UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549




As
filed with the Securities and Exchange Commission on June 13,
2008
 FORM
10-QSB/A





(Mark
One)





xQUARTERLY REPORT UNDER SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




FOR THE QUARTERLY
PERIOD ENDED JUNE 30, 2007





o 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
      of
              incorporation or organization)
            (I.R.S.
      Employer
              Identification
      No.)




1290 N
HANCOCK STREET, ANAHEIM HILLS, CA 92630


(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 o





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





The
number of shares outstanding of the registrant's only class of common stock,
$.01 par value, was 9,004,368 on August 1, 2007.Transitional Small Business
Disclosure Format (Check one).Yes o No x





1


PART
      IFINANCIAL
      INFORMATIONPageItem
      1. Financial Statements
              
              
              3Condensed
      Consolidated Statements of Operations for the three and six months
      endedJune
      30, 2007 and 2006 (unaudited)
              
              
              3Condensed
      Consolidated Balance Sheet as of June 30, 2007 (unaudited)
              
              
              4Condensed
      Consolidated Statements of Cash Flows for the six months ended June
      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
              
              
              33PART
      IIOTHER
      INFORMATIONItem
      1. Legal Proceedings
              
              
              34Item
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds
              
              
              34Item
      3. Defaults Upon Senior Securities
              
              
              34Item
      4. Submission of Matters to a Vote of Security Holders
              
              
              34Item
      5. Other Information
              
              
              34Item
      6. Exhibits
              
              
              34Signatures
              
              
              35Exhibits
      Attached to this amended Quarterly Report on Form
    10-QSB/A
              
              
              36




2




PART I --
FINANCIAL INFORMATION
 
 ITEM 1.
FINANCIAL STATEMENTS




BPO
      MANAGEMENT SERVICES, INC. AND SUBSIDIARIESCONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)THREE
      MONTHS ENDED
              
              SIX
      MONTHS ENDEDJUNE
      30,
              
              JUNE
      30,2007
              
              2006
              
              2007
              
              2006Revenues:Enterprise
      content management
              
              $
              1,352,273
              
              $
              727,952
              
              $
              2,362,044
              
              $
              1,797,330IT
      outsourcing services
              
              
              1,000,608
              
              
              428,483
              
              
              1,980,913
              
              
              869,598Human
      resource outsourcing servicing
              
              
              3,299
              
              
              111,306
              
              
              13,817
              
              
              222,681Total
      revenues
              
              
              2,356,180
              
              
              1,267,741
              
              
              4,356,774
              
              
              2,889,609Operating
      expenses:Cost
      of services provided
              
              
              971,014
              
              
              545,475
              
              
              1,873,487
              
              
              965,115Selling,
      general and administrative
              
              
              2,309,092
              
              
              1,291,576
              
              
              4,152,679
              
              
              2,946,218Research
      and development
              
              
              27,355
              
              
              -
              
              
              93,366
              
              
              -Share-based
      compensation
              
              
              92,744
              
              
              19,977
              
              
              146,743
              
              
              39,953Total
      operating expenses
              
              
              3,400,266
              
              
              1,857,028
              
              
              6,266,276
              
              
              3,951,286Loss
      from operations
              
              
              (1,044,026
              )
              
              (589,287
              )
              
              (1,909,502
              )
              
              (1,061,677
              )Interest
      expense (income)Related
      parties
              
              
              26,926
              
              
              -
              
              
              62,597
              
              
              -Amortization
      of related party debt discount
              
              
              163,940
              
              
              -
              
              
              594,029
              
              
              -Other
      (net)
              
              
              48,811
              
              
              7,121
              
              
              87,345
              
              
              4,996Other
      Expense
              
              
              12,253
              
              
              668
              
              
              14
              
              
              911Total
      interest and other expense
              
              
              251,930
              
              
              7,789
              
              $
              743,985
              
              
              5,907Net
      loss
              
              $
              (1,295,956
              )
              $
              (597,076
              )
              $
              (2,653,487
              )
              $
              (1,067,584
              )Basic
      and diluted net loss per share
              
              $
              (0.15
              )
              $
              (0.08
              )
              $
              (0.31
              )
              $
              (0.11
              )Basic
      and diluted weighted average common
              
              
              8,621,527
              
              
              7,131,277
              
              
              8,623,630
              
              
              9,925,000See
      accompanying notes to condensed consolidated financial
      statements.





3




BPO
      MANAGEMENT SERVICES, INC. AND SUBSIDIARIESCONDENSED
      CONSOLIDATED BALANCE SHEETJune
      30, 2007(Unaudited)ASSETSCurrent
      assets:Cash
      and cash equivalents
              
              $
              5,266,044Restricted
      cash
              
              
              1,948,434Accounts
      receivable, net of allowance for doubtful accounts of$110,998
              
              
              2,916,262Inventory
      consisting of finished goods, net of reserves of $0
              
              
              158,442Prepaid
      expenses and other current assets
              
              
              189,715Total
      current assets
              
              
              10,478,897Equipment,
      net of accumulated depreciation of $1,505,767
              
              
              951,810Goodwill
              
              
              9,703,283Intangible
      assets, net of amortization of $140,670
              
              
              1,010,030Other
      Assets
              
              
              97,689$
              22,241,708LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilities:Current
      portion of long-term debt, net of discount of $3,154
              
              $
              277,545Current
      portion of capital lease obligations
              
              
              92,955Accounts
      payable
              
              
              2,992,668Accrued
      expenses
              
              
              1,005,785Accrued
      interest related party
              
              
              62,384Accrued
      dividend payable-related party
              
              
              75,186Amount
      due former shareholders of acquired companies
              
              
              1,886,301Income
      taxes payable
              
              
              229,506Deferred
      revenues
              
              
              928,966Related
      party notes payable
              
              
              1,200,000Severence
      obligations payable
              
              
              480,015Total
      current liabilities
              
              
              9,231,311Long-term
      debt, net of current portion and net of discount of $6,046
              
