UNITED STATES

SECURITIES
AND EXCHANGE COMMISSION

Washington,
D.C. 20549



FORM
10-Q/A

(Amendment No. 3)



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



For the quarterly period ended:June
30, 2011



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



Commission File Number:000-53223



GBS
ENTERPRISES INCORPORATED

(Exact name of
registrant as specified in its charter)



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



(404) 891-1711

(Registrant’s telephone number, including
area code)



With a copy to:

Philip Magri, Esq.

The Magri Law Firm, PLLC

11 Broadway, Suite 615

New York, NY 10004

T: (646) 502-5900

F: (646) 826-9200

pmagri@magrilaw.com

www.MagriLaw.com



N/A

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





Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.



Yes  ̈      No x



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



Yes  ̈      No x



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 company x



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 July 15, 2013, there were 30,812,624 shares
of common stock, par value $0.001 per share, of the Registrant issued and outstanding.











|           | TABLE OF CONTENTS                                                                     |         
|---------- | ------------------------------------------------------------------------------------- | --------
|           |                                                                                       | Page No:
|           | PART I - FINANCIAL INFORMATION                                                        |         
|Item 1.    | Financial Statements                                                                  | 4       
|Item 2.    | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 43      
|Item 3.    | Quantitative and Qualitative Disclosures About Market Risk                            | 55      
|Item 4.    | Controls and Procedures                                                               | 55      
|           |                                                                                       |         
|           | PART II - OTHER INFORMATION                                                           |         
|Item 1.    | Legal Proceedings                                                                     | 55      
|Item 1A.   | Risk Factors                                                                          | 55      
|Item 2.    | Unregistered Sales of Equity Securities and Use of Proceeds                           | 55      
|Item 3.    | Defaults Upon Senior Securities                                                       | 55      
|Item 5.    | Other Information                                                                     | 56      
|Item 6.    | Exhibits                                                                              | 58      
|Signatures |                                                                                       | 59      



2







EXPLANATORY NOTE





The Company is filing this Amendment No. 3 to its Form 10Q for the fiscal quarter ended June 30, 2011
originally filed with the Securities and Exchange Commission on August 19, 2011 (the “Original Filing”) and subsequently
amended on September 14, 2011, and March 23, 2012. As previously reported by the Company on a Form 8-K filed with the Commission
on September 20, 2012, on September 19, 2012, the Company changed its fiscal year end from March 31st to December 31st,
commencing on December 31, 2012. Prior to this change, the Company’s subsidiaries, with the exception of SD Holdings, Ltd.
had a December 31st fiscal year end and in reporting the Company’s financial statements, the Company, incorrectly
applied of Rule 3A-02 (“the 93-day rule”) promulgated under Regulation S-X by consolidating those subsidiaries without
any adjustments for timing differences in the different period ends. With the change in Company’s fiscal year end, the Company
is retroactively adjusting previously released financial statements to reflect this change, beginning with December 31, 2010. Accordingly,
the unaudited financial statements for the fiscal quarters ended September 30, 2011 and 2010 have been restated in this Amendment
No. 3 in the Form 10-Q for the fiscal quarter ended June 30, 2011 to include the accounts of all consolidated companies for the
same three and six month periods. The restatement of the Company’s financial statements is not a change from one accounting
policy that applies with GAAP to another accounting policy that complies with GAAP.



Except as otherwise noted herein, this
Form 10-Q/A continues to speak as of the date of the Original Filing.





3







PART I - FINANCIAL INFORMATION



Item 1.          Financial
Statements



GBS Enterprises Incorporated



Unaudited Interim Consolidated Financial
Statements



June 30, 2011



(Restated)





4









GBS Enterprises Incorporated

Interim Consolidated Balance Sheets

June 30, 2011 and December 31, 2010

Restated and Unaudited



|                                                    |  | Restated |            |   | Restated     | 
|--------------------------------------------------- |  | -------- | ---------- | - | ------------ | 
|                                                    |  | June 30, |            |   | December 31, | 
|                                                    |  | 2011     |            |   | 2010         | 
|                                                    |  | $        |            |   | $            | 
|Assets                                              |  |          |            |   |              | 
|                                                    |  |          |            |   |              | 
|Current Assets                                      |  |          |            |   |              | 
|Cash and cash equivalents - Note 7                  |  |          | 6,014,411  |   |              | 
|Accounts Receivable - Note 8                        |  |          | 5,280,334  |   |              | 
|Inventories - Note 3                                |  |          | 267,837    |   |              | 
|Prepaid expenses - Note 9                           |  |          | 1,661,329  |   |              | 
|Other current receivables - Note 10                 |  |          | 585,781    |   |              | 
|Total current assets                                |  |          | 13,809,692 |   |              | 
|                                                    |  |          |            |   |              | 
|Non-Current Assets                                  |  |          |            |   |              | 
|Property, plant and equipment - Note  11            |  |          | 508,617    |   |              | 
|Other non-current receivables - Note 12             |  |          | 1,013,392  |   |              | 
|Deferred tax assets                                 |  |          | 2,592,096  |   |              | 
|Goodwill - Note 13                                  |  |          | 45,639,472 |   |              | 
|Software - Note 14                                  |  |          | 17,951,921 |   |              | 
|Other assets - Note 15                              |  |          | 324,709    |   |              | 
|Total non-current assets                            |  |          | 68,030,207 |   |              | 
|                                                    |  |          |            |   |              | 
|Total assets                                        |  |          | 81,839,899 |   |              | 
|                                                    |  |          |            |   |              | 
|                                                    |  |          |            |   |              | 
|Liabilities and stockholders' equity                |  |          |            |   |              | 
|                                                    |  |          |            |   |              | 
|Current liabilities                                 |  |          |            |   |              | 
|Notes payable - Note 16                             |  |          | 1,547,852  |   |              | 
|Liabilities to banks - Note 17                      |  |          | 107,318    |   |              | 
|Accounts payables and accrued liabilities - Note 18 |  |          | 4,390,834  |   |              | 
|Deferred income - Note 19                           |  |          | 9,033,714  |   |              | 
|Other short term liabilities - Note 20              |  |          | 2,611,146  |   |              | 
|Due to related parties - Note 21                    |  |          | 0          |   |              | 
|Total current liabilities                           |  |          | 17,690,864 |   |              | 
|                                                    |  |          |            |   |              | 
|Non - Current liabilities                           |  |          |            |   |              | 
|Liabilities to banks - Note 22                      |  |          | 3,197,482  |   |              | 
|Retirement benefit obligation                       |  |          | 173,191    |   |              | 
|Deferred Tax Liabilities                            |  |          | 690,574    |   |              | 
|Other long term liabilities                         |  |          | 4,330,411  |   |              | 
|Total non-current liabilities                       |  |          | 8,391,658  |   |              | 
|                                                    |  |          |            |   |              | 
|Total liabilities                                   |  |          | 26,082,522 |   |              | 
|                                                    |  |          |            |   |              | 
|Stockholders' equity                                |  |          |            |   |              | 
|                                                    |  |          |            |   |              | 
|Capital stock - Note 23                             |  |          |            |   |              | 
|Authorized:                                         |  |          |            |   |              | 
|75,000,000 common shares of $.001 par value each    |  |          |            |   |              | 
|25,000,000 preferred shares of $.001 par value each |  |          |            |   |              | 
|Issued and outstanding:                             |  |          |            |   |              | 
|23,793,790 shares of common stock                   |  |          | 23,794     |   |              | 
|Additional paid in capital                          |  |          | 39,912,411 |   |              | 
|Accumulated deficit                                 |  |          | (1,571,101 | ) |              | 
|Other comprehensive income                          |  |          | 16,747     |   |              | 
|                                                    |  |          | 38,381,851 |   |              | 
|Noncontrolling interest in subsidiaries             |  |          | 17,375,526 |   |              | 
|                                                    |  |          |            |   |              | 
|Total stockholders' equity                          |  |          | 55,757,377 |   |              | 
|                                                    |  |          |            |   |              | 
|Total stockholders' equity and liabilities          |  |          | 81,839,899 |   |              | 
|                                                    |  |          |            |   |              | 
|Subsequent events - Note 27                         |  |          |            |   |              | 







