UNITED STATES

SECURITIES
AND EXCHANGE COMMISSION

Washington,
D.C. 20549



FORM 10-Q



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



For the quarterly
period ended:March 31, 2012



£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)



(404) 891-1711

Issuer’s
telephone number



Securities registered
under Section 12(b) of the Act:

|Title of each class |  | Name of each exchange on which registered
|------------------- |  | -----------------------------------------
|None                |  | N/A                                      

Securities registered
under Section 12(g) of the Act:



Common
Stock, $0.001 par value

(Title
of class)



Indicate by check mark if the registrant
is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.



Yes  ̈No x



Indicate by check mark if the registrant
is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.



Yes  ̈No x



Note - Checking the box above
will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations
under those Sections.



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.



Yesx No  ̈



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).



Yesx No  ̈



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 February 28, 2013, there were 31,112,624 areas of common stock,
par value $0.001 per share, of the Registrant issued and outstanding.













EXPLANATORY
NOTE



GBS Enterprises Incorporated,
a Nevada corporation (the “Company”), is filing this Quarterly Report on Form 10-Q for the quarter ended March 31,
2012 (the “Form 10-Q”), for the following purposes:



| | 1. | In order to eliminate the inconsistency between the stated period covered by the Company’s
    financial statements and the actual period presented for the Company in the previous filing.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------











|           | TABLE OF CONTENTS                                                                     |             
|---------- | ------------------------------------------------------------------------------------- | ------------
|           |                                                                                       | Page
    No:
|           | PART I - FINANCIAL INFORMATION                                                        |             
|Item 1.    | Consolidated Financial Statements                                                     | 3           
|           | Balance Sheet                                                                         | 4           
|           | Statement of Operations                                                               | 5           
|           | Statement of Cash Flows                                                               | 6           
|           | Notes to the Financial Statements                                                     | 7           
|Item 2.    | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 42          
|Item 3.    | Quantitative and Qualitative Disclosures About Market Risk                            | 56          
|Item 4.    | Controls and Procedures                                                               | 56          
|           |                                                                                       |             
|           | PART II - OTHER INFORMATION                                                           |             
|Item 1.    | Legal Proceedings                                                                     | 58          
|Item 1A.   | Risk Factors                                                                          | 58          
|Item 2.    | Unregistered Sales of Equity Securities and Use of Proceeds                           | 58          
|Item 3.    | Defaults Upon Senior Securities                                                       | 58          
|Item 4.    | [Removed and Reserved by the Securities and Exchange Commission]                      | 58          
|Item 5.    | Other Information                                                                     | 58          
|Item 6.    | Exhibits                                                                              | 58          
|Signatures |                                                                                       | 59          



2







PART I -
FINANCIAL INFORMATION



Item 1.          Financial
Statements



GBS Enterprises
Incorporated



Interim Consolidated
Financial Statements



March 31, 2012



(Unaudited)



3











GBS Enterprises Incorporated

Interim Consolidated Balance
Sheets

March 31, 2012 and December 31,
2011

(Unaudited)



|                                                        |  | March 30, 2012 |             |   | December 31,
    2011 | 
|------------------------------------------------------- |  | -------------- | ----------- | - | --------------------- | 
|                                                        |  | $              |             |   | $                     | 
|Assets                                                  |  |                |             |   |                       | 
|Current Assets                                          |  |                |             |   |                       | 
|Cash and cash equivalents - Note 7                      |  |                | 1,418,277   |   |                       | 
|Accounts receivable) - Note 8                           |  |                | 6,609,219   |   |                       | 
|Inventories - Note 3                                    |  |                | 121,880     |   |                       | 
|Prepaid expenses - Note 9                               |  |                | 570,199     |   |                       | 
|Other receivables - Note 10                             |  |                | 1,558,636   |   |                       | 
|Assets held for Sale                                    |  |                | -           |   |                       | 
|Total
    current assets                                |  |                | 10,278,211  |   |                       | 
|                                                        |  |                |             |   |                       | 
|Property, plant and equipment - Note 11                 |  |                | 1,711,821   |   |                       | 
|Financial assets - Note 12                              |  |                | 545,391     |   |                       | 
|Investment in related company, at equity - Note
    6   |  |                | 265,438     |   |                       | 
|Prepaid expenses                                        |  |                | -           |   |                       | 
|Deferred tax assets                                     |  |                | 4,588,618   |   |                       | 
|Goodwill - Note 13                                      |  |                | 37,423,843  |   |                       | 
|Software - Note 14                                      |  |                | 14,300,067  |   |                       | 
|Other assets - Note 15                                  |  |                | 152,872     |   |                       | 
|Total
    non-current assets                            |  |                | 58,988,048  |   |                       | 
|                                                        |  |                |             |   |                       | 
|Total
    assets                                        |  |                | 69,266,259  |   |                       | 
|                                                        |  |                |             |   |                       | 
|Liabilities and stockholders'
    equity                |  |                |             |   |                       | 
|Current liabilities                                     |  |                |             |   |                       | 
|Notes payable                                           |  |                | -           |   |                       | 
|Liabilities to banks - Note 16                          |  |                | 11,202      |   |                       | 
|Accounts payables and accrued liabilities - Note
    17 |  |                | 6,844,132   |   |                       | 
|Deferred income - Note 19                               |  |                | 11,111,295  |   |                       | 
|Other short term liabilities - Note 18                  |  |                | 3,119,501   |   |                       | 
|Due to related parties                                  |  |                | 52,453      |   |                       | 
|Total
    current liabilities                           |  |                | 21,138,583  |   |                       | 
|                                                        |  |                |             |   |                       | 
|Liabilities to banks - Note 20                          |  |                | 3,886,791   |   |                       | 
|Deferred tax liabilities                                |  |                | 1,169,549   |   |                       | 
|Retirement benefit obligation                           |  |                | 59,087      |   |                       | 
|Other liabilities - Note 21                             |  |                | 1,419,067   |   |                       | 
|Total
    non-current liabilities                       |  |                | 6,534,494   |   |                       | 
|                                                        |  |                |             |   |                       | 
|Total
    liabilities                                   |  |                | 27,673,077  |   |                       | 
|                                                        |  |                |             |   |                       | 
|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                                  |  |                |             |   |                       | 
|28,211,664 shares of common stock                       |  |                |             |   |                       | 
|(22,544,000 shares at March 31, 2011)                   |  |                | 28,212      |   |                       | 
|Additional paid in capital                              |  |                | 47,902,913  |   |                       | 
|Accumulated deficit                                     |  |                | (13,838,354 | ) |                       | 
|Other comprehensive income                              |  |                | 238,388     |   |                       | 
|                                                        |  |                |             |   |                       | 
|                                                        |  |                | 34,331,159  |   |                       | 
|Noncontrolling interest in
    subsidiaries             |  |                | 7,262,023   |   |                       | 
|                                                        |  |                |             |   |                       | 
|Total
    stockholders' equity                          |  |                | 41,593,182  |   |                       | 
|                                                        |  |                |             |   |                       | 
|Total
    stockholders' equity and liabilities          |  |                | 69,266,259  |   |                       | 
|                                                        |  |                |             |   |                       | 
|Commitments - Note 23                                   |  |                |             |   |                       | 
|Subsequent events - Note 24                             |  |                |             |   |                       | 



4







GBS Enterprises Incorporated

Interim Consolidated Statements
of Operations

For the three ended March 31,
2012 and 2011

(Unaudited)



|                                                                                     |  | 2012 |             |   | 2011 |  
|------------------------------------------------------------------------------------ |  | ---- | ----------- | - | ---- | -
|                                                                                     |  | $    |             |   | $    |  
|                                                                                     |  |      |             |   |      |  
|Revenues                                                                             |  |      |             |   |      |  
|Products                                                                             |  |      | 6,014,963   |   |      |  
|Services                                                                             |  |      | 2,715,939   |   |      |  
|                                                                                     |  |      | 8,730,902   |   |      |  
|Cost of goods sold                                                                   |  |      |             |   |      |  
|Products                                                                             |  |      | 2,533,513   |   |      |  
|Services                                                                             |  |      | 2,723,102   |   |      |  
|                                                                                     |  |      | 5,256,615   |   |      |  
|Gross profit                                                                         |  |      | 3,474,286   |   |      |  
|                                                                                     |  |      |             |   |      |  
|Operating expenses                                                                   |  |      |             |   |      |  
|Selling expenses                                                                     |  |      | 4,694,304   |   |      |  
|Administrative expenses                                                              |  |      | 1,614,414   |   |      |  
|General expenses                                                                     |  |      | 235,218     |   |      |  
|                                                                                     |  |      | 6,543,936   |   |      |  
|                                                                                     |  |      |             |   |      |  
|Operating income                                                                     |  |      | (3,069,649  | ) |      |  
|                                                                                     |  |      |             |   |      |  
|Other Income (expense)                                                               |  |      |             |   |      |  
|Other Income (expense)                                                               |  |      | 54,819      |   |      |  
|Interest income                                                                      |  |      | 1,299       |   |      |  
|Interest expense                                                                     |  |      | (56,275     | ) |      |  
|                                                                                     |  |      | (157        | ) |      |  
|                                                                                     |  |      |             |   |      |  
|Income (loss) before income taxes                                                    |  |      | (3,069,807  | ) |      |  
|                                                                                     |  |      |             |   |      |  
|Income tax (income) expense                                                          |  |      | (659,341    | ) |      |  
|                                                                                     |  |      | 0           |   |      |  
|                                                                                     |  |      | 0           |   |      |  
|Net income (loss) bevor extraordinary items                                          |  |      | (23,994,214 | ) |      |  
|                                                                                     |  |      |             |   |      |  
|Extraordinary items (value adjustment on goodwill)                                   |  |      | 0           |   |      |  
|                                                                                     |  |      |             |   |      |  
|Net income (loss)                                                                    |  |      | (2,410,466  | ) |      |  
|Net income (loss) attributable to non controlling
    interest                       |  |      | (719,778    | ) |      |  
|                                                                                     |  |      |             |   |      |  
|Net income (loss) attributable
    to stockholders                                   |  |      | (1,690,688  | ) |      |  
|                                                                                     |  |      |             |   |      |  
|Other comprehensive income (loss)                                                    |  |      | (500,120    | ) |      |  
|Other comprehensive income  (loss)                                                   |  |      |             |   |      |  
|attributable to non noncontrolling
    interest                                      |  |      | (249,560    | ) |      |  
|Other comprehensive income (loss)                                                    |  |      |             |   |      |  
|attributable to stockholders                                                         |  |      | (250,560    | ) |      |  
|                                                                                     |  |      |             |   |      |  
|Net income (loss) and
    comprehensive     income (loss) attributed to stockholders |  |      | (1,941,248  | ) |      |  
|                                                                                     |  |      |             |   |      |  
|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 Cash
    Flows     
|For the three months ended March 31, 2012
    and 2011
|(Unaudited)                                           



