8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

AMENDMENT NO. 1 TO

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)

January 18, 2011

WORKSTREAM INC.

(Exact name of registrant as specified in its charter)

CANADA	001-15503	N/A
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

485 N. KELLER ROAD, SUITE 500 MAITLAND, FLORIDA	32751
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code

(407) 475-5500

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

EXPLANATORY NOTE

On January 21, 2011, Workstream Inc. (the “Company”) filed a Current Report on Form 8-K reporting a merger with Incentives Advisors, LLC. This amendment No.1 amends Item 9.01 of the subject Current Report on Form 8-K to provide the financial statements and pro forma financial information as set forth in Item 9.01.

Item 9.01. Financial Statements and Exhibits.

(a) Financial Statements.

Audited balance sheet of Incentives Advisors as of December 31, 2010 and the related statements of income and Statement of members’ equity and cash flows for the year ended December 31, 2010.

(b) Pro Forma Financial Information.

Unaudited pro forma combined balance sheet of Workstream Inc and Subsidiaries as of November 30, 2010 and the unaudited pro forma combined statement of income (loss) for the year ended May 31, 2010 and for the six months ended November 30, 2010.

(c) Exhibits

Exhibit No.	Description
23.1	Consent of Cross, Fernandez and Riley, LLP, Independent Auditor of Incentives Advisors, LLC.
99.1	Audited balance sheet of Incentive Advisors as of December 31, 2010 and the related statements of income and statement of members' equity and cash flows for the year ended December 31, 2010.
99.2	Unaudited pro forma combined balance sheet of Workstream Inc and subsidiaries as of November 30, 2010 and the unaudited pro forma combined statement of income (loss) for the year ended May 31, 2010 and for the six months ended November 30, 2010.

SIGNATURES

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

	WORKSTREAM INC.
By:	/s/ John Long
Name:	John Long
Title:	Chief Executive Officer

Dated: April 4, 2011

EXHIBIT INDEX

Exhibit No.	Description
23.1	Consent of Cross, Fernandez and Riley, LLP, Independent Auditor of Incentives Advisors, LLC.
99.1	Audited balance sheet of Incentive Advisors as of December 31, 2010 and the related statements of income and statement of members' equity and cash flows for the year ended December 31, 2010.
99.2	Unaudited pro forma combined balance sheet of Workstream Inc and subsidiaries as of November 30, 2010 and the unaudited pro forma combined statement of income (loss) for the year ended May 31, 2010 and for the six months ended November 30, 2010.

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Members

We hereby consent to the incorporation by reference in the Registration Statements on Forms S-8 (Nos. 333-148326 and 333-51468) and Form F-3 (No. 333-101502) of Workstream Inc. of our report dated April 1, 2011, relating to the financial statements of Incentives Advisors, LLC, which appear in this Current Report on Form 8-K of Workstream Inc. dated April 4, 2011.

/s/ Cross, Fernandez & Riley, LLP

Cross, Fernandez & Riley, LLP

Orlando, Florida

April 4, 2011

EX-99.1

Exhibit 99.1

AUDITED

FINANCIAL STATEMENTS

INCENTIVES ADVISORS

DECEMBER 31, 2010

INCENTIVES ADVISORS

AUDITED FINANCIAL STATEMENTS

DECEMBER 31, 2010

CONTENTS

	Page
Independent Auditor's Report	1
Financial Statements
Balance Sheet	2
Statement of Income	3
Statement of Members' Equity	4
Statement of Cash Flows	5
Notes to the Financial Statements	6 - 8

Independent Auditors’ Report

To the Members

Incentives Advisors, LLC

We have audited the accompanying balance sheet of Incentives Advisors, LLC as of December 31, 2010 and the related statements of income, member’s equity and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Incentives Advisors, LLC at December 31, 2010, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ Cross, Fernandez & Riley, LLP