5







GBS Enterprises Incorporated

Interim Consolidated Statements of Operations

Restated and Unaudited



|                                                                             |  | For the Three Months Ended |            |   | For the Six Months Ended | 
|---------------------------------------------------------------------------- |  | -------------------------- | ---------- | - | ------------------------ | 
|                                                                             |  | Restated                   |            |   | Restated                 | 
|                                                                             |  | June 30,                   |            |   | June 30,                 | 
|                                                                             |  | 2011                       |            |   | 2010                     | 
|                                                                             |  | $                          |            |   | $                        | 
|                                                                             |  |                            |            |   |                          | 
|Revenues - Note 24                                                           |  |                            |            |   |                          | 
|Products                                                                     |  |                            | 5,523,620  |   |                          | 
|Services                                                                     |  |                            | 1,890,983  |   |                          | 
|                                                                             |  |                            | 7,414,602  |   |                          | 
|Cost of goods sold                                                           |  |                            |            |   |                          | 
|Products                                                                     |  |                            | 1,378,563  |   |                          | 
|Services                                                                     |  |                            | 2,182,043  |   |                          | 
|                                                                             |  |                            | 3,560,606  |   |                          | 
|Gross profit                                                                 |  |                            | 3,853,996  |   |                          | 
|                                                                             |  |                            |            |   |                          | 
|Operating expenses                                                           |  |                            |            |   |                          | 
|Selling expenses                                                             |  |                            | 4,305,380  |   |                          | 
|Administrative expenses                                                      |  |                            | 1,415,174  |   |                          | 
|General expenses                                                             |  |                            | 483,828    |   |                          | 
|                                                                             |  |                            | 6,204,382  |   |                          | 
|                                                                             |  |                            |            |   |                          | 
|Operating income (loss)                                                      |  |                            | (2,350,386 | ) |                          | 
|                                                                             |  |                            |            |   |                          | 
|Other Income (expense) - Note 25                                             |  |                            |            |   |                          | 
|Other Income (expense)                                                       |  |                            | 969,115    |   |                          | 
|Interest income                                                              |  |                            | 12,607     |   |                          | 
|Interest expense                                                             |  |                            | (101,717   | ) |                          | 
|                                                                             |  |                            | 880,005    |   |                          | 
|                                                                             |  |                            |            |   |                          | 
|Income (loss) before income taxes                                            |  |                            | (1,470,380 | ) |                          | 
|                                                                             |  |                            |            |   |                          | 
|Income tax (income) expense                                                  |  |                            | (625,627   | ) |                          | 
|                                                                             |  |                            |            |   |                          | 
|Income before extraordinary items,                                           |  |                            |            |   |                          | 
|discontinued operations                                                      |  |                            | (844,754   | ) |                          | 
|                                                                             |  |                            |            |   |                          | 
|Discontinued operations                                                      |  |                            | 0          |   |                          | 
|                                                                             |  |                            |            |   |                          | 
|Net income (loss) before extraordinary items                                 |  |                            | (844,754   | ) |                          | 
|                                                                             |  |                            |            |   |                          | 
|Extraordinary items                                                          |  |                            | 0          |   |                          | 
|                                                                             |  |                            |            |   |                          | 
|Net income (loss)                                                            |  |                            | (844,754   | ) |                          | 
|                                                                             |  |                            |            |   |                          | 
|Net Loss attributable to noncontrolling Interest                             |  |                            | (1,451,292 | ) |                          | 
|Net income (loss) attributable to stockholders                               |  |                            | 606,538    |   |                          | 
|                                                                             |  |                            |            |   |                          | 
|Other comprehensive income (loss)                                            |  |                            | (359,008   | ) |                          | 
|Other comprehensive income  (loss)                                           |  |                            | 0          |   |                          | 
|attributable to noncontrolling interest                                      |  |                            | (179,145   | ) |                          | 
|Other comprehensive income (loss)                                            |  |                            |            |   |                          | 
|attributable to stockholders                                                 |  |                            | (179,863   | ) |                          | 
|Net income (loss) and comprehensive income (loss) attributed to stockholders |  |                            | 426,675    |   |                          | 
|                                                                             |  |                            |            |   |                          | 
|Net earnings (loss) per share, basic and diluted                             |  |                            | 0.018      |   |                          | 
|                                                                             |  |                            |            |   |                          | 
|Weighted average number of common stock outstanding, basic and diluted       |  |                            | 23,623,460 |   |                          | 







(1) N/A. No determination of weighted average or earnings per
shares was calculated as this was a predecessor company and comparison is not relevant.



6









|GBS Enterprises Incorporated                             |  |               |            |   |               | 
|-------------------------------------------------------- |  | ------------- | ---------- | - | ------------- | 
|Interim Consolidated Statements of Cash Flows            |  |               |            |   |               | 
|For the six months ended June 30, 2011 and June 30, 2010 |  |               |            |   |               | 
|Restated and Unaudited                                   |  | Restated      |            |   | Restated      | 
|                                                         |  | June 30, 2011 |            |   | June 30, 2010 | 
|                                                         |  | $             |            |   | $             | 
|                                                         |  |               |            |   |               | 
|Cash flow from operating activities                      |  |               |            |   |               | 
|Net loss / net income                                    |  |               | (1,248,582 | ) |               | 
|Adjustments:                                             |  |               |            |   |               | 
|Deferred income taxes                                    |  |               | (1,643,663 | ) |               | 
|Depreciation and amortization                            |  |               | 2,934,950  |   |               | 
|Consulting expense                                       |  |               | 34,000     |   |               | 
|Losses from equity investment                            |  |               | -          |   |               | 
|Loss on Sale of Assets                                   |  |               | -          |   |               | 
|Minority interest losses                                 |  |               | (1,623,563 | ) |               | 
|Changes in operating assets and liabilities:             |  |               |            |   |               | 
|Accounts receivable and other assets                     |  |               | 1,844,647  |   |               | 
|Retirement benefit obligation                            |  |               | 19,126     |   |               | 
|Inventories                                              |  |               | (267,837   | ) |               | 
|Accounts payable and other liabilities                   |  |               | 395,651    |   |               | 
|                                                         |  |               |            |   |               | 
|Net cash provided (used) by operating activities         |  |               | 444,729    |   |               | 
|Net cash provided (used) by discontinued                 |  |               | -          |   |               | 
|                                                         |  |               |            |   |               | 
|Cash flow from investing activities                      |  |               |            |   |               | 
|Sale (Purchase) of intangible assets                     |  |               | (4,482,700 | ) |               | 
|Purchase of property, plant and equipment                |  |               | (254,892   | ) |               | 
|Write-down goodwill and intangibles                      |  |               | -          |   |               | 
|Proceeds (Purchase) of Subsidiaries                      |  |               | (600,000   | ) |               | 
|Increase (Decrease) in Financial assets                  |  |               | 4,627,362  |   |               | 
|                                                         |  |               |            |   |               | 
|Net cash provided (used) in investing activities         |  |               | (710,231   | ) |               | 
|                                                         |  |               |            |   |               | 
|Cash flow from financing activities                      |  |               |            |   |               | 
|Net borrowings - banks                                   |  |               | 2,473,641  |   |               | 
|Other borrowings                                         |  |               | 106,589    |   |               | 
|Capital paid-in                                          |  |               | -          |   |               | 
|Loans from related party                                 |  |               | -          |   |               | 
|                                                         |  |               |            |   |               | 
|Net cash provided (used) in financing activities         |  |               | 2,580,230  |   |               | 
|                                                         |  |               |            |   |               | 
|Effect of exchange rate changes on cash                  |  |               | 1,827,615  |   |               | 
|                                                         |  |               |            |   |               | 
|Net increase (decrease) in cash                          |  |               | 4,142,343  |   |               | 
|Cash and cash equivalents - Beginning of year            |  |               | 1,872,068  |   |               | 
|                                                         |  |               |            |   |               | 
|Cash and cash equivalents - End of Quarter               |  |               | 6,014,411  |   |               | 



7









Notes
to the Unaudited Interim Consolidated Financial Statements

June 30, 2011 - Restated and Unaudited

GBS
Enterprises Incorporated















Note 1	COMPANY AND BACKROUND



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



■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 Radiate, in 2011, IBM Lotus Domino will have a worldwide installed
base of 189 million mailboxes. Currently, the installed base for On-Premises IBM Lotus Domino mailboxes represents the majority
of worldwide IBM Lotus Domino mailboxes, accounting for 87% of worldwide IBM Lotus Domino mailboxes. By 2015, this percentage is
expected to decrease to 80%, as hosted email grows in popularity. (The Radiate Group Inc., April 2011, “IBM Lotus Notes/Domino
Market Analysis, 2011-2015”)





8









Notes
to the Unaudited Interim Consolidated Financial Statements

June 30, 2011 - Restated and Unaudited

GBS
Enterprises Incorporated





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



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



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



General Corporate History





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



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





9









Notes
to the Unaudited Interim Consolidated Financial Statements

June 30, 2011 - Restated and Unaudited

GBS
Enterprises Incorporated





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



About Lotus Holdings, Ltd.



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



SPPEFs



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



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



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





10









Notes
to the Unaudited Interim Consolidated Financial Statements

June 30, 2011 - Restated and Unaudited

GBS
Enterprises Incorporated





Transactions following the acquisition



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



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



Reverse Merger



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



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





11









Notes
to the Unaudited Interim Consolidated Financial Statements

June 30, 2011 - Restated and Unaudited

GBS
Enterprises Incorporated





Key Acquisitions in 2011



In 2011, we made the following key strategic
acquisitions:



Pavone AG.On April 1, 2011,
we acquired 100% of the outstanding common stock of Pavone AG, a German corporation (“Pavone”), for $350,000 in cash
and 1,000,000 shares of GBS common stock. The fair value of the GBS 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.



GroupWare, Inc.On June 1,
2011, we acquired 100% of the outstanding common stock of GroupWare, Inc., a Florida corporation (“GroupWare”), for
$250,000 and 250,000 shares of GBS common stock. The fair value of the GBS 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



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.



Note 2	INTERIM REPORTING



The accompanying unaudited interim consolidated
financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) 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 GAAP 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 unaudited interim consolidated financial statements follow
the same accounting policies and methods of their application as the Company’s audited consolidated financial statements.
All adjustments are of a normal recurring nature.



Operating results for the three months
ended June 30, 2011 are not necessarily indicative of the results that can be expected for the fiscal year ending December 31,
2011.



12











Notes
to the Unaudited Interim Consolidated Financial Statements

June 30, 2011 - Restated and Unaudited

GBS
Enterprises Incorporated





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.



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.



Currency Risk



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





13









Notes
to the Unaudited Interim Consolidated Financial Statements

June 30, 2011 - Restated and Unaudited

GBS
Enterprises Incorporated





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.



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.





14









Notes
to the Unaudited Interim Consolidated Financial Statements

June 30, 2011 - Restated and Unaudited

GBS
Enterprises Incorporated







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.



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.





15









Notes
to the Unaudited Interim Consolidated Financial Statements

June 30, 2011 - Restated and Unaudited

GBS
Enterprises Incorporated





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.



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.





16









Notes
to the Unaudited Interim Consolidated Financial Statements

June 30, 2011 - Restated and Unaudited

GBS
Enterprises Incorporated





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.



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.





17









Notes
to the Unaudited Interim Consolidated Financial Statements

June 30, 2011 - Restated and Unaudited

GBS
Enterprises Incorporated





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.



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.





