UNITED STATES

SECURITIES
AND EXCHANGE COMMISSION

Washington,
D.C. 20549



FORM 10-Q



SQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934



For the quarterly period ended:March
31, 2013



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



Commission File Number:000-53223



GBS ENTERPRISES
INCORPORATED

(Exact name
of registrant as specified in its charter)



|Nevada                                           |  | 27-3755055                          
|------------------------------------------------ |  | ------------------------------------
|(State or other jurisdiction of incorporation or |  | (I.R.S. Employer Identification No.)
|organization)                                    |  |                                     
|                                                 |  |                                     
|585 Molly Lane
        Woodstock, GA             |  | 30189                               
|(Address of principal executive offices)         |  | (Zip Code)                          
|                                                 |  |                                     



(404)
891-1711

(Registrant’s telephone number, including
area code)



With a copy to:

Philip Magri, Esq.

The Magri Law Firm, PLLC

11 Broadway, Suite 615

New York, NY 10004

T: (646) 502-5900

F: (646) 826-9200

pmagri@magrilaw.com

www.MagriLaw.com



N/A

(Former name, former address and former
fiscal year, if changed since last report)



Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 ̈ No x



Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).



Yes  ̈Nox



Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated
filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange ct. (Check
one):



|Large accelerated filer ̈                                            | Accelerated filer ̈        
|------------------------------------------------------------------- | --------------------------
|                                                                    |                           
|Non-accelerated filer ̈(Do not check if a smaller reporting company) | Smaller reporting companyx



Indicate by checkmark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Act).



Yes ̈No x



APPLICABLE ONLY TO CORPORATE REGISTRANTS



Indicate the number of shares outstanding of each of the
registrant’s classes of common stock, as of the latest practicable date. As of June 13, 2013, there were 30,812,624 shares of common stock, par value $0.001 per share, of the Registrant issued
and outstanding.













|           | TABLE OF CONTENTS                                                                     |         
|---------- | ------------------------------------------------------------------------------------- | --------
|           |                                                                                       | Page No:
|           | PART I - FINANCIAL INFORMATION                                                        |         
|Item 1.    | Financial Statements                                                                  | 3       
|Item 2.    | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 40      
|Item 3.    | Quantitative and Qualitative Disclosures About Market Risk                            | 52      
|Item 4.    | Controls and Procedures                                                               | 52      
|           |                                                                                       |         
|           | PART II - OTHER INFORMATION                                                           |         
|Item 1.    | Legal Proceedings                                                                     | 53      
|Item 1A.   | Risk Factors                                                                          | 53      
|Item 2.    | Unregistered Sales of Equity Securities and Use of Proceeds                           | 53      
|Item 3.    | Defaults Upon Senior Securities                                                       | 53      
|Item 4.    | Mine Safety Disclosures                                                               | 53      
|Item 5.    | Other Information                                                                     | 54      
|Item 6.    | Exhibits                                                                              | 55      
|Signatures |                                                                                       | 56      



2







PART I - FINANCIAL INFORMATION



Item 1.          Financial
Statements



GBS Enterprises Incorporated



Interim Consolidated Financial Statements



March 31, 2013



(Unaudited)



3











|GBS Enterprises Incorporated        
|------------------------------------
|Interim Consolidated Balance Sheets 
|March 31, 2013 and December 31, 2012
|(Unaudited)                         









|                                                          |  | March 31, 2013 |             |   | December 31, 2012 | 
|--------------------------------------------------------- |  | -------------- | ----------- | - | ----------------- | 
|                                                          |  | $              |             |   | $                 | 
|Assets                                                    |  |                |             |   |                   | 
|Current Assets                                            |  |                |             |   |                   | 
|Cash and cash equivalents - Note 6                        |  |                | 738,369     |   |                   | 
|Accounts Receivable - Note 7                              |  |                | 3,205,807   |   |                   | 
|Inventories - Note 3                                      |  |                | 0           |   |                   | 
|Prepaid expenses - Note 8                                 |  |                | 214,435     |   |                   | 
|Other current receivables - Note 9                        |  |                | 1,019,080   |   |                   | 
|Assets held for sale                                      |  |                | 0           |   |                   | 
|Total current assets                                      |  |                | 5,177,691   |   |                   | 
|                                                          |  |                |             |   |                   | 
|Non-Current Assets                                        |  |                |             |   |                   | 
|Assets held for sale                                      |  |                | 0           |   |                   | 
|Property, plant and equipment - Note  10                  |  |                | 317,771     |   |                   | 
|Other non-current receivables - Note 11                   |  |                | 1,154       |   |                   | 
|Deferred tax assets                                       |  |                | 1,104,222   |   |                   | 
|Goodwill - Note 12                                        |  |                | 31,260,500  |   |                   | 
|Software - Note 13                                        |  |                | 10,947,781  |   |                   | 
|Other assets - Note 14                                    |  |                | 160,340     |   |                   | 
|Total non-current assets                                  |  |                | 43,791,768  |   |                   | 
|                                                          |  |                |             |   |                   | 
|                                                          |  |                |             |   |                   | 
|Total assets                                              |  |                | 48,969,459  |   |                   | 
|                                                          |  |                |             |   |                   | 
|                                                          |  |                |             |   |                   | 
|Liabilities and stockholders' equity                      |  |                |             |   |                   | 
|Current liabilities                                       |  |                |             |   |                   | 
|Notes payable - Note 15                                   |  |                | 260,421     |   |                   | 
|Liabilities to banks - Note 16                            |  |                | 9,293       |   |                   | 
|Accounts payables and accrued liabilities - Note 17       |  |                | 3,662,133   |   |                   | 
|Deferred income - Note 18                                 |  |                | 8,852,860   |   |                   | 
|Other short term liabilities - Note 19                    |  |                | 800,740     |   |                   | 
|Due to related parties - Note 20                          |  |                | 276,542     |   |                   | 
|Liabilities
held for sale - current                       |  |                | 0           |   |                   | 
|Total current liabilities                                 |  |                | 13,861,989  |   |                   | 
|                                                          |  |                |             |   |                   | 
|Non-Current liabilities                                   |  |                |             |   |                   | 
|Liabilities to banks - Note 21                            |  |                | 2,563,260   |   |                   | 
|Retirement benefit obligation                             |  |                | 160,874     |   |                   | 
|Liabilities
held for sale - non current                   |  |                | 0           |   |                   | 
|Deferred Tax Liabilities                                  |  |                | 0           |   |                   | 
|Total non-current liabilities                             |  |                | 2,724,134   |   |                   | 
|                                                          |  |                | 0           |   |                   | 
|Total liabilities                                         |  |                | 16,586,123  |   |                   | 
|                                                          |  |                |             |   |                   | 
|Stockholders' equity                                      |  |                |             |   |                   | 
|Capital stock - Note 22                                   |  |                |             |   |                   | 
|Authorized:                                               |  |                |             |   |                   | 
|75,000,000 common shares of $.001 par value each          |  |                |             |   |                   | 
|25,000,000 peferred shares of $.001 par value each        |  |                |             |   |                   | 
|Issued and outstanding:                                   |  |                |             |   |                   | 
|30,812,624   shares of common stock                       |  |                |             |   |                   | 
|(29,461,664  shares of common stock at December 31, 2012) |  |                | 30,813      |   |                   | 
|Additional paid in capital                                |  |                | 50,055,132  |   |                   | 
|Subscription Receivable                                   |  |                | 50,000      |   |                   | 
|Accumulated deficit                                       |  |                | (20,308,707 | ) |                   | 
|Other comprehensive income                                |  |                | 112,249     |   |                   | 
|                                                          |  |                |             |   |                   | 
|                                                          |  |                | 29,939,487  |   |                   | 
|Noncontrolling interest in subsidiaries                   |  |                | 2,443,849   |   |                   | 
|                                                          |  |                |             |   |                   | 
|Total stockholders' equity                                |  |                | 32,383,336  |   |                   | 
|                                                          |  |                |             |   |                   | 
|Total stockholders' equity and liabilities                |  |                | 48,969,459  |   |                   | 









|Subsequent events - Note 26
|---------------------------





4











|GBS Enterprises Incorporated                                            | 
|----------------------------------------------------------------------- | 
|Interim Consolidated Statements of Operations                           | 
|For the three months ended March 31, 2013 and March 31, 2012 (Restated) | 
|(Unaudited)                                                             | 







|                                                                             |  |                |            |   | (Restated)     | 
|---------------------------------------------------------------------------- |  | -------------- | ---------- | - | -------------- | 
|                                                                             |  | March 31, 2013 |            |   | March 31, 2012 | 
|                                                                             |  | $              |            |   | $              | 
|                                                                             |  |                |           
|Revenues - Note 23                                                           |  |                |            |   |                | 
|Products                                                                     |  |                | 4,373,010  |   |                | 
|Services                                                                     |  |                | 851,369    |   |                | 
|                                                                             |  |                | 5,224,379  |   |                | 
|Cost of goods sold                                                           |  |                |            |   |                | 
|Products                                                                     |  |                | 857,275    |   |                | 
|Services                                                                     |  |                | 2,244,423  |   |                | 
|                                                                             |  |                | 3,101,698  |   |                | 
|Gross profit                                                                 |  |                | 2,122,681  |   |                | 
|                                                                             |  |                |            |   |                | 
|Operating expenses                                                           |  |                |            |   |                | 
|Selling expenses                                                             |  |                | 2,371,530  |   |                | 
|Administrative expenses                                                      |  |                | 1,500,042  |   |                | 
|General expenses                                                             |  |                | 229,147    |   |                | 
|                                                                             |  |                | 4,100,719  |   |                | 
|                                                                             |  |                |            |   |                | 
|Operating income (loss)                                                      |  |                | (1,978,038 | ) |                | 
|                                                                             |  |                |            |   |                | 
|Other Income (expense) - Note 24                                             |  |                |            |   |                | 
|Other Income (expense)                                                       |  |                | 173,479    |   |                | 
|Interest income                                                              |  |                | 341        |   |                | 
|Interest expense                                                             |  |                | (177,036   | ) |                | 
|                                                                             |  |                | (3,216     | ) |                | 
|                                                                             |  |                |            |   |                | 
|Income (loss) before income taxes                                            |  |                | (1,981,254 | ) |                | 
|                                                                             |  |                |            |   |                | 
|Income tax (income) expense                                                  |  |                | (72,960    | ) |                | 
|                                                                             |  |                |            |   |                | 
|Income before extraordinary items,                                           |  |                |            |   |                | 
|discontinued operations                                                      |  |                | (1,908,294 | ) |                | 
|                                                                             |  |                |            |   |                | 
|Discontinued operations = IDC                                                |  |                |            |   |                | 
|Discontinued operations = SD Holdings                                        |  |                |            |   |                | 
|                                                                             |  |                |            |   |                | 
|Net income (loss) before extraordinary items                                 |  |                | (1,908,294 | ) |                | 
|                                                                             |  |                |            |   |                | 
|Extraordinary items (value adjustment on goodwill)                           |  |                | 0          |   |                | 
|                                                                             |  |                |            |   |                | 
|Net income (loss)                                                            |  |                | (1,908,294 | ) |                | 
|                                                                             |  |                |            |   |                | 
|Net Loss Attributable to noncontrolling Interest                             |  |                | (574,169   | ) |                | 
|                                                                             |  |                |            |   |                | 
|Net income (loss) attributable to stockholders                               |  |                | (1,334,125 | ) |                | 
|                                                                             |  |                |            |   |                | 
|Other comprehensive income (loss)                                            |  |                | (659,864   | ) |                | 
|Other comprehensive income  (loss)                                           |  |                |            |   |                | 
|attributable to noncontrolling interest                                      |  |                | (329,272   | ) |                | 
|Other comprehensive income (loss)                                            |  |                |            |   |                | 
|attributable to stockholders                                                 |  |                | (330,592   | ) |                | 
|Net income (loss) and comprehensive income (loss) attributed to stockholders |  |                | (1,664,717 | ) |                | 
|                                                                             |  |                |            |   |                | 
|                                                                             |  |                |            |   |                | 
|Net earnings (loss) per share, basic and diluted                             |  | $              | (0.509     | ) |                | 
|                                                                             |  |                |            |   |                | 
|Weighted average number of common stock                                      |  |                |            |   |                | 
|outstanding, basic and diluted                                               |  |                | 24,847,525 |   |                | 





5









|GBS Enterprises Incorporated                                           
|-----------------------------------------------------------------------
|Interim Consolidated Statements of Operations                          
|For the three months ended March 31, 2013 and March 31, 2012 (Restated)
|(Unaudited)                                                            





|                                                     |  |                |            |   | (Restated)     | 
|---------------------------------------------------- |  | -------------- | ---------- | - | -------------- | 
|                                                     |  | March 31, 2013 |            |   | March 31, 2012 | 
|                                                     |  | $              |            |   | $              | 
|                                                     |  |                |            |   |                | 
|Cash flow from operating activties                   |  |                |            |   |                | 
|Net loss / net income                                |  |                | (1,908,294 | ) |                | 
|Adjustments                                          |  |                |            |   |                | 
|Deferred income taxes                                |  |                | 27,881     |   |                | 
|Depreciation and amortization                        |  |                | 1,561,952  |   |                | 
|Consulting expense                                   |  |                | 70,000     |   |                | 
|Interest Expense                                     |  |                | 195,288    |   |                | 
|Losses from equity investment                        |  |                | -          |   |                | 
|Loss on Sale of Assets                               |  |                | -          |   |                | 
|Minority interest losses                             |  |                | (900,667   | ) |                | 
|Changes in operating assets and liabilities          |  |                |            |   |                | 
|Accounts receivable and other assets                 |  |                | 2,692,952  |   |                | 
|Retirement benefit obligation                        |  |                | (5,002     | ) |                | 
|Inventories                                          |  |                | -          |   |                | 
|Accounts payable and other liabilities               |  |                | (635,135   | ) |                | 
|                                                     |  |                |            |   |                | 
|Net cash provided (used) by operating activities     |  |                | 1,098,975  |   |                | 
|Net cash provided (used) by discontinued             |  |                | -          |   |                | 
|                                                     |  |                |            |   |                | 
|Cash flow from investing activties                   |  |                |            |   |                | 
|Sale of intangible assets                            |  |                | (2,756,007 | ) |                | 
|Purchase of property, plant and equipment            |  |                | (31,639    | ) |                | 
|Write-down goodwill and intangibles                  |  |                | 2,994,381  |   |                | 
|Proceeds from Sale of Subsidiaries                   |  |                | 3,577,195  |   |                | 
|Increase in Financial assets                         |  |                | (427,267   | ) |                | 
|                                                     |  |                |            |   |                | 
|Net cash provided (used) in investing activities     |  |                | 3,356,663  |   |                | 
|                                                     |  |                |            |   |                | 
|Cash flow from financing activties                   |  |                |            |   |                | 
|Net borrowings - banks                               |  |                | (1,150,322 | ) |                | 
|Other borrowings                                     |  |                | (2,053,151 | ) |                | 
|Forgiveness of Debt                                  |  |                | 10,659     |   |                | 
|Capital paid-in                                      |  |                | 150,000    |   |                | 
|Loans from related party                             |  |                | (1,839,327 | ) |                | 
|                                                     |  |                |            |   |                | 
|Net cash provided (used) in financing activities     |  |                | (4,882,141 | ) |                | 
|                                                     |  |                |            |   |                | 
|Effect of exchange rate changes on cash              |  |                | 10,270     |   |                | 
|                                                     |  |                |            |   |                | 
|Net increase (decrease) in cash                      |  |                | (416,233   | ) |                | 
|Cash and cash equivalents - Beginning of the quarter |  |                | 1,154,602  |   |                | 
|                                                     |  |                |            |   |                | 
|                                                     |  |                |            |   |                | 
|Cash and cash equivalents - End of Quarter           |  |                | 738,369    |   |                | 





6









|GBS Enterprises Incorporated             
|-----------------------------------------
|Interim Consolidated Statements of Equity
|March 31, 2013                           
|(Unaudited)                              







|                                                                                   |  |              |            |  |                    |  |        |                     |  |  |               |  |  |                   |          |   | Equity       |  |             |        | 
|---------------------------------------------------------------------------------- |  | ------------ | ---------- |  | ------------------ |  | ------ | ------------------- |  |  | ------------- |  |  | ----------------- | -------- | - | ------------ |  | ----------- | ------ | 
|                                                                                   |  |              |            |  |                    |  |        |                     |  |  | Accumulated   |  |  |                   |          |   | Attributable |  |             |        | 
|                                                                                   |  | Common Stock |            |  | Additional
Paid in |  |        | Other
Comprehensive |  |  | Accumulated   |  |  | to Noncontrolling |          |   |              | 
|                                                                                   |  | Shares       |            |  | Amount             |  |        | Capital             |  |  | Income (Loss) |  |  | Deficit           |          |   | Interest     |  |             | Equity | 
|                                                                                   |  | #            |            |  | $                  |  |        | $                   |  |  | $             |  |  | $                 |          |   | $            |  |             | $      | 
|                                                                                   |  |              |            |  |                    |  |        |                     |  |  |               |  |  |                   |          |   |              |  |             |        | 
|Balance, December 31, 2010                                                         |  |              | 16,500,000 |  |                    |  | 16,500 |                     |  |  | 27,221,755    |  |  |                   | 557,207  |   |              |  | 17,632      |        | 
|                                                                                   |  |              |            |  |                    |  |        |                     |  |  |               |  |  |                   |          |   |              |  |             |        | 
|March 28, 2011, issued with  sale of units 
at $1.25 /unit                         |  |              | 6,044,000  |  |                    |  | 6,044  |                     |  |  | 6,672,906     |  |  |                   |          |   |              |  |             |        | 
|                                                                                   |  |              |            |  |                    |  |        |                     |  |  |               |  |  |                   |          |   |              |  |             |        | 
|April 1, 2011, issued on purchase  of 
Pavone AG                                   |  |              | 999,790    |  |                    |  | 1,000  |                     |  |  | 4,899,000     |  |  |                   |          |   |              |  |             |        | 
|                                                                                   |  |              |            |  |                    |  |        |                     |  |  |               |  |  |                   |          |   |              |  |             |        | 
|April 1, 2011, Warrants issued  
for services                                      |  |              | -          |  |                    |  | -      |                     |  |  | 34,000        |  |  |                   |          |   |              |  |             |        | 
|                                                                                   |  |              |            |  |                    |  |        |                     |  |  |               |  |  |                   |          |   |              |  |             |        | 
|June 1, 2011, issued on purchase   of 
GroupWare, Inc.                             |  |              | 250,000    |  |                    |  | 250    |                     |  |  | 1,084,750     |  |  |                   |          |   |              |  |             |        | 
|                                                                                   |  |              |            |  |                    |  |        |                     |  |  |               |  |  |                   |          |   |              |  |             |        | 
|July 1, 2011, issued on purchase  of 
IDC Global, Inc.                             |  |              | 880,000    |  |                    |  | 880    |                     |  |  | 3,255,120     |  |  |                   |          |   |              |  |             |        | 
|                                                                                   |  |              |            |  |                    |  |        |                     |  |  |               |  |  |                   |          |   |              |  |             |        | 
|September 27, 2011, issued on  purchase of 
SD Holdings Ltd.                       |  |              | 612,874    |  |                    |  | 613    |                     |  |  | 1,255,837     |  |  |                   |          |   |              |  |             |        | 
|                                                                                   |  |              |            |  |                    |  |        |                     |  |  |               |  |  |                   |          |   |              |  |             |        | 
|December 13,
    2011, warrants exercised 
at $1.50 /sh                            |  |              | 2,020,000  |  |                    |  | 2,020  |                     |  |  | 3,022,950     |  |  |                   |          |   |              |  |             |        | 
|                                                                                   |  |              |            |  |                    |  |        |                     |  |  |               |  |  |                   |          |   |              |  |             |        | 
|Net comprehensive loss for the year                                                |  |              |            |  |                    |  |        |                     |  |  |               |  |  |                   | (63,001  | ) |              |  | (12,165,298 | )      | 
|                                                                                   |  |              |            |  |                    |  |        |                     |  |  |               |  |  |                   |          |   |              |  |             |        | 
|Balance, December 31, 2011                                                         |  |              | 27,306,664 |  |                    |  | 27,307 |                     |  |  | 47,446,318    |  |  |                   | 494,206  |   |              |  | (12,147,666 | )      | 
|                                                                                   |  |              |            |  |                    |  |        |                     |  |  |               |  |  |                   |          |   |              |  |             |        | 
|March 27, 2012, warrants exercised   
at $1.50 /sh                                 |  |              | 5,000      |  |                    |  | 5      |                     |  |  | 7,495         |  |  |                   |          |   |              |  |             |        | 
|                                                                                   |  |              |            |  |                    |  |        |                     |  |  |               |  |  |                   |          |   |              |  |             |        | 
|March 27, 2012, warrants excercised   
at $.50 /sh                                 |  |              | 400,000    |  |                    |  | 400    |                     |  |  | 199,600       |  |  |                   |          |   |              |  |             |        | 
|                                                                                   |  |              |            |  |                    |  |        |                     |  |  |               |  |  |                   |          |   |              |  |             |        | 
|March 30, 2012, warrants exercised   
at $.50 /sh                                  |  |              | 500,000    |  |                    |  | 500    |                     |  |  | 249,500       |  |  |                   |          |   |              |  |             |        | 
|                                                                                   |  |              |            |  |                    |  |        |                     |  |  |               |  |  |                   |          |   |              |  |             |        | 
|March 31, 2012, warrants issued   
for services                                    |  |              | -          |  |                    |  | -      |                     |  |  | 270,208       |  |  |                   |          |   |              |  |             |        | 
|                                                                                   |  |              |            |  |                    |  |        |                     |  |  |               |  |  |                   |          |   |              |  |             |        | 
|April 16, 2012, issued on sale of  units 
at $1.50 /unit                           |  |              | 120,000    |  |                    |  | 120    |                     |  |  | 179,880       |  |  |                   |          |   |              |  |             |        | 
|                                                                                   |  |              |            |  |                    |  |        |                     |  |  |               |  |  |                   |          |   |              |  |             |        | 
|April 28, 2012, issued on conversion  of 
note into shares at $1.15 /sh            |  |              | 550,000    |  |                    |  | 550    |                     |  |  | 631,950       |  |  |                   |          |   |              |  |             |        | 
|                                                                                   |  |              |            |  |                    |  |        |                     |  |  |               |  |  |                   |          |   |              |  |             |        | 
|April 30, 2012, issued on conversion  of 
note into shares at $1.15 /sh            |  |              | 400,000    |  |                    |  | 400    |                     |  |  | 459,600       |  |  |                   |          |   |              |  |             |        | 
|                                                                                   |  |              |            |  |                    |  |        |                     |  |  |               |  |  |                   |          |   |              |  |             |        | 
|April 30, 2012, issued on conversion  of 
note and debt into shares at   $1.15 /sh |  |              | 150,000    |  |                    |  | 150    |                     |  |  | 172,350       |  |  |                   |          |   |              |  |             |        | 
|                                                                                   |  |              |            |  |                    |  |        |                     |  |  |               |  |  |                   |          |   |              |  |             |        | 
|May 15, 2012, issued on sale of  units 
at $1.50 /unit                             |  |              | 30,000     |  |                    |  | 30     |                     |  |  | 44,970        |  |  |                   |          |   |              |  |             |        | 
|                                                                                   |  |              |            |  |                    |  |        |                     |  |  |               |  |  |                   |          |   |              |  |             |        | 
|July 5, 2012, fair value of conversion on 
issuance of convertible debt            |  |              | -          |  |                    |  | -      |                     |  |  | 26,700        |  |  |                   |          |   |              |  |             |        | 
|                                                                                   |  |              |            |  |                    |  |        |                     |  |  |               |  |  |                   |          |   |              |  |             |        | 
|December 21, 2012, warrants  issued 
for services                                  |  |              | -          |  |                    |  | -      |                     |  |  | 2,624         |  |  |                   |          |   |              |  |             |        | 
|                                                                                   |  |              |            |  |                    |  |        |                     |  |  |               |  |  |                   |          |   |              |  |             |        | 
|Net comprehensive loss for the year                                                |  |              |            |  |                    |  |        |                     |  |  |               |  |  |                   | (51,365  | ) |              |  | (6,826,916  | )      | 
|                                                                                   |  |              |            |  |                    |  |        |                     |  |  |               |  |  |                   |          |   |              |  |             |        | 
|Balance, December 31, 2012                                                         |  |              | 29,461,664 |  |                    |  | 29,462 |                     |  |  | 49,691,195    |  |  |                   | 442,841  |   |              |  | (18,974,582 | )      | 
|                                                                                   |  |              |            |  |                    |  |        |                     |  |  |               |  |  |                   |          |   |              |  |             |        | 
|February 12, 2013, warrants exercised   
at $.20 /sh                               |  |              | 500,000    |  |                    |  | 500    |                     |  |  | 99,500        |  |  |                   |          |   |              |  |             |        | 
|                                                                                   |  |              |            |  |                    |  |        |                     |  |  |               |  |  |                   |          |   |              |  |             |        | 
|February 12, 2013, Subscription Receivable                                         |  |              |            |  |                    |  |        |                     |  |  |               |  |  |                   |          |   |              |  |             |        | 
|                                                                                   |  |              |            |  |                    |  |        |                     |  |  |               |  |  |                   |          |   |              |  |             |        | 
|March 20, 2013, issued on conversion of  
debt at $.30 /unit                       |  |              | 450,960    |  |                    |  | 451    |                     |  |  | 134,837       |  |  |                   |          |   |              |  |             |        | 
|                                                                                   |  |              |            |  |                    |  |        |                     |  |  |               |  |  |                   |          |   |              |  |             |        | 
|March 27, 2013, issued on conversion of  
debt at $.30 /unit                       |  |              | 200,000    |  |                    |  | 200    |                     |  |  | 59,800        |  |  |                   |          |   |              |  |             |        | 
|                                                                                   |  |              |            |  |                    |  |        |                     |  |  |               |  |  |                   |          |   |              |  |             |        | 
|March 27, 2013, shares   issued for service                                        |  |              | 200,000    |  |                    |  | 200    |                     |  |  | 69,800        |  |  |                   |          |   |              |  |             |        | 
|                                                                                   |  |              |            |  |                    |  |        |                     |  |  |               |  |  |                   |          |   |              |  |             |        | 
|Net comprehensive loss for the quarter                                             |  |              |            |  |                    |  |        |                     |  |  |               |  |  |                   | (330,592 | ) |              |  | (1,334,125  | )      | 
|                                                                                   |  |              |            |  |                    |  |        |                     |  |  |               |  |  |                   |          |   |              |  |             |        | 
|Balance, March 31, 2013                                                            |  |              | 30,812,624 |  |                    |  | 30,813 |                     |  |  | 50,055,132    |  |  |                   | 112,249  |   |              |  | (20,308,707 | )      | 











