              $
              12,231,552
              
              
              $
              5,855,172





9. 
      COMMITMENTS AND CONTINGENCIES





Financial
      Results, Liquidity and Management's Plan activities





The
      Company has incurred losses in the nine month ended September 30, 2007 of
      $3,932,263. The Company has been able to obtain operating capital through a
      private debt funding source, the sale of shares of its common stock and
      through the exercise of warrants to purchase shares of its common stock.
      Management's plans include the continued development and implementation of
      its business plan.




21


No
      assurances can be given that the Company can obtain sufficient
      working capital through the sale of the Company's common stock and
      borrowing or that the continued implementation of its business plan will
      generate sufficient revenues in the future to sustain ongoing operations.
      These factors raise substantial doubt about the Company's ability to
      continue as a going concern. The financial statements do not include any
      adjustments that might be necessary if the Company is unable to continue as
      a going concern.





AMOUNT
      DUE FORMER SHAREHOLDERS OF ACQUIRED COMPANIES





The
      purchase agreements pursuant to which the Company acquired certain companies
      provides for the cash portion of the purchase price to be paid in
      installments within the year.





OPERATING
      LEASES





The
      Company leases certain facilities and equipment under
      non-cancelable operating leases. The facility leases include options to
      extend the lease terms and provisions for payment of property taxes,
      insurance and maintenance expenses.





At
      September 2007, future minimum
      annual rental commitments under these lease obligations were as
      follows:





For
      the
      twelve months ending September 30:





2008
              
              $
              491,0472009
              
              
              332,3352010
              
              
              198,4862011
              
              
              72,4492012
              
              
              2,422Thereafter
              
              
              -$
              1,096,739





For
      the
      three months September 30, 2007 and 2006 rent expense was $266,956 and $112,278,
      respectively.  For the nine months ended September 30, 2007 and
      2006 rent expense was $581,121 and 344,735, respectively.





LITIGATION





The
      Company is subject to various claims and legal proceedings covering a
      wide range of matters that arise in the ordinary course of its business
      activities. Management believes that any liability that may ultimately
      result from the resolution of these matters will not have a material
      adverse effect on the financial condition or results of operations of the
      Company.





NOTE
      10:  SUBSEQUENT EVENT





Through
      amendments to each of the Series J Warrants to Purchase Shares of Preferred
      Stock issued to the investors who purchased shares of the Company’s Series D
      Convertible Preferred Stock on June 13, 2007 (which Series J Warrants were
      issued in connection with such share purchases), the Company voluntarily reduced
      the per-share warrant exercise price payable upon exercise of its Series J
      Warrant from $14.40 to $9.60, effective only for exercises thereof during the
      period between September 28, 2007 and October 10, 2007.  This reduced
      warrant exercise price only applied for up to seventy-five percent (75%) of
      the
      Series J Warrants then held by each investor and the original exercise price
      of
      $14.40 per share was automatically re-applied to any Series J Warrants not
      exercised at the reduced price.




The
      Company also amended each of the Series C Warrants to purchase shares of Common
      Stock and Series D Warrants to purchase shares of Common Stock, all of which
      were also issued in connection with the purchases of the Series D Convertible
      Preferred Stock on June 13, 2007, to provide that, in the event that an investor
      exercised any portion of the Series J Warrants at the reduced exercise price,
      the per-share warrant exercise price payable upon exercise of its Series C
      Warrant was reduced from $1.35 to $0.01 and the per-share warrant exercise
      price
      payable upon exercise of its Series D Warrant was reduced from $1.87 to $1.10
      for the same percentage of the investor’s Series C Warrants and Series D
      Warrants as the percentage of Series J Warrants then exercised by such investor
      during the reduced warrant price period.   Any applicable reduced
      warrant exercise price for the Series C Warrants and Series D Warrants applies
      for the remainder of their respective terms.




22





As
      of
      September 30, 2007, the period end of this Current Report, an investor had
      exercised certain of their Series J Warrants at the reduced exercise price
      and acquired an aggregate of 375,000 shares of the Company Series
      D-2 Convertible Preferred Stock for an aggregate of approximately $3.6
      million.





In
      October 2007, subsequent to the period for this Current Report, additional
      investors exercised certain of their Series J Warrants at the reduced
      exercise price and acquired an aggregate of 354,167 shares of the
      Company Series D-2 Convertible Preferred Stock for an aggregate of approximately
      $3.4 million.





The
      Company used the proceeds to complete the acquisition of Blue Hill Data
      Services, Inc.





Through
      a
      Stock Purchase Agreement, entered into as of October 10, 2007, the Company
      purchased the issued and outstanding capital stock of Blue Hill Data Services,
      Inc., a privately-held data center outsourcing services company, based in Pearl
      River, New York (“Blue Hill”).  At or about the closing date, the
      Company transferred approximately $11 million of value, as
      follows:  (i) cash payments to the current selling stockholders of
      approximately $6.6 million; (ii) a 15-month promissory note in the initial
      principal amount of $1 million, subject to offset in favor of the Company with
      respect to any claims for indemnity by the Company under the terms of the Stock
      Purchase Agreement; (iii) cash payment through Blue Hill in the amount of
      approximately $1.4 million to its former stockholder; and (iv) 2,666,666 shares
      of the Company’s restricted common stock valued at approximately $1.8 million
      (based upon the volume-weighted average closing bid price of the common stock
      during the ten consecutive trading days immediately preceding the
      closing).  The promissory note bears interest from and after January
      1, 2009, at the rate of 9% per annum and is “secured” by a document to be held
      in escrow, styled as a confession of judgment.  The principal of the
      note, less any offsets, is, at the selling stockholders’ option, convertible
      into restricted shares of the Company’s common stock, the number of which is to
      be calculated in the same manner as the shares issued at closing were
      calculated.