18









Notes
to the Unaudited Interim Consolidated Financial Statements

June 30, 2011 - Restated and Unaudited

GBS
Enterprises Incorporated





Note 4		CHANGE IN ACCOUNTING POLICIES



Fiscal reporting



Effective September 19, 2012, the Company
changed its fiscal year end from March 31 to December 31. Prior to this change, the company’s subsidiaries, with the exception
of SD Holdings, had fiscal year ends of December 31 and in reporting its financial statements, the Company, through the use of
Regulation S-X Rule 3A-02 (“the 93 day rule”), consolidated those subsidiaries without any adjustments for timing differences
in the period ends. This application was in error. With the change in year end, the Company retroactively adjusted previously released
financial statements to reflect this change beginning December 31, 2010. Accordingly, the financial statements for the quarter
ended June 30, 2011 and 2010, include the accounts of all consolidated companies for the same three month period beginning January
1, 2011 and 2010 respectively. The Balance Sheets as at June 30, 2011 and June 30, 2010 have also been adjusted to include the
accounts of all consolidated companies as of those dates.



In accordance with ASC 250, effects of
this restatement to the respective statements are shown below:





|                                         |  | For the six months ended |           
|---------------------------------------- |  | ------------------------ | ----------
|                                         |  | Restated                 |           
|                                         |  | June 30, 2011            |           
|                                         |  | $                        |           
|Assets                                   |  |                          |           
|Current Assets                           |  |                          |           
|Cash and cash equivalents                |  |                          | 6,014,411 
|Accounts receivable                      |  |                          | 5,280,334 
|Inventories                              |  |                          | 267,837   
|Prepaid expenses                         |  |                          | 1,661,329 
|Other receivables                        |  |                          | 585,781   
|Total current assets                     |  |                          | 13,809,692
|                                         |  |                          |           
|Equity investments in related parties    |  |                          |           
|Property, plant and equipment            |  |                          | 508,617   
|other non-current receivables            |  |                          | 1,013,392 
|Deferred tax assets                      |  |                          | 2,592,096 
|Goodwill                                 |  |                          | 45,639,472
|Software                                 |  |                          | 17,951,921
|Other assets                             |  |                          | 324,709   
|Total non-current assets                 |  |                          | 68,030,207
|                                         |  |                          |           
|Total assets                             |  |                          | 81,839,899
|                                         |  |                          |           
|Liabilities and shareholders' equity     |  |                          |           
|Current liabilities                      |  |                          |           
|Notes payable                            |  |                          | 1,547,852 
|Liabilities to banks                     |  |                          | 107,318   
|Accounts payable and accrued liabilities |  |                          | 4,390,834 
|Other liabilities                        |  |                          | 2,611,146 
|Deferred income                          |  |                          | 9,033,714 
|Due to related parties                   |  |                          |           
|Total current liabilities                |  |                          | 17,690,865
|                                         |  |                          |           
|Liabilities to banks                     |  |                          | 3,197,482 
|Deferred tax liabilities                 |  |                          | 690,574   
|Retirement benefit obligation            |  |                          | 173,191   
|Other liabilities                        |  |                          | 4,330,411 
|Total non-current liabilities            |  |                          | 8,391,658 
|                                         |  |                          |           
|Total liabilities                        |  |                          | 26,082,523
|                                         |  |                          |           
|Shareholders' equity                     |  |                          |           
|Capital Stock                            |  |                          |           
|Authorized:                              |  |                          |           
|75,000,000 common shares and             |  |                          |           
|25,000,000 preferred shares each with a  |  |                          |           
|par value of $.001                       |  |                          |           
|Issued and outstanding                   |  |                          |           
|                                         |  |                          |           
|                                         |  |                          | 23,794    
|Additional paid in capital               |  |                          | 39,912,411
|Accumulated deficit                      |  |                          | (1,571,101
|Other comprehensive income               |  |                          | 16,747    
|Total shareholders' equity               |  |                          | 38,381,851
|                                         |  |                          |           
|Non-controlling interest in subsidiaries |  |                          | 17,375,526
|                                         |  |                          |           
|Total equity and liabilities             |  |                          | 81,839,899









19









Notes
to the Unaudited Interim Consolidated Financial Statements

June 30, 2011 - Restated and Unaudited

GBS
Enterprises Incorporated







|                                                                             |  | For the six months ended |           
|---------------------------------------------------------------------------- |  | ------------------------ | ----------
|                                                                             |  | Restated                 |           
|                                                                             |  | June 30, 2011            |           
|                                                                             |  | $                        |           
|Net sales                                                                    |  |                          | 13,091,032
|Cost of goods sold                                                           |  |                          | 6,149,954 
|Gross profit                                                                 |  |                          | 6,941,078 
|                                                                             |  |                          |           
|Operating expenses                                                           |  |                          |           
|Selling expenses                                                             |  |                          | 7,968,855 
|Administrative expenses                                                      |  |                          | 2,858,679 
|General expenses                                                             |  |                          | 692,043   
|                                                                             |  |                          | 11,519,577
|                                                                             |  |                          |           
|Operating income                                                             |  |                          | (4,578,499
|                                                                             |  |                          |           
|Other Income (expense)                                                       |  |                          |           
|Other Income (expense)                                                       |  |                          | 310,547   
|Interest income                                                              |  |                          | 14,174    
|Interest expense                                                             |  |                          | (201,440  
|                                                                             |  |                          | 123,281   
|                                                                             |  |                          |           
|Income (loss) before income taxes                                            |  |                          | (4,455,217
|                                                                             |  |                          |           
|Income tax (income) expense                                                  |  |                          | (1,583,072
|                                                                             |  |                          |           
|Net income (loss)                                                            |  |                          | (2,872,145
|                                                                             |  |                          |           
|Net income (loss) attributable to non-controlling interest                   |  |                          | (1,623,563
|                                                                             |  |                          |           
|Net income (loss) attributable to shareholders                               |  |                          | (1,248,582
|                                                                             |  |                          |           
|Other comprehensive income (loss)                                            |  |                          | (363,268  
|                                                                             |  |                          |           
|Net income (loss) and comprehensive income (loss) attributed to shareholders |  |                          | (1,430,580
|                                                                             |  |                          |           
|Basic and diluted income (loss) per share                                    |  |                          | (0.071    
|                                                                             |  |                          |           
|Weighted average number of shares outstanding                                |  |                          | 20,209,453





20









Notes
to the Unaudited Interim Consolidated Financial Statements

June 30, 2011 - Restated and Unaudited

GBS
Enterprises Incorporated







|                                                    |  | For the six months ended |           
|--------------------------------------------------- |  | ------------------------ | ----------
|                                                    |  | Restated                 |           
|                                                    |  | June 30, 2011            |           
|                                                    |  | $                        |           
|Cash flow from operating activities                 |  |                          |           
|Net loss / net income                               |  |                          | (1,248,582
|Adjustments                                         |  |                          |           
|Deferred income taxes                               |  |                          | (1,643,663
|Depreciation and amortization                       |  |                          | 2,934,950 
|Loss from equity investment                         |  |                          |           
|Consulting Expense                                  |  |                          | 34,000    
|Minority interest losses                            |  |                          | (1,623,563
|Changes in operating assets and liabilities         |  |                          |           
|Accounts receivable and other assets                |  |                          | 1,844,647 
|Retirement benefit obligation                       |  |                          | 19,126    
|Inventories                                         |  |                          | (267,837  
|Accounts payable and other liabilities              |  |                          | 395,651   
|Net cash provided by operating activities           |  |                          | 444,729   
|                                                    |  |                          |           
|Cash flow from investing activities                 |  |                          |           
|Sale (Purchase) of intangible assets                |  |                          | (4,482,700
|Purchase of property, plant and equipment           |  |                          | (254,892  
|Proceeds (Purchase) of subsidiaries                 |  |                          | (600,000  
|Currency differences                                |  |                          |           
|Increase (Decrease) in financial assets             |  |                          | 4,627,362 
|Net cash used in investing activities               |  |                          | (710,231  
|                                                    |  |                          |           
|Cash flow from financing activities                 |  |                          |           
|Net borrowings - banks                              |  |                          | 2,473,641 
|Other borrowings                                    |  |                          | 106,589   
|Loans from related party                            |  |                          |           
|Net cash used in financing activities               |  |                          | 2,580,230 
|                                                    |  |                          |           
|Effect of exchange rate changes on cash             |  |                          | 1,827,615 
|                                                    |  |                          |           
|Net increase in cash                                |  |                          | 4,142,343 
|Cash and cash equivalents - Beginning of the period |  |                          | 1,872,068 
|                                                    |  |                          |           
|Cash and cash equivalents - End of period           |  |                          | 6,014,411 





21













Notes
to the Unaudited Interim Consolidated Financial Statements

June 30, 2011 - Restated and Unaudited

GBS
Enterprises Incorporated





Note 5	SUBSIDIARY COMPANIES



As of June 30, 2011, GBS Enterprises Incorporated
had the following subsidiaries. Such subsidiaries were included in the basis of consolidation (KUSD = 1,000’s of US Dollars):





|                                                                                                 |  |                      |  |                                                |   |  |                                   |  |  |                                      |   |  |           |   |  |                                   |  |  |            | 
|------------------------------------------------------------------------------------------------ |  | -------------------- |  | ---------------------------------------------- | - |  | --------------------------------- |  |  | ------------------------------------ | - |  | --------- | - |  | --------------------------------- |  |  | ---------- | 
|                                                                                                 |  | Headquarters         |  | Stockholders’ Equity