              
              30,225Capital
      lease obligations, net of current portion
              
              
              402,345Total
      liabilities
              
              
              9,663,881Commitments
      and contingencies (Note 9)Stockholders
      equity:Convertible
      preferred stock, Series A, par value $.01; authorized1,608,612
      shares;1,605,598 shares issued and outstanding
              
              
              16,378Convertible
      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
              
              
              14,583Common
      stock, par value $.01; authorized 150,000,000 shares;8,619,400
      shares issued and outstanding
              
              
              90,046Additional
      paid-in capital
              
              
              19,585,232Accumulated
      deficit
              
              
              (6,754,193
              )Accumulated
      other comprehensive loss, foreign currency translation
      adjustments
              
              
              (397,877
              )Total
      stockholders ' equity
              
              
              12,577,827$
              22,241,708See
      accompanying notes to condensed consolidated financial
      statements.





4




BPO
      MANAGEMENT SERVICES, INC. AND SUBSIDIARIESCONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWFOR
      THE SIX MONTHS ENDED JUNE 30, 2007 AND 2006(Unaudited)2007
              
              2006Cash
      flows used in operating activities:Net
      loss
              
              $
              (2,653,487
              )
              $
              (1,067,584
              )Adjustment
      to reconcile net loss from continuing operationsto
      net cash provided by (used in) operating activities:Depreciation
      expense
              
              
              68,443
              
              
              42,932Amortization
      of intangible assets
              
              
              104,668
              
              
              277,655Non-cash
      compensation expense recognized on issuanceof
      stock options
              
              
              146,741
              
              
              39,953Amortization
      of loan discount
              
              
              594,031
              
              
              -Changes
      in operating assets and liabilities:Accounts
      receivable
              
              
              (167,234
              )
              
              171,806Inventory
              
              
              540
              
              
              -Income
      tax receivable
              
              
              250,000
              
              
              -Prepaid
      expenses and other current assets
              
              
              (2,513
              )
              
              -Other
      assets
              
              
              45,393
              
              
              52,696Accounts
      payable
              
              
              (366,412
              )
              
              (31,506
              )Accrued
      expenses
              
              
              348,743
              
              
              -Deferred
      revenue
              
              
              (178,780
              )
              
              22,115Amount
      due former shareholders of acquired companies
              
              
              179,579
              
              
              -Income
      taxes payable
              
              
              (7,725
              )
              
              -Payments
      of severence liability
              
              
              (293,738
              )
              
              (45,526
              )Net
      cash used in operating activities
              
              
              (1,931,753
              )
              
              (537,459
              )Cash
      flows used in investing activities:Purchase
      of property and equipment, net
              
              
              (303,969
              )
              
              (125,470
              )Purchase
      obligation payment - Novus
              
              
              (962,571
              )
              
              -Restricted
      deposit of purchase obligation - DocuCom
              
              
              (1,948,434
              )Cash
      paid for business combinations, net of cash acquired
              
              
              (2,947,422
              )
              
              (375,593
              )Net
      cash used in investing activities
              
              
              (6,162,396
              )
              
              (501,063
              )Cash
      flows from financing activitiesRepayment
      of bank loans
              
              
              (179,483
              )
              
              -Payment
      of notes payable
              
              
              -
              
              
              (3,075
              )Assets
      acquired under capital lease obligations
              
              
              360,090
              
              
              -Repayment
      of capital lease obligations
              
              
              (46,090
              )
              
              -Proceeds
      from related party loan
              
              
              400,000
              
              
              -Proceeds
      from issuance of preferred stock, net of cash paidfor
      commissions and direct costs
              
              
              12,410,033
              
              
              -Net
      cash provided by (used in) financing activities
              
              
              12,944,550
              
              
              (3,075
              )Effect
      of exchange rate changes on cash and cash equivalents
              
              
              (290,555
              )
              
              -Net
      increase in cash
              
              
              4,559,846
              
              
              (1,041,597
              )Cash
      and cash equivalents, beginning of period
              
              
              706,197
              
              
              1,232,169Cash
      and cash equivalents, end of period
              
              $
              5,266,043
              
              $
              190,572See
      accompanying notes to condensed consolidated financial
      statements.


5
 
  BPO
      MANAGEMENT SERVICES, INC. AND SUBSIDIARIESCONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)FOR
      THE SIX MONTHS ENDED JUNE 30, 2007 AND 20062007
                
                2006Supplemental
      disclosure of cash flow information:Cash
      paid for:Interest
                
                $
                56,023
                
                $
                4,394Income
      taxes
                
                $
                -
                
                $
                -Supplemental
      disclosure of non-cash investing and financingactivities:Acquisition
      of equipment under capital leases
                
                $
                360,090
                
                $
                -Issuance
      of warrants
                
                $
                185,187
                
                $
                -Preferred
      Stock Series A dividend
                
                $
                636
                
                $
                626Business
      combinations:Net
      assets acquired
                
                $
                2,393,691
                
                $
                901,885Net
      liabilities assumed
                
                $
                2,973,910
                
                $
                422,688Common
      stock issued as consideration for acquisition
                
                $
                400,000See
      accompanying notes to condensed consolidated financial
      statements.




6


BPO
MANAGEMENT SERVICES, INC. AND SUBSIDIARIES


NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


JUNE 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 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 six month periods ended June 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.
              
              Inception
      date: July 26, 2005Adapsys
      Document Management LP
              
              Acquired:
      July 29, 2005Adapsys
      LP
              
              Acquired:
      July 29, 2005Digica,
      Inc.
              
              Acquired:
      January 1, 2006Novus
      Imaging Solutions, Inc.
              
              Acquired:
      September 30, 2006NetGuru
      Systems, Inc.
              