ITEM
      2.MANAGEMENT'S
      DISCUSSION AND ANALYSIS OR PLAN OF OPERATION





FORWARD-LOOKING
      STATEMENTS





This
      report contains forward-looking statements within the meaning of
      Section 27A of the Securities Act and Section 21E of the Securities
      Exchange Act of 1934, as amended, (the "Exchange Act"). We intend that
      those forward-looking statements be subject to the safe harbors created by
      those sections. These forward-looking statements generally include the
      plans and objectives of management for future operations, including plans
      and objectives relating to our future economic performance, and can
      generally be identified by the use of the words "believe," "intend,"
      "plan," "expect," "forecast," "project," "may," "should," "could," "seek,"
      "pro forma," "goal," "estimates," "continues," "anticipate" and similar
      words. The forward-looking statements and associated risks may include,
      relate to, or be qualified by other important factors, including, without
      limitation:





oOur
      ability to continue
      as a going concern;


oOur
      ability to obtain
      additional debt or equity financing to the extent needed for our continued operations
      or for planned expansion, particularly if we are unable to attain and maintain profitable
      operations in the future;


oOur
      ability to
      successfully implement our business plans and the possibility of strategic acquisitions;


oOur
      ability to attract
      and retain strategic partners and alliances;


oOur
      ability to hire and
      retain qualified personnel;


oThe
      risks of uncertainty
      of protection of our intellectual property;


oRisks
      associated with
      existing and future governmental regulation to which we are subject;
      and


oUncertainties
      relating to
      economic conditions in the markets in which we currently operate and in
      which
      we intend to operate in the future.




23




These
      forward-looking statements necessarily depend upon assumptions and estimates
      that may prove to be incorrect. Although we believe that the assumptions and
      estimates reflected in the forward-looking statements are reasonable, we cannot
      guarantee that we will achieve our plans, intentions or expectations. The
      forward-looking statements involve known and unknown risks, uncertainties and
      other factors that may cause actual results to differ in significant ways from
      any future results expressed or implied by the forward-looking statements.
      We do
      not undertake to update, revise or correct any forward-looking
      statements.





Any
      of
      the factors described above or in the "Risk Factors" section of this report
      could cause our future financial results, including our net income
      (loss) or growth in net income (loss) to differ materially from prior
      results, which in turn could, among other things, cause the price of our
      common stock to fluctuate substantially.





OVERVIEW





The
      Company was incorporated in Delaware and commenced operations on July 26,
      2005.  On December 15, 2006, the Company acquired all of
      the outstanding common stock of publicly-held NetGuru, Inc. in a reverse
      merger ("Merger"). Upon the closing of the Merger, we adopted Former BPOMS’ (as
      the accounting acquirer) the accounting year end of December
      31.





We
      provide business process outsourcing (BPO) services to enterprises in
      the United States, Canada and Europe. "BPO" refers to the outsourcing of
      entire business processes, typically to reduce cost and/or to improve the
      performance of that process. Our objective is to provide a comprehensive
      suite of BPO functions to support the back-office business requirements of
      middle-market enterprises throughout North America and Europe on an
      outsourced and/or recurring revenue basis.





Our
      primary business offerings are:





o     Document
      and data management solutions, also known as enterprise content management or
      "ECM"
      including Finance and Accounting Services Outsourcing or "FAO";


o     Information
      technology services outsourcing or "ITO"; and


o     Human
      resources outsourcing or "HRO".





CRITICAL
      ACCOUNTING POLICIES





We
      have
      identified the following as accounting policies that are the most critical
      to aid in understanding and evaluating our financial results:





o     revenue
      recognition;


o     allowance
      for doubtful accounts receivable; and


o     impairment
      of long-lived assets, including goodwill.





REVENUE
      RECOGNITION





We
      derive
      revenues from:





o     Enterprise
      content management services, including collaborative software products and services;


o     IT
      outsourcing services; and


o     Human
      resources outsourcing services.





We
      recognize revenues when the following criteria are met:





o     Persuasive
      evidence of an arrangement, such as agreements, purchase orders or written
      or online requests, exists;


o     Delivery
      has been completed and no significant obligations remain;


o     Our
      price to the buyer is fixed or determinable; and


o     Collection
      is reasonably assured.




PERSUASIVE
        EVIDENCE OF AN ARRANGEMENT
 
 We
        document all terms of an arrangement in a written contract signed by
        the customer prior to recognizing revenue.


24




DELIVERY
      HAS OCCURRED OR SERVICES HAVE BEEN PERFORMED





We
      perform all services or deliver all products prior to recognizing
      revenue. Monthly services are considered to be performed ratably over the
      term of the arrangement. Professional consulting services are considered to
      be performed when the services are complete. Equipment is considered
      delivered upon delivery to a customer's designated location.





THE
      FEE
      FOR THE ARRANGEMENT IS FIXED OR DETERMINABLE





Prior
      to
      recognizing revenue, a customer's fee is either fixed or determinable under
      the terms of the written contract. Fees for most monthly
      services, professional consulting services, and equipment sales are fixed
      under the terms of the written contract. Fees for certain services are
      variable based on an objectively determinable factor such as usage. Those
      factors are included in the written contract such that the customer's fee
      is determinable. The customer's fee is negotiated at the outset of the
      arrangement.





COLLECTIBILITY
      IS REASONABLY ASSURED





We
      determine that collectibility is reasonably assured prior to
      recognizing revenue. We assess collectibility on a customer by customer
      basis based on criteria outlined by management. New customers are subject
      to a credit review process, which evaluates the customer's financial
      position and ultimately its ability to pay. We do not enter into
      arrangements unless collectibility is reasonably assured at the outset.
      Existing customers are subject to ongoing credit evaluations based on
      payment history and other factors. If it is determined during the
      arrangement that collectibility is not reasonably assured, revenue will be
      recognized on a cash basis.