7













Notes to the Interim
Financial Statements

March 31, 2013

GBS Enterprises Incorporated



Note 1	            COMPANY AND BACKROUND



GBS Enterprises Incorporated, a Nevada corporation,
through its subsidiaries, is a global provider of technology solutions for businesses and government agencies. We focus on developing
and delivering solutions that help our customers to gain value and reduce cost in the development, deployment and management of
the applications used in the course of conducting their business (“business applications”). We do this by building
software and providing services that aid in:



| | n | Information Technology (“IT”) systems analysis, planning
and management;
| | - | ------------------------------------------------------------------------

| | n | Automating business processes;
| | - | ------------------------------

| | n | Optimizing system and application performance;
| | - | ----------------------------------------------

| | n | Ensuring the security and compliance of systems, applications and
processes; and
| | - | --------------------------------------------------------------------------------

| | n | Migrating and integrating systems, applications and processes.
| | - | --------------------------------------------------------------



Our customers include corporate and government IT
departments, solutions integrators (“SIs”) and independent software vendors (“ISVs”). Our corporate customers
are from a variety of industries, including insurance, financial services, pharmaceuticals, healthcare, manufacturing, logistics,
and education. The install-base of our software products spans more than 5,000,000 users in 38 countries on four continents. We
principally market and sell our products and services directly in the United States, Canada, United Kingdom, Germany, Austria,
Switzerland, the Nordics and India; and indirectly through local distributors and resellers representing Australia, South America
and regionally in Europe.





Our software and services are designed to mainly
serve organizations that have investments in IBM’s Lotus® Notes and Domino platform. The IBM Lotus® Notes and Domino
platform is both a system for enterprise email as well as an application platform, meaning that it can be used as both an email
system and an environment in which business applications can be deployed and used. This platform was originally brought to market
by Lotus Development Corp. in 1989, and was subsequently acquired by IBM in 1995. According to Radiate, in 2011, IBM Lotus Domino
will have a worldwide installed base of 189 million mailboxes. Currently, the installed base for On-Premises IBM Lotus Domino mailboxes
represents the majority of worldwide IBM Lotus Domino mailboxes, accounting for 87% of worldwide IBM Lotus Domino mailboxes. By
2015, this percentage is expected to decrease to 80%, as hosted email grows in popularity. (The Radiate Group Inc., April 2011,
“IBM Lotus Notes/Domino Market Analysis, 2011-2015“)





8







Notes to the Interim Financial
Statements

March 31, 2013

GBS Enterprises Incorporated



We, through our subsidiaries, have executed our strategy
to acquire companies, which have developed software and specialized services for the Lotus Notes and Domino market. This growth
by acquisition strategy has resulted in less competition for our software products; a large concentration of highly skilled employees
with unique expertise in the area of Lotus Notes and Domino; staff and physical offices on three continents providing greater access
to a global market; significant market awareness and greater market share amongst organizations that use Lotus Notes and Domino;
and a comprehensive portfolio of solutions specific to the needs and requirements of organizations which use Lotus Notes and Domino.



While our products and services remain in use and
demand, over the last several years, the market itself has been undergoing a paradigm shift. New technologies, especially in the
areas of Cloud Computing and Mobile applications, have grown in popularity due to the potential cost savings and operational efficiencies
they can offer. As organizations make investments in these new technologies, they are faced with highly complex and costly projects
to migrate (“migration”) or replace their existing systems that don’t operate in the cloud or on mobile devices
(“modernization”) – this includes their existing email and business applications that run on Lotus Notes and
Domino.



To that end, we have acquired and developed
technologies that help organizations reduce the time, cost, resources and risks associated with these highly complex migration
and modernization projects.



General Corporate History



We were incorporated in Nevada on March 20,
2007 as SWAV Enterprises Ltd. (“SWAV”). SWAV was an importer and wholesaler of Chinese manufactured goods.



On April 26, 2010, SWAV purchased certain technology assets of Lotus Holdings Ltd. (“Lotus”)
in exchange for 2,265,240 shares of SWAV common stock. Also on April 26, 2010, Lotus (on behalf of the SPPEF Members as discussed
below) purchased an aggregate of 11,984,770 of the outstanding shares of common stock from the selling shareholders of SWAV for
an aggregate of $370,000. As a result of the two sets of transactions, Lotus owned an aggregate of 14,250,010 shares of common
stock of SWAV, representing approximately 95.0% of the 15,000,000 shares of SWAV common stock outstanding on April 26, 2010.



9







Notes to the  Interim
Financial Statements

March 31, 2013

GBS Enterprises Incorporated



On September 6, 2010, SWAV’s name was changed
to GBS Enterprises Incorporated. On October 14, 2010, the Company’s trading symbol on the OTC Bulletin Board was changed
from SWAV to GBSX.



About Lotus Holdings,
Ltd.



Lotus is a holding company which
was formed under the laws of Gibraltar for the purpose of financing merger and acquisition projects, specifically in the niche
market of small or microcap companies listed on the Frankfurt Stock Exchange with complex shareholder structures and whose stock
is trading below one Euro (€1.00) per share.



SPPEFs



Lotus typically finances its
merger and acquisition projects through the use of Special Purpose Private Equity Funds (“SPPEFs”). Typically, SPPEFs
are funded by a company’s major shareholders (the “Major Shareholders”) seeking to raise capital for projects
and who fund at least 50% of the SPPEF, with the remaining portion being provided through the investment community and network
of investors in Lotus. Each SPPEF is co-managed by a representative of the company’s Major Shareholders (the “Representative
Secretary”) and an attorney appointed by Lotus (the “Lotus Representative”).



On February 25, 2010, a group
of shareholders (the “GROUP Major Shareholders”) of GROUP Business Software AG, a German public company trading on
the Frankfurt Stock Exchange under the symbol “INW” (“GROUP”), engaged Lotus to provide financial consulting
and advisory services, on a non-exclusive basis, for the primary task of establishing a SPPEF. On March 12, 2010, the GROUP Major
Shareholders and Lotus established and funded a SPPEF with $1,400,000, consisting of $1,000,000 from the GROUP Major Shareholders
and $400,000 from a Lotus investor (collectively, the “SPPEF Members”).



In early April 2010, the SPPEF Members decided to
acquire SWAV. As disclosed above, on April 26, 2010, Lotus, on behalf of the SPPEF Members, acquired an aggregate of 11,984,770
shares of SWAV common stock from the selling shareholders of SWAV for an aggregate purchase price of $370,000. The 11,984,770 shares
of SWAV common stock represented approximately 79.9% of the 15,000,000 outstanding shares of SWAV common stock on April 26, 2010.
Upon the consummation of the acquisition, the then executive officers and directors of SWAV resigned and Mr. Joerg Ott, the Chief
Executive Officer of GROUP and a GROUP Major Shareholder, was appointed the Chief Executive Officer of SWAV and sole member of
SWAV’s Board of Directors.





10







Notes to the  Interim
Financial Statements

March 31, 2013

GBS Enterprises Incorporated



Transactions following
the acquisition



On November 1, 2010, the Company
repurchased an aggregate of 3,043,985 of the 11,984,770 shares of the Company’s common stock originally purchased by Lotus
on April 26, 2010. In consideration for the 3,043,985 shares of the Company’s common stock, the Company issued to Lotus a
Secured Demand Note, dated November 1, 2010 (the “First Demand Note”), for the principal amount of $300,000 bearing
interest at the rate of 5% per annum. The First Demand Note was repaid in September 2011.



Effective December 30, 2010,
pursuant to securities purchase agreements between the Company and six GROUP Major Shareholders, the Company purchased an aggregate
of 7,115,500 shares of GROUP common stock from the six GROUP Major Shareholders in consideration for an aggregate for 3,043,985
shares of the Company’s common stock (the “December Transaction”). As a result the Company owned approximately
28.2% of the outstanding common stock of GROUP.



Reverse Merger



After the December Transaction
was completed, the additional GROUP Major Shareholders accepted the share swap offer from the Company and effectuated a reverse
merger of GROUP and the Company. To effectuate the reverse merger, on January 5, 2011, the Company repurchased from Lotus an aggregate
of 2,361,426 of the 11,984,770 shares of the Company’s common stock originally purchased by Lotus on April 26, 2010. In consideration
for these 2,361,426 shares, the Company issued to Lotus a Secured Demand Note, dated January 5, 2011 (the “Second Demand
Note”), for the principal amount of $200,000 bearing interest at the rate of 5% per annum. The Second Demand Note was repaid
in November 2011.



Effective January 6, 2011, pursuant
to securities purchase agreements between the Company and the remaining GROUP Major Shareholders, the Company purchased an aggregate
of 5,525,735 shares of GROUP common stock from the remaining GROUP Major Shareholders in consideration for an aggregate of 2,361,426
shares of the Company’s common stock (the “January Transaction”). The 5,525,735 GROUP shares represented approximately
21.9% of the outstanding shares of common stock of GROUP. As a result of the December Transaction and January Transaction, the
Company purchased an aggregate of 12,641,235 shares of GROUP from the GROUP Major Shareholders in consideration for an aggregate
of 5,405,411 shares of the Company’s common stock, resulting in the Company owning approximately 50.1% of the outstanding
common stock of GROUP and effectuating a reverse merger of the Company and GROUP whereby GROUP became the accounting acquirer.



11







Notes to the  Interim
Financial Statements

March 31, 2013

GBS Enterprises Incorporated



Additional
Acquisition



On
February 27, 2012, the Company acquired an additional 883,765 shares of common stock of GROUP from GAVF LLC for an average purchase
price of $.070 per share, or approximately $619,000, after an outstanding loan of GROUP was converted into an aggregate of 1,750,000
shares of GROUP common stock, thereby increasing GROUP’s outstanding common stock to 26,982,000 shares. By acquiring the
new shares, the Company increased its ownership of GROUP common stock to an aggregate of 13,525,000 shares, representing approximately
50.1% of the outstanding common stock of GROUP.





Acquisition/Dissolution
of Subsidiary Companies





Pavone AG



Effective April 1, 2011, the
Company acquired 100% of the outstanding common shares of Pavone AG, a German corporation, for $350,000 in cash and 1,000,000 shares
of its common stock. The fair value of the common stock was determined to be $4.90 per share, representing the market value at
the end of trading on the date of the acquisition. The total value of the investment, including the assumption of $ 583,991 in
debt was $5,843,991. Pavone’s extensive workflow software for Lotus Notes and Domino along with their large customer base
is well suited to GBS Enterprises portfolio strategy. The acquisition of Pavone complements GBS's majority ownership in GROUP and
the Company believes that it further strengthens their leading industry position on the IBM Lotus Platforms and expands their cloud
computing technology offerings beyond the IBM Lotus market. Pavone currently has offices in Germany and the UK. They have over
2,500 customers and over 150,000 users worldwide.



GroupWare, Inc.



Effective June 1, 2011, the
Company acquired 100% of the outstanding common shares of GroupWare, Inc., a Florida corporation (“GroupWare”). As
consideration the Company paid $250,000 and issued 250,000 shares of its common stock. The fair value of the common stock was determined
to be $4.34 per share, representing the market value at the end of trading on the date of the acquisition. The total value of the
investment, including the assumption of $ 694,617 in debt was $ 2,029,617. Upon the consummation of the acquisition, the management
and board of GroupWare resigned and Joerg Ott, the Company’s Chief Executive Officer and sole director, was appointed as
the Chief Executive Officer and sole director of GroupWare. GroupWare is based in Lubeck, Germany with offices in St. Petersburg,
Florida. GroupWare's ePDF server delivers centralized, network-wide PDF solutions for messaging, workflow, document, content and
data management. The Company believes that the acquisition strengthens the GBS Modernizing/Migrating offering, which helps bring
IBM Lotus Notes client applications to the web, by substituting traditional printing methods provided by the Notes client with
simple-to-use print-to-PDF capabilities in the browser.





12







Notes to the  Interim
Financial Statements

March 31, 2013

GBS Enterprises Incorporated



IDC Global, Inc.



On July 25, 2011, the Company acquired 100% of the
issued and outstanding shares of common stock of IDC Global, Inc., a Delaware corporation. Pursuant to the acquisition agreement,
dated July 15, 2011, the Company agreed to issue the shareholders an aggregate of 800,000 shares of common stock and made a cash
payment of $750,000. The agreement required an additional payment to the management shareholders of 80,000 shares of common stock
and signing bonuses to personnel of $35,000. The Company also agreed to reimburse IDC up to $25,000 for incurred accounting and
legal fees related to the transaction. The fair value of the common stock was determined to be $3.70 per share, representing the
market value at the end of trading on the date of the agreement. The total value of the investment, including $883,005 of debt
assumption, was $4,066,000. IDC was a privately held company that provides nationwide network and data center services. IDC delivers
customized, high availability technology solutions for WAN, Wireless Services, Co-location & Hosting, Managed Services, and
Network Security. IDC Global includes two Data Center facilities located in the downtown Chicago area and Colocation facilities
in three other Data Centers in New York, London, England and Frankfurt, Germany. IDC provides internet infrastructure Services
(IaaS) to the business community helping customers make the transition from large, static and expensive on-premise computing to
dynamic, flexible and cost-effective off-premise computing. IDC is helping customers make the transition from large, static and
expensive on-premise computing to dynamic, flexible and cost-effective off-premise computing.





Due to the Company’s perceived increase
in the demand for Modernization, Mobility and Optimization offerings, the Company made a strategic decision in 2012 to focus on
its core offerings in the IBM Notes and Domino market and to divest its non-core businesses, including IDC.







On February1, 2013, GBS entered into a Stock Purchase Agreement, dated February 1, 2013 (the “Agreement”), with IDC Global, Inc.,
a Delaware corporation and a wholly-owned subsidiary of GBS (“IDC”), and Global Telecom & Technology Americas,
Inc., a Virginia corporation (“GTT). Pursuant to the Stock Purchase Agreement, we sold 100% of the issued and outstanding
capital stock of IDC to GTT for an aggregate purchase price of $4,600,000 (the “Purchase Price”), subject to certain
holdback provisions amounting to $1.093 million as described more fully in the Stock Purchase Agreement. The Purchase Price is
also subject to adjustment on a dollar-for-dollar basis for adjustments the Net Working Capital (defined as Current Assets minus
Current Liabilities) of IDC by GTT within 90 days of closing.





SD Holdings, Ltd.



On September 27, 2011, the Company entered into an
acquisition agreement with SD Holdings, Ltd. (“SYN”), a Mauritius corporation, and the shareholders of SYN owning 100%
of issued and outstanding shares of SYN. SYN owns 100% of all issued and outstanding shares of Synaptris, Inc., a California corporation
(“Synaptris”), and 100% of all issued and outstanding shares of Synaptris Decisions Private Limited, a company formed
in India (“Synaptris India”). Pursuant to the acquisition agreement, the Company purchased one hundred percent (100%)
of the issued and outstanding shares of SYN (“SYN Shares”) effective November 1, 2011 in consideration for $525,529
and agreed to issue 700,000 shares of common stock, subject to adjustment. Actual shares issued were 612,874. The fair value of
the common stock was determined to be $2.05 per share, representing the market value at the end of trading on the date of the agreement.





13







Notes to the  Interim
Financial Statements

March 31, 2013

GBS Enterprises Incorporated



On April 1, 2012, the Company
sold SYN, Synaptris and Synaptris India for $1,877,232 to Lotus Holding, Ltd. in an effort to restructure the Company’s multilevel
subsidiary - structure derived from the historical mergers and acquisitions, and to reduce overhead and administrative costs.



GBS India Private Limited



Pursuant
to an existing transfer agreement, effective July, 1, 2012, the Company entered into a purchase agreement with SYN for $1,877,232,
which transferred all assets, including intellectual property rights, and liabilities of the IntelliPRINT and FewClix product lines,
customer contracts and certain employees for operations in a new subsidiary, GBS India Private Limited, an incorporated entity
formed under the Indian Companies Act 1956 (“GBS India”). A royalty fee in the amount of approximately $350,000 has
been agreed upon for the benefit the Company. Additionally a profit based fee of up to $700,000 may be earned based on license
and revenue recognized from the sold IntelliVIEW and IntelliVIEW NXT products.