as of

Restated
06/31/11 |   |  | Percentage of

Subscribed Capital |  |  | Profit

of the

consolidated quarter |   |  | Ownership |   |  | Date

of the

First Consolidation | 
|                                                                                                 |  |                      |  | KUSD                                           |   |  | KUSD                              |  |  | in %                                 |   |  | KUSD      |   |  |                                   |  |  |            | 
|ebVokus Software GmbH                                                                            |  | Dresden (GER)        |  | 317                                            |   |  | 54                                |  |  | 50.1                                 | % |  | (78       | ) |  | I                                 |  |  | 1/11/2005  | 
|GROUP Business Software (UK) Ltd.                                                                |  | Manchester (UK)      |  | 1,365                                          |   |  | 23                                |  |  | 50.1                                 | % |  | (88       | ) |  | I                                 |  |  | 12/31/2005 | 
|GROUP Business Software Corp.                                                                    |  | Woodstock, GA (USA)  |  | (11,632                                        | ) |  | 1                                 |  |  | 50.1                                 | % |  | (3,867    | ) |  | I                                 |  |  | 12/31/2005 | 
|Permessa Corporation                                                                             |  | Waltham, MA (USA)    |  | (5                                             | ) |  | 0                                 |  |  | 50.1                                 | % |  | 667       |   |  | I                                 |  |  | 9/22/2010  | 
|Relavis Corporation                                                                              |  | Woodstock, GA (USA)  |  | (791                                           | ) |  | 2                                 |  |  | 50.1                                 | % |  | 18        |   |  | I                                 |  |  | 1/8/2007   | 
|GROUP LIVE N.V.                                                                                  |  | Den Haag (NL)        |  | (3,377                                         | ) |  | 134                               |  |  | 50.1                                 | % |  | (8        | ) |  | I                                 |  |  | 12/31/2005 | 
|Pavone AG                                                                                        |  | Paderborn (GER)      |  | (1,242                                         | ) |  | 47                                |  |  | 100                                  | % |  | (614      | ) |  |                                   |  |  | 4/1/2011   | 
|Pavone Ltd.                                                                                      |  | North Yorkshire (UK) |  | (79                                            | ) |  | 587                               |  |  | 100                                  | % |  | (4        | ) |  |                                   |  |  | 4/1/2011   | 
|GROUP Business Software AG                                                                       |  | Karlsruhe (GER)      |  | 25,481                                         |   |  | 29                                |  |  | Reverse 
50.1                        | % |  | (1,276    | ) |  | D                                 |  |  | 1/6/2011   | 
|Groupware Inc.                                                                                   |  | Woodstock, GA (USA)  |  | (482                                           | ) |  | 1                                 |  |  | 100.                                 | % |  | 0         |   |  |                                   |  |  | 6/1/2011   | 
|                                                                                                 |  |                      |  |                                                |   |  |                                   |  |  |                                      |   |  |           |   |  |                                   |  |  |            | 
|D - Direct Subsidiary                                                                            |  |                      |  |                                                |   |  |                                   |  |  |                                      |   |  |           |   |  |                                   |  |  |            | 
|                                                                                                 |  |                      |  |                                                |   |  |                                   |  |  |                                      |   |  |           |   |  |                                   |  |  |            | 
|I - Indirect Subsidiary Indirect Subsidiaries are owned 50.1% through GROUP Business Software AG |  |                      |  |                                                |   |  |                                   |  |  |                                      |   |  |           |   |  |                                   |  |  |            | 







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 interest in B.E.R.S AD, with acquisition costs of 265,000.00 Euros, is 50%. It was first
consolidated on December 31, 2006.



|                     |  |              |  | Total Value             |     |       |     |                |     |                    |   
|-------------------- |  | ------------ |  | ----------------------- | --- | ----- | --- | -------------- | --- | ------------------ | --
|                     |  |              |  | Assets
        Restated |     |       |     |                |     |                    |   
|                     |  | Headquarters |  | 6.30.11                 |     | Debts |     | Sales Revenues |     | Annual Profit/Loss |   
|Associated Companies |  |              |  | KUSD                    |     | KUSD  |     | KUSD           |     | KUSD               |   
|                     |  |              |  |                         |     |       |     |                |     |                    |   
|B.E.R.S. AD          |  | Varna (BUL)  |  |                         | 271 |       | 103 |                | 382 |                    | 37



22









Notes
to the Unaudited Interim Consolidated Financial Statements

June 30, 2011 - Restated and Unaudited

GBS
Enterprises Incorporated







Note 7	CASH AND
CASH EQUIVALENTS





As of the financial statement
date, the Company’s cash and cash equivalents totaled 6,014 KUSD (December 31, 2010 year end restated: 1,872 KUSD).





Note 8	ACCOUNTS RECEIVABLE





As of the financial statement date, Accounts Receivable was 5,280 KUSD (December 31, 2010 end restated:
5,712 KUSD). Receivables are generally measured at their nominal value and taking into account all foreseeable risks. Probable
default risks are handled with specific allowances for bad debts. With regard to the trade receivables which are neither impaired
nor delinquent, there are no indications as of the financial statement date that the debtors will not meet their payment obligations.



Note 9		PREPAID EXPENSES





Prepaid expenses in the amount
of 1,661 KUSD were primarily recorded for prepaid rent, insurance and advance on technological collaboration events (December 31,
2010 year end restated: 1,421 KUSD).



Note 10	OTHER RECEIVABLES - CURRENT





Other Receivables as of the financial statement date
were 586 KUSD (December 31, 2010 year end restated: 1,983 KUSD).





Note 11 	PROPERTY, PLANT AND EQUIPMENT





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





|Property,
Plant and Equipment kUSD |  | Development
    
of the cost |  | Development
    of
 accumulated
 depreciation |         | Balance
|---------------------------------- |  | ---------------------------- |  | --------------------------------------------- | ------- | -------
|                                   |  |                              |  |                                               |         |        
|Updated 12/31/2010                 |  | 5,114.1                      |  |                                               | 4,817.1 |        
|Additions                          |  | 228.5                        |  |                                               | 71.4    |        
|Disposals                          |  | 2.8                          |  |                                               | 2.8     |        
|Currency differences               |  | 69.6                         |  |                                               | 15.1    |        
|Reclassifications                  |  |                              |  |                                               |         |        
|Updated 06/30/2011                 |  | 5,409.4                      |  |                                               | 4,900.8 |        





23













Notes
to the Unaudited Interim Consolidated Financial Statements

June 30, 2011 - Restated and Unaudited

GBS
Enterprises Incorporated





Note 12	OTHER RECEIVABLES NON-CURRENT



The Non-current Receivables of the financial statement date were 1,014 KUSD (December 31, 2010 restated
1,370 KUSD) include the following:







The value of the 50% interest in the associated company B.E.R.S.
AD with a book value of 291 KUSD.



The amount still outstanding against the purchaser of GEDYS
IntraWare GmbH of 984 KUSD, being repaid in monthly installments of 20 KUSD.





Note 13	 	GOODWILL



Goodwill derives from the following business
acquisitions:



|Affiliated Company                        |  | Date of the First Consolidation |  | Goodwill as of 6.30.11 in kUSD
|----------------------------------------- |  | ------------------------------- |  | ------------------------------
|global words AG                           |  | 10.01.02                        |  |                               
|GROUP Technologies AG                     |  | 09.01.05                        |  |                               
|GROUP Business Software Inc.              |  | 12.31.05                        |  |                               
|GROUP LIVE N.V.                           |  | 12.31.05                        |  |                               
|zurückbehaltener GoF CRM                  |  | 12.31.05                        |  |                               
|GROUP Business Software Ltd               |  | 12.31.05                        |  |                               
|ebVOKUS Software GmbH                     |  | 10.01.05                        |  |                               
|GAP AG für GSM Applikationen und Produkte |  | 12.31.05                        |  |                               
|Relavis Corporation                       |  | 08.01.07                        |  |                               
|Permessa                                  |  | 09.22.10                        |  |                               
|GROUP Business Software AG                |  | 01.06.11                        |  |                               
|Pavone AG                                 |  | 04.01.11                        |  |                               
|Groupware Inc.                            |  | 06.01.11                        |  |                               
|                                          |  |                                 |  |                               



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.





24









Notes
to the Unaudited Interim Consolidated Financial Statements

June 30, 2011 - Restated and Unaudited

GBS
Enterprises Incorporated





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.



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 |  | Development
    
of the cost |          |  | Development
    of
 accumulated
 depreciation |  |          | Balance | 
|------------------------ |  | ---------------------------- | -------- |  | --------------------------------------------- |  | -------- | ------- | 
|kUSD                     |  |                              |          |  |                                               |  |          |         | 
|                         |  |                              |          |  |                                               |  |          |         | 
|Updated 12/31/2010       |  |                              | 29,497.4 |  |                                               |  | 13,136.6 |         | 
|Additions                |  |                              | 1,771.4  |  |                                               |  | 0        |         | 
|Disposals                |  |                              | 180.6    |  |                                               |  | 0.3      |         | 
|Currency differences     |  |                              | 0        |  |                                               |  | 0        |         | 
|Reclassifications        |  |                              | 0        |  |                                               |  | 0        |         | 
|Updated 06/31/2011       |  |                              | 31,088.2 |  |                                               |  | 13,136.3 |         | 







25











Notes
to the Unaudited Interim Consolidated Financial Statements

June 30, 2011 - Restated and Unaudited

GBS
Enterprises Incorporated





Note 15	OTHER ASSETS





The balance of this account of 325 KUSD primarily includes rent and other security deposits (December
31, 2010 year end restated: 224 KUSD).



Note 16	 NOTES PAYABLE



Notes
Payable had a balance of 1,547 KUSD at June 30, 2011 (December 31, 2010 year end restated: 1,441 KUSD).



Note 17	LIABILITIES TO BANKS
– CURRENT



Included in this account is an operating line of credit of 107 KUSD (December 31, 2010 year end restated:
50 KUSD) with interest at a 3.25% daily periodic rate with a credit limit of 100 KUSD.



Note 18 		ACCOUNTS PAYABLE AND
ACCRUED LIABILITIES



Trade payables



As of the financial statement date, trade accounts payable amounted to 1,564 KUSD (December 31, 2010 year
end restated: 1,441 KUSD). Trade payables are carried at their repayment amount and all have a residual term of up to one year.