We
      recognize revenues from software that we customize to fit a
      customer's requirements based on satisfactory completion of pre-determined
      milestones (evidenced by written acceptance from the customer) and delivery
      of the product to the customer, provided no significant obligations remain
      and collection of the resulting receivable is reasonably assured. Customers
      may choose to purchase ongoing maintenance contracts that include
      telephone, e-mail and other methods of support, and unspecified upgrades on
      a when-and-if available basis. Revenue from the maintenance contracts is
      deferred and recognized ratably over the life of the contract, usually
      twelve months.





In
      1997,
      the Accounting Standards Executive Committee ("AcSec") of the
      American Institute of Certified Public Accountants ("AICPA") issued
      Statement of Position ("SOP") 97-2, "Software Revenue Recognition." SOP
      97-2 distinguishes between significant and insignificant vendor obligations
      as a basis for recording revenue and requires that each element of a
      software licensing arrangement be separately identified and accounted for
      based on relative fair values of each element. We determine the fair value
      of each element in multi-element transactions based on vendor-specific
      objective evidence ("VSOE"). VSOE for each element is based on the price
      charged when the same element is sold separately.





In
      1998,
      the AICPA issued SOP 98-9, Modification of SOP 97-2, "Software
      Revenue Recognition, With Respect to Certain Transactions," which modified
      SOP 97-2 to allow for use of the residual method of revenue recognition if
      certain criteria are met. If evidence of fair value of all undelivered
      elements exists but evidence does not exist for one or more delivered
      elements, then we recognize revenue using the residual method. Under the
      residual method, the fair value of the undelivered elements is deferred,
      and the remaining portion of the transaction fee is recognized as
      revenue.





We
      recognize revenues from our IT services primarily on a time and
      materials basis, with time at a marked-up rate and materials and other
      reasonable expenses at cost, as we perform IT services. Certain IT services
      contracts may be fixed price contracts where we would measure progress
      toward completion by mutually agreed upon pre-determined milestones and
      recognize revenue upon reaching those milestones. Our fixed price IT
      contracts typically are for a short duration of one to nine
      months.





ALLOWANCE
      FOR DOUBTFUL ACCOUNTS RECEIVABLE





We
      sell
      to our customers on credit and grant credit to those who are deemed credit
      worthy based on our analysis of their credit history. We review
      our accounts receivable balances and the collectibility of these balances
      on a periodic basis. Based on our analysis of the length of time that the
      balances have been outstanding, the pattern of customer payments, our
      understanding of the general business conditions of our customers and our
      communications with our customers, we estimate the recoverability of these
      balances. When recoverability is uncertain, we record bad debt expense and
      increase the allowance for accounts receivable by an amount equal to the
      amount estimated to be unrecoverable. If the historical data we use to
      calculate the allowance provided for doubtful accounts does not reflect our
      future ability to collect outstanding receivables, additional provisions
      for doubtful accounts may be needed and our future results of operations
      could be materially affected.




25


IMPAIRMENT
      OF LONG-LIVED ASSETS INCLUDING GOODWILL





At
      inception, we adopted the provisions of SFAS No. 142 "Goodwill and
      Other Intangible Assets." SFAS No. 142 requires that goodwill and
      intangible assets with indefinite useful lives no longer be amortized, but
      instead be tested for impairment at least annually. SFAS No. 142 also
      requires that intangible assets with estimable useful lives be amortized
      over their respective estimated useful lives to their estimated residual
      values, and reviewed for impairment in accordance with SFAS No. 144.
      Pursuant to SFAS No. 142, we were required to perform an assessment of
      whether there was an indication that goodwill was impaired as of the date
      of adoption.





We
      are
      required to perform reviews for impairment annually, or more
      frequently when events occur or circumstances change that would more likely
      than not reduce the fair value of the net carrying amount. The evaluation
      of goodwill impairment involves assumptions about the fair values of assets
      and liabilities of each reporting unit. If these assumptions are materially
      different from actual outcomes, the carrying value of goodwill will be
      incorrect. In addition, the Company's results of operations could be
      materially affected by the write-down of the carrying amount of goodwill to
      its estimated fair value.





We
      assessed the fair value of its three reporting units by considering
      their projected cash flows, using risk-adjusted discount rates and other
      valuation techniques and determined that there was no impairment to
      goodwill. As of September 30, 2007, our goodwill account balance was
      $10,179,091.





CONSOLIDATED
      RESULTS OF OPERATIONS - THREE
      MONTHS ENDED SEPTEMBER 30, 2007 VS. THREE MONTHS ENDED SEPTEMBER 30, 2006 AND
      NINE MONTHS ENDED SEPTEMBER 30, 2007 VS. NINE MONTHS ENDED SEPTEMBER 30,
      2006





The
      privately held Former BPOMS began operations in July 26, 2005 and
      merged with the then publicly-held netGuru, Inc. on December 15, 2006 in a
      reverse merger ("Merger"). For accounting purposes, the acquisition has
      been treated as a recapitalization of Former BPOMS with Former BPOMS as the
      accounting acquirer. The historical financial statements prior to December
      15, 2006, are those of the Former BPOMS.





Certain
      reclassifications have been made to the fiscal 2006 consolidated financial
      statements to conform to the fiscal 2007 presentation. The
      primary reclassifications relate to the presentation of the three business
      segments and the presentation of share and per share data giving effect to
      the one-for-fifteen reverse stock split, the Merger, and the
      resulting recapitalization of equity.