On August 1, 2012, the Company acquired 100% of the
outstanding shares of capital stock of GBS India. We anticipate GBS India’s presence in India to accelerate our plan to expand
our product development team particularly for our strategic offerings in India.



Pavone AG/Groupware AG



On July 6, 2012 and August 9,
2012 wholly-owned subsidiaries Pavone AG and Groupware AG, respectively, were merged into Pavone GmbH. The mergers were consummated
solely for administrative purposes. Pavone GmbH is a wholly-owned subsidiary of the Company.



Pavone, Ltd.



The Company serves the UK market with GROUP’s
subsidiary GBS, Ltd. Therefore, subsidiary Pavone, Ltd, as being a shell company, was dissolved on July 8, 2012.



EbVokus, GmbH.



On October 1, 2012, GROUP Business Software AG sold all of the software and operational assets (constituting
substantially all of the assets) of its wholly-owned subsidiary, ebVokus GmbH, along with the associated maintenance and project
agreements to a non-affiliated third party for a purchase price of approximately $459,000, approximately $258,000 (200,000 Euros:
1 EUR = $1.29 USD on October 1, 2012) was paid at closing and the remaining $201,000 was paid on February 15, 2013 (150,000 Euro:
1EUR = $1.35 USD on February 15, 2013).



14









Notes to the  Interim
Financial Statements

March 31, 2013

GBS Enterprises Incorporated



B.E.R.S. AD



On November 23, 2012 GROUP Business Software AG sold its entire participation (50%) in B.E.R.S AD for
a total of 25,000 BGN.



Note 2		              INTERIM REPORTING



The accompanying unaudited interim consolidated financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial statements prepared under the accrual basis of accounting in
accordance with accounting principles generally accepted in the United States of America. They do not include all information and
footnotes required by generally accepted accounting principles for complete financial statements. However, except as disclosed
herein, they include all adjustments, which are, in the opinion of management, necessary to present fairly the financial position,
results of operations and cash flows for the interim periods presented in accordance with accounting principles generally accepted
in the United States of America. These interim financial statements follow the same accounting policies and methods of their application
as the Company’s audited financial statements. All adjustments are of a normal recurring nature.



Operating results for the three
months ended March 31, 2013 are not necessarily indicative of the results that can be expected for the year ending December 31,
2013.



Note 3	              ACCOUNTING POLICIES



The financial statements and
accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America, the
more significant of which are as follows:



Critical Accounting Policies
and Estimates



The preparation of financial
statements in conformity with accounting principles generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities
at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.





15







Notes to the  Interim
Financial Statements

March 31, 2013

GBS Enterprises Incorporated



Segment Reporting



The Financial Accounting Standards
Board (“FASB”) authoritative guidance regarding segment reporting establishes standards for the way that public business
enterprises report information about operating segments in annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial reports. It also establishes standards for related disclosures
about products and services, geographic areas and major customers. The Company has determined that it operates in only one segment
– the development and maintenance of computer software programs and support products.



Comprehensive Income (Loss)



The Company adopted the FASB
Codification topic (“ASC”) 220, “Reporting Comprehensive Income”, which establishes standards for the reporting
and display of comprehensive income and its components in the financial statements. Comprehensive income consists of net income
and other gains and losses affecting stockholder's equity that are excluded from net income, such as unrealized gains and losses
on investments available for sale, foreign currency translation gains and losses and minimum pension liability. Since inception,
the Company’s other comprehensive income represents foreign currency translation adjustments and small net actuarial losses
on pension plans.



Net Income per Common Share



ASC 260, “Earnings per
share”, requires dual presentation of basic and diluted earnings per share (EPS) with a reconciliation of the numerator and
denominator of the EPS computations. Basic earnings per share amounts are based on the weighted average shares of common stock
outstanding. If applicable, diluted earnings per share would assume the conversion, exercise or issuance of all potential common
stock instruments such as options, warrants and convertible securities, unless the effect is to reduce a loss or increase earnings
per share. Diluted net income (loss) per share on the potential exercise of the equity-based financial instruments is not presented
where anti-dilutive. Accordingly, although the diluted weighted average number of common stock outstanding is disclosed on the
statements of operation, the calculated net loss per share is the same for both the basic and diluted as both are based on the
basic weighted average of common stock outstanding. There were no adjustments required to net income for the period presented in
the computation of diluted earnings per share.





16







Notes to the  Interim
Financial Statements

March 31, 2013

GBS Enterprises Incorporated



Financial Instruments



Financial instruments consist
of cash and cash equivalents, accounts and other receivable, financial assets, notes payable, liabilities to banks, accounts payable,
accrued liabilities and other liabilities, due to related parties and retirement benefit obligations. Financial assets and liabilities
are measured upon first recognition and reviewed at the financial statement date. Changes in fair value are recognized through
profit and loss. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest
or credit risks arising from these financial instruments.



Currency Risk



We use the US dollar as our reporting currency. The functional currencies of our significant foreign subsidiaries
are the local currency, which includes the Euro, the British Pound, the Indian Rupee, and the Bulgarian Lev. Accordingly, some
assets and liabilities are incurred in those currencies and we are subject to foreign currency risks.



Fair Value Measurements



The Company follows ASC 820,
“Fair Value Measurements and Disclosures”, for all financial instruments and non-financial instruments accounted for
at fair value on a recurring basis. This new accounting standard establishes a single definition of fair value and a framework
for measuring fair value, sets out a fair value hierarchy to be used to classify the source of information used in fair value measurement
and expands disclosures about fair value measurements required under other accounting pronouncements. It does not change existing
guidance as to whether or not an instrument is carried at fair value. The Company defines fair value as the price that would be
received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value,
the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurements
or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions
and credit risk.



The Company has adopted ASC
825, Financial Instruments, which allows companies to choose to measure eligible financial instruments and certain other items
at fair value that are not required to be measured at fair value. The Company has not elected the fair value option for any eligible
financial instruments.



17







Notes to the  Interim
Financial Statements

March 31, 2013

GBS Enterprises Incorporated



Cash and cash equivalents



The Company considers all highly
liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.



Inventories



Pursuant to ASC 330 (Inventories),
inventories held for sale are recognized under inventories. Inventories were measured at the lower of cost or market. Cost is determined
on a first-in-first out basis, without any overhead component.



Goodwill and other Intangible
Assets



Intangible assets predominately
comprise goodwill, acquired software and capitalized software development services. Intangible assets acquired in exchange for
payment are reflected at acquisition costs. If the development costs can be capitalized per ASC 985-20-25, these are reflected
as ascribable personnel and overhead costs.



Company created software can
be intended for sale to third parties or used by the Company itself. If the conditions for capitalization are not met, the expenses
are recorded with their effect on profit in the year in which they were incurred.



The Company amortizes intangible
assets with a limited useful life to the estimated residual book value in accordance with ASC regulations. In addition, in special
circumstances according to ASC 350-30, a recoverability test is performed and, if applicable, unscheduled amortization is considered.



The useful life of acquired
software is between three and five years and three years for Company created software.



Intangible assets obtained as
part of an acquisition which do not meet the criteria for a separate entry are identified as goodwill. Goodwill is reviewed once
a year during an impairment test, whereby the appraised fair value of the invested capital of the reporting unit, is compared with
the carrying (book) value of its invested capital amount (including goodwill.) Use value is generally applied in order to determine
the recoverability of goodwill and intangible assets with an indefinite useful life. The projected financial plan prepared by the
management serves as the basis for this determination of use value and the planning assumptions are each adjusted for the current
state of knowledge. Reasonable assumptions regarding macroeconomic trends and historical developments are taken into account in
making these adjustments. Future estimated cash flows are determined based on the expected growth rates of the markets in question.



18









Notes to the  Interim
Financial Statements

March 31, 2013

GBS Enterprises Incorporated



If the carrying
amount of the reporting unit exceeds the appraised fair value, the impairment based on use value measures the amount of loss, if
any, and an unscheduled amortization expense is recorded. If the appraised value of the reporting unit exceeds its carrying amount,
goodwill of the reporting unit is not considered to be impaired.



Property, Plant and Equipment



Property, plant and equipment
are valued at acquisition or manufacturing costs reduced by scheduled and, if necessary, unscheduled depreciation. Fixed assets
are depreciated on a straight-line basis, prorated over their expected useful life. Scheduled depreciation for property, plant
and equipment is based on useful lives of 3 to 10 years. Leasehold Improvements are depreciated up to 40 years.



If fixed assets are sold, retired
or scrapped, the profit or loss arising from the difference between the net sales proceeds and the residual book value are included
under other operating earnings and expenses.



Impairment or Disposal of
Long-Lived Assets



The Company evaluates the recoverability
of its fixed assets and other assets in accordance with ASC topic, 360.10. This guidance requires recognition of impairment of
long-lived assets in the event the net book value of such assets exceeds its’ expected cash flows or appraised value In this
instance, the asset is considered to be impaired and is written down to fair value.



Revenue Recognition



Sources of Revenues:



License revenues



Our
license revenues consist of revenues earned from the licensing of our software products. These products are generally licensed
on a perpetual basis. Pricing models have generally been based either upon the physical infrastructure, such as the number of physical
desktop computers or servers, on which our software runs or on a per user basis. License revenues are recognized when the elements
of revenue recognition for the licensed software are complete, generally upon electronic shipment of the software and the software
key to provide full access to all functionalities for our customers. In general, our invoices reflect license, service and maintenance
components. In the case of multi element contracts, the revenues allocated to the software licensein most cases represent
the residual amount of the contract after the fair value of the other elements has been determined. Certain products of our software
offering are licensed on a subscription basis.





19







Notes to the  Interim
Financial Statements

March 31, 2013

GBS Enterprises Incorporated



Software maintenance revenues



Software maintenance revenues
are recognized ratably on a pro-rata basis over the range of the contract period. Our contract periods typically range from one
to five years. Vendor-specific objective evidence (“VSOE”) of fair value for software maintenance services is established
by the rates charged in stand-alone sales of software maintenance contracts or the stated renewal rate for software maintenance.
Customers who are party to software maintenance agreements with us are entitled to receive support, product updates and upgrades
on a when-and-if-available basis.



Professional services revenues



Professional services include
pre-project consulting, software design, customization, project management, implementation and training. Professional services
are not considered essential to the functionality of our products, as these services do not alter the product capabilities and
may be performed by our customers or by other vendors. Professional services engagements performed for a fixed fee, for which we
are able to make reasonably dependable estimates of progress toward completion, are recognized on a proportional performance basis
based on hours incurred and estimated hours of completion. Professional services engagements that are on a time and materials basis
are recognized based on hours incurred. Revenues on all other professional services engagements are recognized upon completion.
Our professional services may be sold with software products or on a stand-alone basis. Vendor Specific Objective Evidence (VSOE)
of fair value for professional services is based upon the standard rates we charge for such services when sold separately.



Foreign Currency Translation



The functional currency of the
Company is US dollars. For financial reporting purposes, the financial statements of the subsidiary companies whose functional
currency is other than US dollars were translated into US dollars using the current rate method. Assets and liabilities were translated
at the exchange rates at the balance sheet dates, revenue and expenses were translated at the average exchange rates and stockholders’
equity was translated at historical exchange rates. Any translation adjustments resulting are not included in determining net income
but are included in foreign exchange adjustment to other comprehensive income, a component of stockholders’ equity.



Other Provisions



According to FASB ASC 450 “Contingencies”,
provisions are made whenever there is a current obligation to third parties resulting from a past event which is likely in the
future to lead to an outflow of resources and of which the amount can be reliably estimated. Provisions not already resulting in
an outflow of resources in the following year are recognized at their discounted settlement amount on the financial statement date.
The discount taken is based on market interest rates. The settlement amount also includes the expected cost increases. Provisions
are not set off against contribution claims. If the amended estimate leads to a reduction of the obligatory amount, the provision
is proportionally reversed and the earnings are recognized in other operating earnings.





20







Notes to the  Interim
Financial Statements

March 31, 2013

GBS Enterprises Incorporated



Deferred Taxes



Income taxes are provided in
accordance with FASB Codification topic 740, “Accounting for Income Taxes”. A deferred tax asset or liability is recorded
for all temporary differences between financial and tax reporting and net operating loss-carry forwards.



Deferred tax assets are reduced
by a valuation allowance when, in the opinion of management, it is more likely than not that, that some portion or all of the deferred
tax asset will not be realized. Deferred tax assets and liabilities are adjusted for the effect of changes in tax laws and rates
on the date of enactment.



Recent Accounting Pronouncements



In July 2012, the FASB issued
ASU 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment. With the objective of reducing
the cost and complexity of performing an impairment test for indefinite-lived intangible assets by simplifying how an entity tests
those assets for impairment and to improve consistency in impairment testing guidance among long-loved asset categories. The amendments
permit an entity first to assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible
asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance
with Subtopic 350-30, Intangibles – Goodwill and Other – General Intangibles Other than Goodwill. The more-likely-than-not
threshold is defined as having the likelihood of more than 50 percent. The amendments are effective for annual and interim impairment
tests performed beginning April 1, 2013. Adoption of this new standard is not expected to have significant impact to the Company’s
financial statement.



Off - Balance Sheet Arrangements



We have not
entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. We
have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity or that
are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in
assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not
have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us
or engages in leasing, hedging or research and development services with us.





21







Notes to the  Interim
Financial Statements

March 31, 2013

GBS Enterprises Incorporated



Principles of Consolidation
and Reverse Acquisition



As previously disclosed, the
Company has exchanged a total of 5,405,411 shares of common stock in exchange for 50.1% of the outstanding common shares of GROUP.
Although the Company was the legal acquirer, the transaction was accounted for as a recapitalization of GROUP in the form of a
reverse merger, whereby GROUP becomes the accounting acquirer and is deemed to have retroactively adopted the capital structure
of the Corporation. Accordingly, the accompanying consolidated financial statements reflect the historical consolidated financial
statements of GROUP for periods presented prior to January 6, 2011. All costs associated with the reverse merger transaction were
expensed as incurred. Those expenses totaled approximately $300,000 and were included in professional fees in administrative expenses.



The Company has based its financial
reporting for the consolidation with GROUP in accordance with the FASB ASC 805-40 as it relates to reverse acquisitions. Goodwill
has been measured as the excess of the fair value of the consideration effectively transferred by the Company, the acquiree, for
financial reporting purposes, over the net amount of the Company’s recognized identifiable assets and liabilities.



We have recorded the acquired
assets and liabilities of Group Business Software Enterprises, Inc. on the acquisition date of January 6, 2011, at their fair value
and the operations of Group Business Software Enterprises, Inc. have been included in the consolidated financial statements since
the acquisition date.



The assets and liabilities of
GROUP, the acquirer for financial reporting purposes, are measured and recognized in the consolidated financial statements at their
precombination carrying amounts in accordance with ASC 805-40-45-2(a). Therefore, the non-controlling interest reflects the non-controlling
shareholders’ proportionate interest in the pre-combination carrying amounts of GROUP’s net assets even though the
non-controlling interests in other acquisitions are measured at their fair values at the acquisition date.



Note 4		              CHANGE
IN ACCOUNTING POLICIES



Fiscal reporting



Effective September 19, 2012,
the Company changed its fiscal year end from March 31 to December 31. Prior to this change, the company’s subsidiaries, with
the exception of SD Holdings, had fiscal year ends of December 31 and in reporting its financial statements, the Company, through
the use of Regulation S-X Rule 3A-02 (“the 93 day rule”), consolidated those subsidiaries without any adjustments for
timing differences in the period ends. This application was in error. With the change in year end, the Company retroactively adjusted
previously released financial statements to reflect this change beginning December 31, 2010. Accordingly, the financial statements
for the year ended December 31, 2012 and 2011, include the accounts of all consolidated companies for the same twelve month period
beginning January 1, 2012 and 2011 respectively. The Balance Sheets as at December 31, 2012 and December 31, 2011 have also been
adjusted to include the accounts of all consolidated companies as of those dates.





22







Notes
to the  Interim
Financial Statements

March
31, 2013

GBS
Enterprises Incorporated



Note
5	         SUBSIDIARY COMPANIES



The
subsidiaries listed below were included in the basis of consolidation (KUSD = 1,000’s of US Dollars):



|                                      |  |              |  | Stockholders'          |         |  |                                          |  |        | Profit                   |  |  |      |   |                     
|------------------------------------- |  | ------------ |  | ---------------------- | ------- |  | ---------------------------------------- |  | ------ | ------------------------ |  |  | ---- | - | --------------------
|                                      |  |              |  | Equity                 |         |  |                                          |  |        | of
    the               |  |  |      |   | Date                
|                                      |  |              |  | as
    of
    03/31/13 |         |  | Percentage
    of
    Subscribed Capital |  |        | Consolidated
    quarter |  |  |      |   | of
    the
    First
|                                      |  | Headquarters |  | KUSD                   |         |  | KUSD                                     |  |        | in
    %                 |  |  | KUSD |   |                     
|                                      |  |              |  |                        |         |  |                                          |  |        |                          |  |  |      |   |                     
|GROUP
    Business Software (UK) Ltd. |  | Manchester   |  |                        | -1,330  |  |                                          |  | 23     |                          |  |  | 50.1 | % |                     
|GROUP
    Business Software Corp.     |  | Woodstock    |  |                        | -12,962 |  |                                          |  | 1      |                          |  |  | 50.1 | % |                     
|Permessa
    Corporation              |  | Waltham      |  |                        | -5      |  |                                          |  | 0      |                          |  |  | 50.1 | % |                     
|Relavis
    Corporation               |  | Woodstock    |  |                        | -819    |  |                                          |  | 2      |                          |  |  | 50.1 | % |                     
|GROUP
    Business Software AG        |  | Eisenach     |  |                        | 12,516  |  |                                          |  | 36,107 |                          |  |  | 50,1 | % |                     
|Pavone
    GmbH                       |  | Boeblingen   |  |                        | -1,165  |  |                                          |  | 47     |                          |  |  | 100  | % |                     
|Groupware
    Inc.                    |  | Woodstock    |  |                        | -482    |  |                                          |  | 1      |                          |  |  | 100  | % |                     
|GBS
    India                         |  | Chennai      |  |                        | 93      |  |                                          |  | 14     |                          |  |  | 100  | % |                     
|                                      |  |              |  |                        |         |  |                                          |  |        |                          |  |  |      |   |                     



D
- Direct Subsidiary

I
-   Indirect Subsidiary

Indirect Subsidiaries are owned 50.1% through GROUP Business Software AG





Note
6	         CASH AND CASH EQUIVALENTS



As
of the financial statement date, the Company’s cash and cash equivalents totaled 738 KUSD (December 31, 2012 year end: 1,155
KUSD). Included in that amount are cash equivalents of 3 KUSD (December 31, 2012 year end: 3 KUSD).



Note
7	         ACCOUNTS RECEIVABLE



As
of the financial statement date, Accounts Receivable was 3,206 KUSD (December 31, 2012 year end: 4,143 KUSD). Receivables are
generally measured at their nominal value and taking into account all foreseeable risks. Probable default risks are handled with
specific allowances for bad debts. With regard to the trade receivables which are neither impaired nor delinquent, there are no
indications as of the financial statement date that the debtors will not meet their payment obligations.



23







Notes
to the  Interim
Financial Statements

March
31, 2013

GBS
Enterprises Incorporated



Note
8	         PREPAID EXPENSES



Prepaid
expenses in the amount of 214 KUSD were primarily recorded for prepaid rent, insurance and advance on technological collaboration
events (December 31, 2012 year end: 84 KUSD).



Note
9         	OTHER RECEIVABLES - CURRENT





Other Receivables as of the financial statement
date were 1,019 KUSD (December 31, 2012 year end: 677 KUSD). The largest individual item under other receivables represents receivables
from the sale of IDC Global (517 KUSD), a recoverable receivable from a previous insolvency (439 KUSD). Also included are tax assets
(37 KUSD) and other prepaid costs (26 KUSD).



Note
10	         PROPERTY, PLANT AND EQUIPMENT



Property,
plant and equipment are measured at cost less scheduled straight-line depreciation. Depreciation of the computer hardware listed
as office equipment is distributed over a period of three to five years. The depreciation period for other office equipment is
three to ten years. Office furnishings are depreciated over a period of eight to ten years. Leasehold Improvements are depreciated
up to 40 years.



|Property, Plant and Equipment 
    kUSD |  | Development
    of the cost |         |   | Development
    of accumulated depreciation |  |         | Balance | 
|--------------------------------------- |  | --------------------------- | ------- | - | ------------------------------------------- |  | ------- | ------- | 
|                                        |  |                             |         |   |                                             |  |         |         | 
|Updated
    12/31/2012                  |  |                             | 7,206.5 |   |                                             |  | 6,873.7 |         | 
|Additions                               |  |                             | 23      |   |                                             |  | 14      |         | 
|Disposals                               |  |                             | (36     | ) |                                             |  | (6      | )       | 
|Currency
    differences                |  |                             | 9       |   |                                             |  | 3       |         | 
|Reclassifications                       |  |                             | 0       |   |                                             |  | 0       |         | 
|Updated
    03/31/2013                  |  |                             | 7,202.5 |   |                                             |  | 6,884.7 |         | 



24







Notes
to the  Interim
Financial Statements

March
31, 2013

GBS
Enterprises Incorporated



Note
11		         OTHER RECEIVABLES NON-CURRENT



The major components of the Non-current Receivables include the following:



|OTHER RECEIVABLES NON-CURRENT                   |  | KUSD      |   |  | KUSD       | 
|----------------------------------------------- |  | --------- | - |  | ---------- | 
|                                                |  | 3/31/2013 |   |  | 12/31/2012 | 
|Cooperative
    shares                          |  |           | 1 |  |            | 
|Intercompany
    Loan Values during the quarter |  |           | 0 |  |            | 
|Other
    long term receivables                 |  |           | 0 |  |            | 
|Balance                                         |  |           | 1 |  |            | 



Other non-current receivables were reduced on the sale of SD Holdings and the divestiture of derivatives
used for hedging.