|                                                     |  | March 31, 2012 |            |   | March 30, 2011 | 
|---------------------------------------------------- |  | -------------- | ---------- | - | -------------- | 
|                                                     |  | $              |            |   | $              | 
|                                                     |  |                |            |   |                | 
|Cash flow from operating
    activities              |  |                |            |   |                | 
|Net loss / net income                                |  |                | (2,410,466 | ) |                | 
|Adjustments                                          |  |                |            |   |                | 
|Deferred income taxes                                |  |                | (670,269   | ) |                | 
|Depreciation and amortization                        |  |                | 1,654,957  |   |                | 
|Write-down of Goodwill and Intangibles               |  |                | -          |   |                | 
|Gains from equity investment                         |  |                | (20,087    | ) |                | 
|Minority interest losses                             |  |                | (687,008   | ) |                | 
|Changes in operating assets and liabilities:         |  |                |            |   |                | 
|Accounts receivable and other assets                 |  |                | (2,363,002 | ) |                | 
|Other Assets                                         |  |                | (152,872   | ) |                | 
|Inventories                                          |  |                | 114,832    |   |                | 
|Accounts payable and other
    liabilities           |  |                | 2,614,600  |   |                | 
|                                                     |  |                |            |   |                | 
|Net cash
    provided (used) by operating activities |  |                | (1,919,315 | ) |                | 
|                                                     |  |                |            |   |                | 
|Cash flow from investing
    activties               |  |                |            |   |                | 
|Purchase (Sale) of intangible assets                 |  |                | (931,427   | ) |                | 
|Purchase of property, plant and equipment            |  |                | (358,704   | ) |                | 
|Purchase of Subsidiaries                             |  |                | -          |   |                | 
|Proceeds from Sale of Subsidiaries                   |  |                | -          |   |                | 
|Increase (Decrease) in Financial
    assets          |  |                | 1,801,279  |   |                | 
|                                                     |  |                |            |   |                | 
|Net cash
    provided (used) in investing activities |  |                | 511,148    |   |                | 
|                                                     |  |                |            |   |                | 
|Cash flow from financing
    activties               |  |                |            |   |                | 
|Net borrowings - banks                               |  |                | 414,915    |   |                | 
|Other borrowings                                     |  |                | (1,381,821 | ) |                | 
|Capital paid-in                                      |  |                | 576,942    |   |                | 
|Loans from related party                             |  |                | -          |   |                | 
|                                                     |  |                |            |   |                | 
|Net cash
    provided (used) in financing activities |  |                | (389,964   | ) |                | 
|                                                     |  |                |            |   |                | 
|Effect
    of exchange rate changes on cash          |  |                | (34,414    | ) |                | 
|                                                     |  |                |            |   |                | 
|Net increase (decrease) in cash                      |  |                | (1,832,544 | ) |                | 
|Cash and cash equivalents - Beginning of the year    |  |                | 3,250,821  |   |                | 
|                                                     |  |                |            |   |                | 
|Cash
    and cash equivalents - End of year          |  |                | 1,418,277  |   |                | 



6















GBS
Enterprises Incorporated

as
of March 31, 2012





Notes on the Financial Statement
for the Quarter Ending March 31, 2012

GBS Enterprises Incorporated



7













GBS
Enterprises Incorporated

as
of March 31, 2012



| | Note 1 | 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 accept as described in Note 4 with respect to reporting periods, 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. It is suggested that these interim financial statements be read in conjunction with the Company’s audited financial
statements.



Operating
results for the three months ended March 31, 2012 are not necessarily indicative of the results that can be expected for the year
ending December 31, 2012.







8











GBS
Enterprises Incorporated

as
of March 31, 2012



| | Note 2 | 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:



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

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

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

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

| |  ̈ | 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 Radicati, 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 Radicati Group Inc., April 2011, “IBM Lotus Notes/Domino Market Analysis, 2011-2015“)



9











GBS
Enterprises Incorporated

as
of March 31, 2012



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.



10











GBS
Enterprises Incorporated

as
of March 31, 2012



On
April 26, 2010, SWAV purchased certain technology assets of Lotus Holdings Ltd. (“Lotus”) 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.



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”).



11











GBS
Enterprises Incorporated

as
of March 31, 2012



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.



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.



12











GBS
Enterprises Incorporated

as
of March 31, 2012





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.



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.



13











GBS
Enterprises Incorporated

as
of March 31, 2012





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. 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 GBSModernizing/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.



14











GBS
Enterprises Incorporated

as
of March 31, 2012



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.



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.



15















GBS
Enterprises Incorporated

as
of March 31, 2012







| | 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.

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.



16











GBS
Enterprises Incorporated

as
of March 31, 2012



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.



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.



17











GBS
Enterprises Incorporated

as
of March 31, 2012



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 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.



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.



18











GBS
Enterprises Incorporated

as
of March 31, 2012



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.



19











GBS
Enterprises Incorporated

as
of March 31, 2012



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 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.



20











GBS
Enterprises Incorporated

as
of March 31, 2012



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.



21











GBS
Enterprises Incorporated

as
of March 31, 2012



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.



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.





22











GBS Enterprises Incorporated

as of March 31, 2012



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.



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.



23









GBS Enterprises Incorporated

as of March 31, 2012



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.



| | 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. 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 period
ended March 31, 2012 and 2011, include the accounts of all consolidated companies for the same three month period beginning January
1, 2012 and 2011 respectively. The Balance Sheets as of March 31, 2012 and March 31, 2011 have also been adjusted to include the
accounts of all consolidated companies as of those dates.



24









GBS Enterprises Incorporated

as of March 31, 2012



| | Note 5 | SUBSIDIARY
                                                                                          COMPANIES
| | ------ | --------------------------------------------------------------------------------------------------------------



The subsidiaries
listed below were included in the basis of consolidation; in the previous year, there were eight of these subsidiaries (KUSD =
1,000’s of US Dollars).



|                                  |  |                 |  |               |        |  |                    |  |        |              |  |  |           
|--------------------------------- |  | --------------- |  | ------------- | ------ |  | ------------------ |  | ------ | ------------ |  |  | ----------
|                                  |  |                 |  | Stockholders' |        |  |                    |  |        | Profit       |  |  |           
|                                  |  |                 |  | Equity        |        |  |                    |  |        | of
    the   |  |  |           
|                                  |  |                 |  | as
    of     |        |  | Percentage of      |  |        | consolidated |  |  | Date      
|                                  |  |                 |  | 03.31.12      |        |  | Subscribed Capital |  |        | quarter      |  |  | of
    the
|                                  |  | Headquarters    |  | KUSD          |        |  | KUSD               |  |        | in
    %     |  |  | KUSD      
|                                  |  |                 |  |               |        |  |                    |  |        |              |  |  |           
|ebVOKUS Software GmbH             |  | Dresden         |  |               | 351    |  |                    |  | 54     |              |  |  | 50.1      
|GROUP Business Software (UK) Ltd. |  | Manchester      |  |               | -1,290 |  |                    |  | 23     |              |  |  | 50.1      
|GROUP Business Software Corp.     |  | Woodstock       |  |               | -9,389 |  |                    |  | 1      |              |  |  | 50.1      
|GROUP LIVE N.V.                   |  | Den Haag        |  |               | -3,534 |  |                    |  | 134    |              |  |  | 50.1      
|Permessa Corporation              |  | Waltham         |  |               | -5     |  |                    |  | 0      |              |  |  | 50.1      
|Relavis Corporation               |  | Woodstock       |  |               | -834   |  |                    |  | 2      |              |  |  | 50.1      
|GROUP Business Software AG        |  | Eisenach        |  |               | 20,810 |  |                    |  | 36,107 |              |  |  | 50,1      
|Pavone GmbH                       |  | Boeblingen      |  |               | -815   |  |                    |  | 47     |              |  |  | 100.0     
|Pavone Ltd.                       |  | North Yorkshire |  |               | -71    |  |                    |  | 584    |              |  |  | 100.0     
|Groupware Inc.                    |  | Woodstock       |  |               | -482   |  |                    |  | 1      |              |  |  | 100.0     
|IDC Global, Inc.                  |  | Chicago         |  |               | 2,429  |  |                    |  | 0      |              |  |  | 100.0     
|Synaptris, Inc.                   |  | San Jose        |  |               | -820   |  |                    |  | 3,372  |              |  |  | 100.0     



A domination
and profit transfer agreement was in place between GROUP Business Software AG as the dominating company and Group Technologies
GmbH for the last reporting period. GROUP Business Software AG sold this Company on March 08, 2012 for a price of 49 KUSD.



On September
2, 2011, GROUP Business Software AG acquired the outstanding 0.5% of Relavis Corporation.



25









GBS Enterprises Incorporated

as of March 31, 2012



| | Note 6 | ASSOCIATED
                                                                                          COMPANY
| | ------ | ------------------------------------------------------------------------------------------------------------



Due to the
absence of domination/control, B.E.R.S. AD, Varna, Bulgaria was treated an associated company in the consolidated financial statements.
GROUP Business Software AG's acquired B.E.R.S AD for 265 (KEUR). The investment, representing 50% of B.E.R.S. AD has been accounted
for on the equity basis, with the Company’s proportionate share of income being recorded in the consolidated statement of
operations with a corresponding adjustment to the asset carrying value. At March 31, 2012, the proportion share of the loss was
5.5 KUSD.



|                     |  |              |  | Total
    Value |     |  |       |  |    |                |  |  |                    | 
|-------------------- |  | ------------ |  | --------------- | --- |  | ----- |  | -- | -------------- |  |  | ------------------ | 
|                     |  |              |  | Assets          |     |  |       |  |    | Sales Revenues |  |  | Annual Profit/Loss | 
|                     |  |              |  | 03.31.12        |     |  | Debts |  |    | Q1             |  |  | Q1                 | 
|Associated Companies |  | Headquarters |  | KUSD            |     |  | KUSD  |  |    | KUSD           |  |  | KUSD               | 
|                     |  |              |  |                 |     |  |       |  |    |                |  |  |                    | 
|B.E.R.S. AD          |  | Varna        |  |                 | 265 |  |       |  | 91 |                |  |  | 176                | 



| | Note 7 | CASH
                                                                                          AND CASH EQUIVALENTS
| | ------ | -------------------------------------------------------------------------------------------------------------------



As of the financial
statement date, the Company’s cash and cash equivalents totaled 1,418 KUSD (previous year: 9,031 KUSD). Included in that
amount are cash equivalents of 13 KUSD (previous year: 20 KUSD).



| | Note 8 | ACCOUNTS
                                                                                          RECEIVABLE
| | ------ | -------------------------------------------------------------------------------------------------------------



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. The residual term
of the receivables is less than one year with the exception of deposits provided as security presented under Other Financial Assets.



| | Note 9 | PREPAID
                                                                                          EXPENSES
| | ------ | ----------------------------------------------------------------------------------------------------------



Prepaid expenses
in the amount of 570 KUSD (previous year: 1,648 KUSD) were primarily recorded for prepaid rent and advance on technological collaboration
events.



