Workstream Inc. said a U.S.-based payroll business has taken the first step in talks about a potential merger deal.

The on-demand compensation, performance and talent management solutions maker, which relocated to California from Ottawa earlier this year, said it has received an unsolicited offer from the unnamed company to "determine the viability of a merger between the two entities."

While Workstream has enjoyed rapid revenue growth of 771 per cent over the past five years, the company has not seen a profit in several years. In November 2006, it faced delisting from the Nasdaq exchange after its stock traded for less than $1 for 30 consecutive trading days, although it announced in January that it had succeeded in maintaining its listing.

Workstream's net losses in its last fiscal year were $13.8 million, on revenues of $29.3 million.

No financial terms for the deal were disclosed, and a representative was unavailable for comment at the time of reporting.