              Acquired:
      December 15, 2006Research Engineers,
      GmbH
              
              Acquired:
      December 15, 2006DocuCom
      Imaging Solutions, Inc.
              
              Acquired:
      June 21, 2007Human
      Resource Micro-Systems, Inc.
              
              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 June 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 six months ended June
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 June 30, 2007, the Company had
$6,007,867 on deposit that exceeded the United States (FDIC) federal
insurance limit. At June 30, 2007, the Company has $569,150 (the accounts
are in Canadian dollars with a value of $602,722 CDN) 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
$1,800,000 is payable to the previous shareholders of DocuCom, $900,000 payable
in three months and $900,000 payable in nine months from the date of the
acquisition. These payments are guaranteed by a letter of credit for which the
Company deposited as security $1,948,434 which is invested in a certificate of
deposit and is 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:





10




Expected Dividend yield
            
            
            --Expected volatility
            
            
            123
            %Risk-free interest rate
            
            
            4.6%-5.03
            %Expected option lives (in years)
            
            
            7Estimated forfeiture rate
            
            
            7
            %




For the
three months ended June 30, 2007 and 2006, the Company recognized $92,744,
and $19,977, respectively, in share-based compensation expense. For the six
months ended June 30, 2007 and 2006, the Company recognized $146,743 and
$39,953, 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 8 "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 June 30,
2007 and 2006, the Company contributions to the plan amounted to $6,636 and
$7,261, respectively. For the six months ended June 30,  2007 and 2006, the
Company contributions to the plan amounted to $13,101 and $14,518, 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
June 30, 2007 and 2006, the Company contributions to the plan amounted to
$12,336 and $7,678, respectively. For the six months ended June 30, 2007 and
2006, the Company contributions to the plan amounted to $20,683 and $22,343,
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.





11




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 June 30, 2007 and 2006, all potentially
dilutive common stock equivalents amounted to 102,469,199 and 4,645,999
shares, respectively.





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


THREE
      MONTHS ENDED
              
              SIX
      MONTHS ENDEDJUNE
      30,
              
              JUNE
      30,2007
              
              2006
              
              2007
              
              2006Numerator:Net
      loss
              
              $
              (1,295,956
              )
              $
              (597,076
              )
              $
              (2,653,487
              )
              $
              (1,067,584
              )Less:Preferred
      dividends paid in stock
              
              
              (32,112
              )
              
              -
              
              
              (63,594
              )
              
              -Loss
      and numerator used in computing basisand
      diluted loss per share
              
              $
              (1,328,068
              )
              $
              (597,076
              )
              $
              (2,717,081
              )
              $
              (1,067,584
              )Denominator:Denominator
      for basic and diluted net loss per share-weighted
      average number of common sharesoutstanding
              
              
              8,621,527
              
              
              7,131,277
              
              
              8,623,630
              
              
              9,925,000Basic
      and diluted net loss per share
              
              
              (0.15
              )
              
              (0.08
              )
              
              (0.32
              )
              
              (0.11
              )




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
              
              SIX
      MONTHS ENDEDJUNE
      30,
              
              JUNE
      30,2007
              
              2006
              
              2007
              
              2006Options
      to purchase shares of common stock
              
              
              2,487,002
              
              
              1,978,990
              
              
              2,487,002
              
              
              1,978,990Warrants
      to purchase shares of common stock
              
              
              95,436,953
              
              
              49,003
              
              
              95,436,953
              
              
              49,003Shares
      of convertible preferred stock - Series A
              
              
              1,637,710
              
              
              1,168,806
              
              
              1,637,710
              
              
              1,168,806Shares
      of convertible preferred stock - Series B
              
              
              1,449,200
              
              
              1,449,200
              
              
              1,449,200
              
              
              1,449,200Shares
      of convertible preferred stock - Series D
              
              
              23,333,341
              
              
              -
              
              
              23,333,341
              
              
              -Total
              
              
              124,344,206
              
              
              4,645,999
              
              
              124,344,206
              
              
              4,645,999


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
$1,948,434 that is shown on the balance sheet as restricted cash.





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:




13


Cash
      and cash equivalents
              
              $
              -Accounts
      receivable
              
              
              1,579,611Acquired
      contracts
              
              
              -Other
      current assets
              
              
              172,888Property,
      plant and equipment
              
              
              204,419Other
      assets
              
              
              -Goodwill
              
              
              3,592,996Total
      assets acquired
              
              
              5,549,914Note
      payable to bank
              
              
              420,610Accounts
      payable and other accrued liabilities
              
              
              2,247,173Estimated
      termination liability
              
              
              -Total
      liabilities assumed
              
              
              2,667,783Net
      assets acquired
              
              $
              2,882,131




The
purchase price and costs associated with the DocuCom acquisition exceeded the
Company's preliminary allocation of the fair value of net assets acquired by
$3,592,996, 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 and DocuCom for the year ended December 31,
2006 and for the six months ended June 30, 2007 as if the acquisition had
occurred on January 1, 2006 and January 1, 2007, respectively.




14




Unaudited
      Pro Forma Statement of Operations For the Twelve Months Ended December 31,
      2006:BPOMS
              
              DocuCom
              
              Pro
      FormaRevenues
              
              $
              4,711,139
              
              $
              13,066,960
              
              $
              17,778,099Net
      Income (Loss)
              
              $
              (3,300,186
              )
              $
              (355,249
              )
              $
              (3,655,435
              )Basic
      and diluted loss percommon
      share
              
              $
              (0.39
              )
              $
              -
              
              $
              (0.43
              )Basic
      and diluted weighted averagecommon
      shares outstanding
              
              
              8,496,119
              
              
              -
              
              
              8,496,119Unaudited
      Pro Forma Statement of Operations For the Six Months Ended June 30,
      2007:BPOMS
              
              
              DocuCom
              
              
              Pro
      FormaRevenues
              
              $
              4,356,774
              
              $
              7,134,492
              
              $
              11,491,266Net
      Income (Loss)
              
              $
              (2,653,487
              )
              $
              (36,290
              )
              $
              (2,689,777
              )Basic
      and diluted loss percommon
      share
              
              $
              (0.31
              )
              $
              -
              
              $
              (0.31
              )Basic
      and diluted weighted averagecommon
      shares outstanding
              
              
              8,623,630
              
              
              -
              
              
              8,623,630




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 12 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.