Note
12		         GOODWILL



Goodwill
derives from the following business acquisitions:





|                                  |  | Date of       |  | Opening  |          |  | Addtions |  |   | Adjustments |  |  | Written off |   |  | Closing   |  
|--------------------------------- |  | ------------- |  | -------- | -------- |  | -------- |  | - | ----------- |  |  | ----------- | - |  | --------- | -
|March 31, 2013                    |  | first         |  | 1/1/2013 |          |  |          |  |   |             |  |  | as impaired |   |  | 3/31/2013 |  
|                                  |  | Consolidation |  |          |          |  |          |  |   |             |  |  |             |   |  |           |  
|GROUP Business Software AG        |  | 01/06/11      |  |          | 18,425.6 |  |          |  | - |             |  |  | -           |   |  |           | -
|GROUP Business Software (UK) Ltd. |  | 12/31/05      |  |          | 2,765.1  |  |          |  | - |             |  |  | -           |   |  |           | -
|Permessa Corporation              |  | 09/22/11      |  |          | 2,387.4  |  |          |  | - |             |  |  | -           |   |  |           | -
|Pavone GmbH                       |  | 01/04/11      |  |          | 5,950.5  |  |          |  | - |             |  |  | -           |   |  |           | -
|IDC Global Inc.                   |  | 07/25/10      |  |          | 2,994.4  |  |          |  | - |             |  |  | (2,994      | ) |  |           | -
|GBS India                         |  | 8/1/2012      |  |          | 1,731.9  |  |          |  | - |             |  |  | -           |   |  |           | -
|                                  |  |               |  |          | 34,254.9 |  |          |  | - |             |  |  | (2,994.4    | ) |  |           | -





|                                  |  | Date of       |  | Opening  |          |  | Addtions |  |         | Adjustments |  |  | Written off |   |  | Closing    |        
|--------------------------------- |  | ------------- |  | -------- | -------- |  | -------- |  | ------- | ----------- |  |  | ----------- | - |  | ---------- | -------
|December 31, 2012                 |  | first         |  | 1/1/2012 |          |  |          |  |         |             |  |  | as impaired |   |  | 12/31/2012 |        
|                                  |  | Consolidation |  |          |          |  |          |  |         |             |  |  |             |   |  |            |        
|GROUP Business Software AG        |  | 1/6/2011      |  |          | 20,194.4 |  |          |  | 618.6   |             |  |  | (2,387.4    | ) |  |            | -      
|GROUP Business Software Corp      |  | 12/31/2005    |  |          | 2,177.5  |  |          |  | -       |             |  |  | -           |   |  |            | 2,177.5
|GROUP Business Software (UK) Ltd. |  | 12/31/2005    |  |          | 2,765.1  |  |          |  | -       |             |  |  | -           |   |  |            | -      
|evVokus Software GmbH             |  | 10/1/2005     |  |          | 443.6    |  |          |  | -       |             |  |  | (443.60     | ) |  |            | -      
|Permessa Corporation              |  | 20110-09-22   |  |          | 2,387.4  |  |          |  | -       |             |  |  | -           |   |  |            | -      
|Pavone GmbH                       |  | 1/4/2011      |  |          | 5,950.5  |  |          |  | -       |             |  |  | -           |   |  |            | -      
|IDC Global Inc.                   |  | 7/25/2010     |  |          | 2,994.4  |  |          |  | -       |             |  |  | -           |   |  |            | -      
|SD Holdings                       |  | 2011-09.27    |  |          | 2,213.1  |  |          |  | -       |             |  |  | (2,213.1    | ) |  |            | -      
|GBS India                         |  | 8/1/2012      |  |          | -        |  |          |  | 1,731.9 |             |  |  | -           |   |  |            | -      
|                                  |  |               |  |          | 39,126.0 |  |          |  | 2,350.5 |             |  |  | (5,044.1    | ) |  |            | 2,177.5





Note
13		         SOFTWARE



Development
costs



The
costs of developing new software products and updating products already marketed by the Company are generally recognized as expenses
in the period in which they arise. Provided they meet the conditions for capitalization as per FASB ASC 985-20-25, they are capitalized.
Capitalized development costs can be attributed to the defined products. These products are technically realizable and there is
a target market for them.



The
development costs arising in the reporting period result from the personnel costs attributed to the development work as well as
overhead costs, provided that these are related to the development work and do not represent general administrative costs. The
ascribable overhead costs are directly recognized.



25







Notes
to the Interim
Financial Statements

March
31, 2013

GBS
Enterprises Incorporated



Capitalized
development costs are generally amortized over a period of three years starting with the date of marketability of the new products
or major releases.



Concessions,
Industrial Property Rights, Licenses



The
intangible financial assets carried in this item are licenses acquired in exchange for payment.



These
financial assets are measured at acquisition cost less scheduled straight-line amortization. The assets added in the scope of
the cost price allocation of the business divisions acquired this year.



The
useful life spans were based uniformly throughout the Company according to those used by the parent company. Scheduled amortization
is performed over a period from three to ten years.



The
useful life of the domain “gbs.com”, was estimated as unlimited. This is because no other legal, contractual or other
factors exist which would limit its useful life. It is not systematically amortized, but rather annually. Should there exist signs
indicating towards impairment it is tested for recoverability and, if necessary, written down to the amount which could be obtained
for it if sold.



Amortization
of concessions, industrial property and similar rights and assets, as well as licenses to such rights and assets are presented
in the profit and loss statement under "Depreciation and Amortization."



|Concessions and licenseskUSD |  | Development 
    of the cost |          |   | Development 
    of  accumulated  depreciation |  |          | Balance | 
|---------------------------- |  | ---------------------------- | -------- | - | ---------------------------------------------- |  | -------- | ------- | 
|                             |  |                              |          |   |                                                |  |          |         | 
|Updated
    12/31/2012       |  |                              | 33038.7  |   |                                                |  | 20,831.7 |         | 
|Additions                    |  |                              | 120      |   |                                                |  | 98       |         | 
|Disposals                    |  |                              | (1,420   | ) |                                                |  | 122      |         | 
|Currency
    differences     |  |                              | 143      |   |                                                |  | 126      |         | 
|Reclassifications            |  |                              | 0        |   |                                                |  | 0        |         | 
|Updated
    03/31/2013       |  |                              | 31,881.7 |   |                                                |  | 21,177.7 |         | 



Note
14		         OTHER ASSETS





The balance of this account
of 160 KUSD primarily includes rent and other security deposits (December 31, 2012 year end: 156 KUSD).







26







Notes
to the Interim
Financial Statements

March
31, 2013

GBS
Enterprises Incorporated



Note
15		          NOTESPAYABLE





As described more fully in Note 22, a
breakdown of the Notes Payable of $ 260,421 at March 31, 2013 (December 31, 2012 year end: $2,313,572) is as follows:





|                                       |  |  | Date of    |  |  |  | Principal |  |  |  | Interest |  |  |  | Total     |  |  | Due Date  
|-------------------------------------- |  |  | ---------- |  |  |  | --------- |  |  |  | -------- |  |  |  | --------- |  |  | ----------
|                                       |  |  | Loan       |  |  |  |           |  |  |  | Accrued  |  |  |  |           |  |  |           
|                                       |  |  |            |  |  |  | $         |  |  |  | $        |  |  |  | $         |  |  |           
|                                       |  |  | 7/5/2012   |  |  |  | 250,000   |  |  |  | 10,421   |  |  |  | 260,421   |  |  | 1/5/2013  
|                                       |  |  | 10/26/2012 |  |  |  | 1,000,000 |  |  |  | 36,165   |  |  |  | 1,036,165 |  |  | 10/26/2013
|                                       |  |  | 11/30/2012 |  |  |  | 500,000   |  |  |  | 8,493    |  |  |  | 508,493   |  |  | 11/30/2013
|                                       |  |  | 11/30/2012 |  |  |  | 500,000   |  |  |  | 8,493    |  |  |  | 508,493   |  |  | 11/30/2013
|                                       |  |  |            |  |  |  |           |  |  |  |          |  |  |  |           | 
|Balance at December 31, 2012           |  |  |            |  |  |  | 2,250,000 |  |  |  | 63,572   |  |  |  | 2,313,572 | 
|                                       |  |  |            |  |  |  |           |  |  |  |          |  |  |  |           | 
|Accrued Interest converted into shares |  |  |            |  |  |  |           |  |  |  | 36,165   |  |  |  |           | 
|                                       |  |  |            |  |  |  |           |  |  |  |          |  |  |  |           | 
|Payments made through March 31, 2013   |  |  |            |  |  |  | 2,000,000 |  |  |  | 16,986   |  |  |  | 2,053,151 | 
|                                       |  |  |            |  |  |  |           |  |  |  |          |  |  |  |           | 
|Balance at March 31, 2013              |  |  |            |  |  |  | 250,000   |  |  |  | 10,421   |  |  |  | 260,421   | 















Note
16	         	LIABILITIESTO
BANKS – CURRENT



Included in this account
is an operating line of credit of 5 KUSD (December 31, 2012 year end: 5 KUSD)  bearing interest at a 3.25% daily periodic rate
with a credit limit of 100 KUSD.



Also included are checks
in transit as of the financial statement date (4 KUSD).



27







Notes
to the Interim Financial Statements

March
31, 2013

GBS
Enterprises Incorporated



Note
17	         	ACCOUNTS PAYABLE AND ACCRUED LIABILITIES



Trade
payables



As
of the financial statement date, trade accounts payable amounted to 1,677 KUSD (December 31, 2012 year end: 3,274 KUSD).
Trade payables are carried at their repayment amount and all have a residual term of up to one year.



Other
Accrual



Other
provisions are created as of the financial statement date in an amount necessary according to a reasonable commercial appraisal,
to cover future payment obligations, perceivable risks and uncertain liabilities of the Company. Amounts deemed to be most likely
to occur, in careful assessment, are accrued.



|                                                                         |  | Status     |       |  |             |  |        |             |  |  |          |  |  | Currency    |      |  | Status    | 
|------------------------------------------------------------------------ |  | ---------- | ----- |  | ----------- |  | ------ | ----------- |  |  | -------- |  |  | ----------- | ---- |  | --------- | 
|USD                                                                      |  | 12/31/2012 |       |  | Utilization |  |        | Dissolution |  |  | Increase |  |  | Differences |      |  | 3/31/2013 | 
|                                                                         |  |            |       |  |             |  |        |             |  |  |          |  |  |             |      |  |           | 
|Tax
    provision                                                        |  |            | 57    |  |             |  | (57    | )           |  |  | 0        |  |  |             | 55   |  |           | 
|Salary                                                                   |  |            | 861   |  |             |  | (861   | )           |  |  | 24       |  |  |             | 434  |  |           | 
|Vacation                                                                 |  |            | 315   |  |             |  | (303   | )           |  |  | 30       |  |  |             | 258  |  |           | 
|Workers
    Compensation Insurance Association                           |  |            | 25    |  |             |  | (21    | )           |  |  | 0        |  |  |             | 25   |  |           | 
|Compensation
    Levy for Non-Employment of Severely Handicapped Persons |  |            | 19    |  |             |  | (16    | )           |  |  | 0        |  |  |             | 17   |  |           | 
|Outstanding
    Invoices                                                 |  |            | 1,059 |  |             |  | (1,056 | )           |  |  | 60       |  |  |             | 489  |  |           | 
|Annual
    Financial Statement Costs                                     |  |            | 128   |  |             |  | (186   | )           |  |  | 0        |  |  |             | 180  |  |           | 
|Other
    Provisions                                                     |  |            | 446   |  |             |  | (221   | )           |  |  | 0        |  |  |             | 118  |  |           | 
|Warranties                                                               |  |            | 96    |  |             |  | (16    | )           |  |  | 0        |  |  |             | 6    |  |           | 
|Gesture of
    Goodwill                                                  |  |            | 0     |  |             |  | 0      |             |  |  | 0        |  |  |             | 0    |  |           | 
|Provision
    for Legal Costs                                            |  |            | 73    |  |             |  | (4     | )           |  |  | 0        |  |  |             |      |  |           | 
|Severance                                                                |  |            | 70    |  |             |  | (70    | )           |  |  | 0        |  |  |             | 70   |  |           | 
|Total                                                                    |  |            | 3149  |  |             |  | (2,811 | )           |  |  | 114      |  |  |             | 1654 |  |           | 



Provisions
for salaries of 426 KUSD (December 31, 2012 year end: 861 KUSD) include the provisions created for the variable salaries of the
sales staff for the sales objectives reached in this business period.



Vacation
provisions of 253 KUSD (December 31, 2012 year end: 315 KUSD) include the obligations of GROUP’s companies to their employees
for remaining vacation claims from the reporting period. The amount of the provision is calculated on the gross salary of the
individual employee plus the employer contribution to social security/medicare and based on the unused vacation days as of the
financial statement date.



For
liabilities not yet settled, a provision totaling 454 KUSD (December 31, 2012 year end: 1059 KUSD) was created.



28







Notes
to the Interim Financial Statements

March
31, 2013

GBS
Enterprises Incorporated



Other
Provisions of 349  KUSD (December 31, 2012 year end: 446 KUSD) include miscellaneous provisions.



Expenses
for the audit of the Company and preparation of the annual consolidated financial statements were recognized at 126 KUSD (December
31, 2012 year end: 128 KUSD).



A
provision for anticipated legal consulting of 74 KUSD was recorded (December 31, 2012 year end: 73 KUSD).



For
warranty claims, a provision of 127 KUSD (December 31, 2012 year end: 96 KUSD) was created determined by service income.



Note
18		         DEFERRED INCOME



Accruals
for future periods leading to realization of sales after the financial statement date are reported under deferred income. The
deferred income items listed as of the financial statement date in the amount of 8,853 KUSD (December 31, 2012 year end: 6,100
KUSD) primarily include maintenance income collected in advance for the period after the end of the financial statement date.
They are amortized on a straight-line basis over their respective contract terms.



Note
19		         OTHER SHORT TERMLIABILITIES



Other
short-term liabilities of 8,011 KUSD (December 31, 2012 year end: 860 KUSD) includes the following obligations and payments currently
due:



|Other Short-Term Liabilities |  | 3/31/2013 |    
|---------------------------- |  | --------- | ---
|                             |  | KUSD      |    
|Purchase Assets Permessa     |  |           | 538
|Tax Liabilities/Credits      |  |           | -57
|Purchase Archiving Software  |  |           | 320
|Other Liabilities            |  |           | 0  
|                             |  |           | 801



Note
20	         	DUE TO RELATED PARTIES



Related
parties basically refer to the Board of Directors, Supervisory Board, stockholders and associated companies.



Business
transactions between the companies and its subsidiaries which are also considered to be related companies were eliminated through
the consolidation and are not reflected within these footnotes to the consolidated statements.



Remuneration
of the management occupying key positions in the Corporation subject to disclosure includes the remuneration of the Board of Directors
and that of the Supervisory Board.



29







Notes
to the Interim Financial Statements

March
31, 2013

GBS
Enterprises Incorporated





|                                         |  | 3/31/2013 |       |  | 12/31/2012 | 
|---------------------------------------- |  | --------- | ----- |  | ---------- | 
|                                         |  | KUSD      |       |  | KUSD       | 
|Accounts
    payable and accruals        |  |           |       |  |            | 
|Green
    Mind Ventures                  |  |           | 0     |  |            | 
|Vitamin-B
    Venture Gmbh               |  |           | 0     |  |            | 
|Board
    of Directors fees and expenses |  |           | 224.5 |  |            | 
|Notes
    payable – see below            |  |           | 52.0  |  |            | 
|Due
    to associated company            |  |           | 0     |  |            | 
|                                         |  |           | 276.5 |  |            | 







|      |  | Date
    ofLoan |  | Principal |        |  | InterestAccrued |  |       | Total |  |  | Due
    
Date
|----- |  | --------------- |  | --------- | ------ |  | --------------- |  | ----- | ----- |  |  | -------------
|      |  |                 |  | $         |        |  | $               |  |       | $     |  |  |              
|Total |  | 7/5/2012        |  |           | 50,000 |  |                 |  | 2,084 |       |  |  | 52,084       





Note 21	         	LIABILITIES
– NON-CURRENT



Liabilities to banks
as of the financial statement date was 2,563 KUSD (December 31, 2012 year end: 3,716 KUSD) represent bank obligations of GROUP
AG with Baden-Württembergische Bank with a credit line totaling approx. 3,844 KUSD (3,000 KEUR) and are collateralized by
a silent blanket agreement for GROUP AG’s trade receivables. The loan is provided with approx. 2,563 KUSD (2,000 KEUR) as
an asset backed security and with 1,281 KUSD (1,000 KEUR) as a credit line backed up with the accounts receivables of GROUP AG.
The term of the loan runs until June 30, 2014. The Company has curtailed the risk of changing interest rates existing with regard
to liabilities to banks due to variable interest rate agreements by obtaining a fixed interest rate for half of its credit line.
Accordingly, approx. 1,922 KUSD (1,500 KEUR) is bearing interest at prime plus 1.5% and approx. 1,922 KUSD (1,500 KEUR) is fixed
at 3.5%



30











Notes to the Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated



| | Note 22 | COMMON STOCK
| | ------- | ------------



The Company has authorized capital of 75,000,000
shares of common stock and 25,000,000 shares of “blank check” preferred stock, each with a par value of $0.001. No
class of preferred stock has been designated or issued. As of March 31, 2013, there were shares 30,812,624
of common stock outstanding. At the time of the Reverse Merger of the Company by GROUP on January 6, 2011, , there were
16,500,000 shares of common stock of the Company outstanding and, as the Reverse Merger was accounted for as a recapitalization
and applied retroactively, this balance is recorded as the balance outstanding since inception.





Transactions occurring in 2011





| | · | In March 2011, the Company consummated a private placement offering (the “Private Placement”) of an aggregate of 6,044,000 Units at a purchase price of $1.25 per Unit, for gross proceeds of $7,555,000.  Each Unit was comprised of one share of Common Stock and one three-year Warrant to purchase one share of Common Stock at an exercise price of $1.50 per share (“Private Placement Warrant”).   The net proceeds of this offering were $6,878,950. As disclosed in Note 1, the Company issued 1,742,874 shares of common stock for the purchase of Pavone AG., GroupWare, Inc. and SD Holdings Ltd.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | In December, 2011, certain investors exercised their private purchase warrants at $1.50 per share and bought 2,020,000 shares of common stock for net proceeds of $3,024,970 after legal fees.                                                                                                                                                                                                                                                                                                                                                                                                               



Transactions occurring in 2012





| | · | In March, 2012 another investor exercised their private purchase warrant and bought 5,000 shares
of common stock for net proceeds of $7,500.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------



| | · | Also in March, 2012, as a result of purchasing warrants at nominal value, wherein each warrant allowed
the holder to purchase one common share at $0.50 for a period of three years, certain investors exercised those warrants and bought
900,000 shares of common stock for net proceeds of $450,000.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | On April 16, 2012, the Company sold 120,000 Units to Joerg Ott, the then Chief Executive Officer
and Chairman of the Board of Directors of the Company, for a price of $1.50 per Unit, for a total purchase price of $180,000. Each
Unit consisted of one share of Common Stock of the Company and one warrant to purchase one share of Common Stock of the Company
from the date of issuance until the third anniversary date of the date of issuance for $1.50 per share. The Company sold the Units
and underlying securities to Mr. Ott in reliance on Section 4(2) of the Securities Act due to the fact that the issuance was isolated
and did not involve a public offering of securities.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | On April 28, 2012, $632,500 in notes payable were converted at $1.15 per unit into 550,000 units
with each unit consisting of one common share of common stock and one warrant. Each warrant allows the holder to purchase one common
share at $1.75 for a period of three years. The Company issued the Note pursuant to Section 4(2) under the Securities Act due to
the fact that the issuance was isolated and did not involve a public offering of securities.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | On April 30, 2012, $460,000 in notes payable to Lotus Holdings Ltd. (“Lotus Holdings”)
were converted at $1.15 per unit into 400,000 units, with each unit consisting of one share of common stock and one warrant. Each
warrant allows the holder to purchase one common share at $1.75 for a period of three years. The Company issued the Lotus Note
pursuant to Section 4(2) under the Securities Act due to the fact that the issuance was isolated and did not involve a public offering
of securities.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Also on April 30, 2012, $172,500 in debt to a company owned by Joerg Ott, the then Chief Executive
Officer and Chairman of the Board of Directors of the Company, were converted at $1.15 per unit into 150,000 units, with each unit
consisting of one share of common stock and one warrant. Each warrant allows the holder to purchase one common share at $1.75 for
a period of three years. The Company issued the debt pursuant to Section 4(2) under the Securities Act due to the fact that the
issuance was isolated and did not involve a public offering of securities.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | On May 10, 2012, the Company sold 30,000 Units to Markus R. Ernst, the Chief Financial Officer of
the Company, for a purchase price of $1.50 per unit, for a total purchase price of $45,000. Each unit consists of one share of
common stock of the Company and one warrant, allowing the holder to purchase one share of common stock of the Company from the
date of issuance until the third anniversary date of the date of issuance for $1.50 per share. The Company sold the units and underlying
securities to Mr. Ernst in reliance on Section 4(2) of the Securities Act due to the fact that the issuance was isolated and did
not involve a public offering of securities.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | On May 15, 2012, the Company issued 150,000 unregistered shares of common stock to Kjell Jahn, the
former selling stockholder of GroupWare, AG, a Florida corporation purchased by the Company in June 2011. The Company issued the
shares in reliance on Section 4(2) of the Securities Act due to the fact that the issuance was isolated and did not involve a public
offering of securities.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------









31







Notes to the Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated





| | · | On July 5, 2012, the Company entered into a convertible promissory note agreement (the “Loan
Agreement”) with Mohammad A. Shihadah, a member of the Board. Pursuant to the Loan Agreement, the Company issued a convertible
promissory note, dated July 5, 2012 (the “Note”), to Mr. Shihadah for the principal amount of $50,000, bearing interest
at a rate of 8% per year and maturing on the earlier of the first anniversary date of the date of issuance or such other time as
described in more detail in the Note.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The Note was convertible in full at $0.50 per share into common stock of the Company if this conversion was exercised on or
before September 30, 2012. If not exercised, Mr. Shihadah would receive a 3-year warrant to purchase shares at 50,000 shares
of common stock at $1.00 per share.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The conversion was not exercised by September 30, 2012, therefore, as per the terms of the Loan Agreement Mr. Shihadah was
issued a 3-year warrant to purchase shares at 50,000 shares of common stock at $1.00 per share.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | · | On July 5, 2012, the Company entered into a convertible promissory note agreement (the “Loan
Agreement”) with K Group Ltd. Pursuant to the Loan Agreement, the Company issued a convertible promissory note, dated July
5, 2012 (the “Note”), to K Group Ltd. for the principal amount of $250,000, bearing interest at a rate of 8.5% per
year and maturing on the earlier of the first anniversary date of the date of issuance or such other time as described in more
detail in the Note.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Note was convertible in full at $0.50 per share
into common stock of the Company if this conversion was exercised on or before September 30, 2012. If not exercised, K Group Ltd.
would receive a 3-year warrant to purchase shares at 250,000 shares of common stock at $1.00 per share.