The
      following entities of BPOMS are included in the consolidated results
      of operations from the date of their respective
      acquisitions:


COMPANY
                
                
                INCEPTION/ACQUISITION
                    DATEBPO
                    Management Services, Inc. (the "Company")
                Inception
                    date:  July 26, 2005Adapsys
                    Document Management LP ("ADM")
                
                Acquired:  July
                    29, 2005Adapsys
                    LP ("ADP")
                
                
                
                Acquired:  July
                    29, 2005Digica,
                    Inc. ("Digica")
                
                
                
                Acquired:  January
                    1, 2006Novus
                    Imaging Solutions, Inc. ("Novus")
                
                Acquired:  September
                    30, 2006NetGuru
                    Systems, Inc. ("netGuru")
                
                
                Acquired:  December
                    15, 2006Research
                    Engineers, GmbH ("GmbH")
                
                Acquired:  December
                    15, 2006DocuCom
                    Imaging Solutions, Inc. ("DocuCom")
                
                Acquired:  June
                    21, 2007Human
                    Resource Micro-Systems, Inc. ("HRMS")
                Acquired:  June
                    29, 2007
  26


NET
      REVENUES





The
      following table presents our net revenues by operating segment:





Three
                  Months Ended
              
              
              Nine
                  Months EndedSeptember
                  30,
              
              
              September
                  30,2007
              
              
              2006
              
              
              2007
              
              
              2006Net
                  revenuesECM
              
              $
              3,504,953
              
              
              $
              492,908
              
              
              $
              5,866,997
              
              
              $
              2,290,238%
                  of total net revenues
              
              
              75.7
              %
              
              
              51.3
              %
              
              
              65.3
              %
              
              
              59.5
              %ITO
              
              
              880,978
              
              
              
              458,269
              
              
              
              2,861,891
              
              
              
              1,327,867%
                  of total net revenues
              
              
              19.0
              %
              
              
              47.7
              %
              
              
              31.8
              %
              
              
              34.5
              %HRO
              
              
              246,371
              
              
              
              10,114
              
              
              
              260,188
              
              
              
              232,795%
                  of total net revenues
              
              
              5.3
              %
              
              
              1.1
              %
              
              
              2.9
              %
              
              
              6.0
              %Total
                  net revenues
              
              $
              4,632,302
              
              
              $
              961,291
              
              
              $
              8,989,076
              
              
              $
              3,850,900





Total
      net
      revenues increased by $3,671,011 or 382% to $4,632,302 during the three
      months ended September 30, 2007 from $961,291 during the same period in
      the prior year. Total net revenues increased by $5,138,176 or 133% to
      $8,989,076 during the nine months ended September 30, 2007 from $3,850,900
      during the same period in the prior year. Our total net revenues primarily
      consisted of net revenues from (1) enterprise content management,
      (2) IT
      Outsourcing services and (3) human resource outsourcing
      services.




ENTERPRISE
      CONTENT MANAGEMENT ("ECM")





Net
      revenue from ECM products and services during the three months
      ended September 30, 2007 increased by $3,012,045 or 611% to $3,504,953 from
      $492,908 during the three months ended September 30, 2006. During the nine
      months ended September 30, 2007 net revenue increased by $3,576,759 or 156%
      to $5,866,997 from $2,290,238 during the same period in the prior year. Net
      revenue in the ECM business segment in fiscal 2007 also includes net revenue
      from Novus Imaging Solutions, Inc. ("Novus") which was acquired in October
      2006,
      net revenues from netGuru, Inc. ("netGuru"), which was acquired in December
      2006 and net revenues from DocuCom Imaging Solutions, Inc. (“DocuCom”) which was
      acquired in June of 2007.  Net revenue increases attributable to these
      companies acquired subsequent to September 30, 2006 amounted to $2,960,677
      in
      the three months ended September 30, 2007 and $4,267,782 in the nine months
      ended September 30, 2007.  The ECM segment includes our ECM
      solutions group and our collaborative software products and
      related services. The majority of our ECM solutions group services and our
      collaborative software revenue are generated from service-oriented projects
      where the revenue is recognized only upon the completion of specific
      project deliverables. The timing of these projects and the completion and
      recognition of revenue from various size projects creates variability in
      our ECM solutions group services revenues and collaborative software net
      revenues between quarters and fiscal years.





IT
      OUTSOURCING SERVICES ("ITO")





Net
      revenue from ITO during the three months ended September 30, 2007 increased
      by $422,709 or 92% to $880,978 from $458,269 during the three months ended
      September 30, 2006. During the nine months ended September 30, 2007 net
      revenue increased by $1,534,024 or 116% to $2,861,891 from $1,327,867 during
      the
      same period in the prior year.  Increases were primarily due to
      the additional revenues from NetGuru Systems, Inc. acquired in December 2006
      in
      conjunction with the reverse merger with NetGuru Inc.




27




HUMAN
      RESOURCE OUTSOURCING SERVICES ("HRO")





During
      the third quarter of fiscal 2007, net revenues from HRO increased $236,257
      or2336%
      to $246,371 from $10,114 during the third
      quarter of fiscal 2006 and increased $27,393 or 12% to $260,188 from $232,795
      during the nine months ended September 30, 2007. The increase is due to the
      acquisition of HRMS which took place June 29, 2007 and is expected to continue
      offering increasing revenues to this segment in succeeding periods.