The  HRMS
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. 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:





15




Current
      assets
              
              $
              434,834Property,
      plant and equipment
              
              
              1,939Other
      non-current assets
              
              
              -Goodwill
              
              
              2,026,465Identifiable
      intangible assets
              
              
              -Total
      assets acquired
              
              
              2,463,238Current
      liabilities
              
              
              306,127Other
      non-current liabilities
              
              
              -Long-term
      debt
              
              
              -Total
      liabilities assumed
              
              
              306,127Net
      assets acquired
              
              $
              2,157,111


Acquired
identifiable intangible assets in the amount of $0 were assigned to customer
contracts pending valuation. The purchase price and costs associated with the
HRMS acquisition exceeded the Company's allocation of the fair value of net
assets acquired by $2,026,465, which was assigned to goodwill. The amount
ultimately assigned to goodwill is not expected to be deductible for United
States income tax purposes.





The
following unaudited pro forma financial information presents the combined
results of operations of the Company and HRMS for the year ended December 31,
2006 and for the six months ended June 30, 2007 as if the acquisition had
occurred on January 1, 2006 and January 1, 2007, respectively.





16
 
  Unaudited
      Pro Forma Statement of Operations For the Twelve Months Ended December 31,
      2006:BPOMS
                
                HRMS
                
                Pro
      FormaRevenues
                
                $
                4,711,139
                
                $
                1,229,598
                
                $
                5,940,737Net
      Income (Loss)
                
                $
                (3,300,186
                )
                $
                35,583
                
                $
                (3,264,603
                )Basic
      and diluted loss percommon
      share
                
                $
                (0.39
                )
                $
                0.09
                
                $
                (0.37
                )Basic
      and diluted weighted averagecommon
      shares outstanding
                
                
                8,496,119
                
                
                384,968
                
                
                8,881,087Unaudited
      Pro Forma Statement of Operations For the Six Months Ended June 30,
      2007:BPOMS
                
                
                HRMS
                
                
                Pro
      FormaRevenues
                
                $
                4,356,774
                
                $
                682,361
                
                $
                5,039,135Net
      Income (Loss)
                
                $
                (2,653,487
                )
                $
                (3,189
                )
                $
                (2,656,676
                )Basic
      and diluted loss percommon
      share
                
                $
                (0.32
                )
                $
                (0.01
                )
                $
                (0.31
                )Basic
      and diluted weighted averagecommon
      shares outstanding
                
                
                8,238,662
                
                
                384,968
                
                
                8,623,630





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





4. DEBT





SHORT-TERM
RELATED PARTY DEBT





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





17


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
      June 30, 2007:a.        
      Credit
      facility from Bank of Nova Scotia, securedby
      assets of the Company, variable annual interestrate
      of 7% at June 30, 2007
              
              $
              130,968b.        
      Note
      payable to a former owner of an acquired
subsidiary,secured
      by the Company's main operating account andrelated
      proceeds, which has not been perfected, bearingan
      annual interest rate of 10%
              
              
              125,000c.        
      Loan
      from Business Development Bank of Canada,expiring May 21, 2010, variable annual interestrate of 11.25% at June 30, 2007
              
              
              55,203d.       
      Collateralized
      loan payable to Chrysler Financial,expiring March 2008, fixed interest rate of 13.9%
              
              
              5,808e.       
      Capital
      lease obligations maturing at dates rangingfrom November 30, 2009 to December 31, 2011, securedby the leased assets
              
              
              618,308Total
      long-term debt before unamortized discountand
      inputed interest
              
              
              935,287Less:
      Imputed interest and unamortized discount
              
              
              (132,217
              )Long-term
      debt
              
              
              803,070Less:
      current portion
              
              
              370,500$
              432,570
  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 $122,251 as of June 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 June 30, 2007. The stated fixed interest rate is 9.00%
per annum for the three and six month periods ended June 30, 2007. For financial
reporting purposes the effective interest rate yield was 55% and 105% per annum
for the three and six month periods ended June 30, 2007. The loan agreement was
not in effect during either the three or six month periods ending June 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 to $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 valuation model. The following assumptions were used to determine
the fair value of the Warrants using the Black-Scholes 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 six month periods ending June 30, 2007 was $163,940 and
$594,030, respectively. There was no interest expense related to the accretion
of the Warrant discount for the three and six month periods ending June 30,
2006.





18


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 a adjusted closing price
of the common stock on the day immediately preceding the conversion of $3.36).
Under the loan agreement, the Series C Preferred stock is redeemable, in whole
or in part, at the option of the Company at an initial redemption price of 125%
of the amount so converted. Pursuant to the terms of the Company's Series D
preferred stock equity financing, the consent of the holders of such shares is
required prior to the Company redeeming any of the Series C preferred stock. The
Company incurred a $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 BANK OF NOVA SCOTIA





Adapsys
LP has a credit facility with Bank of Nova Scotia. The credit facility is
an operating line of credit with a maximum availability of
approximately $300,000, secured by all present and future personal property
of the Company and carries an annual interest rate of Canadian prime rate
plus 1%, which amounted to 7% at June 30, 2007. The credit facility is
subject to two covenants, the borrowing base covenant and the tangible net
worth covenant. The borrowing base covenant limits the Company's operating
loans not to exceed the lesser of $300,000 or the operating limit of the
borrowing base, defined as an amount equivalent to 75% of the Company's
certain accounts receivables less security interest or charges or specific
payables which have or may have priority over the bank's security. The
tangible net worth covenant requires the Company to maintain a tangible net
worth in excess of approximately $429,000. Tangible net worth is defined by
the bank as stockholders' equity less amounts due from related parties,
investment in affiliates and intangible assets as defined by the bank. At
June 30, 2007, the Company was not in compliance with the tangible net
worth or the borrowing base covenants, and had an outstanding balance
of approximately $130,968.