Certified Public Accountants

April 1, 2011

1

Incentives Advisors, LLC

INCENTIVES ADVISORS, LLC
BALANCE SHEET
	Notes		December 31, 2010
ASSETS:
Current assets:
Cash and cash equivalents			$	47,276
Accounts receivable				134,387
Prepaid expenses and other assets				47,066
Total current assets				228,729
Property and equipment, net		3		9,715
TOTAL ASSETS			$	238,444
LIABILITIES AND MEMBERS’ EQUITY:
Current liabilities:
Accounts payable			$	90,759
Accrued liabilities				20,466
Customer deposits				1,000
Note payable		5		24,000
Total current liabilities				136,225
Note payable - long-term		5		24,000
Total liabilities				160,225
Commitments and Contingencies		4		-
MEMBERS'  EQUITY:
Contributed capital				9,099
Accumulated earnings				69,120
Total members' equity				78,219
TOTAL LIABILITIES AND MEMBERS' EQUITY			$	238,444

The accompanying notes are an integral part of these financial statements.

2

Incentives Advisors, LLC

INCENTIVES ADVISORS, LLC
STATEMENT OF INCOME
			Year Ended
	Notes		December 31, 2010
Revenues:
Tax Advisory Services			$	639,796
Operating expenses:
Operations commissions				118,040
Selling and marketing				133,265
General and administrative				199,233
Amortization and depreciation		3		3,517
Total operating expenses				454,055
NET INCOME			$	185,741

The accompanying notes are an integral part of these financial statements.

3

Incentives Advisors, LLC

INCENTIVES ADVISORS, LLC
STATEMENT OF MEMBERS' EQUITY
	Contributed		Accumulated
	Capital		Earnings			Total
Balance at December 31, 2009	$	2,098	$	-		$	2,098
Contributions		7,001		-			7,001
Distributions		-		(116,621	)		(116,621	)
Net income		-		185,741			185,741
Balance at December 31, 2010	$	9,099	$	69,120		$	78,219

The accompanying notes are an integral part of these financial statements.

4

Incentives Advisors, LLC

INCENTIVES ADVISORS, LLC
STATEMENT OF CASH FLOWS
	Year Ended
	December 31, 2010
Cash flows used in operating activities:
Net income	$	185,741
Adjustments to reconcile net income to net cash provided in operating activities:
Amortization and depreciation		3,517
Net change in components of working capital:
Accounts receivable		(46,198	)
Prepaid expenses and other assets		(9,899	)
Accounts payable		58,689
Accrued liabilities		(45,564	)
Customer deposits		(4,950	)
Net cash provided in operating activities		141,336
Cash flows provided by financing activities:
Repayment on note payable		(12,000	)
Contributions of capital		7,001
Distributions		(116,621	)
Net cash (used in) financing activities		(121,620	)
Net increase in cash and cash equivalents		19,716
Cash and cash equivalents - beginning of period		27,560
Cash and cash equivalents - end of period	$	47,276

The accompanying notes are an integral part of these financial statements.

5

Incentives Advisors, LLC

Notes to Financial Statements

For the Year Ended December 31, 2010

1. Organization and Nature of Business

Incentives Advisors, LLC (the Company) was organized in the state of Arizona in October 2007 and is located in Tempe, Arizona. The Company helps clients, throughout the United States of America, maximize their tax reduction opportunities through the pursuit of available federal, state, and local credits and incentives.

2. Significant Accounting Policies

Use of Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the statements. Actual results could differ from the estimates and assumptions used.

Fair Value of Financial Instruments

The Company follows FASB ASC Topic 820, “Fair Value Measurements and Disclosure,” (ASC 820) which clarifies the definition of fair value, establishes a framework for measuring fair value and expands required disclosure about fair value measurements of assets and liabilities. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs other than quoted prices that are either directly or indirectly observable.

Level 3 – Unobservable inputs that are supported by little or no market activity, therefore requiring an entity to develop its own assumptions that market participants would use in pricing.

Fair value estimates are based upon certain market assumptions and pertinent information available to management at December 31, 2010. The Company uses the market approach to measure fair value for its Level 1 financial assets which include cash equivalents. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The carrying amount reported in the balance sheet for cash, accounts receivable, accounts payable and accrued expenses approximates fair market value due to the immediate or short-term maturity of these financial instruments.  The fair value of note payable approximates its carrying value based upon current rates available to the Company.

Cash Equivalents

The Company considers cash equivalents to be all short-term investments that have an initial maturity of 90 days or less.

Accounts Receivable

Accounts receivable are customer obligations due under normal trade terms from companies in a broad range of industries located throughout the United States. Credit is extended based on an evaluation of the customer’s financial condition, and collateral is normally not required.