OPERATING
      EXPENSES





The
      following table presents our operating expenses and the percentage of total
      net
      revenues:


Three
                  Months Ended
              
              
              Nine
                  Months EndedSeptember
                  30,
              
              
              September
                  30,2007
              
              
              2006
              
              
              2007
              
              
              2006Operating
                  ExpensesCost
                  of services provided expenses
              
              $
              2,563,277
              
              
              $
              376,438
              
              
              $
              4,436,764
              
              
              $
              1,341,553%
                  of total net revenues
              
              
              55.3
              %
              
              
              39.2
              %
              
              
              49.4
              %
              
              
              34.8
              %Selling,
                  general and administrative expenses
              
              $
              3,054,506
              
              
              $
              1,003,089
              
              
              $
              7,207,185
              
              
              $
              3,949,307%
                    of total net revenues
              
              
              65.9
              %
              
              
              104.3
              %
              
              
              80.2
              %
              
              
              102.6
              %Research
                  and development expenses
              
              $
              168,371
              
              
              $
              -
              
              
              $
              261,738
              
              
              $
              -%
                    of total net revenues
              
              
              3.6
              %
              
              
              0.0
              %
              
              
              2.9
              %
              
              
              0.0
              %


Share-based
                  compensation expense
            
            $
            112,118
            
            
            $
            (4,439
            )
            
            $
            258,861
            
            
            $
            35,514%
                  of total net revenues
            
            
            2.4
            %
            
            
            -0.5
            %
            
            
            2.9
            %
            
            
            0.9
            %


Total
                  operating expenses
            
            $
            5,898,272
            
            
            $
            1,375,088
            
            
            $
            12,164,548
            
            
            $
            5,326,374%
                  of total net revenues
            
            
            127.3
            %
            
            
            143.0
            %
            
            
            135.3
            %
            
            
            138.3
            %




COST
      OF
      SERVICES PROVIDED EXPENSES





Cost
      of
      services provided expenses increased by $2,186,839 or 581% to $2,563,277 during
      the third quarter of fiscal 2007 from $376,438 during the third quarter of
      fiscal 2006 primarily due to acquisitions of Novus, DocuCom, HRMS and of
      entities acquired from NetGuru subsequent to the third quarter of fiscal
      2006.





Cost
      of services provided expenses
      increased by $3,095,211 or 231% to $4,436,764 during the nine months of fiscal
      2007 from $1,341,553 during the nine months of fiscal 2006 primarily due to
      acquisitions of Novus, DocuCom, HRMS and of entities acquired from NetGuru
      subsequent to the nine months of fiscal 2006.





SELLING,
      GENERAL AND ADMINISTRATIVE EXPENSES





Selling,
      general and administrative ("SG&A") expenses increased by $2,051,417 or
      205% to $3,054,506 during the third quarter of fiscal 2007 from $1,003,089
      during the third quarter of fiscal 2006 primarily due to
      higher professional fees and higher intangible amortization expense from
      the assets acquired in the previous year, and higher business integration
      expense associated with the consolidation of the newly acquired business
      operations.Additionally,
      SG&A expenses in the third quarter of fiscal 2007 included those of
      Novus,
      DocuCom and HRMS in the amount of $1,017,175 and of entities acquired from
      netGuru in the amount of $316,746 that were not present in the third
      quarter of 2006 since they were acquired in the fourth quarter ended
      December 2006 and DocuCom and HRMS were acquired in June 2007.




28




Selling,
      general and administrative ("SG&A") expenses increased by $3,257,878 or
      82% to $7,207,185 during the first nine months of fiscal 2007
      from $3,949,307 during the first nine months of fiscal 2006 primarily due
      to higher professional fees and higher intangible amortization expense from
      the assets acquired in the previous year, and higher business integration
      expense associated with the consolidation of the newly acquired business
      operations. Additionally, SG&A expenses in the first nine months of
      fiscal 2007 included those of Novus,
      DocuCom
      and HRMS in the amount of $1,453,161 and of entities acquired from netGuru
      in
      the amount of $822,082 that were not present in the first nine months of
      2006 since they were acquired in the fourth quarter ended December 2006 and
      DocuCom and HRMS were acquired in June 2007.





RESEARCH
      AND DEVELOPMENT EXPENSES





Research
      and development ("R&D") expenses consist primarily of
      software developers' wages. In the first quarter and the first nine months
      of fiscal 2006 there were no R&D expenses since the Web4 division which
      is the primary generator of R&D expense was acquired in the fourth
      quarter of fiscal 2006.





SHARE-BASED
      COMPENSATION EXPENSE





We
      recorded share-based compensation expense of $112,118 in the third quarter
      of
      fiscal 2007 compared to $(4,439) in the same period in the prior
      year.  We recorded share-based compensation expense of $258,861 in the
      first nine months of fiscal 2007 compared to $35,514 in the same period in
      the
      prior year.  Grants of employee stock options are recognized as
      expense in the Company’s financial statements based on their respective grant
      date fair values and are charged to compensation expense based on awards that
      are ultimately expected to vest.





OPERATING
      LOSS BY SEGMENT





Operating
      loss in the ECM segment increased to $361,629 in the thirdquarter
      of fiscal 2007 from $274,161 third quarter of 2006 primarily due to higher
      business integration expenses with the acquisition of DocuCom in June 2007.
      The decrease in operating loss in the ITO segment to $1,384 in the third
      quarter of fiscal 2007 from $52,302 in the third quarter of fiscal 2006 is
      primarily due to higher revenues from acquired entities and organic growth
      in the ITO segment during the third quarter of fiscal 2007 compared to the
      same period in the prior year. The increase in operating loss in the HRO
      segment is primarily due to an increase in salaries in the third quarter of
      fiscal 2007 compared to the third quarter of fiscal 2006 and higher
      business integration expenses with the acquisition of HRMS in June 2007.
      Corporate expenses increased to $563,406 in the third quarter of fiscal
      2007 from $41,480 in the third quarter of 2006 primarily due to additional
      employees in the corporate headquarters, increased professional
      fees, intangible amortization expense and share-based compensation expense.
      The following table details the operating loss by segment:




Three
                  Months Ended September 30,2007
              
              
              %
                  of Total
              
              
              2006
              
              
              %
                  of TotalOperating
                  lossECM
              
              $
              (361,629
              )
              
              
              28.6
              %
              
              $
              (274,161
              )
              
              
              66.3
              %ITO
              
              
              (1,384
              )
              
              
              0.1
              %
              
              
              (52,302
              )
              
              
              12.6
              %HRO
              
              
              (339,551
              )
              