Other
Accrual



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





|USD                                                                  |  | Restated   |      
|-------------------------------------------------------------------- |  | ---------- | -----
|                                                                     |  | 06/30/2011 |      
|Tax provision                                                        |  |            | 0    
|Salary                                                               |  |            | 997  
|Vacation                                                             |  |            | 361  
|Workers Compensation Insurance Association                           |  |            | 12   
|Compensation Levy for Non-Employment of Severely Handicapped Persons |  |            | 9    
|Outstanding Invoices                                                 |  |            | 839  
|Annual Financial Statement Costs                                     |  |            | 267  
|Other Provisions                                                     |  |            | 261  
|Warranties                                                           |  |            | 66   
|Gesture of Goodwill                                                  |  |            | 0    
|Provision for Legal Costs                                            |  |            | 14   
|Severance                                                            |  |            | 0    
|Total                                                                |  |            | 2,826







26









Notes
to the Unaudited Interim Consolidated Financial Statements

June 30, 2011 - Restated and Unaudited

GBS
Enterprises Incorporated







Provisions for salaries of 997 KUSD include the provisions created for the variable salaries of the sales
staff for the sales objectives reached in this business period.



Vacation provisions of 361 KUSD include the obligations of GROUP’s companies to their employees
for remaining vacation claims from the reporting period. The amount of the provision is calculated on the gross salary of the individual
employee plus the employer contribution to social security/Medicare and based on the unused vacation days as of the financial statement
date.



For liabilities not yet settled,
a provision totaling 839 KUSD was created.



Other Provisions of 261 KUSD include miscellaneous provisions.



Expenses for the audit of the Company and preparation of the annual consolidated financial statements
were recognized at 267 KUSD.





A provision for anticipated legal consulting of 14
KUSD was recorded.



For warranty claims, a provision of 66 KUSD was created determined by service income.



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 9,034 KUSD (December 31, 2010 year end restated: 6,214 KUSD) primarily include
maintenance income collected in advance for the period after the end of the financial statement date. They are amortized on a
straight-line basis over their respective contract terms.



27











Notes
to the Unaudited Interim Consolidated Financial Statements

June 30, 2011 - Restated and Unaudited

GBS
Enterprises Incorporated





Note 20	OTHER SHORT TERM LIABILITIES



Other short-term liabilities of 2,611 KUSD (December 31, 2010 year end restated: 2,822 KUSD) are comprised
of obligations and payments currently due for the purchase of assets from Lotus 911, Permessa and Salesplace.



Note 21	DUE TO RELATED PARTIES



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



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



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





Note 22	LIABILITIES – NON-CURRENT



Liabilities to banks as of the financial statement date was 3,197 KUSD (December 31, 2010 year end restated:
781 KUSD) represent bank obligations of GROUP AG with Baden-Württembergische Bank.





28











Notes
to the Unaudited Interim Consolidated Financial Statements

June 30, 2011 - Restated and Unaudited

GBS
Enterprises Incorporated





Note 23	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 $0.001. No preferred shares have been issued. As at June 30, 2011,
there were 23,793,790 shares of common stock issued. 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.



Unless otherwise noted, in each instance
where the Company issued its securities to a U.S. Person, the Company relied on the exemption from the registration requirements
of the Securities Act of 1933, as amended (the “Securities Act”) afforded the Company under Section 4(2) promulgated
under the Securities Act due to the fact that it was an isolated issuance and did not involve a public offering of securities.
In the instances where the Company issued its securities to a non-U.S. Person, the Company relied on the exemption from the registration
requirements of the Securities Act afforded the Company under Regulation S promulgated under the Securities Act:



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. The warrants have been valued using a Black-Scholes option pricing model with appropriate volatility, equity value and interest
rate inputs. The valuation of the warrants 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. There are no stock options issued by the Company to employees or other
parties.





29









Notes
to the Unaudited Interim Consolidated Financial Statements

June 30, 2011 - Restated and Unaudited

GBS
Enterprises Incorporated





Valuation of Common Stock Purchase Warrants



Summary of Warrants Issued



|                         |  |            |           |  |              |   |           |  | Stock Value at |  |   | Warrant | 
|------------------------ |  | ---------- | --------- |  | ------------ | - | --------- |  | -------------- |  | - | ------- | 
|Outside Consultants      |  | Grant Size |           |  | Strike Price |   | Val. Date |  | Warrant Date   |  |   | Value   | 
|                         |  |            |           |  |              |   |           |  |                |  |   |         | 
|Ventana Capital Partners |  |            | 2,000,000 |  |              | $ | 4.00      |  | 10/1/2010      |  | $ | 0.03    | 
|                         |  |            |           |  |              |   |           |  |                |  |   |         | 
|Frank J. Pena            |  |            | 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. Pena            |  |            | 3,000     |  |              | $ | 1.50      |  | 3/24/2011      |  | $ | 0.91    | 
|                         |  |            |           |  |              |   |           |  |                |  |   |         | 
|GarWood Securities, LLC  |  |            | 2,400     |  |              | $ | 1.50      |  | 3/24/2011      |  | $ | 0.91    | 
|                         |  |            |           |  |              |   |           |  |                |  |   |         | 
|Jackson E. Spears        |  |            | 9,600     |  |              | $ | 1.50      |  | 3/24/2011      |  | $ | 0.91    | 



|                                                    |  | Common |           | Valuation |                            | Fair Value per |   |      | Warrants’  | 
|--------------------------------------------------- |  | ------ | --------- | --------- | -------------------------- | -------------- | - | ---- | ---------- | 
|Common Stock Warrants Issued to Outside Consultants |  | Shares |           | Date      |                            | Warrant Share  |   |      | 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 |            | 
|                                                    |  |        |           |           |                            |                |   |      |            | 
|                                                    |  |        |           |           | Total Warrants’ Fair Value |                |   | $    | 245,575    | 



Transactions occurring in 2011



| | · | In March 2011, the Company consummated a private placement
offering (the “Private Placement”) of an aggregate of 6,044,000 Units at a purchase price of $1.25 per Unit, for gross
proceeds of $7,555,000.  Each Unit was comprised of one share of Common Stock and one three-year Warrant to purchase
one share of Common Stock at an exercise price of $1.50 per share (“Private Placement Warrant”). The net proceeds
of this offering were $6,878,950. The Company issued the Units and the securities underlying the Units under Section 4(2) and
Rule 506 of Regulation D and Regulation S promulgated under the Securities Act.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | In December, 2011, certain investors in the March
2011 Private Placement exercised their warrants at $1.50 per share for 2,020,000 shares of common stock, resulting in net proceeds
of $3,024,970.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





30









Notes
to the Unaudited Interim Consolidated Financial Statements

June 30, 2011 - Restated and Unaudited

GBS
Enterprises Incorporated





| | · | As disclosed in Note 26, the Company issued an aggregate
2,742,874 shares of common stock as partial consideration for the purchase of Pavone AG, GroupWare, Inc., SD Holdings Ltd and
IDC Global, Inc. in 2011
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





Transactions occurring in 2012



| | · | In March, 2012, an investor in the March 2011 Private
Placement exercised his warrants for 5,000 shares of common stock at $1.50 per share, resulting in proceeds of $7,500.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



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



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



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





31









Notes
to the Unaudited Interim Consolidated Financial Statements

June 30, 2011 - Restated and Unaudited

GBS
Enterprises Incorporated





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



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



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



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



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



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



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



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



32









Notes
to the Unaudited Interim Consolidated Financial Statements

June 30, 2011 - Restated and Unaudited

GBS
Enterprises Incorporated







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



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



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



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



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



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





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



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



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





33











Notes
to the Unaudited Interim Consolidated Financial Statements

June 30, 2011 - Restated and Unaudited

GBS
Enterprises Incorporated





Transactions occurring in 2013



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

| |  | 
| |  | 

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



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



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

| |  | 
| |  | 

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



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

| |  | 
| |  | 

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

| |  | 
| |  | 

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



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



34











Notes
to the Unaudited Interim Consolidated Financial Statements

June 30, 2011 - Restated and Unaudited

GBS
Enterprises Incorporated





Options



The Company does not have any outstanding options.



Warrants



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



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



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



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



Black Scholes assumptions for warrants issued were as follows:



|                        |  | For the period ended 
 December 31, |               
|----------------------- |  | ----------------------------------- | --------------
|                        |  | 2012                                |               
|Volatility              |  |                                     | 120.6 – 134.3%
|Risk free interest rate |  |                                     | 0.34% - 0.51% 
|Expected Life           |  |                                     | 3 years       
|Dividend Rate           |  |                                     | Nil           



35









Notes
to the Unaudited Interim Consolidated Financial Statements

June 30, 2011 - Restated and Unaudited

GBS
Enterprises Incorporated







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



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



In March, 2012, the Company issued an aggregate of 2,020,000 warrants to five “accredited investors”
pursuant to Section 4(2) of the Securities Act. Each investor warrant is exercisable for the three-year period commencing from
the date of issuance for $0.50 per share of Common Stock and has the same terms as the Private Placement Warrants. As noted above,
certain investors immediately exercised warrants and purchased 900,000 shares of common stock for $450,000.On March 27, 2012, the
Company issued an aggregate of 250,000 warrants to three outside consultants pursuant to Section 4(2) of the Securities Act. Each
warrant is exercisable for the three-year period commencing from the date of issuance for $1.10 per share of Common Stock and has
the same terms as the Private Placement Warrants. The value of this issuance, using the Black Scholes pricing model was determined
to $270,208 and this amount was recorded as a professional expense.