26









GBS Enterprises Incorporated

as of March 31, 2012



| | Note 10 | OTHER
                                                                                          RECEIVABLES - CURRENT
| | ------- | ---------------------------------------------------------------------------------------------------------------------



The largest individual item under
other receivables represents security deposits (approx. 486 KUSD) Also included herein are derivatives used for hedging (405 KUSD),
warrant sale proceeds held in escrow (238 KUSD); receivable from the sale of GEDYS IntraWare GmbH (240 KUSD), tax assets (163
KUSD) and Other (27 KUSD). The derivatives represent forward contracts entered into by a subsidiary which require them to deliver
U.S. dollar (USD) and receive Indian Rupees (INR) at agreed upon forward rates. The receivables represent USD to be received at
the delivery date and payables (of 409 KUSD) represent INR to be paid exchanged at the year-end rate. Contracts were entered into
beginning November, 2011 to February, 2012 to be delivered by April, 2012 to October, 2012. Included in operations is an unrealized
foreign exchange gain of 9,440 USD.



| | Note 11 | PROPERTY
                                                                                          PLANT AND EQUIPMENT
| | ------- | ----------------------------------------------------------------------------------------------------------------------



Fixed assets 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 12.31.2011                      |  |                             | 8,459.5 |   |                                             |  | 6,854.5 |         | 
|Additions                               |  |                             | 250     |   |                                             |  | 133     |         | 
|Disposals                               |  |                             | (208    | ) |                                             |  | (208    | )       | 
|Currency differences                    |  |                             | 118     |   |                                             |  | 110     |         | 
|Reclassifications                       |  |                             | (240    | ) |                                             |  | (222    | )       | 
|Updated 03.31.2012                      |  |                             | 8,379.1 |   |                                             |  | 6,667.3 |         | 



27









GBS Enterprises Incorporated

as of March 31, 2012



| | Note 12 | LONG
                                                                                          TERM FINANCIAL ASSETS
| | ------- | --------------------------------------------------------------------------------------------------------------------



The major components of the Financial
Assets include the following:



|                                                                                                                                            |  | KUSD      |      |   | KUSD       | 
|------------------------------------------------------------------------------------------------------------------------------------------- |  | --------- | ---- | - | ---------- | 
|                                                                                                                                            |  | 3/31/2012 |      |   | 12/31/2011 | 
|Receivable from sale of GEDYS IntraWare GmbH                                                                                                |  |           |      |   |            | 
|Balance outstanding, payable in monthly
    installments of $ 20,006, bearing interest at prime plus .25%, not be greater than 2% per annum |  |           | 780  |   |            | 
|Current portion, included in other
    current receivables                                                                                  |  |           | (240 | ) |            | 
|Long Term potion, included in Financial Assets                                                                                              |  |           | 540  |   |            | 
|                                                                                                                                            |  |           |      |   |            | 
|Other long term Financial Assets                                                                                                            |  |           | 5    |   |            | 
|Balance                                                                                                                                     |  |           | 545  |   |            | 



| | Note 13 | GOODWILL
| | ------- | --------



Goodwill
arises from the following business acquisitions:



|Affiliated
    Company        |  | Date of
    the First Consolidation |  | Goodwill
    YE 2011
    in kUSD |          |  | Goodwill
    Q12012
    in kUSD | 
|----------------------------- |  | ----------------------------------- |  | -------------------------------- | -------- |  | ------------------------------- | 
|GROUP Business Software AG    |  | 01/06/11                            |  |                                  | 23,302.8 |  |                                 | 
|GROUP Business Software Corp. |  | 12/31/05                            |  |                                  | 2,177.5  |  |                                 | 
|GROUP LIVE N.V.               |  | 12/31/05                            |  |                                  | 1,324.2  |  |                                 | 
|GROUP Business Software Ltd   |  | 12/31/05                            |  |                                  | 2,765.1  |  |                                 | 
|ebVOKUS Software GmbH         |  | 10/01/05                            |  |                                  | 443.6    |  |                                 | 
|Relavis Corporation           |  | 08/01/07                            |  |                                  | 7,288.3  |  |                                 | 
|Permessa                      |  | 09/22/10                            |  |                                  | 2,387.4  |  |                                 | 
|Pavone AG                     |  | 04/01/11                            |  |                                  |          |  |                                 | 
|Groupware Inc.                |  | 06/01/11                            |  |                                  |          |  |                                 | 
|IDC                           |  | 07/25/11                            |  |                                  |          |  |                                 | 
|SD Holding                    |  | 09/27/11                            |  |                                  |          |  |                                 | 
|                              |  |                                     |  |                                  | 39,689.0 |  |                                 | 



28









GBS Enterprises Incorporated

as of March 31, 2012



| | Note 14 | 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.



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.



29









GBS Enterprises Incorporated

as of March 31, 2012



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 licenses
    kUSD |  | Development
    of the cost |          |   | Development
    of accumulated
    depreciation |  |          | Balance | 
|--------------------------------- |  | --------------------------- | -------- | - | ----------------------------------------------- |  | -------- | ------- | 
|                                  |  |                             |          |   |                                                 |  |          |         | 
|Updated 12.31.2011                |  |                             | 33,093.8 |   |                                                 |  | 18,835.2 |         | 
|Additions                         |  |                             | 868      |   |                                                 |  | 966      |         | 
|Disposals                         |  |                             | (25      | ) |                                                 |  | (5       | )       | 
|Currency differences              |  |                             | 895      |   |                                                 |  | 736      |         | 
|Reclassifications                 |  |                             | 0        |   |                                                 |  | 0        |         | 
|Updated 03.31.2012                |  |                             | 34,831.8 |   |                                                 |  | 20,531.7 |         | 



| | Note 15 | OTHER
                                                                                          ASSETS
| | ------- | ------------------------------------------------------------------------------------------------------



Included are tax credits (31 KUSD)
and other deposits (121 KUSD).



| | Note 16 | LIABILITIES
                                                                                          TO BANKS - CURRENT
| | ------- | ------------------------------------------------------------------------------------------------------------------------



Short term
liabilities to bank (11 KUSD) represent an operating line of credit, bearing interest at a 3.25% daily periodic rate with a credit
limit of 100 KUSD.



| | Note 17 | ACCOUNTS
                                                                                          PAYABLE AND ACCRUED LIABILITIES
| | ------- | ----------------------------------------------------------------------------------------------------------------------------------



Trade payables



As of the financial
statement date, trade accounts payable amounted to 2,795 KUSD (previous year: 1,133 KUSD). Trade payables are carried at their
repayment amount and all have a residual term of up to one year.



Accrued
Liabilities



Other provisions
are created in the amount necessary as of the financial statement date which is necessary, according to a reasonable commercial
appraisal, in order to cover future payment obligations, perceivable risks as well as uncertain liabilities of the Company. The
amounts deemed to be most likely in a careful assessment of the situation are accrued.



30









GBS Enterprises Incorporated

as of March 31, 2012



|                                                                         |  | Status   |       |  |             |  |       |             |  |  |          |  |  | Currency    |       |  | Status   | 
|------------------------------------------------------------------------ |  | -------- | ----- |  | ----------- |  | ----- | ----------- |  |  | -------- |  |  | ----------- | ----- |  | -------- | 
|KUSD                                                                     |  | 12/31/11 |       |  | Utilization |  |       | Dissolution |  |  | Increase |  |  | Differences |       |  | 03/31/12 | 
|                                                                         |  |          |       |  |             |  |       |             |  |  |          |  |  |             |       |  |          | 
|Tax provision                                                            |  |          | 32    |  |             |  | 32    |             |  |  | 0        |  |  |             | 2     |  |          | 
|Salary                                                                   |  |          | 859   |  |             |  | 489   |             |  |  | 24       |  |  |             | 363   |  |          | 
|Vacation                                                                 |  |          | 439   |  |             |  | -55   |             |  |  | 30       |  |  |             | 79    |  |          | 
|Workers Compensation Insurance Association                               |  |          | 27    |  |             |  | -1    |             |  |  | 0        |  |  |             | 4     |  |          | 
|Compensation Levy for Non-Employment of Severely Handicapped
    Persons |  |          | 17    |  |             |  | 16    |             |  |  | 0        |  |  |             | 5     |  |          | 
|Outstanding Invoices                                                     |  |          | 882   |  |             |  | 626   |             |  |  | 60       |  |  |             | 722   |  |          | 
|Annual Financial Statement Costs                                         |  |          | 401   |  |             |  | 147   |             |  |  | 0        |  |  |             | 125   |  |          | 
|Other Provisions                                                         |  |          | 367   |  |             |  | 221   |             |  |  | 0        |  |  |             | 504   |  |          | 
|Warranties                                                               |  |          | 60    |  |             |  | 0     |             |  |  | 0        |  |  |             | 0     |  |          | 
|Gesture of Goodwill                                                      |  |          | 160   |  |             |  |       |             |  |  | 160      |  |  |             |       |  |          | 
|Provision for Legal Costs                                                |  |          | 71    |  |             |  | 0     |             |  |  | 0        |  |  |             | 0     |  |          | 
|Severance                                                                |  |          | 0     |  |             |  | 0     |             |  |  | 0        |  |  |             | 108   |  |          | 
|Total                                                                    |  |          | 3,314 |  |             |  | 1,475 |             |  |  | 274      |  |  |             | 1,913 |  |          | 



Tax accruals



As of the financial
statement date, provisions for taxation were created in the amount of 2 KUSD.



Provisions
for Salaries (724 KUSD) include the provisions created for the variable salaries of the sales staff for the sales objectives
reached in this business year.



Vacation
provisions (555 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 based on the gross salary of the individual employee plus the employer
contribution to social security and the unused vacation days as of the financial statement date.



Outstanding
Invoices - For liabilities not yet settled, a provision totaling 940 KUSD was created.



Annual Accounting
Costs - Expenses for preparing the annual financial statements and the consolidated financial statements, for the auditing
of the Company and consolidated financial statements were recognized at 382 KUSD.



Legal Expenses- A provision for anticipated legal consulting was 73 KUSD was recorded.



Warranties- For outstanding warranty claims, a provision of 61 KUSD was created depending on income from services.



31









GBS Enterprises Incorporated

as of March 31, 2012



Other provisionsfor accrued items include accruals of 406 KUSD (previous year: nil) for forward contracts entered into by Synaptris Private
Decisions Limited (See Note 10.) Also included in this category are gratuity obligations 67 KUSD (previous year: nil) for this
subsidiary.



| | Note 18 | OTHER
                                                                                          SHORT TERM LIABILITIES
| | ------- | ----------------------------------------------------------------------------------------------------------------------



Other short-term liabilities are
comprised of the following:



|                             |  | 03/31/12 |       |  | 12/31/11 | 
|---------------------------- |  | -------- | ----- |  | -------- | 
|Other Short-Term Liabilities |  | KUSD     |       |  | KUSD     | 
|Purchase Assets L911         |  |          | 1,100 |  |          | 
|Purchase Assets Fastworks    |  |          | 0     |  |          | 
|Purchase Assets Permessa     |  |          | 750   |  |          | 
|Purchase Assets Salesplace   |  |          | 0     |  |          | 
|Tax Liabilities              |  |          | 847   |  |          | 
|Purchase Archiving Software  |  |          | 333   |  |          | 
|Other Liabilities            |  |          | 88    |  |          | 
|                             |  |          | 3,120 |  |          | 



| | Note 19 | 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 11,111 KUSD (previous year: 9,674 KUSD) mainly include
maintenance income collected in advance for the period after the end of the fiscal year which primarily accumulated in the parent
company. They are amortized on a straight-line basis over the respective contract terms.