The conversion was not exercised by September 30,
2012, therefore, as per the terms of the Loan Agreement K Group was issued a 3-year warrant to purchase shares at 250,000 shares
of common stock at $1.00 per share.



| | · | On July 5, 2012, the Company entered into a convertible promissory note agreement (the “Loan
Agreement”) with Vitamin B Venture GmbH. Pursuant to the Loan Agreement, the Company issued a convertible promissory note,
dated July 5, 2012 (the “Note”), to Vitamin B Venture GmbH for the principal amount of $252,500, bearing interest at
a rate of 8.5% per year and maturing on the earlier of the first anniversary date of the date of issuance or such other time as
described in more detail in the Note.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Note was convertible in full at $0.50 per share
into common stock of the Company if this conversion was exercised on or before September 30, 2012. If not exercised Vitamin B Venture
GmbH would receive a 3-year warrant to purchase shares at 250,000 shares of common stock at $1.00 per share.



The conversion was not exercised by September 30,
2012, therefore, as per the terms of the Loan Agreement Vitamin B Venture GmbH was issued a 3-year warrant to purchase shares at
250,000 shares of common stock at $1.00 per share.



| | · | On August 13, 2012, the Company entered into a note purchase and security agreement (the “Loan Agreement”)
with John A. Moore, a member of the Board. Pursuant to the Loan Agreement, the Company issued a secured promissory note, dated
October 26, 2012 (the “Note”), to Mr. Moore for the principal amount of $1,000,000, bearing interest at a rate of 20%
per year and maturing on the earlier of the first anniversary date of the date of issuance or such other time as described in more
detail in the Note, without any penalty for prepayment. To secure the obligations of the Company under the Note, the Company granted
Mr. Moore a secured priority security interest in the Company’s Accounts Receivable and its subsidiaries located in the United
States of America, as more fully described in the full text of the document.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In connection with the execution of the Loan Agreement, on October 26, 2012, the Company issued the Lender
a common stock purchase warrant (the “Warrant”), pursuant to which the Lender is entitled to purchase 100,000 shares
of common stock at an exercise price of $0.35 until the third anniversary date of the date of issuance. The Warrant was issued
in a private transaction between the Company and the Lender and was exempt from registration under the Securities and Exchange
Act of 1933, as amended, pursuant to Section 4(2) thereof.



In connection with the Loan Agreement, on February 22, 2013, the Company and Mr. Moore amended the Note
pursuant to which Mr. Moore agreed to convert the interest due under the Note into shares of GBSX common stock at a rate of $0.30
per share. Pursuant to the amendment, the Company issued 450,960 shares of Common Stock to Mr. Moore. The Company issued the shares
in reliance on Section 4(2) of the Securities Act due to the fact that the issuance was isolated and did not involve a public offering
of securities.





32







Notes to the Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated



| | · | On October 26, 2012, the Company entered into a note purchase and security agreement (the “Loan
Agreement”) with Stephen D. Baksa, a member of the Board. Pursuant to the Loan Agreement, the Company issued a secured promissory
note, dated October 26, 2012 (the “Note”), to Mr. Baksa for the principal amount of $1,000,000, bearing interest at
a rate of 20% per year and maturing on the earlier of the first anniversary date of the date of issuance or such other time as
described in more detail in the Note, without any penalty for prepayment. To secure the obligations of the Company under the Note,
the Company granted the Baksa a first priority security interest in all of the Company’s right, title and interest in and
to the shares of IDC Global, Inc. then owned by the Company. The Note contains customary provisions upon an Event of Default, as
more fully described in the full text of the document.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In connection with the execution of the Loan Agreement, on October 26, 2012, the Company issued the Lender
a common stock purchase warrant (the “Warrant”), pursuant to which the Lender is entitled to purchase 500,000 shares
of common stock at an exercise price of $0.20 until the third anniversary date of the date of issuance. The Warrant was issued
in a private transaction between the Company and the Lender and was exempt from registration under the Securities and Exchange
Act of 1933, as amended, pursuant to Section 4(2) thereof. On February 12, 2013, Mr. Baksa exercised the right to purchase 500,000
shares of common stock at the exercise price of $0.20.



In connection with the Loan Agreement, on February 22, 2013, the Company and Mr. Baksa amended the Note
pursuant to which Mr. Baksa agreed to convert the interest due under the Note into shares of GBSX common stock at a rate of $0.30
per share. Pursuant to the amendment, the Company issued 200,000 shares of Common Stock to Mr. Baksa. The Company issued the shares
in reliance on Section 4(2) of the Securities Act due to the fact that the issuance was isolated and did not involve a public offering
of securities



Transactions occurring in 2013



| | · | As stated above, on February 12, 2013, and in connection with the above October 26, 2012 Loan Agreement
the Company issued an aggregate of 500,000 restricted shares of Common Stock to Board Member, Stephen Baksa pursuant to exercise
of a common stock purchase warrant issued on October 26, 2012 and exercisable for $0.20 per share. The Company issued the securities
in reliance on Section 4(2) of the Securities Act due to the fact that the issuance was isolated and did not involve a public offering
of securities.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | On February 12, 2013, the Company sold an aggregate of 250,000 restricted shares of Common Stock to an
Accredited Investor (as that term is defined the Securities Act) pursuant to exercise of a common stock purchase warrant issued
on November 30, 2012 and exercisable for $0.20 per share. The Company issues the securities in reliance on Section 4(2) of the
Securities Act due to the fact that the issuance was isolated and did not involve a public offering of securities.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As of March 31, 2013, these shares had not yet been issued and remain as Subscriptions Receivable.



| | · | As stated above, on February 22, 2013 and in connection with the above August 13, 2012 Loan Agreement,
the Company and Board Member, John Moore amended the Note pursuant to which Mr. Moore agreed to convert the interest due under
the Note into shares of GBSX common stock at a rate of $0.30 per share. Pursuant to the amendment, the Company issued 450,960 shares
of Common Stock to Mr. Moore. The Company issued the shares in reliance on Section 4(2) of the Securities Act due to the fact that
the issuance was isolated and did not involve a public offering of securities.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | As stated above, on February 22, 2013, and in connection with the above October 26, 2012 Loan Agreement,
the Company and Board Member Stephen Baksa amended the Note pursuant to which Mr. Baksa agreed to convert the interest due under
the Note into shares of GBSX common stock at a rate of $0.30 per share. Pursuant to the amendment, the Company issued 200,000 shares
of Common Stock to Mr. Baksa. The Company issued the shares in reliance on Section 4(2) of the Securities Act due to the fact that
the issuance was isolated and did not involve a public offering of securities.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | On March 20, 2013, the Company issued an aggregate of 450,950 restricted shares of Common Stock to Board
Member, John Moore pursuant to a February 22, 2013 amendment to a Secured Promissory Note Agreement entered into on August 13,
2012 between the Company and the Board Member. The Company issued the securities in reliance on Section 4(2) of the Securities
Act due to the fact that the issuance was isolated and did not involve a public offering of securities.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | On March 27, 2013, the Company issued an aggregate of 200,000 restricted shares of Common Stock to Board
Member, Stephen Baksa pursuant to a February 22, 2013 amendment to a Secured Promissory Note Agreement entered into on October
26, 2012 between the Company and the Board Member. The Company issued the securities in reliance on Section 4(2) of the Securities
Act due to the fact that the issuance was isolated and did not involve a public offering of securities.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | On March 27, 2013, the Company issued 200,000 restricted shares of Common Stock to a third party non-affiliated
consultant in consideration for consulting services rendered by the consultant to the Company. The Company issued the securities
in reliance on Section 4(2) of the Securities Act due to the fact that the issuance was isolated and did not involve a public offering
of securities.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







33







Notes to the Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated



Other changes in common stock are disclosed
in Note 25, Supplementary Cash Flow Disclosures.



Options



The Company has not issued any options, so that none are outstanding as of March 31, 2013.



Warrants



The Company has issued warrants in four
different manners. In each instance, the warrant allows the holder to purchase a common share within a three year period from issuance
at a specific price per share. In the first instance, warrants have been issued as part of a private placement offering wherein
the investor purchases a common share, and a warrant. The fair value of those warrants has been determined (and is shown below)
by utilizing the residual method, whereby the current market value of the stock is deducted from the unit price and the remainder
is allocated to the warrant. The valuation of the warrants issued is for disclosure purposes only and has no impact to the financial
statements. A description of those warrants has been described above under common shares.



The second manner in which warrants are
issues is in respect to financing by way of the issuance of notes payable or the conversion of debt into shares. In these instances,
the fair value of the warrant has been determined using the effective interest rate method whereby the note is discounted when
the interest rate is less than other similar notes and discount is allocated to the warrant and credited to additional paid in
capital. The corresponding charge to discount is then amortized over the life of the note. Where there is no difference in interest
terms, no value is attributable to the warrant.



The Company has also sold warrants at nominal
value to certain investors. In this instance the fair value of the warrants has been determined using a Black-Scholes option pricing
model with volatility, equity value and interest rate inputs noted below. The valuation of the warrants issued is for disclosure
purposes only and has no impact to the financial statements.



Lastly, the Company has issued warrants
to outside consultants in payments for services. The warrants are issued as “cashless” warrants and have been valued
using a Black-Scholes option pricing model with volatility, equity value and interest rate inputs noted below.. The fair value
of warrants issued for financing are determined for disclosure purposes as there is no impact to the financial statements. The
fair value for other services, namely legal, and consulting have been recorded in the financial statements with a charge to the
corresponding expense account and a credit to additional paid in capital.



34







Notes to the  Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated



Black Scholes assumptions for warrants issued were as follows:





|For the period ending     | December 31, 2012 - | December 31, 2011
|------------------------- | ------------------- | -----------------
|                          |                     |                  
|Volatility -              | 120.6 – 134.3%      | 77.1%            
|                          |                     |                  
|Risk free interest rate - | 0.34% - 0.51%       | 1.19%            
|                          |                     |                  
|Expected life -           | 3 years             | 3 years          
|                          |                     |                  
|Dividend rate -           | Nil                 | Nil              



The following share purchase warrant transactions have not been
disclosed elsewhere.



On April 1, 2011, the former CFO was issued 100,000 share purchase
warrants, which gave him the option of purchasing 100,000 shares of common stock for a period of 3 years at a price of $1.50 per
common share. The value of this issuance, using the Black Scholes pricing model was determined to $34,000 and this amount was recorded
as a consulting expense.



In March, 2012, the Company issued an aggregate of 2,020,000
warrants to five “accredited investors” pursuant to Section 4(2) of the Securities Act. Each investor warrant is exercisable
for the three-year period commencing from the date of issuance for $0.50 per share of Common Stock and has the same terms as the
Private Placement Warrants. As noted above investors immediately exercised warrants and purchased 900,000 shares of common stock
for $450,000.



35







Notes to the  Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated



On March 27, 2012, the Company issued an aggregate of 250,000
warrants to 3 outside consultants pursuant to Section 4(2) of the Securities Act. Each warrant is exercisable for the three-year
period commencing from the date of issuance for $1.10 per share of Common Stock and has the same terms as the Private Placement
Warrants. The value of this issuance, using the Black Scholes pricing model was determined to $270,208 and this amount was recorded
as a professional expense.



In December, 2012, The Company issued 16,875 warrants to an
outside consultant pursuant to Section 4(2) of the Securities Act. Each warrant is exercisable for the three-year period commencing
from the date of issuance for $0.21 per share of Common Stock and has the same terms as the Private Placement Warrants. The value
of this issuance, using the Black Scholes pricing model was determined to $2,624 and this amount was recorded as a consulting expense.





|                               |  | # of shares |            |   |       |  |            |        |  |  |            |  |  | Fair value |      |  |        |  |           |           |  |  | Balance   | 
|------------------------------ |  | ----------- | ---------- | - | ----- |  | ---------- | ------ |  |  | ---------- |  |  | ---------- | ---- |  | ------ |  | --------- | --------- |  |  | --------- | 
|                               |  | allowed to  |            |   |       |  |            |        |  |  | Strike     |  |  | at         |      |  |        |  |           |           |  |  | End of    | 
|                               |  | purchase    |            |   | Issue |  |            | Expiry |  |  | Price      |  |  | Issuance   |      |  | Issued |  |           | Exercised |  |  | Period    | 
|                               |  | #           |            |   | Date  |  |            | Date   |  |  | $          |  |  | $          |      |  | #      |  |           | #         |  |  | #         | 
|Opening - Jan 1, 2011          |  |             | 2,000,000  |   |       |  | 10/1/2010  |        |  |  | 6/1/2013   |  |  |            | 4.00 |  |        |  | -         |           |  |  | -         | 
|Issued for financing services  |  |             |            |   |       |  | 3/14/2011  |        |  |  | 3/14/2014  |  |  |            | 1.50 |  |        |  | -         |           |  |  | 707,280   | 
|Issued for financing services  |  |             |            |   |       |  | 3/24/2011  |        |  |  | 3/24/2014  |  |  |            | 1.50 |  |        |  | -         |           |  |  | 15,000    | 
|Sold with share units          |  |             |            |   |       |  | 3/31/2011  |        |  |  | 3/31/2014  |  |  |            | 1.50 |  |        |  | -         |           |  |  | 6,044,000 | 
|Issued for consulting services |  |             |            |   |       |  | 4/1/2011   |        |  |  | 4/1/2014   |  |  |            | 1.50 |  |        |  | 34,000    | (1)       |  |  | 100,000   | 
|Closing - Dec 31, 2011         |  |             |            |   |       |  |            |        |  |  |            |  |  |            |      |  |        |  |           |           |  |  | 6,866,280 | 
|                               |  |             |            |   |       |  |            |        |  |  |            |  |  |            |      |  |        |  |           |           |  |  |           | 
|Opening - Jan 1, 2012          |  |             | 6,846,280  |   |       |  |            |        |  |  |            |  |  |            |      |  |        |  |           |           |  |  |           | 
|Amended                        |  |             | (2,000,000 | ) |       |  | 10/1/2010  |        |  |  | 6/1/2013   |  |  |            | 4.00 |  |        |  | -         |           |  |  | -         | 
|Reissued                       |  |             | 2,000,000  |   |       |  | 6/1/2012   |        |  |  | 6/1/2015   |  |  |            | 1.00 |  |        |  | 556,785   |           |  |  | -         | 
|Issued for legal services      |  |             |            |   |       |  | 3/31/2012  |        |  |  | 3/31/2012  |  |  |            | 1.10 |  |        |  | 270,208   | (2)       |  |  | 250,000   | 
|Issued for nominal value       |  |             |            |   |       |  | 3/28/2012  |        |  |  | 3/28/2015  |  |  |            | 0.50 |  |        |  | 2,457,662 |           |  |  | 2,020,000 | 
|Sold with share units          |  |             |            |   |       |  | 4/16/2012  |        |  |  | 4/16/2015  |  |  |            | 1.50 |  |        |  | 90,000    |           |  |  | 120,000   | 
|Issued with debt conversion    |  |             |            |   |       |  | 4/28/2012  |        |  |  | 4/28/2015  |  |  |            | 1.75 |  |        |  | -         |           |  |  | 550,000   | 
|Issued with debt conversion    |  |             |            |   |       |  | 4/30/2012  |        |  |  | 4/30/2015  |  |  |            | 1.75 |  |        |  | -         |           |  |  | 500,000   | 
|Sold with share units          |  |             |            |   |       |  | 5/10/2012  |        |  |  | 5/10/2015  |  |  |            | 1.50 |  |        |  | 25,800    |           |  |  | 30,000    | 
|Issued with debt               |  |             |            |   |       |  | 7/5/2012   |        |  |  | 7/5/2012   |  |  |            | 0.50 |  |        |  | 26,500    |           |  |  | 550,000   | 
|Issued with debt               |  |             |            |   |       |  | 8/13/2012  |        |  |  | 8/13/2015  |  |  |            | 0.35 |  |        |  | -         |           |  |  | 100,000   | 
|Issued with debt               |  |             |            |   |       |  | 10/26/2012 |        |  |  | 10/29/2015 |  |  |            | 0.20 |  |        |  | -         |           |  |  | 500,000   | 
|Issued with debt               |  |             |            |   |       |  | 11/30/2012 |        |  |  | 11/30/2015 |  |  |            | 0.20 |  |        |  | -         |           |  |  | 500,000   | 
|Issued for consulting services |  |             |            |   |       |  | 12/21/2012 |        |  |  | 12/21/2015 |  |  |            | 0.21 |  |        |  | 2,624     | (1)       |  |  | 16,875    | 
|Closing - March 31, 2013       |  |             |            |   |       |  |            |        |  |  |            |  |  |            |      |  |        |  |           |           |  |  | 5,136,875 | 





(1) recorded as consulting expense

(2) recorded as legal expense



36







Notes to the  Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated





| | Note 23 | REVENUE ALLOCATION
| | ------- | ------------------



Gross revenue may be broken down by the
following products for the three months ended March 31, 2013 are as follows:



|                         |  | 3/31/2013 |      
|------------------------ |  | --------- | -----
|Sales Revenues           |  | KUSD      |      
|                         |  |           |      
|Licenses                 |  |           | 871  
|Maintenance              |  |           | 2,688
|Partner Contribution     |  |           | 0    
|Service                  |  |           | 851  
|Third-Party Products     |  |           | 685  
|LND Third-Party Products |  |           | 129  
|Others                   |  |           | 0    
|Discontinued Operations  |  |           | 0    
|                         |  |           | 5,224



Revenues by geographical area for the three
months ended March 31, 2013 are as follows:



|Sales Revenues          |  | 3/31/2013 |      
|----------------------- |  | --------- | -----
|by geographic area      |  | KUSD      |      
|                        |  |           |      
|US                      |  |           | 1,027
|Germany                 |  |           | 3,973
|United Kingdom          |  |           | 224  
|Others                  |  |           | 0    
|Discontinued Operations |  |           | 0    
|                        |  |           | 5,224



Long-lived assets by geographical
area, which primarily include property plant and equipment, are as follows:





|Long-lived assets       |  | 3/31/2013 |    
|----------------------- |  | --------- | ---
|by geographic area      |  | KUSD      |    
|                        |  |           |    
|US                      |  |           | 126
|Germany                 |  |           | 188
|United Kingdom          |  |           | 4  
|Others                  |  |           | 0  
|Discontinued Operations |  |           | 0  
|                        |  |           | 318





37







Notes to the  Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated





| | Note 24 | OTHER INCOME/EXPENSE
| | ------- | --------------------



At
the financial statement date, Other income was 78 KUSD (December 31, 2012 year end: Other Expense 33 KUSD).