              
              26.8
              %
              
              
              (45,854
              )
              
              
              11.1
              %Corporate
              
              
              (563,406
              )
              
              
              44.5
              %
              
              
              (41,480
              )
              
              
              10.0
              %Consolidated
              
              $
              (1,265,970
              )
              
              
              100.0
              %
              
              $
              (413,797
              )
              
              
              100.0
              %




Operating
      loss in the ECM segment increased to $865,350 in the first nine monthsof
      fiscal 2007 from $615,644 in the third quarter of 2006 primarily due to higher
      business integration expenses with the acquisition of DocuCom in June 2007,
      and the entities acquired from netGuru during the fourth quarter of 2006. The
      operating loss in the ITO segment of $187,168 in the first nine months of fiscal
      2007 decreased from $252,536 in the same period in the prior year.
      The  operating loss in the HRO segment of 488,061 in the first nine months
      of fiscal 2007 is little changed from $503,065 in the same period in the prior
      year. Corporate expenses increased to $1,634,893 in the first nine months
      of fiscal 2007 from $104,229 in the first nine months of 2006 primarily due
      to additional employees in the corporate headquarters, increased
      professional fees, intangible amortization expense and share-based
      compensation expense. The following table details the operating loss by
      segment:




29


Nine
                  Months Ended September 30,2007
              
              
              %
                  of Total
              
              
              2006
              
              
              %
                  of TotalOperating
                  lossECM
              
              $
              (865,350
              )
              
              
              27.3
              %
              
              $
              (615,644
              )
              
              
              41.7
              %ITO
              
              
              (187,168
              )
              
              
              5.9
              %
              
              
              (252,536
              )
              
              
              17.1
              %HRO
              
              
              (488,061
              )
              
              
              15.4
              %
              
              
              (503,065
              )
              
              
              34.1
              %Corporate
              
              
              (1,634,893
              )
              
              
              51.5
              %
              
              
              (104,229
              )
              
              
              7.1
              %Consolidated
              
              $
              (3,175,472
              )
              
              
              100.0
              %
              
              $
              (1,475,474
              )
              
              
              100.0
              %




INTEREST
      AND OTHER EXPENSE





The
      following table presents our interest and other expense and its
      percentage of total net revenues:





Three
                  Months Ended
              
              
              Nine
                  Months EndedSeptember
                  30,
              
              
              September
                  30,2007
              
              
              2006
              
              
              2007
              
              
              2006Other
                  Expense (Income)Related
                  parties interest
              
              $
              27,222
              
              
              $
              -
              
              
              $
              89,819
              
              
              $
              -%
                  of total net revenues
              
              
              0.6
              %
              
              
              0.0
              %
              
              
              1.0
              %
              
              
              0.0
              %Amortization
                  of relatedparty
                  debt discount
              
              $
              -
              
              
              $
              -
              
              
              $
              594,029
              
              
              $
              -%
                  of total net revenues
              
              
              0.0
              %
              
              
              0.0
              %
              
              
              6.6
              %
              
              
              0.0
              %Other
                  interest, net
              
              $
              (11,300
              )
              
              $
              26,898
              
              
              $
              76,045
              
              
              $
              31,894%
                  of total net revenues
              
              
              -0.2
              %
              
              
              2.8
              %
              
              
              0.8
              %
              
              
              0.8
              %Other
                  income
              
              $
              (3,115
              )
              
              $
              (911
              )
              
              $
              (3,102
              )
              
              $
              -%
                  of total net revenues
              
              
              -0.1
              %
              
              
              -0.1
              %
              
              
              0.0
              %
              
              
              0.0
              %Total
                  other expense (income)
              
              $
              12,807
              
              
              $
              25,987
              
              
              $
              756,791
              
              
              $
              31,894%
                  of total net revenues
              
              
              0.3
              %
              
              
              2.7
              %
              
              
              8.4
              %
              
              
              0.8
              %





TOTAL
      INTEREST AND OTHER EXPENSE





Total
      interest and other expense decreased by $13,180 in the third quarter of fiscal
      2007 to $12,807 from $25,987 in the third quarter of fiscal 2006 primarily
      due
      to interest income earned on the restricted time deposit with no corresponding
      interest income in the same period in 2006.





Total
      interest and other expense increased by $724,897 in the first nine months of
      fiscal 2007 to $756,791 from $31,894 in the first nine months of fiscal 2006
      primarily due to $594,029 in amortization of the value of warrants issued
      pursuant to bridge loans, $89,819 in interest expense on bridge loans and
      interest on lease obligations and bank debt.





INCOME
      TAXES





In
      the
      third quarter and first nine months of fiscal 2007 and fiscal 2006, we recorded
      no income tax expense since we had incurred net losses from
      operations.




30


LIQUIDITY
      AND CAPITAL RESOURCES





Our
      principal sources of liquidity at September 30, 2007 consisted of
      $6,102,487in
      cash and cash equivalents. Cash and cash equivalents increased by
      $5,396,290in
      the
      first nine months of fiscal 2007. We incurred net losses from operations of
      $3,175,472 and $1,475,474 and used cash in operations of $3,947,257 and $699,323
      in the first nine months of 2007 and 2006, respectively.





The
      primary reasons for cash used in operations during the first nine months of
      fiscal 2007 were: net loss of $3,932,263 that included non-cash
      charges related amortization of the loan discount in the amount of
      $594,031,depreciation
      and amortization expense of $329,195, and share-based compensation expense
      of $258,861. In addition, the timing differences in the payment of
      our current liabilities and collection of our current assets also
      contributed to the cash used in operations.





The
      primary reasons for cash used in operations during the first nine monthsof
      fiscal 2006 were: net loss of $1,507,368,
      depreciation and amortization expense of $575,278, and share-based
      compensation expense of $35,514. In addition, the timing differences in the
      payment of our current liabilities and collection of our current assets
      also contributed to the cash used in operations.