B. NOTE PAYABLE
TO A FORMER OWNER OF AN ACQUIRED SUBSIDIARY





In
conjunction with the reverse merger with NetGuru, Inc. in December 2006, a note
in the amount of $125,000 was issued to the former owner, secured by the
Company’s main operating account and related proceeds, which has not been
perfected, bearing an annual interest rate of 10% and which was repaid in July
2007.




C. TERM LOAN
FROM BUSINESS DEVELOPMENT BANK OF CANADA





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 June
30, 2007, the annual rate of interest on this loan was 11.25% and the
balance outstanding was approximately $55,203. 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 June 30, 2007 was approximately $9,209.





19




D. LOAN PAYABLE
TO CHRYSLER FINANCIAL





Digica
has a loan payable to Chrysler Financial collateralized by a vehicle with a
net book value of $10,500. The loan has a fixed annual interest rate of
13.9% and matures in March 2008. At June 30, 2007, the loan balance was
$5,808.





E. 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.





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




Long-Term
              
              Capital
      LeaseDebt
              
              Obligations2008
              
              $
              277,545
              
              $
              140,8982009
              
              
              15,769
              
              
              140,3502010
              
              
              14,456
              
              
              135,6772011
              
              
              -
              
              
              134,2562012
              
              
              -
              
              
              67,128Thereafter
              
              
              -
              
              
              -Total
      minimum payments
              
              $
              307,770
              
              $
              618,309Less:
      amount representing interest
              
              
              
              
              
              (123,009
              )Present
      value of minimum capital lease payments
              
              
              
              
              $
              495,300


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.





20


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.





The
Company intends to use the proceeds to complete previously announced
acquisitions, fund additional growth in accordance with its business plan, and
for general working capital requirements.





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 June 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:





o
            Enterprise content management
    (ECM)o
            Information Technology services outsourcing
      (ITO) ando
            Human 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.





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





21


Three
      Months Ended
              
              Six
      Months EndedJune
      30,
              
              June
      30,2007
              
              2006
              
              2007
              
              2006Net
      revenuesECM
              
              $
              1,206,791
              
              $
              727,952
              
              $
              2,362,044
              
              $
              1,797,330ITO
              
              
              1,146,090
              
              
              428,483
              
              
              1,980,913
              
              
              869,598HRO
              
              
              3,299
              
              
              111,306
              
              
              13,817
              
              
              222,681Consolidated
              
              $
              2,356,180
              
              $
              1,267,741
              
              $
              4,356,774
              
              $
              2,889,609Operating
      lossECM
              
              $
              (138,148
              )
              $
              (216,983
              )
              $
              (503,721
              )
              $
              (273,483
              )ITO
              
              
              (169,140
              )
              
              (83,936
              )
              
              (185,784
              )
              
              (187,234
              )HRO
              
              
              (77,694
              )
              
              (258,258
              )
              
              (148,510
              )
              
              (538,211
              )Corporate
              
              
              (659,044
              )
              
              (30,110
              )
              
              (1,071,487
              )
              
              (62,749
              )Consolidated
              
              $
              (1,044,026
              )
              $
              (589,287
              )
              $
              (1,909,502
              )
              $
              (1,061,677
              )Depreciation
      and amortization expenseECM
              
              $
              17,336
              
              $
              6,100
              
              $
              39,168
              
              $
              14,326ITO
              
              
              35,823
              
              
              7,497
              
              
              64,962
              
              
              37,410HRO
              
              
              2,561
              
              
              -
              
              
              5,159
              
              
              -Corporate
              
              
              62,222
              
              
              577
              
              
              115,355
              
              
              5,197Consolidated
              
              $
              117,942
              
              $
              14,174
              
              $
              224,644
              
              $
              56,933





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
              
              Six
      Months EndedJune
      30,
              
              June
      30,2007
              
              2006
              
              2007
              
              2006Net
      revenuesNorth
      America
              
              $
              2,127,584
              
              $
              1,267,741
              
              $
              4,011,895
              
              $
              2,889,609Europe
              
              
              228,596
              
              
              -
              
              
              344,879
              
              
              -Consolidated
              
              $
              2,356,180
              
              $
              1,267,741
              
              $
              4,356,774
              
              $
              2,889,609At
              
              
              AtJune
      30,
              
              
              December
      31,Long-Lived
      Assets
              
              
              2007
              
              
              2006North
      America
              
              $
              10,633,088
              
              $
              5,638,220Europe
              
              
              -
              
              
              25,874Consolidated
              
              $
              10,633,088
              
              $
              5,664,094
  9. COMMITMENTS
AND CONTINGENCIES





Financial
Results, Liquidity and Management's Plan activities





22


The
Company has incurred net losses in the six month period ended June 30,
2007 of $2,653,487 and a negative cash flow from operations of $1,931,753
over the same period. 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.





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





For the
twelve months ending June 30:


2008
              
              $
              601,9912009
              
              
              405,8862010
              
              
              258,5572011
              
              
              116,2422012
              
              
              2,749Thereafter
              
              
              229$
              1,385,654




For the
three months June 30, 2007 and 2006 rent expense was $158,415 and $62,075,
respectively. For the six months ended June 30, 2007 and 2006 rent expense
was $308,633 and 246,178, 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.





