EX-99.4 8 bpo_8ka-ex9904.htm PRO FORMAS bpo_8ka-ex9904.htm
                                                                                                                                        Exhibit 99.4

DOCUCOM IMAGING SOLUTIONS INC. BUSINESS COMBINATION

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 as of June 30, 2007.

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.


 
 
 

BPO MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2006
(Unaudited)
   
BPO
Management
Services, Inc.
    
DocuCom
    
Pro forma
Adjustments
    
Pro forma
BPO
Management
Services, Inc.
  
 ASSETS
                        
Current assets:
                        
Cash and cash equivalents
   $
706,197
     $
-
     $
-
     $
706,197
  
Accounts receivable
    
743,114
      
1,628,013
      
-
      
2,371,127
  
Inventory consisting of finished goods
    
37,960
      
174,428
      
-
      
212,388
  
Income taxes receivable
    
250,000
      
-
      
-
      
250,000
  
Prepaid expenses and other current assets
    
123,165
      
42,964
      
-
      
166,129
  
Total current assets
    
1,860,436
      
1,845,405
      
-
      
3,705,841
  
                                 
Equipment
    
509,929
      
284,359
      
-
      
794,288
  
Goodwill
    
4,009,223
              
3,592,996
      
7,602,219
  
Intangible assets
    
1,114,698
      
-
      
-
      
1,114,698
  
Other Assets
    
146,723
      
-
      
-
      
146,723
  
    $
7,641,009
     $
2,129,764
     $
3,592,996
     $
13,363,769
  
LIABILITIES AND STOCKHOLDERS' EQUITY
                                
Current liabilities:
                                
Current portion of long-term debt
   $
322,778
     $
-
     $
-
     $
322,778
  
Current portion of capital lease obligations
    
170,976
      
-
      
-
      
170,976
  
Bank overdraft
    
-
      
210,241
      
-
      
210,241
  
Accounts payable
    
1,381,243
      
1,275,150
      
-
      
2,656,393
  
Accrued expenses
    
725,935
      
-
              
725,935
  
Purchase price payable-short term
    
977,473
              
1,691,820
      
2,669,293
  
Income taxes payable
    
-
      
-
      
-
      
-
  
Deferred revenues
    
334,672
      
486,526
      
-
      
821,198
  
Related party notes payable
    
516,157
      
-
      
-
      
516,157
  
Severence obligations payable
    
543,291
      
-
      
-
      
543,291
  
Other current liabilities
    
25,491
      
-
      
-
      
25,491
  
Total current liabilities
    
4,998,016
      
1,971,917
      
1,691,820
      
8,661,753
  
                                 
Long-term debt, net of current portion
    
39,475
      
-
      
-
      
39,475
  
Capital lease obligations, net of current portion
    
10,328
      
-
      
-
      
10,328
  
Purchase price payable-long term
    
179,579
      
-
      
-
      
179,579
  
Other long-term liabilities
    
33,115
      
-
      
-
      
33,115
  
Total liabilities
    
5,260,513
      
1,971,917
      
1,691,820
      
8,924,250
  
                                 
Stockholders equity:
                                
Capital stock
    
125,594
      
-
      
-
      
125,594
  
Additional paid-in capital
    
6,462,928
      
157,847
      
1,901,176
      
8,521,951
  
Accumulated deficit
     (4,100,706 )    
-
      
-
       (4,100,706 )
Accumulated other comprehensive loss, foreign currency
     (107,320 )    
-
      
-
       (107,320 )
Total stockholders ' equity
    
2,380,496
      
157,847
      
1,901,176
      
4,439,519
  
    $
7,641,009
     $
2,129,764
     $
3,592,996
     $
13,363,769
  

 
Pro forma adjustments: The adjustments reflect the booking of goodwill which resulted from the difference between net assets and net liabilities acquired with an entry for the purchase price payable and a corresponding entry to equity. All intercompany balances have been eliminated.

 
 
 
 
BPO MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2006
(Unaudited)
 
   
BPO
MANAGEMENT
SERVICES, INC.
    
DOCUCOM
    
PRO FORMA
ADJUSTMENTS
    
PRO FORMA
BPO
MANAGEMENT
SERVICES, INC.
  
Revenues                        
Enterprise content management
   $ 2,713,769     $ 11,634,588     $ -     $ 14,348,357  
IT outsourcing services
     1,833,052       -       -       1,833,052  
Human resource outsourcing servicing
     164,318       -       -       164,318  
Total revenues
    
4,711,139
      
11,634,588
       -      
16,345,727
  
                                 
Operating expenses:
                                
Cost of services provided
    
1,523,983
      
8,903,490
       -      
10,427,473
  
Selling, general and administrative
    
5,737,335
      
2,985,981
       -      
8,723,316
  
Research and development
    
19,491
      
-
       -      
19,491
  
Change in estimated severance liability
     (223,726 )    
-
       -       (223,726 )
Share-based compensation
    
598,031
      
-
       -      
598,031
  
Total operating expenses
    
7,655,114
      
11,889,471
       -      
19,544,585
  
Loss from operations
     (2,943,975 )     (254,884 )     -       (3,198,859 )
                                 
Interest expense (income)
                                
Related parties
    
-
      
-
       -      
-
  
Amortization of related party debt discount
    
-
      
-
       -      
-
  
Other (net)
    
366,943
      
-
       -      
366,943
  
Other Expense (Income)
     (10,732 )    
-
       -       (10,732 )
Total interest and other expense
    
356,211
      
-
       -      
356,211
  
                                 
Net loss
   $ (3,300,186 )   $ (254,884 )   $
-
     $ (3,555,070 )
                                 
Basic and diluted net loss per share
   $ (0.39 )   $ (0.03 )   $
-
     $ (0.42 )
                                 
Basic and diluted weighted average common
    
8,496,119
      
8,496,119
              
8,496,119
  
 
 
 
 
 
 
 
BPO MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
FOR THE SIX MONTHS ENDED JUNE 30, 2007
(Unaudited)
 
 
  
BPO
Management
Services, Inc.
    