| | Note 25 | SUPPLEMENTAL
CASH FLOW DISCLOSURES
| | ------- | ----------------------------------







The significant non-cash transactions
through March 31, 2013 were as follows:







| | · | On April 1, 2011, the Company acquired Pavone AG, for 350 KUSD, assumption of $583,991 debt and 1,000,000 shares of its common stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | On June 1, 2011, the Company acquired GroupWare, Inc., for 250 KUSD, assumption of $694,617 debt and 250,000 shares of its common stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | · | On July 25, 2011, the Company acquired IDC Global, Inc. for 750 KUSD, $ 883,005 assumption of debt, 25 (KUSD) reimbursement for accounting and legal fees, 35 KUSD signing bonuses and 880,000 shares of common stock.                                                                                                                                                                                                                                                                                                                                                                                        
| | · | On September 27, 2011, the Company acquired SD Holdings Ltd for $525,529 and issued 612,874 shares of Common Stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | · | On February 27, 2012, an outstanding debt of GROUP was converted into an aggregate of 1,750,000 shares of GROUP common stock, increasing GROUP’s total outstanding common stock to 26,982,000 shares. As a result of the foregoing increase in the number of total outstanding shares of GROUP common stock, the Company increased its ownership of GROUP common stock to an aggregate of 13,525,000 shares, representing approximately 50.1% of the outstanding common stock of GROUP, by purchasing the 883,765 shares of GROUP common stock from GAVF LLC for an average purchase price of $0.70 per share.
| | · | On
March 31, 2012, warrants were issued in lieu of consulting services and the fair value, based on the Black Scholes method, was
determined to be $ 270,208 and recorded as Additional Paid-In Capital.                                                                                                                                                                                                                                                                                                                                                                                                      
| | · | On
    April 28, 2012, $ 632,500 in notes payable to RealRisk Ventures, LL were converted into 550,000 shares of common stock and
    into 550,000 warrants with each warrant allowing the holder to purchase one common share at $1.75 for a period of 3 years. On
    April 30, 2012, $ 460,000 in notes payable to Lotus Holdings Ltd. were converted into 400,000 shares of common stock and
    400,000 warrants, with each warrant allowing the holder to purchase one common share at $1.75 for a period of 3
    years.                                                                               
| | · | On April 30, 2012 $ 172,500 of accounts payable due to Vitamin B Venture, GmbH was converted into 150,000 shares of common stock in satisfaction of a converted note to Kjell Jahn.                                                                                                                                                                                                                                                                                                                                                                                                                           
| | · | On July 5, 2012, promissory notes for $552,500 were issued at 8.5% and had a conversion feature. Similar notes without the conversion were issued at 20%. Therefore, it was determined that the conversion feature had a value which was calculated by discounting the note as if the cost of capital was 20% and based on the due date set forth of 6 months. The calculated value was classified as discounted debt and amortized over the life of the promissory notes resulting in additional Interest expense and a credit to Additional Paid-In Capital for $26,700.                                    
| | · | On December 21, 2012,warrants were issued in lieu of consulting services and the fair value, based on the Black Scholes method, was determined to be $ 2,624 and recorded as Additional Paid-In Capital.                                                                                                                                                                                                                                                                                                                                                                                                      
| | · | On March 1, 2013, $700,000 of Notes Payable and Accounts Payable due to Vitamin VbV GmbH was dissolved as payment against a Loan Payable from Group AG.                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | · | On March 20, 2013, 450,960 shares were issued at a rate of .30/share on conversion of accrued interest due on a Note Payable to John Moore.                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | · | On March 27, 2013, 200,000 shares were issued at a rate of .30/share on conversion of accrued interest due on a Note Payable to Stephen Baksa.                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | · | On March 27, 2013, 200,000 shares were issued in lieu of services and the fair value, based on the Black Scholes, method was determined to be $ 70,000 and recorded as Additional Paid-In Capital.                                                                                                                                                                                                                                                                                                                                                                                                            



38







Notes to the Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated



| | Note 26 | SUBSEQUENT EVENTS
| | ------- | -----------------



| | · | Group Live N.V. operating under the laws of the Netherlands and a 100% subsidiary of Group Business Software AG declared its end of business May 31, 2012, registered in the commercial register June 22, 2012. Following the local procedures the Company has been dissolved from the register as per April 5, 2013, registered April 16, 2013.Each of the directors of the Company, including all five disinterested directors with respect to the transaction, has approved each of the transaction agreements discussed above and the transactions contemplated thereby.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | On April 26, 2013, the Company entered into a note purchase and security agreement (the “Loan Agreement”) with Stephen D. Baksa (the “Lender’), a member of the Board. Pursuant to the Loan Agreement, the Company issued a secured promissory note, dated April 26, 2013 (the “Note”), to Mr. Baksa for the principal amount of $200,000, bearing interest at a rate of 2% per month and maturing on June 30, 2013 or such other time as described in more detail in the Note, without any penalty for prepayment. This Note is secured by fifty percent (50%) of certain financial holdbacks to the Company pursuant to the Stock Purchase Agreement, dated February 1, 2013, by and among the Company, IDC Global, Inc. and Global Telecom & Technology Americas, Inc.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | · | In
connection with the execution of the Loan Agreement, on April 29, 2013, the Company issued the Lender a common stock purchase
warrant (the “Warrant”), pursuant to which the Lender is entitled to purchase 100,000 shares of common stock at an
exercise price of $0.25 from May 1, 2013 until April 30, 2016.  The Warrant was issued in a private transaction between
the Company and the Lender and was exempt from registration under the Securities Act of 1933, as amended (the “Securities
Act”), pursuant to Section 4(2) thereof.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | In connection with the execution of the Loan Agreement, on April 29, 2013, the Company issued the Lender a conditional common stock purchase warrant (the “Conditional Warrant”) which is exercisable in the event that Note is not paid in full by June 30, 2013, pursuant to which the Lender is entitled to purchase 100,000 shares of common stock at an exercise price of $0.25 from July 1, 2013 until June 30, 2016 as described more fully in the Note. The Conditional Warrant was issued in a private transaction between the Company and the Lender and was exempt from registration under the Securities Act, pursuant to Section 4(2) thereof.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The Company intends on expediently paying off the amounts loaned in connection with the above referenced Loan Agreement. If needed, the Company will aggressively re-negotiate the terms of the Loan Agreement with the Lender.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | On April 26, 2013, the Company entered into a note purchase and security agreement (the “Loan Agreement”) with Vitamin B Venture GmbH (the “Lender”), an entity of which Joerg Ott, the Company’s Chairman, has voting and dispositive control. Pursuant to the Loan Agreement, the Company issued to the Lender a secured promissory note, dated October 26, 2012 (the “Note”), for the principal amount of $200,000, bearing interest at a rate of 2% per month and maturing on June 30, 2013 or such other time as described in more detail in the Note, without any penalty for prepayment. This Note is secured by fifty percent (50%) of certain financial holdbacks to be paid to the Company pursuant to the Stock Purchase Agreement, dated February 1, 2013, by and among the Company, IDC Global, Inc. and Global Telecom & Technology Americas, Inc.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | In connection with the execution of the Loan Agreement, on April 29, 2013, the Company issued the Lender a common stock purchase warrant (the “Warrant”), pursuant to which the Lender is entitled to purchase 100,000 shares of common stock at an exercise price of $0.25 from May 1, 2013 until April 30, 2016. The Warrant was issued in a private transaction between the Company and the Lender and was exempt from registration under the Securities Act pursuant to Section 4(2) thereof.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | In connection with the execution of the Loan Agreement, on April 29, 2013, the Company issued the Lender a conditional common stock purchase warrant (the “Conditional Warrant”) which is exercisable in the event that Note is not paid in full by June 30, 2013, pursuant to which the Lender is entitled to purchase 100,000 shares of common stock at an exercise price of $0.25 from July 1, 2013 until June 30, 2016 as described more fully in the Note. The Conditional Warrant was issued in a private transaction between the Company and the Lender and was exempt from registration under the Securities Act, pursuant to Section 4(2) thereof.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The Company intends on expediently paying off the amounts loaned in connection with the above referenced Loan Agreement. If needed, the Company will aggressively re-negotiate the terms of the Loan Agreement with the Lender.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | On May 29, 2013, the Company’s
    Common Stock was moved from the OTC Bulletin Board to the Pink Sheets due to the Company’s Common Stock not being quoted
    by a broker/dealer for more than four consecutive days and not meeting the requirements of 15c2-11 under the Exchange Act.  The
    Company intends to solicit a FINRA-registered broker/dealer to apply to be a market maker for the Company’s Common Stock
    and file a Form 211 with FINRA.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | Note 27 | COMPARATIVE STATEMENTS
| | ------- | ----------------------



In certain circumstances, the classification of accounts previously
presented in 2012 has been changed to conform with the presentation used in 2013.





39











Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations.



Note Regarding Forward-Looking Statements



The following discussion and analysis
should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere
in the Quarterly Report. Our discussion includes forward-looking statements based upon current expectations that involve risks
and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ
materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set
forth under the “Risk Factors,” “Cautionary Notice Regarding Forward-Looking Statements” and “Description
of Business” sections in the Company’s latest Annual Report on Form 10-K and subsequent filings. We use words such
as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,”
“expect,” “believe,” “intend,” “may,” “will,” “should,”
“could,” “predict,” and similar expressions to identify forward-looking statements. Although we believe
the expectations expressed in these forward-looking statements are based on reasonable assumptions within the bounds of our knowledge
of our business, our actual results could differ materially from those discussed in these statements. We undertake no obligation
to update publicly any forward-looking statements for any reason even if new information becomes available or other events occur
in the future. Except as required by applicable law, including the securities laws of the United States, we do not intend to update
any of the forward-looking statements to conform these statements to actual results. Readers are urged to carefully review and
consider the various disclosures made throughout the entirety of this quarterly report, which attempt to advise interested parties
of the risks and factors that may affect our business, financial condition, results of operations, and prospects.



OVERVIEW







GBS Enterprises Incorporated, a
Nevada corporation (the “Company,” “GBS,” “GBSX,” “we,” “us,”
“our” or similar expressions), conducts its primary business through its 50.1% owned subsidiary, GROUP Business
Software AG (“GROUP”), a German-based public-company whose stock trades on the Frankfurt Exchange under the stock
symbol INW. GROUP’s software and consulting business is focused on serving IBM’s Lotus Notes and Domino market.
GROUP caters primarily to mid-market and enterprise-size organizations with over 3,500 customers in thirty-eight countries
spanning four continents, representing more than 5,000,000 active users of its products. GROUP’s customers include
Abbot, Ernst & Young, Deutsche Bank, Bayer, HBSC, Merck and Toyota. GROUP provides IBM Lotus Notes/Domino Application and
Transformation technology. Headquartered in Eisenach, Germany, GROUP has offices throughout Europe and North America. The
Company maintains a website at www.gbsx.us. GROUP maintains a website at www.gbs.com. The information contained in the
Company’s and GROUP’s websites is not incorporated by reference herein.



Products and Services



GBS has consolidated the fragmented
Lotus Software market through the acquisition of companies with complementary product, technology or services offerings. GBS
has continuously developed its software and service business to service and support GBS’s expanding Lotus customer
base.



Historically, GROUP has achieved growth
by acquiring companies with complimentary operations and leveraging GROUP’s expertise to turnaround and integrate these companies.
Key success factors for this strategy are: enhanced portfolio, positioning GROUP as the ‘one-stop-shop’ for Lotus applications
and services, expanded customer support, fast code migration, and cloud enablement/XPages conversion of acquired applications.



Going forward, the Company may focus on
potential acquisition targets in the following areas of software and services: Applications and Application Modernizations, Professional
Services, Hosting/Outsourcing Services, Administration and IT services, and XPages expertise.







Messaging and Business Applications
Software & Solutions



GBS Messaging and Business Application
Software & Solutions product lines include software and advisory services for email and Instant Messaging (IM) Management,
Security, Compliance, Archiving and Productivity, CRM Applications, Governance, Risk & Compliance (GRC) Management software,
Workflow and Business Process Management software, ePDF Archiving & Document Management.



40







GBS develops, sells and installs well-known
business process and management software suites based on Lotus Notes / Domino and IBM Portal technology, mainly for major international
companies and medium-sized customers.





Through GBS’s comprehensive messaging software product lines and associated services, Lotus Notes,
Microsoft Exchange or SMTP-based-email customers, as well as Lotus Sametime, customers are able to provide their users with a secure,
efficient and centrally administered use of e-mail and IM while maintaining control over their compliance with current legal requirements
and corporate guidelines.





Consulting Services



GBS develops, sells and orchestrates customer-specific
Lotus Domino strategy and consulting services, such as CIO and IT department leader Strategic Advisory Services, Managed Services,
Outsourcing, Administration, Assessments and Implementations, Performance Improvements, Custom Application Development, Governance
and Security, Technical Support, and Training, as well as Email Migration Services.







Based on GBS’s unique concentration
of industry talent and expertise, mainly in the areas inside and around IBM Lotus Notes/Domino, inside and around corporate messaging
(IBM, Microsoft, SMTP) and inside and around IT environmental and application assessment, analysis and reporting, commercial and
governmental customers, as well as Software Integrators (SI) and channel partners, are able to rely on the company’s strategic
and tactical advisory services for evaluating, planning, staffing and execution of related customer projects. GBS Consulting Services’
global teams of consultants use modern project management techniques, proprietary methodologies and GBS accelerator technologies
to complete client projects on time and with reduced risk.





We believe that our focus on recruiting
and retaining top Lotus expertise positions our team to offer leading-edge Lotus Notes / Domino subject matter knowledge to our
customers. GBS consultants have an average of over 12 years’ experience each in Lotus Notes/Domino and its related products
and are routinely asked to present at IBM Lotus events including Lotusphere (Connect), an annual conference hosted by IBM Lotus
Software.



As a Premier IBM Business Partner, GBS
is one of the few partners that can sell and support licenses for all five IBM software brands: Lotus, WebSphere, Rational, Tivoli,
and DB2.



Market Trends







As IT departments face continuous budget
reductions and constant pressure for higher performance and efficiency, CIOs are focusing on modern technologies to support their
need for increased scalability, flexibility and lower costs. GBS has identified this demand as a strategic growth opportunity for
the company and has placed a significant focus on expanding its Modernizing/Migrating technology, which will assist client companies
as they move to scale and adapt while remaining cost conscious.





GBS Lotus Application Modernization
and Migration







GBS Lotus Application Modernization and
Migration activities are focused on the IBM Lotus / Domino applications market and the offering spans from expert services and
accelerator technologies to modernized, web enabled (also named “cloud” or “cloud computing”) and migrated
Lotus applications; and thus ultimately to take the Lotus applications from legacy to the future. The foundation of the Modernizing/Migrating
Suite Software offering is GBS’s significant R&D investment in a set of methodologies and key technology accelerators
to automate the conversion of traditional Notes based client-server applications, into the IBM XPages framework which enables Domino
applications to be run and accessed via the Lotus client, a web browser or on a mobile device. The patent-pended software that
underpins Modernizing/Migrating was developed by GBS with assistance and guidance from IBM’s Software Group to ensure alignment
with future releases of the IBM Lotus / Domino and XPages technology.





Revenue Model



GBS generates its revenue from the sale
of internally created software, third-party developed software and the delivery of related services, including IT systems planning,
administration, support, hosting, implementation and integration.



Strategy and Focus Areas



Based on current market demands for modern,
Cloud-based and mobile-device capable business applications, we have acquired and developed a set of unique technologies that
help organizations reduce the time, cost, resources and risks associated with modernizing or migrating their existing applications.



We generate revenue from subscription
and usage fees and related services, including support and strategic consulting services. The subscription period is typically
based on a yearly or multi-year contract with our customers. Another sector of our strategic portfolio is a suite of tools and
methodologies we have developed to rapidly convert Lotus Notes applications into web and modern mobile applications. This portfolio
includes a set of powerful analysis tools known as Insights that identify all of the Lotus Notes applications within an organization
and provide metrics about the uses and users of those applications. Because of the nature of Lotus Notes and Domino, the applications
within a customer environment tend to be highly distributed and number in the thousands. For many organizations, this fact alone
makes it extremely difficult to plan for projects that involve modernizing these applications for use in a browser and on mobile
devices or migrating them to another platform. Our technologies help them to dramatically reduce the cost, risk, time and resources
associated with these highly complex projects.



41











We generate revenue with our analysis tools
by charging a fee for the use of our technology and for the associated cost of the services to produce a report and set of recommendations
for the customer. Additional revenues come from consulting services that result from helping our customers implement those recommendations.
For use of our conversion tools, referred to as Modernizing/Migrating, we charge a flat fee for the conversion and additional hourly
rates to perform additional supporting development or testing as needed.



We also believe there is a significant
revenue opportunity in licensing these tools to a network of global partners who also have existing presence and expertise in the
Lotus Notes and Domino market. We have established partner agreements for the use of the analysis and conversion tools with partners
in several countries and directly with IBM.





Sale of IDC Global, Inc.









On February 1, 2013, GBS entered into a
Stock Purchase Agreement, dated February 1, 2013 (the “Agreement”), with IDC Global, Inc., a Delaware corporation and
a wholly-owned subsidiary of GBS (“IDC”), and Global Telecom & Technology Americas, Inc., a Virginia corporation
(“GTT). Pursuant to the Stock Purchase Agreement, we sold 100% of the issued and outstanding capital stock of IDC to GTT
for an aggregate purchase price of $4,600,000 (the “Purchase Price”), subject to certain holdback provisions amounting
to $1.093 million as described more fully in the Stock Purchase Agreement. The Purchase Price is also subject to adjustment
on a dollar-for-dollar basis for adjustments the Net Working Capital (defined as Current Assets minus Current Liabilities) of IDC
by GTT within 90 days of closing.





We had acquired IDC on July 25, 2011 for
880,000 shares of GBS common stock and $785,000. The fair value of the GBS common stock was determined to be $3.50 per share, representing
the market value at the end of trading on the date of the agreement. The total value of the investment, including $883,005 of debt
assumption, was $4,066,000. Due to the Company’s perceived increase in the demand for Modernization, Mobility and Optimization
offerings, the Company made a strategic decision in 2012 to focus on its core offerings in the IBM Notes and Domino market and
to divest its non-core businesses, including IDC.







General Corporate History



The Company was originally incorporated
in the state of Nevada on March 20, 2007 as SWAV Enterprises Ltd. (“SWAV”). SWAV was in a different industry and had
a different management team and Board of Directors.



On April 26, 2010, SWAV purchased certain
technology assets of Lotus Holdings Ltd. (“Lotus”) in consideration for 2,265,240 shares of SWAV common stock. Also
on April 26, 2010, Lotus (on behalf of the SPPEF Members as discussed below) purchased an aggregate of 11,984,770 of the outstanding
shares of SWAV common stock from certain selling shareholders of SWAV for an aggregate purchase price of $370,000. As a result
of these two sets of transactions, Lotus acquired an aggregate of 14,250,010 shares of SWAV common stock which constituted approximately
95.0% of the 15,000,000 outstanding shares of SWAV common stock on April 26, 2010.







Upon the consummation of the April 26,
2010 acquisition, the then executive officers and directors of SWAV resigned and Mr. Joerg Ott, the Chief Executive Officer of
GROUP and a GROUP Major Shareholder, was appointed the Chief Executive Officer of SWAV and sole member of SWAV’s Board of
Directors. Mr. Ott currently serves as the Chairman of the Board of Directors of GBSX and the Chief Executive Officer
of GROUP.





On September 6, 2010, SWAV’s name
was changed to GBS Enterprises Incorporated. On October 14, 2010, the Company’s trading symbol on the OTC Bulletin Board
was changed from SWAV to GBSX.



About Lotus Holdings, Ltd.



Lotus is a holding company which was formed
under the laws of Gibraltar for the purpose of financing merger and acquisition projects, specifically in the niche market of
small or microcap companies listed on the Frankfurt Stock Exchange with complex shareholder structures and whose stock is trading
below one Euro (€1.00) per share.





42







SPPEFs



Lotus typically finances its merger and
acquisition projects through the use of Special Purpose Private Equity Funds (“SPPEFs”). Typically, SPPEFs are funded
by a company’s major shareholders (the “Major Shareholders”) seeking to raise capital for projects and who fund
at least 50% of the SPPEF, with the remaining portion being provided through the investment community and network of investors
in Lotus. Each SPPEF is co-managed by a representative of the Major Shareholders (the “Representative Secretary”)
and an attorney appointed by Lotus (the “Lotus Representative”).



On February 25, 2010, a group of shareholders
(the “GROUP Major Shareholders”) of GROUP Software AG, a German public company trading on the Frankfurt Stock Exchange
under the symbol “INW” (“GROUP”), engaged Lotus to provide financial consulting and advisory services,
on a non-exclusive basis, for the primary task of establishing a SPPEF. On March 12, 2010, the GROUP Major Shareholders and Lotus
established and funded a SPPEF with $1,400,000, consisting of $1,000,000 from the GROUP Major Shareholders and $400,000 from a
Lotus investor (collectively, the “SPPEF Members”).



In early April 2010, the SPPEF Members
decided to acquire SWAV. As disclosed above, on April 26, 2010, Lotus, on behalf of the SPPEF Members, acquired an aggregate of
11,984,770 shares of SWAV common stock from the selling shareholders of SWAV for an aggregate purchase price of $370,000. The
11,984,770 shares of SWAV common stock shares represented approximately 79.9% of the 15,000,000 outstanding shares of SWAV common
stock on April 26, 2010.



Transactions following the April
26, 2010 Transaction



On November 1, 2010, the Company repurchased
an aggregate of 3,043,985 of the 11,984,770 shares of the Company’s common stock originally purchased by Lotus on April
26, 2010. In consideration for these 3,043,985 shares, the Company issued to Lotus a Secured Demand Note, dated November 1, 2010
(the “First Demand Note”), for the principal amount of $300,000, bearing interest at the rate of 5% per annum. The
First Demand Note was repaid in September 2011.