The allowance for all probable uncollectible receivables is based on a combination of historical data, cash payment trends, specific customer issues, write-off trends, general economic conditions and other factors. These factors are continuously monitored by management to arrive at the estimate for the amount of accounts receivable that may be ultimately uncollectible. In circumstances where the Company is aware of a specific customer’s inability to meet its financial obligations, the Company records a specific allowance for bad debts against amounts due, to reduce the net recognized receivable to the amount it reasonable believes will be collected. Based upon the information available, management believes that no allowance for bad debts is necessary at December 31, 2010.

6

Incentives Advisors, LLC

Notes to Financial Statements

For the Year Ended December 31, 2010

Property and Equipment

Property and equipment are recorded at cost. Depreciation on furniture and equipment is computed using accelerated methods over their estimated useful lives ranging from 5 to 7 years.  Leasehold improvements are amortized over the shorter of their estimated useful lives or the related lease life.

Long-Lived Assets

When facts and circumstances indicate that the carrying values of long-lived assets may be impaired, an evaluation of recoverability is performed by comparing the carrying values of the assets to projected undiscounted future cash flows in addition to other quantitative and qualitative analyses.  Upon indication that the carrying values of such assets may not be recoverable, the Company recognizes an impairment loss by a charge against current operations.

Income Taxes

The Company is organized as a limited liability company, which is taxed in a manner similar to a partnership, whereby income or losses are passed through the Company to the individual members.  Accordingly, no provision for income taxes has been presented in the accompanying consolidated financial statements.

The Company has adopted the provisions of FASB ASC Topic 740, “Accounting for Uncertainty in Income Taxes.” FASB ASC Topic 740 clarifies the accounting for uncertainty in income taxes recognized in the Company’s financial statements and 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 return. FASB ASC Topic 740 also provides guidance on derecognition and measurement of a tax position taken or expected to be taken in a tax return.

The Company files income tax returns in the U.S. federal jurisdiction and the state of Arizona. The Company’s federal income tax returns for tax years 2008 and beyond remain subject to examination by the Internal Revenue Service. The Company’s state income tax returns for the years 2008 and beyond remain subject to examination by the Arizona’s Department of Revenue.

The Company did not have unrecognized tax benefits as of December 31, 2010 and does not expect this to change significantly over the next 12 months. As of December 31, 2010, the Company has not accrued interest or penalties related to uncertain tax positions.

Revenue Recognition and Labor Costs

Tax advisory service revenues are generated from transaction fees based on a percentage of the value of the tax credit identified and are recognized in the period that the approval of the underlying eligible employee or program is received from the taxing authority and such credit is reported to the client. Revenue from hourly and fixed fee consulting services is recognized as the services are performed.

Subsequent Events

The Company has evaluated events and transactions occurring subsequent to December 31, 2010 as of April 1, 2011, which is the date the financial statements were available to be issued. Subsequent events occurring after April 1, 2011 have not been evaluated by management. No material events have occurred since December 31, 2010 that require recognition or disclosure in the financial statements except as discussed in Note 7.

7

Incentives Advisors, LLC

Notes to Financial Statements

For the Year Ended December 31, 2010

3. Property and Equipment

As of December 31, 2010, property and equipment is as follows:

Furniture and equipment	$	18,640
Leasehold improvements		1,160
		19,800
Less accumulated depreciation		(10,085	)
	$	9,715

Depreciation and amortization expense was $3,517 for the year ended December 31, 2010.

4. Commitments and Contingencies

Legal

In the normal course of conducting its business, the Company may be involved in various litigation.  The Company is not a party to any litigation which its management believes could result in any judgments or fines against it that would have a material adverse affect on its financial position, liquidity or results of operations.

Commissions Agreement

On October 28, 2010, the Company entered into a Commissions Agreement (the “Agreement”) with Economic Incentives Advisors Group LLC (“EIAG”) which is owned by a former member of the Company.  The Agreement provides for sales commissions to be paid to EIAG at varying rates, as defined, based upon the type of product sold and the gross amount of billings invoiced to the customer.  The Agreement remains in effect through December 31, 2012 with one year automatic renewals unless cancelled in writing by both EIAG and the Company.