32









GBS Enterprises Incorporated

as of March 31, 2012



| | Note 20 | LIABILITIES
                                                                                           TO BANKS – LONG TERM
| | ------- | ---------------------------------------------------------------------------------------------------------------------------



Liabilities
to banks (3,887 KUSD; previous year: -0- KUSD) represent bank obligations of GROUP AG with Baden-Württembergische Bank with
a credit line totaling 4,000 KUSD (3,000 KEUR) and are collateralized by a silent blanket agreement for GROUP AG’s trade
receivables. 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, 2,000 KUSD (1,500 KEUR) is bearing interest at prime plus 1.5% and 2,000 KUSD (1,500 KEUR) is fixed
at 3.5%.



| | Note 21 | OTHER
                                                                                           LIABILITIES – LONG TERM
| | ------- | ------------------------------------------------------------------------------------------------------------------------



Other long-term liabilities are
made up of unsecured liabilities connected to the purchase of assets as follows:



|                            |  | 03/31/12 |       |  | 12/31/11 | 
|--------------------------- |  | -------- | ----- |  | -------- | 
|Other Long-Term Liabilities |  | KUSD     |       |  | KUSD     | 
|                            |  |          |       |  |          | 
|Purchase Assets L911        |  |          |       |  |          | 
|Purchase Shares GBS AG      |  |          |       |  |          | 
|Real Risk Ventures LLC      |  |          | 633   |  |          | 
|Related parties             |  |          | 669   |  |          | 
|Capital lease               |  |          | 118   |  |          | 
|                            |  |          | 1,419 |  |          | 



Expected payments over the next
5 fiscal years stated in KUSD.



|                           |  | Purchase
    Assets L911 |       |   | Purchase
    Assets  Permessa |  |       | Purchase
    Shares GBS AG | 
|-------------------------- |  | ------------------------ | ----- | - | ----------------------------- |  | ----- | -------------------------- | 
|                           |  |                          |       |   |                               |  |       |                            | 
|Interest                   |  |                          | 4.50  | % |                               |  | 0.00  | %                          | 
|                           |  |                          |       |   |                               |  |       |                            | 
|Expiration date            |  |                          |       |   |                               |  |       |                            | 
|2012                       |  |                          | 1,094 |   |                               |  | 1,900 |                            | 
|2013                       |  |                          |       |   |                               |  |       |                            | 
|2014                       |  |                          |       |   |                               |  |       |                            | 
|converted into Shares 2012 |  |                          | 2,266 |   |                               |  |       |                            | 
|Thereafter                 |  |                          |       |   |                               |  |       |                            | 
|Total                      |  |                          | 3,360 |   |                               |  | 1,900 |                            | 



33









GBS Enterprises Incorporated

as of March 31, 2012



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





Common stock belongs to
the legally purchasing company according to the principles of a Reverse Acquisition and therefore, the common stock is that of
GBS Enterprises Incorporated. The Company has authorized capital of 75,000,000 common shares and 25,000,000 preferred shares each
with a par value of $001. No preferred shares have been issued. As at September 30, 2012, there were 29,431,664 shares of common
stock outstanding. At the time of the Reverse Acquisition, there were 16,500,000 shares of common stock outstanding and, as the
Reverse Acquisition was accounted for as a recapitalization applied retroactively, this balance is recorded as the balance outstanding
since inception.





In March, 2011, the Company
consummated a private placement offering 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 $6,839,327.25.





34







GBS Enterprises Incorporated

as of March 31, 2012





On April 9, 2012, the Company
filed a Registration Statement on Form S-1 (File No: 333-180626) (the “Registration Statement”) therein registering
the 6,044,000 shares of Common Stock underlying the Private Placement Warrants and 2,020,000 underlying the Investor Warrants on
behalf of the selling stockholders named in the Registration Statement (the “Selling Stockholders”). As of the date
of this Form 10-Q, the Registration Statement has not been declared effective under the Securities Act by the SEC. The Company
is in the process of amending the Registration Statement in response to the SEC’s most recent comments regarding the first
amendment to the Registration Statement filed on July 19, 2012.



We will not receive any proceeds
from the sale of shares of Common Stock by the Selling Stockholders. We will, however, receive proceeds in the event the Private
Placement Warrants and Investor Warrants are exercised by the Selling Stockholders. As of the date of this Form 10-Q, the Selling
Stockholders have exercised an aggregate of 2,025,000 Private Placement Warrants and 900,000 Investor Warrants, for gross proceeds
of $3,487,500. If the outstanding 4,019,000 Private Placement Warrants and 1,120,000 Investor Warrants are exercised, we will receive
an aggregate of $6,588,500 in additional gross proceeds. However, there can be no assurance that any additional warrants will be
exercised. To date, we have used the proceeds of the warrants already exercised for general corporate working capital purposes.
We intend to use the proceeds from the exercise of any additional warrants for general corporate working capital purposes.



The number of shares of Common Stock issuable upon the exercise of the Private Placement Warrants and
Investor Warrants and corresponding exercise prices are subject to adjustment in the event of a stock split, dividend, recapitalization,
reclassification and otherwise. The Private Placement Warrants and Investor Warrants are only exercisable by the payment of cash.
Pursuant to the terms of the Private Placement Warrants and Investor Warrants, the warrant holders are required to exercise their
Warrants, in the event our Common Stock trades at an average of at least $3.00 per share for a period of not less than 20 consecutive
trading days. Also, throughout the three year exercise period of the Private Placement Warrants and Investor Warrants, the Company
has the right to redeem the Warrants for $0.05 per share.





35







GBS Enterprises Incorporated

as of March 31, 2012





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
to RealRisk Ventures, LLC (“RealRisk”) 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 RealRisk 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.



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. As of March 31, 2012, the Company
has not issued these 30,000 shares of common stock underlying under the units but such shares are deemed to be beneficially owned
by Mr. Ernst.





36







GBS Enterprises Incorporated

as of March 31, 2012





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.



On
August 13, 2012, the Company entered into a Note Purchase and Security Agreement with John A. Moore, a member of the Board of Directors
of the Company, and his spouse (collectively, the “Lender”) pursuant to which the Company sold a secured promissory
note (the “Note”) to the Lender in the aggregate principal amount of $1,000,000 bearing interest at a rate of 20% per
year and maturing on the first anniversary date of the issuance with a 2% prepayment penalty. To secure the obligations of the
Company under the Note, the Company granted the Lender a first priority security interest in the accounts receivable of the Company
and its subsidiaries located in the United States of America on a one-for-one (1:1) basis.



In connection
with the execution of the Loan Agreement, on August 13, 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 agreed to an Amendment to the Note in which the Lender agreed to convert
the interest due under the Note to shares of Company common stock to be issued at $0.30 per share. Subsequently the Lender was
issued 450,960 shares of Common Stock. 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.



Other changes in common
stock are disclosed in Note 24, Supplementary Cash Flow Disclosures.













37









GBS Enterprises Incorporated

as of March 31, 2012







Warrants and Options



The Company
has issued warrants to outside consultants in payments for services provided as detailed in the following schedule. The warrants
are issued as “cashless” warrants and all have a three-year term with the exception of the Ventana Capital Partners’
warrant which has a 30 month term. Each warrant is exercisable into one share of common stock. The warrants have been valued using
a Black-Scholes option pricing model with volatility, equity value and interest rate inputs noted below. The valuation of the
warrants issued in the year ending March 31, 2011 is for disclosure purposes only as the charge is related to the cost of issuing
the shares and there is no impact to the financial statements. The warrants issued on April 1, 2011, whose value was determined
to be $34,000, was included as compensation expense and credited to additional paid in capital in 2012. There are no stock options
issued by the Company to employees or other parties.



Black Scholes assumptions for warrants
issued were as follows:



|For the year ending March 31, 2011 - |               | For the year ending March 31, 2012
    - | 
|------------------------------------ | ------------- | ---------------------------------------- | 
|                                     |               |                                          | 
|Volatility -                         | 65.0% - 77.2% |                                          | 
|Risk free interest rate -            | 0.74% - 1.19% |                                          | 
|Expected life -                      | 2.5 - 3 years |                                          | 
|Dividend rate -                      | Nil           |                                          | 



38









GBS Enterprises Incorporated

as of March 31, 2012



|Summary of Warrants
    Issued: |  |                |           |  |                  |   |      |               |  |                                  |  |   |                                    | 
|------------------------------- |  | -------------- | --------- |  | ---------------- | - | ---- | ------------- |  | -------------------------------- |  | - | ---------------------------------- | 
|Outside Consultants             |  | Grant
    Size |           |  | Strike
    Price |   |      | Val.
    Date |  | Stock
    Value at Val.
    Date |  |   | Warrant
    Value at Val.
    Date | 
|Ventana Capital Partners        |  |                | 2,000,000 |  |                  | $ | 4.00 |               |  | 10/1/2010                        |  | $ | 0.03                               | 
|Frank J. Rena                   |  |                | 117,880   |  |                  | $ | 1.50 |               |  | 3/14/2011                        |  | $ | 0.91                               | 
|Garwood Securities, LLC         |  |                | 117,880   |  |                  | $ | 1.50 |               |  | 3/14/2011                        |  | $ | 0.91                               | 
|Jackson E. Spears               |  |                | 421,520   |  |                  | $ | 1.50 |               |  | 3/14/2011                        |  | $ | 0.91                               | 
|William Gregozeski              |  |                | 50,000    |  |                  | $ | 1.50 |               |  | 3/14/2011                        |  | $ | 0.91                               | 
|Frank J. Rena                   |  |                | 3,000     |  |                  | $ | 1.50 |               |  | 3/14/2011                        |  | $ | 0.91                               | 
|Garwood Securities, LLC         |  |                | 2,400     |  |                  | $ | 1.50 |               |  | 3/14/2011                        |  | $ | 0.91                               | 
|Jackson E. Spears               |  |                | 9,600     |  |                  | $ | 1.50 |               |  | 3/14/2011                        |  | $ | 0.91                               | 
|Ronald J. Everett               |  |                | 100,000   |  |                  | $ | 1.50 |               |  | 4/1/2011                         |  | $ | 0.91                               | 



|Common Stock Warrants                               |  | Common |           |  | Valuation |           | Fair Value Per |   |      | Warrants       | 
|--------------------------------------------------- |  | ------ | --------- |  | --------- | --------- | -------------- | - | ---- | -------------- | 
|Issued to Outside
    Consultants                   |  | Shares |           |  | Date      |           | Warrant        |   |      | Fair
    Value | 
|                                                    |  |        |           |  |           |           |                |   |      |                | 
|Common Stock Warrants
    issued on October 1, 2010 |  |        | 2,000,000 |  |           | 10/1/2010 |                | $ | 0.00 |                | 
|                                                    |  |        |           |  |           |           |                |   |      |                | 
|Common Stock Warrants issued on
    March 14, 2011  |  |        | 707,280   |  |           | 3/14/2011 |                | $ | 0.34 |                | 
|                                                    |  |        |           |  |           |           |                |   |      |                | 
|Common Stock Warrants Granted on
    March 24, 2011 |  |        | 15,000    |  |           | 3/24/2011 |                | $ | 0.34 |                | 
|                                                    |  |        |           |  |           |           |                |   |      |                | 
|Common Stock Warrants Granted on
    April 1, 2011  |  |        | 100,000   |  |           | 4/1/2011  |                | $ | 0.34 |                | 
|                                                    |  |        |           |  |           |           |                |   |      |                | 
|Total Warrants'
    Fair Value                      |  |        |           |  |           |           |                |   |      |                | 



None of these warrants have been
exercised.