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





FORWARD-LOOKING
STATEMENTS





This
amended quarterly report on Form 10-QSB/A  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:





23




o
            Our
      ability to continue as a going
concern;


o
            Our
      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
      maintainprofitable
      operations in the future;


o
            Our
      ability to successfully implement our business plans and the possibility
      of strategicacquisitions;


o
            Our
      ability to attract and retain strategic partners and
      alliances;


o
            Our
      ability to hire and retain qualified
personnel;


o
            The
      risks of uncertainty of protection of our intellectual
      property;


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


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




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  amended quarterly report on Form 10-QSB/A 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.





24




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.





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.





25


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.





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 June 30, 2007, our goodwill account balance was
$9,703,283.





CONSOLIDATED
RESULTS OF OPERATIONS -


THREE
MONTHS ENDED JUNE 30, 2007 VS. THREE MONTHS ENDED JUNE 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.





26


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.
                
                Inception
      date: July 26, 2005Adapsys
      Document Management LP
                
                Acquired:
      July 29, 2005Adapsys
      LP
                
                Acquired:
      July 29, 2005Digica,
      Inc.
                
                Acquired:
      January 1, 2006Novus
      Imaging Solutions, Inc.
                
                Acquired:
      September 30, 2006NetGuru
      Systems, Inc.
                
                Acquired:
      December 15, 2006Research
      Engineers, GmbH
                
                Acquired:
      December 15, 2006DocuCom
      Imaging Solutions, Inc.
                
                Acquired:
      June 21, 2007Human
      Resource Micro-Systems, Inc.
                
                Acquired:
      June 29, 2007
 Net
Revenues





The
following table presents our net revenues by operating segment:


Three
      Months Ended
              
              Six
      Months EndedJune
      30,
              
              June
      30,2007
              
              2006
              
              2007
              
              2006Net
      revenuesECM
              
              $
              1,352,273
              
              $
              727,952
              
              $
              2,362,044
              
              $
              1,797,330%
      of total net
              
              
              57.4
              %
              
              57.4
              %
              
              54.2
              %
              
              62.2
              %revenuesITO
              
              
              1,000,608
              
              
              428,483
              
              
              1,980,913
              
              
              869,598%
      of total net revenues
              
              
              42.5
              %
              
              33.8
              %
              
              45.5
              %
              
              30.1
              %revenuesHRO
              
              
              3,299
              
              
              111,306
              
              
              13,817
              
              
              222,681%
      of total net revenuesrevenues
              
              
              0.1
              %
              
              8.8
              %
              
              0.3
              %
              
              7.7
              %Total
      net revenues
              
              $
              2,356,180
              
              $
              1,267,741
              
              $
              4,356,774
              
              $
              2,889,609




Total net
revenues increased by $1,088,439 or 86% to $2,356,180 during the three
months ended June 30, 2007 from $1,267,741 during the same period in
the prior year. Total net revenues increased by $1,467,165 or 51% to
$4,356,774 during the six months ended June 30, 2007 from $2,889,609 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 June
30, 2007 increased by $478,836 or 66% to $1,206,791 from $727,952
during the three months ended June 30, 2006. During the six months
ended June 30, 2007 net revenue increased by $419,232 or 23% to $2,216,562
from $1,797,330 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 and
net revenues from netGuru, Inc. ("netGuru"), which was acquired in December
2006. 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.





27


In
addition, the Company completed the acquisition of DocuCom on June 21, 2007. The
results of DocuCom operations from June 21 to June 30, 2007 have little impact
on the results of this segment, but are expected to increase revenues of
this segment in succeeding periods.





IT
OUTSOURCING SERVICES ("ITO")





Net
revenue from ITO during the three months ended June 30, 2007 increased by
$572,125 or 167% to $1,000,608 from $428,483 during the three months ended
June 30, 2006. During the six months ended June 30, 2007 net revenue
increased by $1,111,315 or 145% to $1,980,913 from $869,598 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.





HUMAN
RESOURCE OUTSOURCING SERVICES ("HRO")





During
the second quarter of fiscal 2007, net revenues from HRO declined 97% to
$3,299 from $111,306 during the second  quarter of fiscal 2006 and 94% to
$13,817 from $222,681 during the six months ended June 30, 2007. The HRO segment
prior to the HRMS acquisition consisted consists of a small
project/consulting group that delivered HRO related services to our clients
on a project basis. While no significant projects were undertaken during the
three and six months ended June 30, 2007, we have developed a pipeline of HRO
related opportunities which we estimate will bring increased revenues in
future periods. The acquisition of HRMS which took place June 29, 2007, is
expected to form the cornerstone of our HRO offering in the future and bring
increasing revenues to this segment in succeeding periods.








28


OPERATING
EXPENSES





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




Three
      Months Ended
                
                Six
      Months EndedJune
      30,
                
                June
      30,2007
                
                2006
                
                2007
                
                2006Operating
      ExpensesCost
      of services provided expenses
                
                $
                971,014
                
                $
                545,475
                
                $
                1,873,488
                
                $
                965,115%
      of total net revenues
                
                
                41.2%
                
                
                43.0%
                
                
                43.0%
                
                
                33.4%Selling,
      general and administrative expenses
                
                $
                2,309,092
                
                $
                1,291,576
                
                $
                4,152,679
                
                $
                2,946,218%
      of total net revenues
                
                
                98.0%
                
                
                101.9%
                
                
                95.3%
                
                
                102.0%Research
      and development expenses
                
                $
                27,355
                
                $
                -
                
                $
                93,366
                
                $
                -%
      of total net revenues
                
                
                1.2%
                
                
                0.0%
                
                
                4.0%
                
                
                0.0%Share-based
      compensation expense
                
                $
                92,744
                
                $
                19,977
                
                $
                146,743
                
                $
                39,953%
      of total net revenues
                
                
                3.9%
                
                
                1.6%
                
                
                3.4%
                
                
                1.4%Total
      operating expenses
                
                $
                3,400,205
                
                $
                1,857,028
                
                $
                6,266,275
                
                $
                3,951,286%
      of total net revenues
                
                
                144.3%
                
                
                146.5%
                
                
                143.8%
                
                
                136.7%


COST
OF SERVICES PROVIDED EXPENSES
 
 Cost
of services provided increased by $425,539 (78%) to $971,014 during the second
quarter of fiscal 2007 from $545,475 during the second quarter of fiscal 2006
primarily due to acquisitions of Novus and DocuCom and of entities acquired from
NetGuru subsequent to the second quarter of fiscal 2006.
 