Net
      cash
      used in investing activities in the first nine months of fiscal 2007 was
      $6,272,073, primarily for purchase of DocuCom, Novus, HRMS and property and
      equipment.





Net
      cash
      used in investing activities in the first nine months of fiscal 2006 was
      $2,329,085, primarily for purchase of Digica and $279,014 for the purchase
      of
      property and equipment.





Net
      cash
      provided by financing activities during the first nine months of 2007 was
      $15,946,799 of which $15,737,910 came from the net proceeds from the sale of
      $17,600,000 of preferred shares. In the first nine monthsof
      fiscal 2007, we received $400,000 in cash proceeds from bridge loans and
      repaid bank debt in the amount of $317,251. The bridge loan was provided
      by Mr. Dolan, our chief executive officer and we issued a warrant to
      purchase 133,333 shares of common stock pursuant to the bridge loan
      agreement.




In
        lieu
        of procuring mezzanine financing from otherwise unaffiliated third parties
        in
        order to finance our acquisition of Blue Hill Data Services, Inc. (as
        originally contemplated by the seven institutional investors who purchased
        shares of our Series D Convertible Preferred Stock on June 13, 2007 and us
        as of
        June 13, 2007, the date on which we closed our Series D Convertible Preferred
        Stock private placement with such institutional investors), we provided an
        enhanced opportunity to obtain such financing from these seven institutional
        investors.  Through amendments to each of our Series J Warrants to
        Purchase Shares of Preferred Stock (“Series J Warrants”) issued to these
        investors on June 13, 2007 (which Series J Warrants were issued in connection
        with the Series D Convertible Preferred Stock purchases), we voluntarily
        reduced
        the per-share warrant exercise price payable upon exercise by any such investor
        of its Series J Warrant from $14.40 to $9.60, effective only for exercises
        thereof during the period between September 28, 2007 and October 10, 2007
        (the
“Reduced Warrant Price Period”).  This reduced warrant exercise price
        only applied for up to seventy-five percent (75%) of the Series J Warrants
        then
        held by each such institutional investor and the original exercise price
        of
        $14.40 per share automatically re-applied to any Series J Warrants not exercised
        at the reduced price during the Reduced Warrant Price Period.  Since
        we believed that we would obtain the funds we needed to complete the acquisition
        from the exercise of these Series J Warrants, we agreed that we will not
        procure
        such mezzanine financing or any other financing which is not permitted by
        the
        terms of the Series D Convertible Preferred Stock Purchase Agreement dated
        as of
        June 13, 2007, entered into by these institutional investors and
        us.
 
 We
        also
        amended each of our Series C Warrants to Purchase Shares of Common Stock
        (“Series C Warrants”) and Series D Warrants to Purchase Shares of Common Stock
        (“Series D Warrants”), all of which were also issued in connection with such
        purchases of our Series D Convertible Preferred Stock on June 13, 2007 to
        these
        seven institutional investors, to provide that, in the event that the investor
        holding such warrant exercises any portion of its Series J Warrant during
        the
        Reduced Warrant Price Period, the per-share warrant exercise price payable
        upon
        exercise of its Series C Warrant was reduced from $1.35 to $0.01 and the
        per-share warrant exercise price payable upon exercise of its Series D Warrant
        was reduced from $1.87 to $1.10 for the same percentage of such investor’s
        Series C Warrant and Series D Warrant as the percentage as the percentage
        of the
        Series J Warrant exercised by such investor during the Reduced Warrant Price
        Period.  For example, if an institutional investor exercised
        one-quarter (1/4) of its Series J Warrant during the Reduced Warrant Price
        Period, the per-share exercise price for its Series C Warrant and Series
        D
        Warrant was reduced for one-quarter (1/4) of its Series C Warrant and Series
        D
        Warrant.  Any applicable reduced warrant exercise price for the Series
        C Warrants and Series D Warrants will apply for the remainder of their
        respective terms.
 
 During
        the Reduced Warrant Price Period, six institutional investors exercised certain
        of their Series J Warrants at the reduced exercise price and acquired an
        aggregate of approximately 729,167 shares of our Series D-2 Convertible
        Preferred Stock for an aggregate of approximately $7.0 million.  In
        October 2007, one of the institutional investors exercised a portion of its
        Series C Warrant at the reduced exercise price and acquired an aggregate
        of
        500,000 shares of our common stock.


31
 We
          have
          funded our operations primarily from the private placement of shares of our
          common stock and preferred stock and through the founders bridge loan
          facility established in August 2006. During the next twelve months,
          we anticipate raising capital necessary to grow our business and
          complete additional acquisitions by issuing our equity securities and/or
          debt in one or more private transactions. We have retained C. E. Unterberg,
          Towbin as our investment banker to spearhead this
          effort.


In
      the
      event that such transaction(s) do not take place at all and/or
      are unreasonably delayed, our future capital requirements will depend upon
      many factors. These factors include but are not limited to sales and
      marketing efforts, the development of new products and services, possible
      future corporate mergers or strategic acquisitions or divestitures, the
      progress of research and development efforts, and the status of competitive
      products and services. If our anticipated financing transactions do not
      take place at all and/or are unreasonably delayed, we may not have adequate
      funds to extinguish all our remaining liabilities and fund our current
      operations going forward.





Although
      we expect to meet our operating capital needs by additional private equity
      and/or debt transactions, and current economic resources, there can be no
      assurance that funds required will be available on terms acceptable to us,
      if at all. If we are unable to raise sufficient funds on acceptable terms,
      we may be not be able to complete our business plan. If equity financing is
      available to us on acceptable terms, it could result in additional dilution
      to our existing stockholders.