As noted above,
through a private placement, the Company issued 6,044,000 warrants which allowed the holder to purchase one share of common stock
of the Company from the date of the grant until the third anniversary of the date of the grant for a purchase price of $1.50 per
share. During the year 2,925,000 warrants were exercised, leaving a balance of 3,199,000 that expire in March, 2014. A recap of
the warrants outstanding as at March 31, 2012 is as follows:



39









GBS Enterprises Incorporated

as of March 31, 2012



|Number of
    Warrants |  | Exercise
    price |   |      | Expiration date
|---------------------- |  | ------------------ | - | ---- | ---------------
|2,000,000              |  |                    | $ | 4.00 |                
|707,280                |  |                    | $ | 1.50 |                
|15,000                 |  |                    | $ | 1.50 |                
|3,199,000              |  |                    | $ | 1.50 |                
|100,000                |  |                    | $ | 1.50 |                



The weighted average exercise price
at March 31, 2011 was $2.07

The weighted average exercise price
at March 31, 2012 was $2.32



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



Gross revenue may be broken down
by the following products:



|                         |  | 03/31/12 |       |  | 03/31/11 |  |       | 12/31/11 | 
|------------------------ |  | -------- | ----- |  | -------- |  | ----- | -------- | 
|Sales Revenues           |  | KUSD     |       |  | KUSD     |  |       | KUSD     | 
|                         |  |          |       |  |          |  |       |          | 
|Licenses                 |  |          | 1,322 |  |          |  | 1,092 |          | 
|Maintenance              |  |          | 2,943 |  |          |  | 2,655 |          | 
|Partner Contribution     |  |          | 0     |  |          |  | 0     |          | 
|Service                  |  |          | 2,716 |  |          |  | 1,225 |          | 
|Third-Party Products     |  |          | 639   |  |          |  | 397   |          | 
|LND Third-Party Products |  |          | 1,089 |  |          |  | 285   |          | 
|Others                   |  |          | 22    |  |          |  | 23    |          | 
|                         |  |          |       |  |          |  |       |          | 
|                         |  |          | 8,731 |  |          |  | 5,676 |          | 



Revenues by geographic area for
the quarter ended March 31, 2012, March 31, 2011 and the year ended December 31, 2011 are as follows:



|Sales Revenues         |  | 03/31/12 |       |  | 03/31/11 |  |       | 12/31/11 | 
|---------------------- |  | -------- | ----- |  | -------- |  | ----- | -------- | 
|by geographic
    area |  | KUSD     |       |  | KUSD     |  |       | KUSD     | 
|                       |  |          |       |  |          |  |       |          | 
|US                     |  |          | 3,476 |  |          |  | 1,942 |          | 
|Germany                |  |          | 5,026 |  |          |  | 3,454 |          | 
|United Kingdom         |  |          | 229   |  |          |  | 280   |          | 
|Others                 |  |          | 0     |  |          |  | 0     |          | 
|                       |  |          |       |  |          |  |       |          | 
|                       |  |          | 8,731 |  |          |  | 5,676 |          | 



40









GBS Enterprises Incorporated

as of March 31, 2012



Long-lived
assets by geographic area, which primarily include property plant and equipment as at March 31, 2012, March 31, 2011 and the year
ended December 31, 2011 are as follows:



|Long-lived assets      |  | 03/31/12 |       |  | 03/31/11 |  |     | 12/31/11 | 
|---------------------- |  | -------- | ----- |  | -------- |  | --- | -------- | 
|by geographic
    area |  | KUSD     |       |  | KUSD     |  |     | KUSD     | 
|                       |  |          |       |  |          |  |     |          | 
|US                     |  |          | 1,409 |  |          |  | 103 |          | 
|Germany                |  |          | 280   |  |          |  | 241 |          | 
|United Kingdom         |  |          | 4     |  |          |  | 3   |          | 
|Others                 |  |          | 19    |  |          |  | 0   |          | 
|                       |  |          |       |  |          |  |     |          | 
|                       |  |          | 1712  |  |          |  | 347 |          | 



| | Note 24 | SUPPLEMENTAL
                                                                                           CASH FLOW DISCLOSURES
| | ------- | -----------------------------------------------------------------------------------------------------------------------------



The significant non-cash transactions
through the quarter ended March 31, 2012 were as follows:



| | a. | On May 10,
                                                           2010, the Company purchased Fastworks Assets for 1,305 KUSD. The Company
                                                           paid 502 KUSD upon signing and financed the balance. The balance is
                                                           disclosed in Notes 18 & 21, Other Liabilities.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b. | On September
                                                           17, 2010, the Company purchased Permessa Assets for 3,079 KUSD. The
                                                           Company paid 535 KUSD upon signing and financed the balance. The balance
                                                           is disclosed in Notes 19 & 23, Other Liabilities
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | c. | On September
                                                           22, 2010, the Company purchased Salesplace Assets for 3,341 KUSD. The
                                                           Company paid 1,332 KUSD upon signing and financed the balance. The
                                                           balance is disclosed in Note 19 & 23, Other Liabilities.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | d. | 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.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | e. | 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.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | f. | 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.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | g. | On September
                                                           27, 2011, the Company acquired SD Holdings Ltd for $525,529 and issued
                                                           612,874 shares of Common Stock.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | h. | 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.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



41









GBS Enterprises Incorporated

as of March 31, 2012



| | Note 25 | SUBSEQUENT
                                                                                           EVENTS
| | ------- | ------------------------------------------------------------------------------------------------------------



The following events happened after
March 31, 2012:



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.



On April 28,
2012, $ 632,500 in notes payable to related parties were converted into 550,000 common shares.



On April 30,
2012, $ 632,500 in notes payable to related parties were converted into 550,000 common shares.



On May 15,
2012 30,000 warrants were exercised into 30,000 common shares.



Effective June
1, 2012, Synaptris Private Decsions, Ltd. (subsidiary of SD Holdings, Ltd.) entered into a transfer agreement and is now operating
as GBS India Private, Ltd. The Company sold Synaptris, Inc. (subsidiary of SD Holdings, Ltd.) for a royalty fee of 380.4 KUSD.
In addition, a variable revenue based on earn out has been agreed upon with the buyer.





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.



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.





On July 8, 2012 Pavone, Ltd, as being a shell
company, was dissolved.





On October 26, 2012, GBS Enterprises
Incorporated (the “Company”) entered into a note purchase and security agreement (the “Loan Agreement”)
with Stephen D. Baksa (the “Lender”), a member of the board of directors of the Company. Pursuant to the Loan Agreement,
the Company issued a secured promissory note, dated October 26, 2012 (the “Note”), to the Lender in the aggregate
principal amount of $1,000,000, bearing an annual interest rate of 20% 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 Lender a first priority security interest in all of the
Company’s right, title and interest in and to the shares of IDC Global, Inc. 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.









42









GBS
Enterprises Incorporated

as
of March 31, 2012









On February
12, 2013 the Lender exercised the right to purchase 250,000 shares of common stock at the exercise price of $0.20.



In connection
with the Loan Agreement, on February 22, 2013, the Company agreed to an Amendment to the Note in which the Lender agreed to convert
the interest due under the Note to shares of Company common stock to be issued at $0.30 per share. Subsequently the Lender was
issued 200,000 shares of Common Stock. 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
October 29, 2012, the Company entered into a note purchase agreement (the “Intercompany Loan Agreement”) with Group
Business Software AG, a German public company and the Company’s 50.1% owned subsidiary (“GROUP”). Pursuant to
the Intercompany Loan Agreement, GROUP issued a promissory note, dated October 29, 2012 (the “GROUP Note”), to the
Company in the aggregate principal amount of $145,000, bearing an annual interest rate of 20% and maturing on the first anniversary
date of the date of issuance, without any penalty for prepayment. The Intercompany Loan Agreement contains restrictions that require
GROUP to use the proceeds of the GROUP Note solely (i) to pay the payroll of GROUP Business Software Corp., due October 29, 2012,
and (ii) for such other purposes as the parties to the Intercompany Loan Agreement may agree from time to time. The GROUP Note
contains customary provisions upon an Event of Default, as more fully described in the full text of the document.





On
November 14, 2012, GBS Enterprises Incorporated (the “Company”) entered into a note purchase agreement (the “Intercompany
Loan Agreement”) with Group Business Software AG, a German public company and the Company’s 50.1% owned subsidiary
(“GROUP”). Pursuant to the Intercompany Loan Agreement, GROUP issued a promissory note, dated November 14, 2012 (the
“GROUP Note”), to the Company in the aggregate principal amount of $227,018.20, bearing an annual interest rate of
20%and maturing on the first anniversary date of the date of issuance without any penalty for prepayment. The Intercompany Loan
Agreement contains restrictions that require GROUP to use the proceeds of the GROUP Note solely for the payment of certain trade
payables of GROUP and certain of its subsidiaries. The GROUP Note contains customary provisions upon an Event of Default, as more
fully described in the full text of the document.



43









GBS
Enterprises Incorporated

as
of March 31, 2012





On
November 30, 2012, the Company entered into a note purchase and security agreement (the “Loan Agreement”) with Pike
H. Sullivan (the “Lender”). Pursuant to the Loan Agreement, the Company issued a secured promissory note, dated November
30, 2012 (the “Note”), to the Lender in the aggregate principal amount of $500,000, bearing an annual interest rate
of 20% 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 Lender a first priority security interest in all of the Company’s right, title and interest in and to the shares of
IDC Global, Inc. 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 November 30, 2012, the Company issued the Lender a common stock purchase
warrant (the “Warrant”), pursuant to which the Lender is entitled to purchase 250,000 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 the Lender exercised the right to purchase 250,000 shares of common stock at the exercise price of $0.20.



On
November 30, 2012, the Company entered into a note purchase and security agreement (the “Loan Agreement”) with Edward
M. Giles (the “Lender”). Pursuant to the Loan Agreement, the Company issued a secured promissory note, dated November
30, 2012 (the “Note”), to the Lender in the aggregate principal amount of $500,000, bearing an annual interest rate
of 20% 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 Lender a first priority security interest in all of the Company’s right, title and interest in and to the shares of
IDC Global, Inc. 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 November 30, 2012, the Company issued the Lender a common stock purchase
warrant (the “Warrant”), pursuant to which the Lender is entitled to purchase 250,000 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 the Lender exercised the right to purchase 250,000 shares of common stock at the exercise price of $0.20.



On
February 1, 2013 IDC Global Inc. („IDC“), entered into a Stock Purchase Agreement, with Global Telecom & Technology
Americas, Inc., a Virginia corporation (“GTT”). GTT is a publicly traded (GTLT:OTC US) cloud network provider. Pursuant
to the Agreement, the Company sold 100% of the issued and outstanding shares of capital stock of IDC (the “IDC Shares”)
to GTT for an aggregate purchase price of $4,600,000 in cash.





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.



44







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 10-Q for the quarter ended March 31, 2012. 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 the Company 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.





The
Company’s Common Stock is quoted on the OTC Bulletin Board under the ticker symbol, “GBSX.”



Products
and Services



GBS
has grown by consolidating 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 through acquisition by targeting underperforming companies with complimentary operations and leveraging
GROUP’s expertise to turnaround and integrate these targets.

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 will 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.



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.



45







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 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 companies strategic and tactical advisory services for evaluating, planning, staffing and execution of any customer project.
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, 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.



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”, “cloud computing”) and migrated
Lotus applications; and thus ultimately 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-pending software
that underpins Modernizing/Migrating was developed by GBS with assistance and guidance from IBM Corporation’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.





46









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.



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
to 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 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.





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”) 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.



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 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.



47







Transactions
following the April 26, 2010 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 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 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.



Additional
Acquisitions



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.



Subsidiary
Companies



Pavone
AG





Effective
April 1, 2011, the Company acquired 100% of the outstanding common shares of Pavone AG, a German corporation (“Pavone”)
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 .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 (as
discussed below), 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.



48







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.



On February 1,
2013 IDC Global Inc. („IDC“), entered into a Stock Purchase Agreement, with Global Telecom & Technology Americas,
Inc., a Virginia corporation (“GTT”). GTT is a publicly traded (GTLT:OTC US) cloud network provider. Pursuant to the
Agreement, the Company sold 100% of the issued and outstanding shares of capital stock of IDC (the “IDC Shares”) to
GTT for an aggregate purchase price of $4,600,000 in cash.



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.



On April 1, 2012,
the Company sold SYN, Synaptris and Synaptris India to Lotus Holding, Ltd. for a purchase price of $1,877,232 in an effort to
restructure the Company’s multilevel subsidiary- structure derived from 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.



49







Competition





The competitive landscape in
the enterprise data center market is intense and changing, and we expect there will be a new class of very large, well-financed,
and aggressive competitors, each bringing its own new class of products to address this new market. We also expect to see acquisitions,
further industry consolidation, and new alliances among companies as they seek to serve the enterprise data center market.



The Company
is focused on developing a portfolio of modern software technologies and application services to address the needs of Independent
Software Vendors (ISV), data center and businesses of commercial and government organizations.





Results of
Operations



Assets:



Total Assets decreased
from $ 69,686,193 at December 31, 2011 to $69,266,259 at March 31, 2012.  Total Assets consists of Total Current Assets
and Total Non-Current Assets.