5. Note Payable

The Company is obligated under an unsecured, non-interest bearing note payable to a former member.  The note is payable in monthly installments of $2,000 through December 2012.  The note had a balance of $48,000 at December 31, 2010 and was paid in full in January 2011.

6. Major Customer

The Company had revenues from one significant customer representing 10.5% of total revenues for the year ended December 31, 2010.

7. Subsequent Event

On January 18, 2011, the Company was purchased by Tomahawk Merger Corporation, a wholly owned subsidiary of Workstream, Inc. Consideration received from the purchaser was $2,124,000 consisting of $154,000 in cash, two subordinated promissory notes each in the face amount of $117,500 and 47,508,215 unregistered common shares of Workstream, Inc. valued at $1,735,000.

8 

EX-99.2

Exhibit 99.2

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

The following unaudited pro forma combined financial statements have been prepared to give effect to the acquisition by Workstream Inc. of Incentives Advisors, using the purchase method of accounting and the assumptions and adjustments described in the accompanying notes to unaudited pro forma combined financial statements.

The table that follows presents unaudited pro forma financial data for Workstream Inc. and Incentives Advisors for the six months ended November 30, 2010 and for the year ended May 31, 2010 as if the acquisitions had been completed on June 1, 2009 for income statement purposes and on November 30, 2010 for balance sheet purposes. The pro forma information is based upon the historical consolidated financial statements of Workstream Inc. and Incentives Advisors and the assumptions, estimates and adjustments described in the notes to the unaudited pro forma combined financial information. The assumptions, estimates and adjustments are preliminary and have been made solely for purposes of developing such pro forma information.

The unaudited pro forma combined financial statements are presented for illustrative purposes only and are not necessarily indicative of the consolidated financial position or consolidated results of operations of Workstream Inc. that would have been reported had the acquisitions occurred on the dates indicated, nor do they represent a forecast of the consolidated financial position of Workstream Inc. at any future date or the consolidated results of operations for any future period. Furthermore, no effect has been given in the unaudited pro forma combined statements of income (loss) for synergistic benefits or cost savings that may be realized through the combination of the Workstrean Inc. and Incentives Advisors or costs that may be incurred in integrating their operations. The unaudited pro forma combined financial information should be read in conjunction with the historical financial statements and related notes and management’s discussion and analysis of financial condition and results of operations of Workstream Inc. which is included in its annual report on Form 10-K, which is incorporated by reference, and the historical financial statements and related notes of Incentives Advisors which are included in this Form 8-K/A.

1

Workstream Inc.

Unaudited Pro Forma Combined Balance Sheet

November 30, 2010

WORKSTREAM INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
NOVEMBER 30, 2010
			Workstream Inc.			Incentives Advisors		Pro Forma
	Notes		Historical			Historical		Adjustments			Pro Forma
ASSETS:
Current assets:
Cash and cash equivalents			$	375,161		$	37,665	$	(154,000	)	$	258,826
Accounts receivable, net of allowances of $512,224				1,832,296			101,114		-			1,933,410
Prepaid expenses and other assets				52,110			44,447		-			96,557
Total current assets				2,259,567			183,226		(154,000	)		2,288,793
Equipment, net				199,458			10,009		-			209,467
Other assets				43,043			-		-			43,043
Intangible assets, net		D		150,162			-		663,000			813,162
Goodwill		A		6,731,326			-		1,330,277			8,061,603
TOTAL ASSETS			$	9,383,556		$	193,235	$	1,839,277		$	11,416,068
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current liabilities:
Accounts payable			$	939,927		$	10,512	$	-		$	950,439
Accrued liabilities				1,837,481			52,000		-			1,889,481
Accrued compensation				403,562			-		-			403,562
Current portion of senior secured notes payable and  accrued interest				-			-		-			-
Embedded put derivative				-			-		-			-
Current portion of long-term obligations				172,941			-		-			172,941
Deferred revenue				1,272,563			-		-			1,272,563
Total current liabilities				4,626,474			62,512		-			4,688,986
Senior secured note payable				-			-		-			-
Senior secured note payableand accrued interest, net  related party		B		849,926			-		235,000			1,084,926
Long-term obligations, less current portion				65,426			-		-			65,426
Deferred revenue – long-term				21,440			-		-			21,440
Common stock warrant liability				67,100			-		-			67,100
Total liabilities				5,630,366			62,512		235,000			5,927,878
Commitments and Contingencies
SHAREHOLDERS’ EQUITY:
Preferred shares, no par value				-			-		-			-
Common shares, no par value,				136,880,540			-		-			136,880,540
Common stock payable				-			-		-			-
Additional paid-in capital		B		30,760,815			-		1,735,000			32,495,815
Accumulated deficit		C		(162,913,611	)		130,723		(130,723	)		(162,913,611	)
Accumulated other comprehensive loss				(974,554	)		-		-			(974,554	)
Total shareholders’ equity				3,753,190			130,723		1,604,277			5,488,190
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY			$	9,383,556		$	193,235	$	1,839,277		$	11,416,068