 Cost
of services provided expenses increased by $908,373 (94%) to $1,873,488 during
the six months of fiscal 2007 from $965,115 during the six months of fiscal 2006
primarily due to acquisistions of Novus and DocuCom and of entities acquired
from NetGuru subsequent to the six months of fiscal 2006.




SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES





Selling,
general and administrative ("SG&A") expenses increased by $1,017,516
(79%) to $2,309,092 during the second quarter of fiscal 2007
from $1,291,576 during the second 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 second quarter of fiscal
2007 included those of Novus and DocuCom in the amount of $242,266 and of
entities acquired from netGuru in the amount of $304,364 that were not
present in the second quarter of 2006 since they were acquired in the
fourth quarter ended December 2006 and DocuCom was acquired in June
2007.





Selling,
general and administrative ("SG&A") expenses increased by $1,206,461
(41%) to $4,152,679 during the first six months of fiscal 2007
from $2,946,218 during the first six 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 six months of
fiscal 2007 included those of Novus and DocuCom in the amount of $435,987
and of entities acquired from netGuru in the amount of $532,714 that were
not present in the first six months of 2006 since they were acquired in the
fourth quarter ended December 2006 and DocuCom was 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 six 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 $92,744 in the second quarter of
fiscal 2007 compared to $19,977 in the same period in the prior year. We
recorded share-based compensation expense of $146,743 in the first six months of
fiscal 2007 compared to $39,953 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.





29





OPERATING
LOSS BY SEGMENT





Operating
loss in the ECM segment decreased to $138,148 in the second quarter of
fiscal 2007 from $216,983 second quarter of 2006 primarily due to higher margin
project revenues in the second quarter 2007, along with higher
business integration expenses and an increase in the ratio of lower margin
third party product sales during the second quarter of fiscal 2006. The
increase in operating loss in the ITO segment to $169,140 in the second
quarter of fiscal 2007 from $83,936 in the second quarter of fiscal 2006 is
primarily due to higher revenues from acquired entities and organic growth
in the ITO segment during the second quarter of fiscal 2007 compared to the
same period in the prior year. The decrease in operating loss in the HRO
segment is primarily due to decrease in salaries in the second quarter of
fiscal 2007 compared to the second quarter of fiscal 2006. Corporate
expenses increased to $659,044 in the second quarter of fiscal 2007 from
$30,110 in the second 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 June 30,2007
              
              %
      of Total
              
              2006
              
              %
      of TotalOperating
      lossECM
              
              $
              (138,148
              )
              
              13.2
              %
              $
              (216,983
              )
              
              36.8
              %ITO
              
              
              (169,140
              )
              
              16.2
              %
              
              (83,936
              )
              
              14.2
              %HRO
              
              
              (77,694
              )
              
              7.4
              %
              
              (258,258
              )
              
              43.8
              %Corporate
              
              
              (659,044
              )
              
              63.1
              %
              
              (30,110
              )
              
              5.1
              %Consolidated
              
              $
              (1,044,026
              )
              
              100.0
              %
              $
              (589,287
              )
              
              100.0
              %
  Operating
loss in the ECM segment increased to $503,721 in the first six months of
fiscal 2007 from $273,483 in the second quarter of 2006 primarily due to higher
margin project revenues in the second quarter 2007, along with higher
business integration expenses and an increase in the ratio of lower margin
third party product sales during the first six months of fiscal 2006. The
operating loss in the ITO segment of $185,784 in the first six months of fiscal
2007 is little changed from $187,234 in the same period in the prior year.
The decrease in operating loss in the HRO segment is primarily due to
decrease in salaries in the first six months of fiscal 2007 compared to the
first six months of fiscal 2006. Corporate expenses increased to $1,071,487
in the first six months of fiscal 2007 from $62,749 in the first six 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:




Six
      Months Ended June 30,2007
              
              %
      of Total
              
              2006
              
              %
      of TotalOperating
      lossECM
              
              $
              (503,721
              )
              
              26.4
              %
              $
              (273,483
              )
              
              25.8
              %ITO
              
              
              (185,784
              )
              
              9.7
              %
              
              (187,234
              )
              
              17.6
              %HRO
              
              
              (148,510
              )
              
              7.8
              %
              
              (538,211
              )
              
              50.7
              %Corporate
              
              
              (1,071,487
              )
              
              56.1
              %
              
              (62,749
              )
              
              5.9
              %Consolidated
              
              $
              (1,909,502
              )
              
              100.0
              %
              $
              (1,061,677
              )
              
              100.0
              %
  OTHER
EXPENSE (INCOME)





The
following table presents our other expense (income) and its percentage of
total net revenues:





30




Three
      Months Ended
              
              Six
      Months EndedJune
      30,
              
              June
      30,2007
              
              2006
              
              2007
              
              2006Other
      Expense (Income)Related
      parties interest
              
              $
              26,926
              
              $
              -
              
              $
              62,597
              
              $
              -%
      of total net revenues
              
              
              1.1
              %
              
              0.0
              %
              
              1.4
              %
              
              0.0
              %Other
      interest, net
              
              $
              212,751
              
              $
              7,121
              
              $
              681,374
              
              $
              4,996%
      of total net revenues
              
              
              9.0
              %
              
              0.6
              %
              
              15.6
              %
              
              0.2
              %Other
      income
              
              $
              12,253
              
              $
              668
              
              $
              14
              
              $
              911%
      of total net revenues
              
              
              0.05
              %
              
              0.1
              %
              
              0.0
              %
              
              0.0
              %Total
      other expense (income)
              