At
March 31, 2012, Total Current Assets were $ 10,278,211 as compared to $ 9,862,585 at December 31, 2011. Total Current Assets consist
of: Cash and Cash Equivalents; Accounts Receivable; Inventories; Prepaid Expenses; and Other Receivables.



| | n | Cash
                                                                                                                      and Cash
                                                                                                                      Equivalentsdecreased
                                                                                                                      from $ 3,250,821
                                                                                                                      at December
                                                                                                                      31, 2011
                                                                                                                      to $ 1,418,277
                                                                                                                      at March
                                                                                                                      31, 2012
                                                                                                                      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 the
                                                                                                                      resulting
                                                                                                                      losses in
                                                                                                                      operations.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | n | Accounts
                                                                                                                      Receivableincreased
                                                                                                                      from $ 4,886,788
                                                                                                                      at December
                                                                                                                      31, 2011
                                                                                                                      to $ 6,609,219
                                                                                                                      at March
                                                                                                                      31, 2012
                                                                                                                      due to increased
                                                                                                                      invoicing
                                                                                                                      in the area
                                                                                                                      of maintenance
                                                                                                                      billing.
                                                                                                                      GROUP increased
                                                                                                                      its accounts
                                                                                                                      receivables
                                                                                                                      by approx.
                                                                                                                      $1.7 million.
                                                                                                                      With $1.4
                                                                                                                      million
                                                                                                                      mainly in
                                                                                                                      the trade
                                                                                                                      receivables;
                                                                                                                      GBS Corp
                                                                                                                      by approx.
                                                                                                                      $700,000,
                                                                                                                      Pavone Groupware
                                                                                                                      GmbH by
                                                                                                                      approx.
                                                                                                                      $200,000
                                                                                                                      whereas
                                                                                                                      the accounts
                                                                                                                      receivables
                                                                                                                      of GBSX
                                                                                                                      increased
                                                                                                                      by $1.9
                                                                                                                      million
                                                                                                                      resulting
                                                                                                                      from the
                                                                                                                      sale of
                                                                                                                      the Companies
                                                                                                                      participation
                                                                                                                      in Synaptris
                                                                                                                      Holding.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | n | Inventoriesdecreased
                                                                                                                      from $ 236,712
                                                                                                                      at December
                                                                                                                      31, 2011
                                                                                                                      to $ 121,880
                                                                                                                      at March
                                                                                                                      31, 2012
                                                                                                                      from the
                                                                                                                      sale of
                                                                                                                      finished
                                                                                                                      goods (pdf
                                                                                                                      licenses)
                                                                                                                      within Pavone
                                                                                                                      Groupware
                                                                                                                      GmbH.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | n | Prepaid
                                                                                                                      Expensesincreased
                                                                                                                      from $444,147
                                                                                                                      at December
                                                                                                                      31, 2011
                                                                                                                      to $ 570,199
                                                                                                                      at March
                                                                                                                      31, 2012.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | n | Other
                                                                                                                                                      Receivables
                                                                                                                                                      increased
                                                                                                                                                      from
                                                                                                                                                      $
                                                                                                                                                      1,020,010
                                                                                                                                                      at
                                                                                                                                                      December
                                                                                                                                                      31,
                                                                                                                                                      2011
                                                                                                                                                      to
                                                                                                                                                      $
                                                                                                                                                      1,558,636
                                                                                                                                                      at
                                                                                                                                                      March
                                                                                                                                                      31,
                                                                                                                                                      2012.
                                                                                                                                                      The
                                                                                                                                                      largest
                                                                                                                                                      individual
                                                                                                                                                      item
                                                                                                                                                      under
                                                                                                                                                      other
                                                                                                                                                      receivables
                                                                                                                                                      represents
                                                                                                                                                      security
                                                                                                                                                      deposits
                                                                                                                                                      (approx.
                                                                                                                                                      $486,000).
                                                                                                                                                      Also
                                                                                                                                                      included
                                                                                                                                                      are
                                                                                                                                                      derivatives
                                                                                                                                                      used
                                                                                                                                                      for
                                                                                                                                                      hedging
                                                                                                                                                      (approx.
                                                                                                                                                      $405,000),
                                                                                                                                                      receivable
                                                                                                                                                      from
                                                                                                                                                      the
                                                                                                                                                      sale
                                                                                                                                                      of
                                                                                                                                                      GEDYS
                                                                                                                                                      IntraWare
                                                                                                                                                      GmbH
                                                                                                                                                      (approx.
                                                                                                                                                      $240,000),
                                                                                                                                                      tax
                                                                                                                                                      assets
                                                                                                                                                      (approx.
                                                                                                                                                      $
                                                                                                                                                      163,000),
                                                                                                                                                      warrant
                                                                                                                                                      payment
                                                                                                                                                      held
                                                                                                                                                      in
                                                                                                                                                      escrow
                                                                                                                                                      (approx.
                                                                                                                                                      $
                                                                                                                                                      238,000),
                                                                                                                                                      and
                                                                                                                                                      other
                                                                                                                                                      (approx.
                                                                                                                                                      $26,000.)
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



At
March 31, 2012, Total Non-Current Assets were $58,988,048 as compared to $59,823,608 at December 31, 2011.  Total Non-Current
Assets consist of: Property (plant and equipment), Non-Operating Receivables, Investments in Related Company, Deferred Tax Assets,
Goodwill, Software and Other Assets.



| | n | Net
                                                                                                                      Property
                                                                                                                      (plant and
                                                                                                                      equipment)increased
                                                                                                                      from $1,604,994
                                                                                                                      at December
                                                                                                                      31, 2011
                                                                                                                      to $ 1,711,821
                                                                                                                      at March
                                                                                                                      31, 2012
                                                                                                                      with additional
                                                                                                                      net investments
                                                                                                                      in depreciable
                                                                                                                      equipment
                                                                                                                      in IDC Global
                                                                                                                      (approx.
                                                                                                                      $140,000)
                                                                                                                      and Pavone
                                                                                                                      (approx.
                                                                                                                      $ 20,000)
                                                                                                                      with the
                                                                                                                      remainder
                                                                                                                      primarily
                                                                                                                      to charges
                                                                                                                      for depreciation
                                                                                                                      (approx.
                                                                                                                      $ 52,000).
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



nNon-Operating
Receivables slight decreased from $ 548,909 at December 31, 2011 to $ 545,391 at March 31, 2012.



| | n | Investments
                                                                                                                      in Related
                                                                                                                      Companyincreased
                                                                                                                      from $ 244,219
                                                                                                                      at December
                                                                                                                      31, 2011
                                                                                                                      to $ 265,438
                                                                                                                      at March
                                                                                                                      31, 2012.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | n | Deferred
                                                                                                                      Tax Assetsincreased
                                                                                                                      from $ 3,945,272
                                                                                                                      at December
                                                                                                                      31, 2011
                                                                                                                      to $4,588,618
                                                                                                                      at March
                                                                                                                      31, 2012
                                                                                                                      and consisted
                                                                                                                      of Deferred
                                                                                                                      Tax Assets
                                                                                                                      derived
                                                                                                                      from financial
                                                                                                                      assets and
                                                                                                                      losses carried
                                                                                                                      forward.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | n | Goodwilldecreased
                                                                                                                      from $39,221,603
                                                                                                                      at December
                                                                                                                      31, 2011
                                                                                                                      to $37,423,843
                                                                                                                      at March
                                                                                                                      31, 2012
                                                                                                                      and consisted
                                                                                                                      of the goodwill
                                                                                                                      associated
                                                                                                                      with eight
                                                                                                                      business
                                                                                                                      entities.
                                                                                                                      Decreases
                                                                                                                      were mainly
                                                                                                                      from a reduction
                                                                                                                      for negative
                                                                                                                      goodwill
                                                                                                                      for $ 1,702,208
                                                                                                                      as described
                                                                                                                      more fully
                                                                                                                      in Note
                                                                                                                      12 of the
                                                                                                                      Financial
                                                                                                                      Statements.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



50







| | n | Softwareincreased
                                                                                                                      from $14,258,610
                                                                                                                      at December
                                                                                                                      31, 2011
                                                                                                                      to $ 14,300,067
                                                                                                                      at March
                                                                                                                      31, 2012,
                                                                                                                      as a result
                                                                                                                      of the quarterly
                                                                                                                      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
                                                                                                                      Assetsincreased
                                                                                                                      from $ nil
                                                                                                                      at December
                                                                                                                      31, 2011
                                                                                                                      to $ 152,872
                                                                                                                      at March
                                                                                                                      31, 2012.
                                                                                                                      This category
                                                                                                                      includes
                                                                                                                      rent deposits.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Liabilities:



Total Liabilities
increased from $ 26,049,451 at December 31, 2011 to $ 27,673,077 at March 31, 2012.  Total Liabilities consists of Total
Current Liabilities and Total Non-Current Liabilities.



At
March 31, 2012, Total Current Liabilities were $ 21,138,583 compared to $ 19,058,394 at December 31, 2011.  Total Current
Liabilities consist of Liabilities to Banks, Accounts Payable and Accrued Liabilities, Deferred Income, Other Liabilities and
Amounts Due to Related Parties.



| | n | Notes
                                                                                                                      Payabledecreased
                                                                                                                      from $1,381,821
                                                                                                                      at December
                                                                                                                      31, 2011
                                                                                                                      to $ nil
                                                                                                                      at March
                                                                                                                      31, 2012.
                                                                                                                      $1,702 was
                                                                                                                      converted
                                                                                                                      into shares
                                                                                                                      of GROUP
                                                                                                                      with the
                                                                                                                      balance
                                                                                                                      being repaid
                                                                                                                      in cash
                                                                                                                      in January
                                                                                                                      2012.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | n | Liabilities
                                                                                                                      to Banksdecreased
                                                                                                                      from $19,595
                                                                                                                      at December
                                                                                                                      31, 2011
                                                                                                                      to $ 11,202
                                                                                                                      at March
                                                                                                                      31, 2012
                                                                                                                      and included
                                                                                                                      a line of
                                                                                                                      credit,
                                                                                                                      and cash
                                                                                                                      in transit.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | n | Accounts
                                                                                                                      Payable
                                                                                                                      and Accrued
                                                                                                                      Liabilitiesdecreased
                                                                                                                      from $6,872,665
                                                                                                                      at December
                                                                                                                      31, 2011
                                                                                                                      to $ 6,844,132
                                                                                                                      at March
                                                                                                                      31, 2012.
                                                                                                                      This includes
                                                                                                                      trades payables
                                                                                                                      (approx.
                                                                                                                      $2,800,000),
                                                                                                                      other accruals
                                                                                                                      (approx.
                                                                                                                      $3,540,000)
                                                                                                                      and short-term
                                                                                                                      loan (approx.
                                                                                                                      $500,000).
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | n | Deferred
                                                                                                                      Incomeincreased
                                                                                                                      from $6,476,582
                                                                                                                      at December
                                                                                                                      31, 2011
                                                                                                                      to $ 11,111,295
                                                                                                                      at March
                                                                                                                      31, 2012
                                                                                                                      encompassing
                                                                                                                      maintenance
                                                                                                                      income collected
                                                                                                                      in advance
                                                                                                                      with a minor
                                                                                                                      decrease
                                                                                                                      related
                                                                                                                      to contracts
                                                                                                                      for annual
                                                                                                                      services
                                                                                                                      which were
                                                                                                                      billed to
                                                                                                                      customers
                                                                                                                      in advance.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | n | Other
                                                                                                                      Liabilitiesof $4,256,410
                                                                                                                      at December
                                                                                                                      31, 2011
                                                                                                                      decreased
                                                                                                                      to $ 3,119,501
                                                                                                                      at March
                                                                                                                      31, 2012
                                                                                                                      and includes
                                                                                                                      amounts
                                                                                                                      due for
                                                                                                                      purchased
                                                                                                                      software,
                                                                                                                      purchased
                                                                                                                      companies
                                                                                                                      (Permessa)
                                                                                                                      and business
                                                                                                                      technology
                                                                                                                      (ebVokus),
                                                                                                                      short term
                                                                                                                      loans, and
                                                                                                                      tax liabilities.
                                                                                                                      Decrease
                                                                                                                      was primarily
                                                                                                                      related
                                                                                                                      to the payment
                                                                                                                      made to
                                                                                                                      the shareholders
                                                                                                                      of Permessa
                                                                                                                      Corporation
                                                                                                                      for the
                                                                                                                      initial
                                                                                                                      purchase
                                                                                                                      of this
                                                                                                                      entity ($1,150,000,
                                                                                                                      remaining
                                                                                                                      amount due:
                                                                                                                      $750,000).
                                                                                                                      Increases
                                                                                                                      included
                                                                                                                      payments
                                                                                                                      currently
                                                                                                                      due for
                                                                                                                      acquired
                                                                                                                      assets (approx.
                                                                                                                      $1,450,000)
                                                                                                                      and tax
                                                                                                                      liabilities
                                                                                                                      (approx.
                                                                                                                      $847,000).
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | n | Amounts
                                                                                                                      Due to Related
                                                                                                                      Partiesremained
                                                                                                                      on the same
                                                                                                                      level and
                                                                                                                      slightly
                                                                                                                      increased
                                                                                                                      from $ 51,321
                                                                                                                      at December
                                                                                                                      31, 2011
                                                                                                                      to $ 52,453
                                                                                                                      at March
                                                                                                                      31, 2012
                                                                                                                      and includes
                                                                                                                      amounts
                                                                                                                      due to associated
                                                                                                                      companies.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