DocuCom
    
Pro forma
Adjustments
    
Pro forma
BPO
Management
Services, Inc.
  
ASSETS
                        
Current assets:
                        
Cash and cash equivalents
   $
5,040,293
     $
225,751
     $
-
     $
5,266,044
  
Restricted cash
    
1,948,434
      
-
      
-
      
1,948,434
  
Accounts receivable
    
1,377,637
      
1,538,624
      
-
      
2,916,262
  
Inventory consisting of finished goods
    
35,426
      
123,016
      
-
      
158,442
  
Prepaid expenses and other current assets
    
140,719
      
48,996
      
-
      
189,715
  
Total current assets
    
8,542,510
      
1,936,387
      
-
      
10,478,897
  
                                 
Equipment
    
774,940
      
176,870
      
-
      
951,810
  
Goodwill
    
6,110,287
      
-
      
3,592,996
      
9,703,283
  
Intangible assets
    
1,010,030
      
-
      
-
      
1,010,030
  
Other Assets
    
90,027
      
7,662
      
-
      
97,689
  
    $
16,527,792
     $
2,120,920
     $
3,592,996
     $
22,241,708
  
                                 
LIABILITIES AND STOCKHOLDERS' EQUITY
                                
Current liabilities:
                                
Current portion of long-term debt
   $
277,545
     $
-
     $
-
     $
277,546
  
Current portion of capital lease obligations
    
92,955
      
-
      
-
      
92,955
  
Accounts payable
    
1,561,155
      
1,431,514
      
-
      
2,992,667
  
Accrued expenses
    
1,005,785
      
-
      
-
      
1,005,785
  
Accrued interest-related party
    
62,384
      
-
      
-
      
62,384
  
Accrued dividend payable-related party
    
75,186
      
-
      
-
      
75,186
  
Amount due former shareholders of acquired companies
    
194,481
      
-
      
1,691,820
      
1,886,301
  
Income taxes payable
    
-
      
229,506
      
-
      
229,506
  
Deferred revenues
    
786,511
      
142,455
      
-
      
928,966
  
Related party notes payable
    
1,200,000
      
-
      
-
      
1,200,000
  
Severence obligations payable
    
480,015
      
-
      
-
      
480,015
  
Total current liabilities
    
5,736,016
      
1,803,475
      
1,691,820
      
9,231,311
  
                                 
Long-term debt, net of current portion
    
30,225
      
-
      
-
      
30,225
  
Capital lease obligations, net of current portion
    
402,345
      
-
      
-
      
402,345
  
Total liabilities
    
6,168,586
      
1,803,475
      
1,691,820
      
9,663,881
  
                                 
Stockholders equity:
                                
Capital stock
    
144,666
      
-
      
-
      
144,666
  
Additional paid-in capital
    
16,685,837
      
998,219
      
1,901,176
      
19,585,232
  
Accumulated deficit
     (6,073,419 )     (680,774 )    
-
       (6,754,193 )
Accumulated other comprehensive loss, foreign currency
     (397,877 )    
-
      
-
       (397,877 )
Total stockholders ' equity
    
10,359,207
      
317,445
      
1,901,176
      
12,577,827
  
    $
16,527,792
     $
2,120,920
     $
3,592,996
     $
22,241,708
  
   
 
Pro forma adjustments: The adjustments reflect the booking of goodwill which resulted from the difference between net assets and net liabilities acquired with an entry for the purchase price payable and a corresponding entry to equity. All intercompany balances have been eliminated.
 
 
 
 
 
 
BPO MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2007
(Unaudited)
 
 
   
BPO
MANAGEMENT
SERVICES, INC.
    
DOCUCOM
    
PRO FORMA
ADJUSTMENTS
    
PRO FORMA
BPO
MANAGEMENT
SERVICES, INC.
  
Revenues:                        
Enterprise content management
   $ 2,056,879     $ 6,492,596     $ -     $ 8,549,474  
IT outsourcing services
     1,980,913       -       -       1,980,913  
Human resource outsourcing servicing
     13,817       -       -       13,817  
Total revenues
    
4,051,609
      
6,492,596
       -      
10,544,204
  
                                 
Operating expenses:
                                
Cost of services provided
    
1,639,425
      
4,750,547
       -      
6,389,972
  
Selling, general and administrative
    
4,113,874
      
1,915,305
       -      
6,029,179
  
Research and development
    
93,366
      
-
       -      
93,366
  
Share-based compensation
    
146,743
      
-
       -      
146,743
  
Total operating expenses
    
5,993,408
      
6,665,852
       -      
12,659,260
  
Loss from operations
     (1,941,799 )     (173,257 )     -       (2,115,056 )
                                 
Interest expense (income)
                                
Related parties
    
62,597
      
-
       -      
62,597
  
Amortization of related party debt discount
    
594,029
      
-
       -      
594,029
  
Other (net)
    
87,345
      
-
       -      
87,345
  
Other Expense
    
14
      
-
       -      
14
  
Total interest and other expense
    
743,985
      
-
       -      
743,985
  
                                 
Net loss
   $ (2,685,784 )   $ (173,257 )   $
-
     $ (2,859,041 )
                                 
Basic and diluted net loss per share
   $ (0.31 )   $ (0.02 )           $ (0.33 )
                                 
Basic and diluted weighted average common
    
8,623,630
      
8,623,630
              
8,623,630