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



|                                   |  | # of shares |            |   |       |  |            |        |  |  |            |  |  | Fair value |      |  |        |  |           |           |  |  | Balance   |  |  |  |           |  |  | 
|---------------------------------- |  | ----------- | ---------- | - | ----- |  | ---------- | ------ |  |  | ---------- |  |  | ---------- | ---- |  | ------ |  | --------- | --------- |  |  | --------- |  |  |  | --------- |  |  | 
|                                   |  | allowed to  |            |   | Issue |  |            | Expiry |  |  | Strike     |  |  | at         |      |  |        |  |           |           |  |  | End of    |  |  |  |           |  |  | 
|                                   |  | purchase    |            |   | Date  |  |            | Date   |  |  | Price      |  |  | Issuance   |      |  | Issued |  |           | Exercised |  |  | Period    |  |  |  |           |  |  | 
|                                   |  | #           |            |   |       |  |            |        |  |  | $          |  |  | $          |      |  | #      |  |           | #         |  |  | #         |  |  |  |           |  |  | 
|Opening - Jan
    1, 2011          |  |             | 2,000,000  |   |       |  | 10/1/2010  |        |  |  | 6/1/2013   |  |  |            | 4.00 |  |        |  | -         |           |  |  | -         |  |  |  | -         |  |  | 
|Issued
    for financing services  |  |             |            |   |       |  | 3/14/2011  |        |  |  | 3/14/2014  |  |  |            | 1.50 |  |        |  | -         |           |  |  | 707,280   |  |  |  | -         |  |  | 
|Issued
    for financing services  |  |             |            |   |       |  | 3/24/2011  |        |  |  | 3/24/2014  |  |  |            | 1.50 |  |        |  | -         |           |  |  | 15,000    |  |  |  | -         |  |  | 
|sold with
    share units          |  |             |            |   |       |  | 3/31/2011  |        |  |  | 3/31/2014  |  |  |            | 1.50 |  |        |  | -         |           |  |  | 6,044,000 |  |  |  | 2,020,000 |  |  | 
|Issued
    for consulting services |  |             |            |   |       |  | 4/1/2011   |        |  |  | 4/1/2014   |  |  |            | 1.50 |  |        |  | 34,000    | (1)       |  |  | 100,000   |  |  |  | -         |  |  | 
|Closing - Dec 31, 2011             |  |             |            |   |       |  |            |        |  |  |            |  |  |            |      |  |        |  |           |           |  |  | 6,866,280 |  |  |  | 2,020,000 |  |  | 
|                                   |  |             |            |   |       |  |            |        |  |  |            |  |  |            |      |  |        |  |           |           |  |  |           |  |  |  |           |  |  | 
|Opening - Jan 1, 2012              |  |             | 6,846,280  |   |       |  |            |        |  |  |            |  |  |            |      |  |        |  |           |           |  |  |           |  |  |  | 5,000     |  |  | 
|Amended                            |  |             | (2,000,000 | ) |       |  | 10/1/2010  |        |  |  | 6/1/2013   |  |  |            | 4.00 |  |        |  | -         |           |  |  | -         |  |  |  | -         |  |  | 
|Reissued                           |  |             | 2,000,000  |   |       |  | 6/1/2012   |        |  |  | 6/1/2015   |  |  |            | 1.00 |  |        |  | 556,785   |           |  |  | -         |  |  |  | -         |  |  | 
|Issued
    for legal services      |  |             |            |   |       |  | 3/31/2012  |        |  |  | 3/31/2012  |  |  |            | 1.10 |  |        |  | 270,208   | (2)       |  |  | 250,000   |  |  |  | -         |  |  | 
|Issued
    for nominal value       |  |             |            |   |       |  | 3/28/2012  |        |  |  | 3/28/2015  |  |  |            | 0.50 |  |        |  | 2,457,662 |           |  |  | 2,020,000 |  |  |  | 900,000   |  |  | 
|Sold with
    share units          |  |             |            |   |       |  | 4/16/2012  |        |  |  | 4/16/2015  |  |  |            | 1.50 |  |        |  | 90,000    |           |  |  | 120,000   |  |  |  | -         |  |  | 
|Issued
    with debt conversion    |  |             |            |   |       |  | 4/28/2012  |        |  |  | 4/28/2015  |  |  |            | 1.75 |  |        |  | -         |           |  |  | 550,000   |  |  |  | -         |  |  | 
|Issued
    with debt conversion    |  |             |            |   |       |  | 4/30/2012  |        |  |  | 4/30/2015  |  |  |            | 1.75 |  |        |  | -         |           |  |  | 500,000   |  |  |  | -         |  |  | 
|Sold with
    share units          |  |             |            |   |       |  | 5/10/2012  |        |  |  | 5/10/2015  |  |  |            | 1.50 |  |        |  | 25,800    |           |  |  | 30,000    |  |  |  | -         |  |  | 
|Issued
    with debt               |  |             |            |   |       |  | 7/5/2012   |        |  |  | 7/5/2012   |  |  |            | 0.50 |  |        |  | 26,500    |           |  |  | 550,000   |  |  |  | -         |  |  | 
|Issued
    with debt               |  |             |            |   |       |  | 8/13/2012  |        |  |  | 8/13/2015  |  |  |            | 0.35 |  |        |  | -         |           |  |  | 100,000   |  |  |  | -         |  |  | 
|Issued
    with debt               |  |             |            |   |       |  | 10/26/2012 |        |  |  | 10/29/2015 |  |  |            | 0.20 |  |        |  | -         |           |  |  | 500,000   |  |  |  | -         |  |  | 
|Issued
    with debt               |  |             |            |   |       |  | 11/30/2012 |        |  |  | 11/30/2015 |  |  |            | 0.20 |  |        |  | -         |           |  |  | 500,000   |  |  |  | -         |  |  | 
|Issued
    for consulting services |  |             |            |   |       |  | 12/21/2012 |        |  |  | 12/21/2015 |  |  |            | 0.21 |  |        |  | 2,624     | (1)       |  |  | 16,875    |  |  |  | -         |  |  | 
|Closing
    - March 31, 2013       |  |             |            |   |       |  |            |        |  |  |            |  |  |            |      |  |        |  |           |           |  |  | 5,136,875 |  |  |  | 905,000   |  |  | 





(1) recorded as consulting expense

(2) recorded as legal
expense





36









Notes
to the Unaudited Interim Consolidated Financial Statements

June 30, 2011 - Restated and Unaudited

GBS
Enterprises Incorporated





Note 24	REVENUE ALLOCATION



Gross revenue may be broken down by the following products for the six months ended June 30, 2011 are
as follows:



|Sales Revenues           |  | 06/30/2011 |       
|------------------------ |  | ---------- | ------
|                         |  | KUSD       |       
|                         |  |            |       
|Licenses                 |  |            | 2,176 
|Maintenance              |  |            | 5,601 
|Partner Contribution     |  |            | 0     
|Service                  |  |            | 3,116 
|Third-Party Products     |  |            | 1,043 
|LND Third-Party Products |  |            | 1,093 
|Others                   |  |            | 62    
|Discontinued Operations  |  |            | 0     
|                         |  |            | 13,091



Revenues by geographical area for the six months ended June 30, 2011 are as follows:



|Sales Revenues          |  | 06/30/2011 |       
|----------------------- |  | ---------- | ------
|by geographic area      |  | KUSD       |       
|                        |  |            |       
|US                      |  |            | 4,044 
|Germany                 |  |            | 7,532 
|United Kingdom          |  |            | 1,515 
|Others                  |  |            | 0     
|Discontinued Operations |  |            | 0     
|                        |  |            | 13,091



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



|Long-lived assets       |  | 06/30/2011 |      
|----------------------- |  | ---------- | -----
|by geographic area      |  | KUSD       |      
|                        |  |            |      
|US                      |  |            | 154.4
|Germany                 |  |            | 348.6
|United Kingdom          |  |            | 5.6  
|Others                  |  |            | 0    
|Discontinued Operations |  |            | 0    
|                        |  |            | 508.6



Note 25 	OTHER INCOME/EXPENSE



At the financial statement date, Other income was 123 KUSD (June 30, 2010 six month period end restated:
Other Income 1,196 KUSD).





37













Notes
to the Unaudited Interim Consolidated Financial Statements

June 30, 2011 - Restated and Unaudited

GBS
Enterprises Incorporated





Note 26	SUPPLEMENTAL CASH FLOW DISCLOSURES



The significant non-cash transactions subsequent
to June 30, 2011 were as follows. In each instance where the Company issued its securities to a U.S. Person, the Company relied
on the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”)
afforded the Company under Section 4(2) promulgated under the Securities Act due to the fact that it was an isolated issuance and
did not involve a public offering of securities. In the instances where the Company issued its securities to a non-U.S. Person,
the Company relied on the exemption from the registration requirements of the Securities Act afforded the Company under Regulation
S promulgated under the Securities Act:



| | · | On April 1, 2011, the Company acquired Pavone AG,
for $350,000, assumption of $583,991 debt and 1,000,000 shares of common stock.
| | - | ---------------------------------------------------------------------------------------------------------------------------------



| | · | On June 1, 2011, the Company acquired GroupWare, Inc.,
for $250,000, assumption of $694,617 debt and 250,000 shares of common stock.
| | - | ------------------------------------------------------------------------------------------------------------------------------------



| | · | On July 25, 2011, the Company acquired IDC Global,
Inc. for $750,000, $883,005 assumption of debt, $25,000 reimbursement for accounting and legal fees, $35,000 signing bonuses and
880,000 shares of common stock.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | On September 27, 2011, the Company acquired SD Holdings,
Ltd. for $525,529 and 612,874 shares of common stock.
| | - | --------------------------------------------------------------------------------------------------------------



| | · | On February 27, 2012, an outstanding debt of GROUP
was converted into an aggregate of 1,750,000 shares of GROUP common stock, increasing GROUP’s total outstanding common stock
to 26,982,000 shares. As a result of the foregoing increase in the number of total outstanding shares of GROUP common stock, the
Company increased its ownership of GROUP common stock to an aggregate of 13,525,000 shares, representing approximately 50.1% of
the outstanding common stock of GROUP, by purchasing the 883,765 shares of GROUP common stock from GAVF LLC for an average purchase
price of $0.70 per share.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | On March 31, 2012, warrants were issued in lieu of
consulting services and the fair value, based on the Black Scholes method, was determined to be $270,208 and recorded as Additional
Paid-In Capital.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | On April 28, 2012, $632,500 in notes payable to RealRisk
Ventures, LLC were converted into 550,000 shares of common stock and into 550,000 warrants with each warrant allowing the holder
to purchase one share of common stock for $1.75 for a period of 3 years from the date of issuance.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | On April 30, 2012, $460,000 in notes payable to Lotus
Holdings Ltd. were converted into 400,000 shares of common stock and 400,000 warrants, with each warrant allowing the holder to
purchase one share of common stock for $1.75 for a period of 3 years from the date of issuance.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | On April 30, 2012, $172,500 of accounts payable due
to Vitamin B Venture, GmbH was converted into 150,000 shares of common stock in satisfaction of a converted note to Kjell Jahn.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | On July 5, 2012,
promissory notes for $552,500 were issued with an interest rate of 8.5% per annum and had a conversion feature. Similar notes
without the conversion were issued with an interest rate of 20% per annum. Therefore, it was determined that the conversion feature
had a value which was calculated by discounting the note as if the cost of capital was 20% and based on the due date set forth
of 6 months. The calculated value was classified as discounted debt and amortized over the life of the promissory notes resulting
in additional Interest expense and a credit to Additional Paid-In Capital for $26,700.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