              $
              251,930
              
              $
              7,789
              
              $
              743,985
              
              $
              5,907%
      of total net revenues
              
              
              10.7
              %
              
              0.6
              %
              
              17.1
              %
              
              0.2
              %


INTEREST
EXPENSE, NET





Net
interest expense increased by $244,141 in the second quarter of fiscal 2007 to
$251,930 from net interest expense of $7,789 in the second quarter
of fiscal 2006 primarily due to $163,939 in amortization of the value of
warrants issued pursuant to bridge loans, $26,926 in interest expense on
bridge loans, $19,529 in interest expense related to purchase price payable
to sellers of Novus.





Net
interest expense increased by $738,078 in the first six months of
fiscal 2007 to $743,985 from net interest expense of $5,907 in the first
six months of fiscal 2006 primarily due to $594,029 in amortization of the
value of warrants issued pursuant to bridge loans, $50,597 in interest
expense on bridge loans, $37,848 in interest expense related to purchase
price payable to sellers of Novus and $12,000 in loan origination
fees.





INCOME
TAXES





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




LIQUIDITY
AND CAPITAL RESOURCES





Our
principal sources of liquidity at June 30, 2007 consisted of
$5,266,044  in cash
and cash equivalents. Cash and cash equivalents increased by
$4,559,847  in the
first six months of fiscal 2007. We incurred net losses from operations of
$1,909,502 and $1,061,677 and used cash in operations of $1,931,752 and $537,459
in the first six months of 2007 and 2006, respectively.





The
primary reasons for cash used in operations during the first six months of
fiscal 2007 were: net loss of $2,653,487 that included non-cash
charges related amortization of the loan discount in the amount of
$594,031, depreciation and amortization expense of $173,111, and
share-based compensation expense of $146,741. 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 six months of
fiscal 2006 were: net loss of $1,067,584, depreciation and amortization expense
of $320,587, and share-based compensation expense of $39,953. 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 six months of fiscal 2007 was
$6,162,396, primarily for purchase of DocuCom, Novus, HRMS and property and
equipment.





31


Net cash
used in investing activities in the first six months of fiscal 2006 was
$501,063, primarily for purchase of Digica and $125,470 for the purchase of
property and equipment.





Net
cash provided by financing activities during the first six months of 2007 was
$12,944,550 of which $12,410,033 came from the net proceeds from the sale of
$14,000,000 of preferred shares. In the first six months of fiscal 2007, we
received $400,000 in cash proceeds from bridge loans and repaid bank debt
in the amount of $179,483. 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.





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 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, additional draw down on the founders' bridge loan
facility, 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





32


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 June 30, 2007:




Less
      Than
              
              
              
              
              
              AfterTotal
              
              1
      Year
              
              1-3
      Years
              
              4-5
      Years
              
              5
      YearsLong-term
      debt
              
              $
              182,770
              
              $
              152,545
              
              $
              30,225
              
              $
              -
              
              $
              -Capital
      lease obligations*
              
              
              495,300
              
              
              95,208
              
              
              214,526
              
              
              185,566
              
              
              -Operating
      leases
              
              
              1,385,655
              
              
              601,991
              
              
              664,444
              
              
              118,991
              
              
              229Purchase
      price payable -Novus
      and DocuCom
              
              
              1,886,301
              
              
              1,886,301
              
              
              -
              
              
              -
              
              
              -Short-term
      loan payable
              
              
              125,000
              
              
              125,000
              
              
              -
              
              
              -
              
              
              -Bridge
      loan payable
              
              
              1,200,000
              
              
              1,200,000
              
              
              -
              
              
              -
              
              
              -Total
      contractual obligations
              
              $
              5,275,026
              
              $
              4,061,045
              
              $
              909,195
              
              $
              304,557
              
              $
              229




*Excludes imputed interest of
$123,009




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 June 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 second 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.





33


PART II
-- OTHER INFORMATION





ITEM 1.
LEGAL PROCEEDINGS





None





ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS





In
January 2007, we received cash proceeds of $400,000 from Mr. Patrick Dolan
as bridge loan. Pursuant to the bridge loan agreement, we issued Mr. Dolan
a 7-year warrant to purchase 133,333 shares of our common stock. The
exercise price of the shares is $0.035 and the warrant vested immediately.
Using the Black-Scholes Merton option valuation model, a volatility of
125%, risk free rate of 4.75% and the fair value at grant date of $1.40 per
share, we valued the warrant to be approximately $185,187. The value of the
warrant was recorded as a discount to the bridge loan and is being
amortized over the term of the loan. Unamortized loan discount balance at
June 30, 2007 was $0. In addition to the warrant Mr. Dolan is also entitled
to a 3% loan guarantee fee, amounting to $12,000, which has been accrued as
of June 30, 2007.





In
January 2007, we also issued 309 shares of Series A preferred stock
as paid-in-kind dividends to Messrs. Dolan and Cortens based on 1,543,251
shares of Series A preferred stock outstanding as of December 31,
2006.





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
            Description31.1
            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 amended quarterly report on Form
10-QSB/A.





34





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.


BPO
      MANAGEMENT SERVICES, INC.Date: June 13, 2008
            By:
            /s/ Donald W.
      RutherfordChief Financial Officer(principal financial
      officer and duly authorized officer)






35




EXHIBITS
ATTACHED TO THIS AMENDED QUARTERLY REPORT ON FORM 10-QSB/A


Exhibit
                Number
              Description31.1
              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)
  36