See the accompanying notes to the unaudited pro forma financial information.

2

Workstream Inc.

Unaudited Pro Forma Combined Statement of Income (Loss)

For the Six Months Ended November 30, 2010

WORKSTREAM INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS & COMPREHENSIVE INCOME (LOSS)
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2010
			Workstream Inc.			Incentives Advisors		Pro Forma
	Notes		Historical			Historical		Adjustments			Pro Forma
Revenues:
Software			$	2,288,399		$	-	$	-		$	2,288,399
Professional services				148,434			-		-			148,434
Rewards				3,998,443			-		-			3,998,443
Tax Advisory Services				-			258,616		-			258,616
Career networks				1,146,471			-		-			1,146,471
Revenues, net				7,581,747			258,616		-			7,840,363
Cost of revenues:
Rewards				3,009,271			-		-			3,009,271
Other				333,905			8,299		-			342,204
Cost of revenues (exclusive of amortization and depreciation expense noted below)				3,343,176			8,299		-			3,351,475
Gross profit				4,238,571			250,317		-			4,488,888
Operating expenses:
Selling and marketing		F		763,601			50,813		126,342			940,756
General and administrative				3,962,392			68,346		-			4,030,738
Research and development				(283,215	)		-		-			(283,215	)
Amortization and depreciation		D		111,277			1,667		66,300			179,244
Impairment of goodwill				(685,426	)		-		-			(685,426	)
Total operating expenses				3,868,629			120,826		192,642			4,182,097
Operating Income (loss)				369,942			129,491		(192,642	)		306,791
Other income / (expense):
Interest income and expense, net		E		(672,367	)		-		(3,332	)		(675,699	)
Gain on exchange of senior secured notes payable				1,192,635			-		-			1,192,635
Change in fair value of warrants and derivative				201,500			-		-			201,500
Other income and expense, net				(321	)		-		-			(321	)
Other income (expense), net				721,447			-		(3,332	)		718,115
Income (loss) before income tax expense				1,091,389			129,491		(195,974	)		1,024,906
Income tax expense				(7,356	)		-		-			(7,356	)
NET INCOME (LOSS)			$	1,084,033		$	129,491	$	(195,974	)	$	1,017,550
Income (loss) per share - basic and diluted			$	0.00							$	0.00
Weighted average number of common shares outstanding:
Basic				487,666,585					95,016,430			582,683,015
Diluted				540,921,399					95,016,430			635,937,829
Net income			$	1,084,033		$	129,491	$	(195,974	)	$	1,017,550
Comprehensive loss:
Foreign curency translation adjustment				(43,542	)		-		-			(43,542	)
COMPREHENSIVE INCOME			$	1,040,491		$	129,491	$	(195,974	)	$	974,008

See the accompanying notes to the unaudited pro forma financial information.

3

Workstream Inc.