At
March 31, 2012, our Total Non-Current Liabilities were $6,534,494 compared to $ 6,991,056 at December 31, 2011.  Total
Non-Current Liabilities consist of Liabilities to Banks, Deferred Tax Liabilities, Retirement Benefit Obligation, and Other Liabilities.



| | n | Liabilities
                                                                                                                      to Banksincreased
                                                                                                                      from $ 3,463,483
                                                                                                                      at December
                                                                                                                      31, 2011
                                                                                                                      to $ 3,886,791
                                                                                                                      at March
                                                                                                                      31, 2012
                                                                                                                      and consisted
                                                                                                                      of a long-term
                                                                                                                      business
                                                                                                                      line of
                                                                                                                      credit due
                                                                                                                      to the Baden-Württembergische
                                                                                                                      Bank.  The
                                                                                                                      increase
                                                                                                                      is due to
                                                                                                                      the funding
                                                                                                                      of expenditures
                                                                                                                      consistent
                                                                                                                      with the
                                                                                                                      advancement
                                                                                                                      of our technology,
                                                                                                                      the associated
                                                                                                                      costs necessary
                                                                                                                      to build
                                                                                                                      and implement
                                                                                                                      the go to
                                                                                                                      market strategy
                                                                                                                      and the
                                                                                                                      resulting
                                                                                                                      losses in
                                                                                                                      operations.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | n | Deferred
                                                                                                                      Tax Liabilitiesdecreased
                                                                                                                      from $ 1,196,472
                                                                                                                      at December
                                                                                                                      31, 2011
                                                                                                                      to $1,169,549
                                                                                                                      at March
                                                                                                                      31, 2012
                                                                                                                      resulting
                                                                                                                      from the
                                                                                                                      deferred
                                                                                                                      taxes associated
                                                                                                                      with the
                                                                                                                      capitalization
                                                                                                                      of software
                                                                                                                      expenses,
                                                                                                                      the purchase
                                                                                                                      price allocation
                                                                                                                      of acquired
                                                                                                                      assets,
                                                                                                                      and the
                                                                                                                      temporary
                                                                                                                      adjustment
                                                                                                                      of depreciation.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | n | Retirement
                                                                                                                      Benefit
                                                                                                                      Obligationincreased
                                                                                                                      from $57,364
                                                                                                                      at December
                                                                                                                      31, 2011
                                                                                                                      to $ 59,087
                                                                                                                      at March
                                                                                                                      31, 2012.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | n | Other
                                                                                                                      Liabilitiesdecreased
                                                                                                                      from $ 2,273,737
                                                                                                                      at December
                                                                                                                      31, 2011
                                                                                                                      to $ 1,419,067
                                                                                                                      at March
                                                                                                                      31, 2012.
                                                                                                                      The decrease
                                                                                                                      resulted
                                                                                                                      from a debt
                                                                                                                      to equity
                                                                                                                      conversion
                                                                                                                      in GROUP
                                                                                                                      in the amount
                                                                                                                      of $2,266,075.
                                                                                                                      Increases
                                                                                                                      in the capital
                                                                                                                      leases of
                                                                                                                      IDC Global,
                                                                                                                      Inc. (approx.
                                                                                                                      $118,000),
                                                                                                                      related
                                                                                                                      party loan
                                                                                                                      of approx.
                                                                                                                      $670,000
                                                                                                                      and a loan
                                                                                                                      for the
                                                                                                                      acquisition
                                                                                                                      of additional
                                                                                                                      shares in
                                                                                                                      Group Business
                                                                                                                      Software
                                                                                                                      AG as further
                                                                                                                      described
                                                                                                                      in Note
                                                                                                                      21.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 



51









Revenues



For
the quarter ended March 31, 2012, our Net Sales increased to $ 8,730,902 from $5,676,430 from the quarter ended March 31, 2011.



Product
revenue increased from $4,451,106 to $6,014,963 in the three-months ended March 31, 2012 as compared to the prior year period
as a result of an increase from Third Party Products with an increase in revenue licenses also contributing.



Service
revenue increased from $1,225,324 to $2,715,939 in the three-months ended March 31, 2012 as compared to the prior year period
generated primarily from the service revenue associated with the recently acquired IDC Global, Inc. and Pavone Groupware GmbH.



The
total revenue from IDC’s data center services was approx. $1.4 million, and GROUP contributed with an increased revenue
of approximately $800,000.The total revenue in GBS Corp. increased by $0.2 million and PavoneGroupware GmbH contributed approx.
$0.7 million.



Cost of Goods
Sold



For
the quarter ended March 31, 2012, Cost of Goods Sold increased to $5,256,615 from $2,589,348 during the quarter ended March 31,
2011.  Cost of Goods Sold consists of Cost for Services, Cost for Third-Party Products and Cost for Software Licenses.



Within
Cost of Goods Sold there was an increase of $1,811,612 in the three-months ended March 31, 2012 as compared to the prior year
period for costs related to the products division of Revenue and an increase of $855,655 in the three-months ended March 31, 2012
as compared to the prior year period for the associated costs within the services division of Revenue. Of these, increases were
in the categories of materials ($1.8 million), operating costs (approx. $400,000) and capitalized development costs (approx. $100,000).
These increases were primarily associated with the acquisitions of PavoneGroupware GmbH and IDC Global, Inc., and additional material
costs incurred through GROUP AG. Personnel costs increased (approx. $400,000) and amortization increased ($200,000) in the three-months
ended March 31, 2012 as compared to the prior year period.



Operating Expenses



For
the quarter ended March 31, 2012, Operating Expenses increased to $6,543,936 from $5,270,756 during the quarter ended March 31,
2011.  Operating Expenses consist of Selling Expenses, Administrative Expenses and General Expenses.



For
the quarter ended March 31, 2012, Selling Expenses increased to $4,694,304 from $3,663,474 during the quarter ended March 31,
2011.  This increase was primarily attributable to increases in personnel expenses of approx. $900,000 and an increase in
service expenses of approx. $150,000.



For
the quarter ended March 31, 2012, Administrative Expenses increased to $1,614,414 from $1,399,146 for the quarter ended March
31, 2011.  Administrative Expenses consist of costs for the management and administration units. Within this increase
approx. $200,000 is related to operating expenses. The operating expenses increased by approx.. $130,000 in the categories of
external services and by approx. $90,000 in insurances. Travel expenses including expenses for cars decreased by approx. $100,000.



For
the quarter ended March 31, 2012, General Expenses slightly increased to $235,218 from $208,135 for the quarter ended March 31,
2011. General expenses consist of costs for communication (approx. $100,000), costs for insurance (approx. $60,000), bank charges
(approx. 50,000) and other costs.



Other Income
(Expense)



For
the quarter ended March 31, 2012, Other Income of $54,819 increased from Other expenses of $658,569 for the quarter ended March
31, 2011. This includes income from investments of associated companies and other income.



Interest Income
(Expense)



For
the quarter ended March 31, 2012, interest expenses of $56,275 increased from interest expenses of $99,723 for the quarter ended
March 31, 2011.





52







Liquidity
& Capital Resources



At
March 31, 2012 the Company had $1,418,277 in cash and cash equivalents, compared to $ 3,250,821 at December 31, 2011.



In
March 2011, the Company consummated a private placement offering 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 number of shares of Common Stock issuable upon the exercise of the Private Placement Investor Warrants and corresponding exercise
prices are subject to adjustment in the event of a stock split, dividend, recapitalization, reclassification and otherwise. The
Private Placement Warrants are only exercisable by the payment of cash. Pursuant to the terms of the Private Placement Warrants,
the warrant holders are required to exercise their Private Placement Warrants in the event our Common Stock trades at an average
of at least $3.00 per share for a period of not less than 20 consecutive trading days. Also, throughout the three year exercise
period of the Private Placement Warrants, the Company has the right to redeem the Warrants for $0.05 per share.



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 (the “Investor Warrants”). 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.



On
April 9, 2012, the Company filed a Registration Statement on Form S-1 (File No: 333-180626) (the “Registration Statement”)
therein registering the 6,044,000 shares of Common Stock underlying the Private Placement Warrants and 2,020,000 underlying the
Investor Warrants on behalf of the selling stockholders named in the Registration Statement (the “Selling Stockholders”).
As of the date of this Form 10-Q, the Registration Statement has not been declared effective under the Securities Act by the SEC.
The Company is in the process of amending the Registration Statement in response to the SEC’s most recent comments regarding
the first amendment to the Registration Statement filed on July 19, 2012.



The
Company will not receive any proceeds from the sale of shares of Common Stock by the Selling Stockholders. It will, however, receive
proceeds in the event the Private Placement Warrants and Investor Warrants are exercised by the Selling Stockholders. As of the
date of this Form 10-Q, the Selling Stockholders have exercised an aggregate of 2,025,000 Private Placement Warrants and 900,000
Investor Warrants, for gross proceeds of $3,487,500. If the outstanding 4,019,000 Private Placement Warrants and 1,120,000 Investor
Warrants are exercised, the Company will receive an aggregate of $6,588,500 in additional gross proceeds. However, there can be
no assurance that any additional warrants will be exercised. To date, we have used the proceeds of the warrants already exercised
for general corporate working capital purposes. We intend to use the proceeds from the exercise of any additional warrants for
general corporate working capital purposes.



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 to RealRisk Ventures, LLC (“RealRisk”) were converted into 550,000 shares
of common stock and into a warrant as described below. On February 22, 2012, the Company had issued a Convertible Promissory Note
(the “RealRisk Note”) to RealRisk in the principal amount of $632,500 bearing interest at the rate of 4.5% per year
and maturing on June 30, 2012. The Company issued the RealRisk 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. The outstanding principal and interest
under the RealRisk Note was convertible by the holder thereof into shares of the Company’s Common Stock at a rate of $1.15
per share prior to May 15, 2012. Under the RealRisk Note, if the holder converted such note prior to May 1, 2012, the Company
would issue the holder a warrant to purchase 550,000 shares of the Company’s Common Stock for a period commencing on the
date of issuance until the third anniversary date of the date of issuance for $1.75 per share.