Effective December 30, 2010, pursuant
to securities purchase agreements between the Company and six GROUP Major Shareholders, the Company purchased an aggregate of
7,115,500 shares of GROUP common stock from the six GROUP Major Shareholders in consideration for the 3,043,985 shares of GBS
common stock (the “December 2010 Transaction”). As a result, the Company owned approximately 28.2% of the outstanding
common stock of GROUP.



Reverse Merger



After the December 2010 Transaction was
completed, the additional GROUP Major Shareholders decided to accept the share swap offer from the Company and to effectuate a
reverse merger of GROUP and the Company. To effectuate the reverse merger, on January 5, 2011, the Company repurchased from Lotus
an aggregate of 2,361,426 of the 11,984,770 shares of the Company’s common stock originally purchased by Lotus on April
26, 2010. In consideration for these 2,361,426 shares, the Company issued to Lotus a Secured Demand Note, dated January 5, 2011
(the “Second Demand Note”), for the principal amount of $200,000, bearing interest at the rate of 5% per annum. The
Second Demand Note was repaid in November 2011.



Effective January 6, 2011, pursuant to
securities purchase agreements between the Company and the remaining GROUP Major Shareholders, the Company purchased an aggregate
of 5,525,735 shares of GROUP common stock from the remaining GROUP Major Shareholders in consideration for the 2,361,426 shares
of GBS common stock (the “January 2011 Transaction”). These 5,525,735 GROUP shares represented approximately 21.9%
of the outstanding shares of common stock of GROUP. As a result of the December 2010 Transaction and January 2011 Transaction,
the Company had acquired an aggregate of 12,641,235 shares of GROUP common stock from the GROUP Major Shareholders in consideration
for an aggregate of 5,405,411 shares of GBS common stock, resulting in GBS owning approximately 50.1% of the outstanding GROUP
common stock and effectuating a reverse merger of the Company and GROUP whereby GROUP became the accounting acquirer.



Additional GROUP Acquisition



On February 27, 2012, we acquired an additional
883,765 shares of GROUP common stock for $619,000 in order to maintain our 50.1% majority ownership of GROUP due to an increase
in the outstanding common stock of GROUP.



Executive Offices



Our principal executive office is located
at 585 Molly Lane, Woodstock, Georgia 30189 and our telephone number is (404) 891-1711. GROUP’s executive offices are located
at Hospitalstrasse 6, 99817 Eisenach, Germany. We maintain a website at www.gbsx.us. GROUP maintains a website at www.gbs.com.The information contained in the Company’s and GROUP’s websites is not incorporated by reference herein.





43







Results of Operations



Assets:







Total Assets decreased from $56,802,492 at December 31, 2012
to $ 48,969,459 at March 31, 2013.  Total Assets consists of Total Current Assets and Total Non-Current Assets.





Total Current Assets







At March 31, 2013, Total Current Assets were $5,177,691 as compared to $6,444,192 at December 31, 2012.
Total Current Assets consist of: Cash and Cash Equivalents, Accounts Receivable, Prepaid Expenses, Other Receivables-current and
Assets Held for Sale.











| | n | Cash
and Cash Equivalents decreased from $1,154,602 at December 31, 2012 to $738,369 at March 31, 2013 as a result of our investments
in strategic technology areas such as application migration and modernization, cloud technology, the associated costs necessary
to build and implement the go- to- market strategy and losses in operations.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | n | Accounts
                                                                                                           Receivable
                                                                                                           decreased from $4,143,448
                                                                                                           at December 31, 2012
                                                                                                           to $3,205,807 at March
                                                                                                           31, 2013 due to increased
                                                                                                           collections and less
                                                                                                           sales.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | n | Prepaid
                                                                                                           Expenses increased
                                                                                                           from $84,304 at December
                                                                                                           31, 2012 to $214,435
                                                                                                           at March 31, 2013 from
                                                                                                           prepaid rent, insurance
                                                                                                           and advances on technological
                                                                                                           events.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | n | Other
                                                                                                           Receivables-current
                                                                                                           increased from $676,976 at December 31, 2012 to $1,019,080 at March 31, 2013 and includes receivables
from the sale of IDC Global, Ltd. of approximately $ 517,000, a receivable from a previous insolvency of approximately $439,000,
tax assets of approximately $37,000 and prepaid costs of approximately $26,000.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | n | Assets
                                                                                                           Held for Saledecreased from $384,862 at December 31, 2012 to $Nil at March 31, 2013 as a result of the sale of IDC
Global.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







Total Non-Current Assets







At March 31, 2013, Total Non-Current Assets were $43,791,768 as compared to $50,358,300 at December 31,
2012.  Total Non-Current Assets consist of: Property Plant and Equipment, Other Receivables-non current, Deferred Tax
Assets, Goodwill, Software, Other Assets and Assets Held for Sale.





| | n | Net Property (plant and equipment) decreased from $332,839 at December 31, 2012 to $317,771 at March 31, 2013.                                                                                                                                                                                                                               
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                              
| | n | Other Receivables non-currentdecreased
    from $428,422 at December 31, 2012 to $1,154 at March 31, 2013 as a result of derivatives used for hedging which were
    divested in the sale of subsidiary SD Holdings.                                                                                                                         
| |   |                                                                                                                                                                                                                                                                                                                                              
| | n | Deferred Tax Assets increased from $1,132,103 at December 31, 2012 to $1,104,222 at March 31, 2013 and consisted of Deferred Tax Assets derived from financial assets and losses carried forward.                                                                                                                                            
| |   |                                                                                                                                                                                                                                                                                                                                              
| | n | Goodwilldecreased
    from $34,254,881 at December 31, 2012 to $31,260,500 at March 31, 2013. The decreased in goodwill of $ 2,994,381 resulted
    from the sale of the subsidiary IDC Global during the quarter.                                                                                                                           
| |   |                                                                                                                                                                                                                                                                                                                                              
| | n | Software decreased from $12,207,031 at December 31, 2012 to $10,947,781 at March 31, 2013, as a result of the quarterly re-calculation of capitalized development costs, product rights and license for our expert business software, legacy business software and strategic business software all in the developmental or improvement stage.
| |   |                                                                                                                                                                                                                                                                                                                                              
| | n | Other Assets increased from $156,379 at December 31, 2012 to $160,340 at March 31, 2013. This category includes rent and other security deposits.                                                                                                                                                                                            
| |   |                                                                                                                                                                                                                                                                                                                                              
| | n | Assets Held
    for Sale decreased from $1,846,645 at December 31, 2012 to $Nil at March 31, 2013 as a result of the sale of IDC
    Global.                                                                                                                                                                                                 







Liabilities







Total Liabilities decreased from $22,269,059 at December 31,
2012 to $16,586,123 at March 31, 2013.  Total Liabilities consists of Total Current Liabilities and Total Non-Current
Liabilities.







Total Current Liabilities





At March 31, 2013, Total Current Liabilities
were $13,861,989, compared to $18,227,184 at December 31, 2012.  Total Current Liabilities consist of Notes Payable,
Liabilities to Banks, Accounts Payable and Accrued Liabilities, Deferred Income, Other Liabilities, Amounts Due to Related Parties
and Liabilities Held for Sale.







44









| | n | Notes Payabledecreased from $2,313,572 at December 31, 2012 to $260,421 at March 31, 2013 based on repayments of short terms loans during the quarter.                                                                                                                                                                                          
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                 
| | n | Liabilities to Banks increased from $6,774 at December 31, 2012 to $9,293 at March 31, 2013 and included a line of credit and cash in transit.                                                                                                                                                                                                  
| |   |                                                                                                                                                                                                                                                                                                                                                 
| | n | Accounts Payable and Accrued Liabilitiesdecreased from $6,241,733 at December 31, 2012 to $3,662,133 at March 31, 2013. The decrease was due to the reduction of trade payables by approximately $1,367,000 and a decrease in accrued liabilities of approximately $1,213,000 by repayment and as a result of the sale of subsidiary IDC Global.
| |   |                                                                                                                                                                                                                                                                                                                                                 
| | n | Deferred Income increased from $6,099,570 at December 31, 2012 to $8,852,860 at March 31, 2013, generally as a result of maintenance income collected in advance.                                                                                                                                                                               
| |   |                                                                                                                                                                                                                                                                                                                                                 
| | n | Other Liabilities of $860,032 at December 31, 2012 decreased to $800,740 at March 31, 2013 and includes $320,000 due for
purchased software, $538,000 for purchased companies (Permessa) and tax credits of ($57,000).                                                                                                                          
| |   |                                                                                                                                                                                                                                                                                                                                                 
| | n | Amounts Due to Related Parties decreased from $2,115,869 at December 31, 2012 to $276,542 at March 31, 2013 as a result of payments to related parties during the quarter.                                                                                                                                                                      
| |   |                                                                                                                                                                                                                                                                                                                                                 
| | n | Liabilities Held for Sale decreased from $589,634 at December 31, 2012 to $Nil at March 31, 2013 as a result of the sale of IDC Global.                                                                                                                                                                                                         











Total Non-Current Liabilities







At March 31, 2013, our Total Non-Current
Liabilities were $2,724,134, compared to $4,041,875 at December 31, 2012.  Total Non-Current Liabilities consist of Liabilities
to Banks, Deferred Tax Liabilities, Retirement Benefit Obligation, and Liabilities Held for Sale.





| | n | Liabilities
to Banks decreased from $3,716,102 at December 31, 2012 to $2,563,260 at March 31, 2013 as a result of partial payments,
and included a long-term business loan/line of credit due to the Baden-Württembergische Bank, Stuttgart, Germany.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                       
| | n | Retirement Benefit Obligation decreased from $165,876 at December 31, 2012 to $160,874 at March 31, 2013.                                                                                                                                             
| |   |                                                                                                                                                                                                                                                       
| | n | Deferred Tax Liabilitiesremained unchanged from $Nil at December 31, 2012 to $Nil at March 31, 2013.                                                                                                                                                  
| |   |                                                                                                                                                                                                                                                       
| | n | Liabilities
Held for Sale decreased from $159,898 at December 31, 2012 to $Nil at March 31, 2013 as a result of the sale of IDC Global
in February, 2013.                                                                                             







Three Months
Ended March 31, 2013 Compared to the Three Months Ended March 31, 2012





Revenues









For the three months ended March 31, 2013,
our total revenue decreased to $5,224,379 from $6,952,049 for the three months ended March 31, 2012.





The Company generates revenue from two
divisions. The Product division of Revenues includes revenue generated from the sale of Licenses, Maintenance, Third-Party Products,
and Other revenues. The Service division includes revenue generated from services rendered.





The Product division decreased to $4,373,010
for the three months ended March 31, 2013 from $5,593,365 for the three months ended March 31, 2012, a decline of $1,220,354 or
21.82%. The primary factors contributing to the decline were decreases in License revenues of $317,876, Third Party Product revenues
of $914,196 and Other revenues of $22,154Company saw an increase in Maintenance revenue of $33,872 for the three months ended March
31, 2013 compared to the three months ended March 31, 2012. The decrease in License sales was equally split between the European
(-$158,097) and the North American operations (-$159,779) of the Company. This is mainly as a result of economic conditions causing
an increase in the sales cycles, whereby strategic customers are giving greater consideration towards the modernization/migration
of their current application platform. While such an investment decision might affect the core business of the Company and a decrease
in License sales, it also ideally creates potential service engagements for our migration/modernization offerings.









Service revenue decreased from $1,358,684 for the three months ended March 31, 2012 to $851,369 for the
three months ended March 31, 2013 mainly as a result of the strategic reorganization allowing for an intensified focus around servicing
the modernization, mobilizing and migration market.



45







Cost of Goods Sold





For the three months ended March 31, 2013, total Cost of Goods
Sold decreased to $3,101,698 from $4,173,174 for the three months ended March 31, 2012.



The Company’s Cost of Goods Sold
are segmented into two divisions. The first are costs related to the Product division of revenue which includes the total cost
of materials. The second are the costs related to the Service division of revenue which includes; other operating expenses, depreciation
& amortization expense, and personnel expenses.





Within the Costs of Goods Sold related
to the Product division the Company was able to achieve a reduction in total cost of materials from $1,916,624 to $ 857,275 for
the three months ended March 31, 2013 compared to the three months ended March 31, 2012. The primary factors contributing to the
Company’s reduction in Costs of Goods Sold related to the Product division of revenues were a $118,372 reduction in product
material costs and a $940,977 reduction in third party product material costs, for the three months ended March 31, 2013 compared
to the three months ended March 31, 2012.



Within the Costs of Goods Sold related to the Service division, the Company was able to achieve a small
(0.5%) reduction in the total costs of services for the three months ended March 31, 2013 compared to the three months ended March
31, 2012. The primary factor contributing to the Company’s reduction in the costs of services was a reduction in personnel
costs, depreciation and amortization costs. It should be noted that additional personnel costs relating to Services are included
in Selling Expenses and these were also reduced from the quarter ending March 31, 2012 as indicated below.







Operating Expenses







The Company’s total operating expense
consist of three segments; selling, administrative and general expenses. For the three months ended March 31, 2013, total operating
expenses decreased to $4,100,719 from $5,879,204 for the three months ended March 31, 2012.



For the three months ended March 31, 2013,
Selling Expenses decreased to $2,371,530 from $4,178,185 for the three months ended March 31, 2012.  This was primarily due
to decreases in cost of materials of $208,654, personnel expense of $1,062,307 and in other selling expense of $535,694.





For the three months ended March 31, 2013,
administrative expense increased by $26,395 to $1,500,042 from $1,473,647 for the three months ended March 31, 2012. This was primarily
due to reductions in personnel costs of $163,054, being offset by an increase in other administrative expense of $189,449 related
to the Company’s restructuring and sale of subsidiary companies as well as an increase in compliance costs.





For the three months ended March 31, 2013,
General Expenses slightly increased to $229,147 from $227,372 for the three months ended March 31, 2012.





Other Income (Expense)







For the three months ended March 31, 2013,
Other Expense of $3,216 decreased fromOther Expense of $33,609 for the three months ended
March 31, 2012. This change is primarily due to an increase of Miscellaneous Other Income of $158,978 and a net decrease in Interest
Expense of $127,627 for the three months ended March 31, 2013 compared to the three months ended March 31, 2012.











Liquidity & Capital Resources





As March 31, 2013, the Company
had $738,369 in cash and cash equivalents, compared to $1,154,602 at December 31, 2012.





The Company's cash flow depends on the
timely and successful market entry of its strategic offerings. The dependency accounts for revenue generated from direct customers
engagements, as well as for revenue generated through the partner channel network.





Especially for strategic offerings for
paradigm shifting technologies, management's budget plan is based on a series of assumptions regarding market acceptance, readiness
and pricing. While management's assumptions are based on market research and customer surveys, assumptions bear the risk of being
incorrect and may result in a delay in customer projects and consequently a delay or a reduction in related invoicing. In case
these delays have an impact on the Company's liquidity and therefore its ability to support its operations with the necessary cash
flow, the Company depends on its ability to generate cash flow from other resources, such as debt financing from related or independent
resources or as equity financing from existing shareholders or through the stock market.



During the entire fiscal year 2012 and for the first three months of 2013, the Company was in constant
contact with internal and external sources for financing. These sources provided necessary funds to support the working capital
needs of the Company; mainly to finance the Company’s strategic offerings.  There can be no assurances, however, that
the Company will be able to obtain additional funds from these or any other sources or that such funds will be sufficient to permit
the Company to implement its intended business strategy. In the event the Company is not able to generate additional funds, management
will postpone any strategic investment until the financing will be sufficient. However, management believes as a result of the
assets purchased to date, in accordance with the above-mentioned statement, the Company will be able to provide sufficient cash
flow to support its standard operations for the next 9 months.





46









From time to time, the Company has issued promissory notes to
fund its operations. As of March 31, 2013, the Company had an aggregate of $260,421 of indebtedness, including principal and accrued
interest, outstanding resulting from a promissory note issued to K Group, Ltd. on July 5, 2012, bearing interest at the rate of
8.5% and maturing on the earlier of the first anniversary date of the date of issuance or such other time as described in more
detail in the Notes.



During the period ended March 31, 2013,
we raised capital by consummating the following transactions:



| | n | On February 1, 2013, we sold 100% of our ownership in IDC Global, Inc. for net proceeds of $ 3,577,195 including cash received balanced against forgiven debt.                                                                                                                                                                    
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                   
| | n | On February 12, 2013, we issued an aggregate of 500,000 restricted shares of Common Stock to a Board Member pursuant to exercise of a common stock purchase warrant issued on October 26, 2012 and exercisable for $0.20 per share, for total proceeds of $100,000.                                                               
| |   |                                                                                                                                                                                                                                                                                                                                   
| | n | On February 12, 2013, the Company issued an aggregate of 250,000 restricted shares of Common Stock to an Accredited Investor  (as that term is defined the Securities Act) pursuant to exercise of a common stock purchase warrant issued on November 30, 2012 and exercisable for $0.20 per share, for total proceeds of $50,000.



In the future, the Company may supplement its liquidity to fund its operations or implement its business
strategy through the sale of equity or debt securities or through short or long term loans. However, there can be no assurances
that the Company will be successful in consummating any such financings on favorable terms, if at all.







Cash Flows





|                                                                       |  | Three Months Ended
 March 31, 2013 |            |   | Three Months Ended
 March 31, 2012 |  
|---------------------------------------------------------------------- |  | ---------------------------------- | ---------- | - | ---------------------------------- | -
|                                                                       |  |                                    |            |   |                                    |  
|Net cash provided (used in) Operating Activities                       |  | $                                  | 1,098,975  |   |                                    | $
|Net cash provided (used) by
    Discontinued Operations                |  | $                                  | -          |   |                                    | $
|Net cash provided (used in) Investing Activities                       |  | $                                  | 3,356,663  |   |                                    | $
|Net cash provided (used in) Financing Activities                       |  | $                                  | (4,882,141 | ) |                                    | $
|Effect of exchange rate changes on cash                                |  | $                                  | 10,270     |   |                                    | $
|Net increase (decrease) in cash and cash equivalents during the period |  | $                                  | (416,233   | ) |                                    | $
|Cash and cash equivalents, beginning of period                         |  | $                                  | 1,154,602  |   |                                    | $
|Cash and cash equivalents, end of period                               |  | $                                  | 738,369    |   |                                    | $









47















Net Cash
provided by operating activities for the three month period ended March 31, 2013 was $1,098,975 compared to net cash used in operating
activities of $2,292,301 for the three month period ended March 31, 2012 increasing by approximately $3,400,000. This change is
primarily due toa decrease in Accounts Receivable,Prepaids, Other Receivables,Other Assets, and Assets Held
for Sale for a total change of approximately $5,300,000,, Inventories of approximately $115,000, Deferred Tax Assets of approximately
$700,000 offset by a decrease of Accounts Payable, Accrued Liabilities, Deferred Income, Other Liabilities and Liabilities Held
for Sale of approximately $ 3,200,000 and an increase in Minority Interest losses of $180,000.



Net cash provided in investing activities
during the three month period ended March 31, 2013 was $3,356,663, compared to cash provided by investing activities in the comparative
period ended March 31, 2012 of $258,103 increasing by approximately $3,400,000. The increase was provided primarily by proceeds
from the sale of IDC Global in February 2013.



Net cash used in financing activities during the three month period ended March
31, 2013 was $4,882,141, compared to net cash used in financing activities in the comparative period ended March 31, 2012 of
$9,996 increasing by approximately $ 4,900,000. This change was primarily due
to the reduction of bank and related party loans, and other borrowings.





CRITICAL ACCOUNTING POLICIES AND ESTIMATES



Critical Accounting Policies and Estimates



The preparation of financial statements
in conformity with accounting principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities
at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.   The areas where critical estimates were made that have significant importance
to the financial statements are as follows:



i.    Allowance for
doubtful accounts. The company provides for potential bad debts on an account-by-account basis. Bad debts have not been significant
and our allowance has been accurate. Non-trade receivables are also scrutinized and allowed for based on expected recovery.



ii.    Allocation
of the price paid when acquiring subsidiaries.  When the Company acquires subsidiary companies an allocation of the
purchase is required.  The allocation is based on management’s analysis of the value of the net assets, and is
based on estimated future cash flows that each component will produce.  Such components might include software, customer
lists and other intangible assets that are not readily determinable.  The allocation has a significant impact on the
future earnings of the Company as certain assets, customer lists for example, must be amortized and charged to operations over
time, while other assets, notably goodwill, does not.





iii.   Impairment testing on intangibles and goodwill.  As noted in more detail below, these areas involve numerous
estimates as to expected cash flows, expected rates of return and other factors that are difficult to determine and are often
out of the Company’s direct control.



iv.  Valuation of deferred tax credits.  The Company provides an allowance for tax recoveries arising from the
application of losses carried forward.  An allowance is provided where management has determined that it is less
than likely that the loss will be applied and income taxes recovered.





Comprehensive Income (Loss)



The Company adopted FASB Codification
topic (“ASC”) 220, Reporting Comprehensive Income, which establishes standards for the reporting and display of comprehensive
income and its components in the financial statements. Comprehensive income consists of net income and other gains and losses
affecting stockholder's equity that are excluded from net income, such as unrealized gains and losses on investments available
for sale, foreign currency translation gains and losses and minimum pension liability. Since inception, the Company’s other
comprehensive income represents foreign currency translation adjustments andsmall net actuarial
losses on pension plans.