38









Notes
to the Unaudited Interim Consolidated Financial Statements

June 30, 2011 - Restated and Unaudited

GBS
Enterprises Incorporated





| |  | 
| |  | 

| | · | On
December 21, 2012,warrants were issued in lieu of consulting services and the fair value, based on the Black Scholes method,
was determined to be $2,624 and recorded as Additional Paid-In Capital.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | On March 1, 2013, $700,000 of Notes Payable and Accounts
Payable due to Vitamin B Venture GmbH was dissolved as payment against a Loan Payable from Group AG.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | On March 20, 2013, 450,960 shares were issued at a
rate of $0.30/share on conversion of accrued interest due on a Note Payable to John Moore, Jr., a member of the Board of Directors.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | On March 27, 2013, 200,000 shares were issued at a
rate of $0.30/share on conversion of accrued interest due on a Note Payable to Stephen D. Baksa, a member of the Board of Directors.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

| | · | On March 27, 2013, 200,000 shares were issued in lieu
of services and the fair value, based on the Black Scholes, method was determined to be $70,000 and recorded as Additional Paid-In
Capital.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Note 27	OTHER SUBSEQUENT EVENTS



Key Acquisitions in 2011



In 2011, we made the following key strategic acquisitions:



IDC Global, Inc.On July 25, 2011, we acquired
100% of the outstanding common stock of IDC Global, Inc., a Delaware corporation (“IDC”), for 880,000 shares of GBS
common stock and $785,000. The fair value of the GBS common stock was determined to be $3.50 per share, representing the market
value at the end of trading on the date of the agreement. The total value of the investment, including $883,005 of debt assumption,
was $4,066,000.



SD Holdings, Ltd.On November
1, 2011, we acquired 100% of the outstanding common stock of SD Holdings Ltd., a Mauritius corporation (“SYN”), for
$525,529 and 612,874 shares of GBS common stock. The fair value of the GBS 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. SYN owns 100% of Synaptris, Inc., a California corporation
(“Synaptris”), and Synaptris Decisions Private Limited, an India company.





39











Notes
to the Unaudited Interim Consolidated Financial Statements

June 30, 2011 - Restated and Unaudited

GBS
Enterprises Incorporated





2012 Highlights



Subsidiary Restructurings in 2012



In 2012, in order to reduce overhead and
administrative costs, we decided to restructure the Company’s multilevel subsidiary-structure. During the year ended December
31, 2012, we restructured the following subsidiaries:



SD Holdings, Ltd./GBS India Private
Limited. On April 1, 2012, we sold SYN and its wholly-owned subsidiaries, Synaptris and Synaptris India, to Lotus for $1,877,232.
On July 1, 2012, the Company entered into a purchase agreement with SYN for $1,877,232, which transferred all SYN’s 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 Indian company (“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 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 and consolidated
into one wholly-owned subsidiary, Pavone GmbH. The mergers were consummated solely for administrative purposes.



Pavone, Ltd. On July 8, 2012,
Pavone, Ltd., a subsidiary of Pavone AG and a shell company, was dissolved. The Company serves the United Kingdom market through
GROUP’s subsidiary GBS, Ltd.



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



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





40









Notes
to the Unaudited Interim Consolidated Financial Statements

June 30, 2011 - Restated and Unaudited

GBS
Enterprises Incorporated





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



Changes in Corporate Governance in 2012



| |  | On February 24, 2012, Markus R. Ernst was appointed as the Company’s Chief Financial Officer.
| |  | ---------------------------------------------------------------------------------------------



| |  | On March 1, 2012, the size of the Board was increased to seven members and the Board appointed David M. Darsch, John A. Moore, Jr., Mohammad Shihadah, Stephen D. Baksa and Woody A. Allen (each, a “New Director” or “Independent Director” and collectively, the “New Directors” or “Independent Directors”) as members of the Board until the next annual meeting of stockholders of the Company or until his respective successor is elected and qualified. On March 1, 2012, the Board formed the following committees and appointed the following directors to serve on such committees:
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | o | Audit Committee: John A. Moore, Jr. (Chairman), Woody A, Allen and Gary D. MacDonald
| | - | ------------------------------------------------------------------------------------





| | o | Compensation Committee:Woody A. Allen (Chairman), David M. Darsch, John A. Moore, Jr., Mohammad Shihadah and Stephen D. Baksa
| | - | -----------------------------------------------------------------------------------------------------------------------------



| | o | Corporate Governance, Regulatory and Nominating Committee: Woody A. Allen (Chairman), David M. Darsch, John A. Moore, Jr., Mohammad Shihadah and Stephen D. Baksa
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | On July 11, 2012, Joerg Ott resigned as the Chief Executive Officer of the Company. His resignation was not due to a dispute or any disagreements with the Company. He retained his membership on the Company’s Board of Directors (the “Board”), and since July 11, 2012, Mr. Ott has been serving as the Board’s Chairman. Mr. Ott also serves as the Chief Executive Officer of GROUP.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | On July 11, 2012, the Board appointed Gary D. MacDonald as the Company’s Interim Chief Executive Officer and Managing Director of Worldwide Operations.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------



Related Party Transactions



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





41









Notes
to the Unaudited Interim Consolidated Financial Statements

June 30, 2011 - Restated and Unaudited

GBS
Enterprises Incorporated





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

| |  | 
| |  | 

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

| |  | 
| |  | 

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

| |  | 
| |  | 

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

| |  | 
| |  | 

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



On May 29, 2013, the Company’s Common Stock was moved
from the OTC Bulletin Board to the Pink Sheets due to the Company’s Common Stock not being quoted by a broker/dealer for
more than four consecutive days and not meeting the requirements of 15c2-11 under the Exchange Act. The Company’s common
stock is currently quoted on the OTC Markets’ OTCQB under the symbol, “GBSX.”







42







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



Note Regarding Forward-Looking Statements



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



OVERVIEW



GBS Enterprises Incorporated, a Nevada
corporation (the “Company,” “GBS,” “GBSX,” “we,” “us,” “our”
or similar expressions), conducts its primary business through its 50.1% owned subsidiary, GROUP Business Software AG (“GROUP”),
a German-based public-company whose stock trades on the Frankfurt Exchange under the stock symbol INW. GROUP’s software
and consulting business is focused on serving IBM’s Lotus Notes and Domino market. GROUP caters primarily to mid-market
and enterprise-size organizations with over 3,500 customers in 38 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 also provides IBM Lotus Notes/Domino Application and Transformation technology. Headquartered in Eisenach, Germany,
GROUP has offices throughout Europe and North America. The Company maintains a website at www.gbsx.us. GROUP maintains a website
at www.gbs.com. The information contained in the Company’s and GROUP’s websites is not incorporated by reference herein.



Products and Services



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



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



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



Messaging and Business Applications
Software & Solutions

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



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.





43







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



Consulting Services



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



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



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



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



Market Trends



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



GBS Lotus Application Modernization
and Migration



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



Revenue Model



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



Strategy and Focus Areas



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



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





44







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



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



General Corporate History



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



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



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



On September 6, 2010, SWAV’s name
was changed to GBS Enterprises Incorporated. On October 14, 2010, the Company’s trading symbol on the OTC Bulletin Board
was changed from SWAV to GBSX. The Company’s common stock is currently quoted on the OTC Markets’ OTCQB under the symbol
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 Major Shareholders (the “Representative Secretary”) and
an attorney appointed by Lotus (the “Lotus Representative”).



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



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





45







Transactions following the April
26, 2010 Transaction



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



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



Reverse Merger



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



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



Additional GROUP Acquisition



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



Key Acquisitions in 2011



In 2011, we made the following key strategic acquisitions:



Pavone AG.On April 1, 2011, we acquired 100% of the outstanding common stock of Pavone AG, a German corporation (“Pavone”),
for $350,000 in cash and 1,000,000 shares of GBS common stock. The fair value of the GBS 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.



GroupWare,
Inc.On June 1, 2011, we acquired 100% of the outstanding common stock of GroupWare, Inc., a Florida corporation (“GroupWare”),
for $250,000 and 250,000 shares of GBS common stock. The fair value of the GBS 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.





Executive Offices



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



Results of Operations



Assets:





Total Assets increased from $60,502,276 at December 31, 2010
to $81,839,899 at June 30, 2011.  Total Assets consists of Total Current Assets and Total Non-Current Assets.