Unaudited Pro Forma Combined Statement of Income (Loss)

For the Year Ended May 31, 2010

WORKSTREAM INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS & COMPREHENSIVE INCOME (LOSS)
FOR THE YEAR ENDED MAY 31, 2010
			Workstream Inc.			Incentives Advisors			Pro Forma
	Notes		Historical			Historical			Adjustments			Pro Forma
Revenues:
Software			$	6,011,926		$	-		$	-		$	6,011,926
Professional services				752,251			-			-			752,251
Rewards				6,600,265			-			-			6,600,265
Tax Advisory Services				-			373,931
Career networks				3,160,323			-			-			3,160,323
Revenues, net				16,524,765			373,931			-			16,524,765
Cost of revenues:
Rewards				5,198,618			-			-			5,198,618
Other				754,463			214,416			-			968,879
Cost of revenues (exclusive of amortization and depreciation expense noted below)				5,953,081			214,416			-			6,167,497
Gross profit				10,571,684			159,515			-			10,357,268
Operating expenses:
Selling and marketing		F		1,880,091			123,948			252,685			2,256,724
General and administrative				7,654,941			80,560			-			7,735,501
Research and development				1,519,396			-			-			1,519,396
Amortization and depreciation		D		822,903			4,198			132,600			959,701
Impairment of goodwill				11,683,548			-			-			11,683,548
Total operating expenses				23,560,879			208,706			385,285			24,154,870
Operating Income (loss)				(12,989,195	)		(49,190	)		(385,285	)		(13,797,602	)
Other income / (expense):
Interest income and expense, net		E		(2,605,578	)		(3,098	)		(9,955	)		(2,618,631	)
Loss on extinguishment of debt				(13,071,440	)		-			-			(13,071,440	)
Change in fair value of warrants and derivative				2,074,393			-			-			2,074,393
Other income and expense, net				54,908			-			-			54,908
Other income (expense), net				(13,547,717	)		(3,098	)		(9,955	)		(13,560,770	)
Income (loss) before income tax expense				(26,536,912	)		(52,288	)		(395,240	)		(27,358,371	)
Income tax expense				(46,819	)		-			-			(46,819	)
NET INCOME (LOSS)			$	(26,583,731	)	$	(52,288	)	$	(395,240	)	$	(27,405,190	)
Income (loss) per share - basic and diluted			$	(0.45	)							$	0.00
Weighted average number of common shares outstanding:
Basic				58,758,625			-			95,016,430			153,775,055
Diluted				58,758,625			-			95,016,430			153,775,055
Net income			$	(26,583,731	)	$	(52,288	)	$	(395,240	)	$	(27,405,190	)
Comprehensive loss:
Foreign curency translation adjustment				(69,938	)		-			-			(69,938	)
COMPREHENSIVE INCOME			$	(26,653,669	)	$	(52,288	)	$	(395,240	)	$	(27,475,128	)

See the accompanying notes to the unaudited pro forma financial information.

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Workstream Inc.

Notes to Unaudited Pro Forma Financial Information

(A) The purchase price of Incentives Advisors is $2.1 million, subject to adjustment, as described in the respective purchase agreement. The allocation of the purchase price is based upon preliminary estimates of the assets and liabilities acquired in accordance with ASC 805. A full determination of the purchase price allocation will be made upon receipt of a final valuation analysis of tangible and intangible assets. It is anticipated that the final purchase price allocation will not differ materially from the preliminary allocations.

The allocation of the purchase price is estimated as follows:

Goodwill	$	1,309,713
Identifiable intangible assets	$	663,000
Net assets acquired		151,287
Purchase Price	$	2,124,000

(B)  The purchase price of Incentives Advisors is comprised of the following:

Cash paid to sellers	$	154,000
Stock paid to sellers	$	1,735,000
Notes issued to sellers		235,000
Purchase Price	$	2,124,000

(C) Adjustment reflects the elimination of the stockholders’ equity of Incentives Advisors.

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Workstream Inc.

Notes to Unaudited Pro Forma Financial Information

(D)  Adjustment reflects the effect of the acquisition on amortization of the pro forma adjustment for customer relationships, amortized over the estimated useful life of 5 years as follows:

	Intangible Asset		Estimated Useful Life		Year ended May 31, 2010		Six months ended November 30, 2010
Customer Relationships	$	663,000		5	$	132,600	$	66,300
	$	663,000			$	132,600	$	66,300

(E)  Adjustment reflects the effects on interest expense of notes issued in the acquisitions:

			Year ended May 31, 2010		Six months ended November 30, 2010
Notes issued, interest at 5%	$	235,000		9,955		3,232
			$	9,955	$	3,232

(F) Adjustment reflects compensation expense for the former owners of Incentives Advisors, LLC.

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