On
April 30, 2012, $ 632,500 in notes payable to Lotus Holdings Ltd. (“Lotus Holdings”) were converted into 550,000 shares
of common stock and into a warrant as described below. On January 5, 2012, the Company had issued a Convertible Promissory Note
(the “Lotus Note”) to Lotus Holdings for the principal amount of $500,000 bearing interest at the rate of 4.5% per
year and maturing on June 30, 2012. 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. The outstanding principal and interest
under the Lotus Note was convertible by the holder thereof into shares of the Company’s Common Stock at a rate of $1.15
per share prior to May 15, 2012. Under the Lotus Note, if the holder converted such note prior to May 1, 2012, the Company would
issue the holder a warrant to purchase 500,000 shares of the Company’s Common Stock for a period commencing on the date
of issuance until the third anniversary date of the date of issuance for $1.75 per share.







53









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 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.
As of March 31, 2012, the Company has not issued these 30,000 shares of Common Stock underlying under the Units but such shares
are deemed to be beneficially owned by Mr. Ernst.



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.



On August 13, 2012,
the Company entered into a Note Purchase and Security Agreement with John A. Moore, a member of the Board of Directors of the
Company, and his spouse (collectively, the “Lender”) pursuant to which the Company sold a secured promissory note
(the “Note”) to the Lender in the aggregate principal amount of $1,000,000 bearing interest at a rate of 20% per year
and maturing on the first anniversary date of the issuance with a 2% prepayment penalty. To secure the obligations of the Company
under the Note, the Company granted the Lender a first priority security interest in the accounts receivable of the Company and
its subsidiaries located in the United States of America on a one-for-one (1:1) basis.



In connection with
the execution of the Loan Agreement, on August 13, 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 agreed to an Amendment to the Note in which the Lender agreed to convert
the interest due under the Note to shares of Company common stock to be issued at $0.30 per share. Subsequently the Lender was
issued 450,960 shares of Common Stock. 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.



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



|                                                                           |  | Quarter Ended |            |   | Quarter Ended |  
|-------------------------------------------------------------------------- |  | ------------- | ---------- | - | ------------- | -
|                                                                           |  | March 31,     |            |   | March 31,     |  
|                                                                           |  | 2012          |            |   | 2011          |  
|Net cash provided
    (used in) Operating Activities                       |  | $             | (1,919,315 | ) |               | $
|Net cash provided by (used in) Investing
    Activities                    |  | $             | 511,148    |   |               | $
|Net cash provided (used in) by Financing
    Activities                    |  | $             | (389,964   | ) |               | $
|Effect of exchange rate changes on
    cash                                |  | $             | (34,414    | ) |               | $
|Net increase (decrease) in cash and
    cash equivalents during the period |  | $             | (1,832,544 | ) |               | $
|Cash and cash equivalents, beginning
    of period                         |  | $             | 3,250,821  |   |               | $
|                                                                           |  |               |            |   |               |  
|Cash and cash equivalents, end of period                                   |  | $             | 1,418,277  |   |               | $



Cash Flows



Net Cash used by operating activities
for the three month period ending March 31, 2012 was approximately $1.9 million compared to net cash provided by operating activities
for the three month period ending March 31, 2011 of approximately $ 2.8 million. This change is primarily due to an increased
change in depreciation and amortization with a total of $1.7 million for the period ended March 31, 2012 compared to a change
in depreciation and amortization with a total of $ 4.0 million for the three month period ending March 31, 2011. The cash provided
in investing activities during the three month period ending March 31, 2012 was approximately $0.5 million, compared to cash used
in investing activities in the comparative period ending March 31, 2011 of approximately $2.9 million. This increase was primarily
resulting from the reduction of goodwill of approximately $1.8 million and that no new investments were made in new businesses
during the three month period ending March 31, 2012. Net cash provided by financing activities decreased from approximately $7.5
million for the three month period ended March 31, 2011 to net cash used in financing activities by approximately $0.4 million
for the three month period ended March 31, 2012. The decrease was primarily due to increase in loan to banks of approximately
$0.4 million and a decrease from a debt to equity swap of $1.4 million in GROUP Business Software AG.





54







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 and small net actuarial losses
on pension plans.



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.



55







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.



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.





56







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.



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.





57









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.



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.





58







Item
3.  Quantitative and Qualitative Disclosures about Market Risk.



None



Item
4.  Controls and Procedures.



Under the
supervision of and with the participation of our management, including our principal executive officer and the principal financial
officer, we have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures,
as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
as of March 31, 2012.



Following the conclusion
that our control procedures were not effective as of September 30, 2012, the Company took a number of steps to ensure adequate
disclosure controls and procedures were in place after September 30, 2012.



On March 31st, 2012
an Audit Committee was established comprised of members from our Board of Directors, the purpose of which is to assist the Board
in fulfilling its responsibility to oversee the conduct and integrity of the Company’s financial reports. The Committee
is made up of highly qualified individuals serving on the Company’s Board of Directors.



The duties of the Audit
Committee include, but are not limited to, ensuring that the Company maintains adequate internal control structures, monitoring
relevant aspects of compliance, review and assessment of any potentially significant legal matters facing the Company, the appointment
and monitoring of an independent auditor, and final review of the independently audited financial statements. The Audit Committee
reports any and all findings to the Company’s Board of Directors, which maintains all final decision making authority regarding
any of the aforementioned activities



These directors have
met on June 12th, 2012, August 16th, 2012, and November 13th, 2012. The purpose of these meetings
included, along with the above listed activities, drafting and presenting to the Board for ratification an Audit Committee charter,
and to ensure that all duties tasked to the Committee have been fulfilled.



On September
19, 2012, the Board of Directors of the Company changed the Company’s fiscal year end from March 31 to December 31, beginning
December 31, 2012.



We concluded
that our control procedures were not effective as of September 30, 2012 for the following reasons; we did not disclose that the
changes to our previously published financial statements were simply a restatement of those financial statements, we did not disclose
the details of the restatement as required by ASC 250, nor did we disclose whether any change occurred in our internal control
over financial reporting during the fiscal quarter ended September 30, 2012.



Subsequent
Events



On October 26,
2012, the Company entered into a note purchase and security agreement (the “Loan Agreement”) with Stephen D. Baksa
(the “Lender”), a member of the board of directors of the Company. Pursuant to the Loan Agreement, the Company issued
a secured promissory note, dated October 26, 2012 (the “Note”), to the Lender in the aggregate principal amount of
$1,000,000, bearing an annual interest rate of 20% 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 Lender a first priority security interest in all of the Company’s right,
title and interest in and to the shares of IDC Global, Inc. 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 the Lender exercised the right to purchase 250,000 shares of common stock at the exercise price of $0.20.



In connection with
the Loan Agreement, on February 22, 2013, the Company agreed to an Amendment to the Note in which the Lender agreed to convert
the interest due under the Note to shares of Company common stock to be issued at $0.30 per share. Subsequently the Lender was
issued 200,000 shares of Common Stock. 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.





59







On
October 29, 2012, the Company entered into a note purchase agreement (the “Intercompany Loan Agreement”) with GROUP.
Pursuant to the Intercompany Loan Agreement, GROUP issued a promissory note, dated October 29, 2012 (the “GROUP Note”),
to the Company in the aggregate principal amount of $145,000, bearing an annual interest rate of 20% and maturing on the first
anniversary date of the date of issuance, without any penalty for prepayment. The Intercompany Loan Agreement contains restrictions
that require GROUP to use the proceeds of the GROUP Note solely (i) to pay the payroll of GROUP Business Software Corp., due October
29, 2012, and (ii) for such other purposes as the parties to the Intercompany Loan Agreement may agree from time to time. The
GROUP Note contains customary provisions upon an Event of Default, as more fully described in the full text of the document.







On November 14,
2012, GBS Enterprises Incorporated (the “Company”) entered into a note purchase agreement (the “Intercompany
Loan Agreement”) with Group Business Software AG, a German public company and the Company’s 50.1% owned subsidiary
(“GROUP”). Pursuant to the Intercompany Loan Agreement, GROUP issued a promissory note, dated November 14, 2012 (the
“GROUP Note”), to the Company in the aggregate principal amount of $227,018.20, bearing an annual interest rate of
20%and maturing on the first anniversary date of the date of issuance, without any penalty for prepayment. The Intercompany
Loan Agreement contains restrictions that require GROUP to use the proceeds of the GROUP Note solely for the payment of certain
trade payables of GROUP and certain of its subsidiaries. The GROUP Note contains customary provisions upon an Event of Default,
as more fully described in the full text of the document.



On November 30,
2012, the Company entered into a note purchase and security agreement (the “Loan Agreement”) with Pike H. Sullivan
(the “Lender”). Pursuant to the Loan Agreement, the Company issued a secured promissory note, dated November 30, 2012
(the “Note”), to the Lender in the aggregate principal amount of $500,000, bearing an annual interest rate of 20%
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 Lender a first priority security interest in all of the Company’s right, title and interest in and to the shares of
IDC Global, Inc. 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 November 30, 2012, the Company issued the Lender a common stock purchase
warrant (the “Warrant”), pursuant to which the Lender is entitled to purchase 250,000 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 the Lender exercised the right to purchase 250,000 shares of common stock at the exercise price of $0.20.



On November 30,
2012, the Company entered into a note purchase and security agreement (the “Loan Agreement”) with Edward M. Giles
(the “Lender”). Pursuant to the Loan Agreement, the Company issued a secured promissory note, dated November 30, 2012
(the “Note”), to the Lender in the aggregate principal amount of $500,000, bearing an annual interest rate of 20%
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 Lender a first priority security interest in all of the Company’s right, title and interest in and to the shares of
IDC Global, Inc. 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 November 30, 2012, the Company issued the Lender a common stock purchase
warrant (the “Warrant”), pursuant to which the Lender is entitled to purchase 250,000 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 the Lender exercised the right to purchase 250,000 shares of common stock at the exercise price of $0.20.



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.





60









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.



In
connection with a note purchase and security agreement, the Company issued John A. Moore, a member of the Board of Directors of
the Company and his wife a warrant to purchase 100,000 shares of common stock of the Company. The warrant and related transactions
are described in the Company’s Form 8-K filed August 16, 2012.



Item 3. Defaults
Upon Senior Securities.



None.



Item 4. Mine
Safety Disclosures.



Not applicable



Item
5. Other Information.



Item
6. Exhibits.



|No.     |  | Description                                                                                 
|------- |  | --------------------------------------------------------------------------------------------
|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 |  | XBRL Instance Document                                                                      
|        |  |                                                                                             
|101.SCH |  | XBRL Taxonomy Extension Schema Document                                                     
|        |  |                                                                                             
|101.CAL |  | XBRL Taxonomy Extension Calculation Linkbase Document                                       
|        |  |                                                                                             
|101.LAB |  | XBRL Taxonomy Extension Labels Linkbase Document                                            
|        |  |                                                                                             
|101.DEF |  | XBRL Taxonomy Extension Definition Linkbase Document                                        
|        |  |                                                                                             
|101.PRE |  | XBRL Taxonomy Extension Presentation Linkbase Document                                      



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



61







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: March 29, 2013 | By:                                         
|                     | Gary D. MacDonald                           
|                     | Interim Chief Executive Officer             
|                     | (Principal Executive Officer)               
|                     |                                             
|Date: March 29, 2013 | By:                                         
|                     | Markus R. Ernst                             
|                     | Chief Financial Officer                     
|                     | (Principal Financial and Accounting Officer)





62