This
      uncertainty, recurring losses from operations, limited cash resources, and
      an accumulated deficit, among other factors, raised doubt about our ability
      to continue as a going concern and led our independent registered public
      accounting firm to include an explanatory paragraph related to our ability
      to continue as a going concern in their report that accompanied
      our financial statements for the year ended December 31, 2006. Reports
      of independent auditors questioning a company's ability to continue as a
      going concern generally are viewed unfavorably by analysts and investors.
      This report may make it difficult for us to raise additional debt or equity
      financing to the extent needed for our continued operations or for planned
      expansion, particularly if we are unable to attain and maintain profitable
      operations in the future. Consequently, future losses may adversely affect
      our business, prospects, financial condition, results of operations and
      cash flows.




The
      following table summarizes our contractual obligations and
      commercial commitments at September 30, 2007:




Less
                  Than
              
              
              
              
              
              
              
              
              AfterTotal
              
              
              1
                  Year
              
              
              1-3
                  Years
              
              
              4-5
                  Years
              
              
              5
                  YearsLong-term
                  debt
              
              $
              170,001
              
              
              $
              141,942
              
              
              $
              28,059
              
              
              $
              -
              
              
              $
              -Capital
                  lease obligations*
              
              
              548,039
              
              
              
              136,826
              
              
              
              254,652
              
              
              
              156,561
              
              
              
              -Operating
                  leases
              
              
              1,096,739
              
              
              
              491,047
              
              
              
              530,821
              
              
              
              74,871
              
              
              
              -Purchase
                  price payable -Novus
                  and DocuCom
              
              
              1,101,771
              
              
              
              1,101,771
              
              
              
              -
              
              
              
              -
              
              
              
              -Bridge
                  loan payable
              
              
              1,200,000
              
              
              
              1,200,000
              
              
              
              -
              
              
              
              -
              
              
              
              -Total
                  contractual obligations
              
              $
              4,116,550
              
              
              $
              3,071,586
              
              
              $
              813,532
              
              
              $
              231,432
              
              
              $
              -




*Excludes
      imputed interest of $118,927





ITEM
      3.  CONTROLS AND PROCEDURES





Our
      management, with the participation of our principal executive officer and
      principal financial officer, has evaluated the effectiveness of
      our disclosure controls and procedures as of September 30, 2007. Based on
      such evaluation, our principal executive officer and principal financial
      officer have concluded, as of the end of such period, that our disclosure
      controls and procedures are effective in recording, processing, summarizing
      and reporting, on a timely basis, information required to be disclosed by
      us in our reports that we file or submit under the Securities Exchange Act
      of 1934.





During
      the third quarter of fiscal 2007, there were no changes to our internal
      control over financial reporting that have materially affected, or
      are reasonably likely to materially affect, our internal controls over
      financial reporting.






32


PART
        II -
        OTHER INFORMATION
 
 ITEM
        1.  LEGAL PROCEEDINGS
 
 None
 
 ITEM
        2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
        PROCEEDS
  In September
            2007, we recorded the following paid-in-kind dividends to Messrs. Dolan
            and
            Cortens: 32,754 shares of our Series A Preferred Stock, based on a calculated 1,637,710
            shares of Series A Preferred Stock that would be outstanding as of June
            30,
            2007. Once we have obtained the approval of the requisite number of shares
            (and classes)
            of our equity to increase the number of authorized shares of our Series
            A
            Preferred Stock, we will issue the number of shares of Series A Preferred
            Stock
            covered by
            the
            paid-in-kind dividend recorded in June 2007 and September
            2007.
 In
        late
        September and early October 2007, we issued 729,167 Shares of our Series
        D-2
        Convertible Preferred Stock to six institutional investors, based upon their
        partial exercise of their Series J Warrants, for gross proceeds of approximately
        $7.0 million.  In October 2007, we issued 500,000 of our common shares
        to an institutional investor, based upon its partial exercise of its Series
        C
        Warrant, for gross proceeds of approximately $5,000.




ITEM
      3.  DEFAULTS UPON SENIOR SECURITIES





None





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





None.





ITEM
      5.  OTHER INFORMATION





None.





ITEM
      6.  EXHIBITS





Exhibit
              Number
            Description  31.1
            Certification
                of Chief Executive Officer required by Rule 13a-14(a) of the
                Securities Exchange Act of 1934, as amended, as adopted pursuant to
                Section 302 of the Sarbanes-Oxley Act of 2002
                (1)





31.2
            Certification
                of Chief Financial Officer required by Rule 13a-14(a) of the Securities
                Exchange Act of 1934, as amended, as adopted pursuant to Section
                302 of
                the Sarbanes-Oxley Act of 2002 (1)





32
            Certification
                of Chief Executive Officer and Chief Financial Officer pursuant to
                18
                U.S.C. Section 1350, as adopted pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002 (1)


______________


(1)  Attached
      as an exhibit to this Form 10-QSB.





33





SIGNATURES




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




Date:  November
              14, 2007
            BPO
              MANAGEMENT SERVICES, INC.By:
                /s/ Donald W. Rutherford
              Chief Financial Officer
              (principal financial officer and duly authorized
                officer)








34




EXHIBITS
      ATTACHED TO THIS QUARTERLY REPORT ON FORM 10-QSB




Exhibit
                Number
              Description  31.1
              Certification
                  of Chief Executive Officer required by Rule 13a-14(a) of the
                  Securities Exchange Act of 1934, as amended, as adopted pursuant to
                  Section 302 of the Sarbanes-Oxley Act of
                  2002
 
 31.2
              Certification
                  of Chief Financial Officer required by Rule 13a-14(a) of the Securities
                  Exchange Act of 1934, as amended, as adopted pursuant to Section
                  302 of
                  the Sarbanes-Oxley Act of 2002
 
 32
              Certification
                  of Chief Executive Officer and Chief Financial Officer pursuant
                  to 18
                  U.S.C. Section 1350, as adopted pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002








35