48







Net Income per Common Share



FASB Codification topic (“ASC”)
260, Earnings per share, requires dual presentation of basic and diluted earnings per share (EPS) with a reconciliation of the
numerator and denominator of the EPS computations. Basic earnings per share amounts are based on the weighted average shares of
common stock outstanding. If applicable, diluted earnings per share would assume the conversion, exercise or issuance of all potential
common stock instruments such as options, warrants and convertible securities, unless the effect is to reduce a loss or increase
earnings per share. Diluted net income (loss) per share on the potential exercise of the equity-based financial instruments is
not presented where anti-dilutive. Accordingly, although the diluted weighted average number of common stock outstanding is disclosed
on the statements of operation, the calculated net loss per share is the same for bother basic and diluted as both are based on
the basic weighted average of common stock outstanding. There were no adjustments required to net income for the period presented
in the computation of diluted earnings per share.



Financial Instruments



Financial instruments consist of cash
and cash equivalents, accounts receivable, financial assets, notes payable, liabilities to banks, accounts payable and accrued
liabilities and other liabilities.  As of the financial statement date, the Company does not hold any derivate financial
instruments. Financial assets and liabilities are measured upon first recognition and reviewed at the financial statement date.  Changes
in fair value are recognized through profit and loss.  Unless otherwise noted, it is management’s opinion that
the Company is not exposed to significant interest or credit risks arising from these financial instruments.



Currency Risk



We use the US dollar as our reporting
currency.  The functional currencies of our significant foreign subsidiaries are the local currency, which includes
the Euro, the British pound, the Bulgarian lev and the Indian rupee.  Accordingly, some assets and liabilities are incurred
in those currencies and we are subject to foreign currency risks.



Fair Value Measurements



The Company follows FASB Codification
topic (ASC”) 820, Fair Value Measurements and Disclosures, for all financial instruments and non-financial instruments accounted
for at fair value on a recurring basis. This new accounting standard establishes a single definition
of fair value and a framework for measuring fair value, sets out a fair value hierarchy to be used to classify the source of information
used in fair value measurement and expands disclosures about fair value measurements required under other accounting pronouncements. It does not change existing guidance as to whether or not an instrument is carried at fair value. The Company defines
fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. When determining the fair value measurements for assets and liabilities,
which are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the
Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the
asset or liability, such as inherent risk, transfer restrictions and credit risk.



The Company has adopted (“ASC”)
825, Financial Instruments, which allows companies to choose to measure eligible financial instruments and certain other items
at fair value that are not required to be measured at fair value. The Company has not elected the fair value option for any eligible
financial instruments.



Cash and Cash Equivalents



The Company considers all highly liquid
instruments with a maturity of three months or less at the time of issuance to be cash equivalents.



Inventories



Pursuant to ASC 330 (Inventories), inventories
held for sale are recognized under inventories. Inventories were measured at the lower of cost or market. Cost is determined on
a first-in-first out basis, without any overhead component.





49







Goodwill and other Intangible Assets



Intangible assets predominately include
goodwill, acquired software and capitalized software development. Intangible assets acquired in exchange for payment are reflected
at acquisition costs. If the development costs can be capitalized per ASC 985-20-25, these are reflected as ascribable personnel
and overhead costs.



Company created software can be intended
for sale to third parties or used by the Company itself. If the conditions for capitalization are not met, the expenses are recorded
with their effect on profit in the year in which they were incurred.



The Company amortizes intangible assets
with a limited useful life to the estimated residual book value in accordance with ASC regulations. In addition, in special circumstances
according to ASC 350-30, a recoverability test is performed and, if applicable, unscheduled amortization is considered.



The useful life of acquired software is
between three and five years and three years for Company-designed software.



Intangible assets obtained as part of
an acquisition which do not meet the criteria for a separate entry are identified as goodwill. Goodwill is reviewed once a year
during an impairment test, whereby the appraised fair value of the invested capital of the reporting unit, is compared with the
carrying (book) value of its invested capital amount (including goodwill.) Use value is generally applied in order to determine
the recoverability of goodwill and intangible assets with an indefinite useful life. The projected financial plan prepared by
the management serves as the basis for this determination of use value and the planning assumptions are each adjusted for the
current state of knowledge. Reasonable assumptions regarding macroeconomic trends and historical developments are taken into account
in making these adjustments. Future estimated cash flows are determined based on the expected growth rates of the markets in question.



If the carrying amount
of the reporting unit exceeds the appraised fair value, the impairment based on use value measures the amount of loss, if any,
and an unscheduled amortization expense is recorded. If the appraised value of the reporting unit exceeds its carrying amount,
goodwill of the reporting unit is not considered to be impaired.



Property, Plant and Equipment



Property, plant and equipment are valued
at acquisition or manufacturing costs, reduced by scheduled and, if necessary, unscheduled depreciation. Fixed assets are depreciated
on a straight-line basis, prorated over their expected useful life. Scheduled depreciation is mainly based on useful lives of
3 to 10 years. Leasehold improvements are depreciated up to 40 years.



If fixed assets are sold, retired or scrapped,
the profit or loss arising from the difference between the net sales proceeds and the residual book value are included under other
operating earnings and expenses.



Impairment or Disposal of Long-Lived
Assets



The Company evaluates the recoverability
of its fixed assets and other assets in accordance with ASC topic, 360.10. This guidance requires recognition of impairment of
long-lived assets in the event the net book value of such assets exceeds its’ expected cash flows or appraised value In
this instance, the asset is considered to be impaired and is written down to fair value.



Revenue Recognition



License Revenues



Our license revenues consist of revenues
earned from the licensing of our software products. These products are generally licensed on a perpetual basis. Pricing models
have generally been based either upon the physical infrastructure, such as the number of physical desktop computers or servers,
on which our software runs or on a per user basis. License revenues are recognized when the elements of revenue recognition for
the licensed software are complete, generally upon electronic shipment of the software and the software key to provide full access
to all functionalities for our customers. In general our invoices reflect license, service and maintenance components. In the
case of multi element contracts, the revenues allocated to the software license in most cases represent the residual amount of
the contract after the fair value of the other elements has been determined. Certain products of our software offering are licensed
on a subscription basis.



Software Maintenance Revenues



Software maintenance revenues are recognized
ratably on a pro-rata basis over the range of the contract period. Our contract periods typically range from one to five years.
Vendor-specific objective evidence (“VSOE”) of fair value for software maintenance services is established by the
rates charged in stand-alone sales of software maintenance contracts or the stated renewal rate for software maintenance. Customers
who are party to software maintenance agreements with us are entitled to receive support, product updates and upgrades on a when-and-if-available
basis.





50







Professional Services Revenues





Professional services include pre-project
consulting, software design, customization, project management, implementation and training. Professional services are not considered
essential to the functionality of our products, as these services do not alter the product capabilities and may be performed by
our customers or by other vendors. Professional services engagements performed for a fixed fee, for which we are able to make
reasonably dependable estimates of progress toward completion, are recognized on a proportional performance basis based on hours
incurred and estimated hours of completion. Professional services engagements that are on a time and materials basis are recognized
based on hours incurred. Revenues on all other professional services engagements are recognized upon completion. Our professional
services may be sold with software products or on a stand-alone basis. Vendor Specific Objective Evidence (VSOE) of fair value
for professional services is based upon the standard rates we charge for such services when sold separately.



Foreign Currency Translation



The functional currency of the Company
is US dollars. For financial reporting purposes, the financial statements of GROUP were translated into US dollars. Assets and
liabilities were translated at the exchange rates at the balance sheet dates and revenue and expenses were translated at the average
exchange rates and stockholders’ equity was translated at historical exchange rates. Any translation adjustments resulting
are not included in determining net income but are included in foreign exchange adjustment to other comprehensive income, a component
of stockholders’ equity.



Other Provisions



According to FASB ASC 450 Contingencies,
provisions are made whenever there is a current obligation to third parties resulting from a past event which is likely in the
future to lead to an outflow of resources and of which the amount can be reliably estimated. Provisions not already resulting
in an outflow of resources in the following year are recognized at their discounted settlement amount on the financial statement
date. The discount taken is based on market interest rates. The settlement amount also includes the expected cost increases. Provisions
are not set off against contribution claims. If the amended estimate leads to a reduction of the obligatory amount, the provision
is proportionally reversed and the earnings are recognized in other operating earnings.



Deferred Taxes



Income taxes are provided in accordance
with FASB Codification topic 740, Accounting for Income Taxes. A deferred tax asset or liability is recorded for all temporary
differences between financial and tax reporting and net operating loss-carry forwards.



Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that, some portion or all of the deferred tax asset will
not be realized. Deferred tax assets and liabilities are adjusted for the effect of changes in tax laws and rates on the date
of enactment.



Recent Accounting Pronouncements



In July 2012, the FASB issued ASU 2011-08,
Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment. With the objective of reducing the cost and
complexity of performing an impairment test for indefinite-lived intangible assets by simplifying how an entity tests those assets
for impairment and to improve consistency in impairment testing guidance among long-loved asset categories. The amendments permit
an entity first to assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible
asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance
with Subtopic 350-30, Intangibles – Goodwill and Other – General Intangibles Other than Goodwill. The more-likely-than-not
threshold is defined as having the likelihood of more than 50 percent. The amendments are effective for annual and interim impairment
tests performed beginning April 1, 2013. Adoption of this new standard is not expected to have significant impact to the Company’s
financial statement.



Principles of Consolidation and Reverse
Acquisition



As previously disclosed, the Company originally
exchanged a total of 5,405,411 shares of common stock in exchange for 50.1% of the outstanding common shares of GROUP (and retained
its 50.1% shareholding by acquiring an additional 883,765 shares of GROUP on February 27, 2012). Although the Company was the
legal acquirer, the transaction was accounted for as a recapitalization of GROUP in the form of a reverse merger, whereby GROUP
became the accounting acquirer and was deemed to have retroactively adopted the capital structure of the Corporation. Accordingly,
the accompanying consolidated financial statements reflect the historical consolidated financial statements of GROUP for all periods
presented, and do not include the historical financial statements of the Company. All costs associated with the reverse merger
transaction were expensed as incurred. Those expenses totaled approximately $300,000 and were included in professional fees in
administrative expenses.



51







The Company has based its financial reporting
for the consolidation with GROUP in accordance with FASB Accounting Standard Codification (ASC) 805-40 as it relates to reverse
acquisitions. Goodwill has been measured as the excess of the fair value of the consideration effectively transferred by the Company,
the acquiree, for financial reporting purposes, over the net amount of the Company’s recognized identifiable assets and
liabilities.



We have recorded the acquired assets and
liabilities of GBSX on the acquisition date of January 6, 2011, at their fair value and the operations of GBSX have been included
in the consolidated financial statements since the acquisition date.



The assets and liabilities of GROUP, the
acquirer for financial reporting purposes, are measured and recognized in the consolidated financial statements at their precombination
carrying amounts in accordance with ASC 805-40-45-2(a). Therefore, in a reverse acquisition, the non-controlling interest reflects
the non-controlling shareholders’ proportionate interest in the pre-combination carrying amounts of GROUP’s net assets
even though the non-controlling interests in other acquisitions are measured at their fair values at the acquisition date.



OFF-BALANCE SHEET ARRANGEMENTS



We have not entered into any other financial
guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative
contracts that are indexed to our shares and classified as shareholder’s equity or that are not reflected in our consolidated
financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated
entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated
entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and
development services with us.



Item 3.  Quantitative and
Qualitative Disclosures about Market Risk.



N/A



Item 4.  Controls and Procedures.



Evaluation of Disclosure Controls and
Procedures







As of March 31, 2013, our management, with
the participation of our Interim Chief Executive Officer (principal executive officer) and our Chief Financial Officer (principal
financial and accounting officer), evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(b)
promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on that evaluation, our
Interim Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2013, our disclosure controls and procedures
were not effective in ensuring that the information required to be disclosed in the reports that we file or submit under the Exchange
Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s
rules and forms, including ensuring that such material information is accumulated and communicated to our management, including
our Interim Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required
disclosure.





Changes in Internal Control Over Financial Reporting



During the quarter ended March 31, 2013,
there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely
to materially affect, our internal control over financial reporting.





52







PART II-OTHER INFORMATION



Item 1. Legal Proceedings.



None



Item 1A. Risk Factors.



The disclosure required under this item
is not required to be reported by small reporting companies; as such term is defined by Item 503(e) of Regulation S-K.









Item 2. Unregistered Sales of Equity Securities and Use of Proceeds







On February 12, 2013, the Company issued an aggregate of 500,000
restricted shares of Common Stock to a Board Member pursuant to exercise of a common stock purchase warrant issued on October 26,
2012 and exercisable for $0.20 per share. The Company issued the securities in reliance on Section 4(2) of the Securities Act due
to the fact that the issuance was isolated and did not involve a public offering of securities.



On February 12, 2013, the Company issued an aggregate of 250,000
restricted shares of Common Stock to an Accredited Investor (as that term is defined the Securities Act) pursuant to exercise of
a common stock purchase warrant issued on November 30, 2012 and exercisable for $0.20 per share. The Company issued the securities
in reliance on Section 4(2) of the Securities Act due to the fact that the issuance was isolated and did not involve a public offering
of securities.



On March 20, 2013, the Company issued
an aggregate of 450,950 restricted shares of Common Stock to a Board Member pursuant to a February 22, 2013 amendment to a Secured
Promissory Note Agreement entered into on August 13, 2012 between the Company and the Board Member. The Company issued the securities
in reliance on Section 4(2) of the Securities Act due to the fact that the issuance was isolated and did not involve a public
offering of securities.



On March 27, 2013, the Company issued an aggregate of 200,000
restricted shares of Common Stock to a Board Member pursuant to a February 26, 2013 amendment to a Secured Promissory Note Agreement
entered into on October 26, 2012 between the Company and the Board Member. The Company issued the securities in reliance on Section
4(2) of the Securities Act due to the fact that the issuance was isolated and did not involve a public offering of securities.



On March 27, 2013, the Company issued 200,000 restricted shares
of Common Stock to a third party non-affiliated consultant in consideration for consulting services rendered by the consultant
to the Company. The Company issued the securities in reliance on Section 4(2) of the Securities Act due to the fact that the issuance
was isolated and did not involve a public offering of securities.









Item 3. Defaults Upon Senior Securities.





None



Item 4. Mine Safety Disclosures.



N/A





53







Item 5. Other Information.



Subsequent Events





| | · | Group Live N.V. operating under the laws of the Netherlands and a 100% subsidiary of GROUP declared its
end of business May 31, 2012, registered in the commercial register June 22, 2012. Following the local procedures the Company has
been dissolved from the register as per April 5, 2013, registered April 16, 2013.Each of the directors of the Company, including
all five disinterested directors with respect to the transaction, has approved each of the transaction agreements discussed above
and the transactions contemplated thereby.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | On April 26, 2013, the Company entered into a note purchase and security
agreement (the “Loan Agreement”) with Stephen D. Baksa (the “Lender’), a member of the Board. Pursuant
to the Loan Agreement, the Company issued a secured promissory note, dated April 26, 2013 (the “Note”), to Mr. Baksa
for the principal amount of $200,000, bearing interest at a rate of 2% per month and maturing on June 30, 2013 or such other time
as described in more detail in the Note, without any penalty for prepayment. This Note is secured by fifty percent (50%) of certain
financial holdbacks to the Company pursuant to the Stock Purchase Agreement, dated February 1, 2013, by and among the Company,
IDC Global, Inc. and Global Telecom & Technology Americas, Inc.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | § | In connection with the execution of the Loan Agreement, on April 29,
2013, the Company issued the Lender a common stock purchase warrant (the “Warrant”), pursuant to which the Lender is
entitled to purchase 100,000 shares of common stock at an exercise price of $0.25 from May 1, 2013 until April 30, 2016. The Warrant
was issued in a private transaction between the Company and the Lender and was exempt from registration under the Securities Act
of 1933, as amended (the “Securities Act”), pursuant to Section 4(2) thereof.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | § | In connection with the execution of the Loan Agreement, on April 29,
2013, the Company issued the Lender a conditional common stock purchase warrant (the “Conditional Warrant”) which is
exercisable in the event that Note is not paid in full by June 30, 2013, pursuant to which the Lender is entitled to purchase 100,000
shares of common stock at an exercise price of $0.25 from July 1, 2013 until June 30, 2016 as described more fully in the Note.
The Conditional Warrant was issued in a private transaction between the Company and the Lender and was exempt from registration
under the Securities Act, pursuant to Section 4(2) thereof.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | § | The Company intends on expediently paying off the amounts loaned in
connection with the above referenced Loan Agreement. If needed, the Company will aggressively re-negotiate the terms of the Loan
Agreement with the Lender.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | On April 26, 2013, the Company entered into a note purchase and security
agreement (the “Loan Agreement”) with Vitamin B Venture GmbH (the “Lender”), an entity of which Joerg Ott,
the Company’s Chairman, has voting and dispositive control. Pursuant to the Loan Agreement, the Company issued to the Lender
a secured promissory note, dated October 26, 2012 (the “Note”), for the principal amount of $200,000, bearing interest
at a rate of 2% per month and maturing on June 30, 2013 or such other time as described in more detail in the Note, without any
penalty for prepayment. This Note is secured by fifty percent (50%) of certain financial holdbacks to be paid to the Company pursuant
to the Stock Purchase Agreement, dated February 1, 2013, by and among the Company, IDC Global, Inc. and Global Telecom & Technology
Americas, Inc.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | § | In connection with the execution of the Loan Agreement, on April 29,
2013, the Company issued the Lender a common stock purchase warrant (the “Warrant”), pursuant to which the Lender is
entitled to purchase 100,000 shares of common stock at an exercise price of $0.25 from May 1, 2013 until April 30, 2016. The Warrant
was issued in a private transaction between the Company and the Lender and was exempt from registration under the Securities Act
pursuant to Section 4(2) thereof.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | § | In connection with the execution of the Loan Agreement, on April 29,
2013, the Company issued the Lender a conditional common stock purchase warrant (the “Conditional Warrant”) which is
exercisable in the event that Note is not paid in full by June 30, 2013, pursuant to which the Lender is entitled to purchase 100,000
shares of common stock at an exercise price of $0.25 from July 1, 2013 until June 30, 2016 as described more fully in the Note.
The Conditional Warrant was issued in a private transaction between the Company and the Lender and was exempt from registration
under the Securities Act, pursuant to Section 4(2) thereof.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | § | The Company intends on expediently paying off the amounts loaned in
connection with the above referenced Loan Agreement. If needed, the Company will aggressively re-negotiate the terms of the Loan
Agreement with the Lender.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | · | On May 29, 2013, the Company's Common Stock was moved from the OTC Bulletin Board to the Pink Sheets due to the Company's Common Stock not being quoted by a broker/dealer for more than four consecutive days and not meeting the requirements of 15c2-11 under the Exchange Act.  The Company intends to solicit a FINRA-registered broker/dealer to apply to be a market maker for the Company's Common Stock and file a Form 211 with FINRA.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------









54







Item 6. Exhibits.



|Exhibit      |  |                                                                                                                                                                 
|------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
|No.          |  | Description                                                                                                                                                     
|             |  |                                                                                                                                                                 
|10.1(1)      |  | Stock Purchase Agreement, dated February 1, 2013, by and among IDC Global, Inc., GBS Enterprises Incorporated and Global
    Telecom & Technology Americas, Inc.
|             |  |                                                                                                                                                                 
|31.1(1)      |  | Rule 13(a)-14(a)/15(d)-14(a) Certification of Principal Executive Officer                                                                                       
|             |  |                                                                                                                                                                 
|31.2(1)      |  | Rule 13(a)-14(a)/15(d)-14(a) Certification of Principal Financial and Accounting Officer                                                                        
|             |  |                                                                                                                                                                 
|32.1(1)      |  | Section 1350 Certification of Principal Executive Officer                                                                                                       
|             |  |                                                                                                                                                                 
|32.2(1)      |  | Section 1350 Certification of Principal Financial and Accounting Officer                                                                                        
|             |  |                                                                                                                                                                 
|101.INS (2)* |  | XBRL Instance Document                                                                                                                                          
|             |  |                                                                                                                                                                 
|101.SCH (2)* |  | XBRL Taxonomy Extension Schema Document                                                                                                                         
|             |  |                                                                                                                                                                 
|101.CAL (2)* |  | XBRL Taxonomy Extension Calculation Linkbase Document                                                                                                           
|             |  |                                                                                                                                                                 
|101.LAB (2)* |  | XBRL Taxonomy Extension Labels Linkbase Document                                                                                                                
|             |  |                                                                                                                                                                 
|101.DEF (2)* |  | XBRL Taxonomy Extension Definition Linkbase Document                                                                                                            
|             |  |                                                                                                                                                                 
|101.PRE (2)* |  | XBRL Taxonomy Extension Presentation Linkbase Document                                                                                                          



|(1) | Filed herewith.
|--- | ---------------





|(2) | Furnished herewith. Users of this data are advised that, pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Exchange Act of 1934 and otherwise are not subject to liability.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | * | To be filed by amendment.
| | - | -------------------------



55







SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.



|                     | GBS ENTERPRISES INCORPORATED                
|-------------------- | --------------------------------------------
|                     |                                             
|Date: June  13, 2013 | By:                                         
|                     | Gary D. MacDonald                           
|                     | Interim Chief Executive Officer             
|                     | (Principal Executive Officer)               
|                     |                                             
|Date: June  13, 2013 | By:                                         
|                     | Markus R. Ernst                             
|                     | Chief Financial Officer                     
|                     | (Principal Financial and Accounting Officer)





56