46









Total Current Assets





At June 30, 2011, Total Current Assets were $13,809,692 as compared to $10,988,106 at December 31, 2010.
Total Current Assets consist of: Cash and Cash Equivalents, Accounts Receivable, Prepaid Expenses, and Other Receivables-current.







| | n | Cash and Cash Equivalents increased from $1,872,068 at December 31, 2010 to $6,014,411
at June 30, 2011.
| | - | --------------------------------------------------------------------------------------------------------



| | n | Accounts Receivable decreased from $5,712,157 at December 31, 2010 to $5,280,334
at June 30, 2011, and was primarily due to a slight increase in payment activity.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | n | Prepaid Expenses increased from $1,420,662 at December 31, 2011 to $1,661,329 at
June 30, 2011, from prepaid rent, insurance and advances on technological events.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | n | Other Receivables-current decreased from $1,983,219 at December 31, 2010 to $585,781
at June 30, 2011, and consisted of a receivable for anticipated compensation for damage, security
deposits, and tax refund claims.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





Total Non-Current Assets





At June 30, 2011, Total Non-Current Assets
were $68,030,207 as compared to $49,514,170 at December 31, 2010.  Total Non-Current Assets consist of: Property Plant
and Equipment, Other Receivables non-current, Deferred Tax Assets, Goodwill, Software, and Other Assets.







| | n | Net Property (plant and equipment) increased from $297,011 at December 31, 2010 to
$508,617 at June 30, 2011.
| | - | -------------------------------------------------------------------------------------------------------------





| | n | Other Receivables non-currentdecreased from $1,370.374
at December 31, 2010 to $1,013,392 at June 30, 2011, andinclude the remaining balance from a note receivable from the purchaser
of GEDYS IntraWare GmbH which is being paid off in monthly installments.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | n | Deferred Tax Assets increased from $257,859 at December 31, 2010 to $2,592,096 at
June 30, 2011, and consisted of Deferred Tax Assets derived from financial assets and losses carried forward.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | n | Goodwillincreased from $31,004,262 at December 31, 2010 to $45,639,472 at June 30,
2011.
| | - | ----------------------------------------------------------------------------------------



| | n | Software increased from $16,360,884 at December 31, 2010 to $17,951,921 at June 30,
2011, as a result of the quarterly re-calculation of capitalized development costs, product rights and license for our expert business
software, legacy business software and strategic business software all in the developmental or improvement stage.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | n | Other Assets increased from $223,780 at December 31, 2010 to $324,709 at June 30,
2011. This category includes rent and other security deposits.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------





Liabilities





Total Liabilities increased from $22,396,941 at December 31,
2010 to $26,082,522 at June 30, 2011.  Total Liabilities consists of Total Current Liabilities and Total Non-Current
Liabilities.





Total Current Liabilities





At June 30, 2011, Total Current Liabilities were $17,690,864, compared to $15,330,583 at December 31,
2010.  Total Current Liabilities consist of Notes Payable, Liabilities to Banks, Accounts Payable and Accrued Liabilities,
Deferred Income and Other Liabilities.







| | n | Notes Payableincreased from $1,441,263 at December 31, 2010 to $1,547,852 at June
30, 2011, based on additional short terms loans during the quarter.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------







47









| | n | Liabilities to Banks increased from $50,358 at December 31, 2010 to $107,318 at June
30, 2011, and included a line of credit and cash in transit.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------



| | n | Accounts Payable and Accrued Liabilitiesdecreased from $4,804,434 at December 31,
2010 to $4,390,834 at June 30, 2011.
| | - | ----------------------------------------------------------------------------------------------------------------------



| | n | Deferred Income increased from $6,212,630 at December 31, 2010 to $9,033,714 at June
30, 2011, generally as a result of reduced maintenance income collected in advance.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | n | Other Liabilities decreased from $2,821,898 at December 31, 2010 to $2,611,146 at
June 30, 2011.
| | - | ------------------------------------------------------------------------------------------------





Total Non-Current Liabilities



At June 30, 2011, our Total Non-Current Liabilities were $8,391,658, compared to $7,066,358 at December
30, 2010.  Total Non-Current Liabilities consist of Liabilities to Banks, Retirement Benefit Obligation, Deferred Tax
Liabilities and Other Non-current Liabilities.



| | n | Liabilities to Banks increased from $780,801 at December 31, 2010 to $3,197,482 at June 30, 2011 as a result of a long-term business loan/line of credit
at the Baden-Württembergische Bank, Stuttgart, Germany.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | n | Retirement Benefit Obligation increased from $154,065 at December 31, 2010 to $173,191
at June 30, 2011.
| | - | --------------------------------------------------------------------------------------------------------





| | n | Deferred Tax Liabilitiesincreased from $nil at December 31, 2010 to $690,574 at
June 30, 2011.
| | - | ----------------------------------------------------------------------------------------------





| | n | Other Non-current Liabilities decreased from $6,131,492 at December 31, 2010 to $4,330,411 at
June 30, 2011.
| | - | ------------------------------------------------------------------------------------------------------------







Six Months
Ended June 30, 2011 Compared to the Six Months Ended June 30, 2010



Revenues



For the six months ended June 30, 2011, total revenue increased $493,453 or 3.92%, to $13,091,032 from
$12,597,579 for the six months ended June 30, 2010.



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





The Product division increased to $9,974,726 for the six months ended June 30, 2011 from $9,849,216 for
the six months ended June 30, 2010, an increase of $125,509 or 1.27%. The primary contributing factors were an increase in Maintenance
revenues of $903,541 or 19.24%, offset by decreases in License revenues of $38,407 or 1.73%, Third Party Product revenues of $323,434
or 13.15%, and Other revenues of $416,191 for the six months ended June 30, 2011 compared to the six months ended June 30, 2010.







The Service division increased $367,944
or 13.39%, from $2,748,363 for the six months ended June 30, 2010 to $3,116,307 for the six months ended June 30, 2011. Mainly
as a result of the strategic reorganization allowing for an intensified focus around servicing the modernization, mobilizing and
migration market.







48









Cost of Goods Sold





For the six months ended June 30, 2011, total Cost of Goods
Sold increased $180,765 or 3.03% to $6,149,954 from $5,969,189 for the six months ended June 30, 2010.



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





Within Costs of Goods Sold related to the
Product division, the Company was able to achieve a reduction in total cost of materials from $2,897,881 to $2,100,464 for the
six months ended June 30, 2011 compared to the six months ended June 30, 2010. The primary factors contributing to the Company’s
reduction in Costs of Goods Sold related to the Product division of revenues was a $797,416 or 27.52% reduction in product material
and third party product material costs.



Within the Costs of Goods Sold related
to the Service division, the Company saw a $978,181 or 31.85% increase in the total costs of services, from $3,071,308 for the
six months ended June 30, 2010 to $4,049,490 for the six months ended June 30, 2011. The primary factors contributing to the Company’s
additional costs of services were increases in personnel costs, depreciation and amortization costs.



Operating Expenses



The Company’s total Operating Expense
consist of three segments; Selling, Administrative and General Expenses. For the six months ended June 30, 2011 total Operating
Expenses increased $3,463,415 or 42.99% to $11,519,577 from $8,056,162 for the six months ended June 30, 2010.



For the six months ended June 30, 2011,
Selling Expenses increased $2,467,962 or 44.86% to $7,968,855 from $5,500,893 for the six months ended June 30, 2010.  This
was primarily due to increases in cost of materials, personnel expense and in other expenses within the Selling Expense segment.



For the six months ended June 30, 2011,
Administrative Expenses increased $849,602 or 42.29%, to $2,858,679 from $2,009,077 for the six months ended June 30, 2010. This
was primarily due to increases in personnel expenses and other Administrative Expenses related to the Company’s acquisition
of subsidiary companies and the increased compliance costs associated with restructuring.



For the
six months ended June 30, 2011, General Expenses increased $145,850 or 26.70% to $692,043 from $546,193 for the six months ended
June 30, 2010, primarily due to increases in professional fees, cost of money transactions and currency conversion.





Other Income (Expense)



For the six months ended June 30, 2011, Total Other income of $123,281 decreased
from Total Other income of $1,196,227 for the six months ended June 30, 2010, a $1,072,946 or 89.69%
decline. This change was primarily due to a decrease in Other Income of $1,088,646 or 77.81%, due to the previous period’s
higher earnings in relation to the sale of the assets of GEDYS IntraWare GmbH. Coupled with a net decrease in Interest Expense
of $15,700 or 7.74%, for the six months ended June 30, 2011 compared to the six months ended June 30, 2010.





Liquidity & Capital Resources





As June 30, 2011, the Company had $6,014,411 in cash and cash equivalents, compared to $1,662,386 at June
30, 2010.





In March 2011 we consummated a private
placement of Units for $1.25 per Unit for total gross proceeds of $7,555,000 (the “Private Placement”). The net proceeds
of this offering were $6,839,327.25. Each Unit consisted of one share of common stock and one warrant exercisable to purchase one
share of common stock from the date of grant until the third anniversary of the date of grant for $1.50 per share (the “Private
Placement Warrants”).



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



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





49







Liquidity & Capital Resources
as of June 30, 2011







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





|                                                                       |  | Six Months Ended June 30, |          
|---------------------------------------------------------------------- |  | ------------------------- | ---------
|                                                                       |  | 2011                      |          
|                                                                       |  |                           |          
|Net cash provided (used in) Operating Activities                       |  | $                         | 444,729  
|                                                                       |  |                           |          
|Net cash provided (used in) Investing Activities                       |  | $                         | (710,231 
|Net cash provided (used in) Financing Activities                       |  | $                         | 2,580,230
|Effect of exchange rate changes on cash                                |  | $                         | 1,827,615
|Net increase (decrease) in cash and cash equivalents during the period |  | $                         | 4,142,343
|Cash and cash equivalents, beginning of period                         |  | $                         | 1,872,068
|Cash and cash equivalents, end of period                               |  | $                         | 6,014,411



50









Net Cash
provided by Operating Activities for the six month period ended June 30, 2011 was $444,729, a decrease of $3,731,429 compared to
net cash provided in Operating Activities of $4,176,158 for the six month period ended June 30, 2010. Within Operating Activities,
increases totaling $2,720,339 were mainly caused by increases inDepreciation of $1,076,258, Accounts Payable of $1,583,579, Consulting Expense of $34,000 and Retirement Benefit Obligation
of $26,502. Total increases to Operating Activities were offset by decreases totaling $6,451,768, and were mainly caused by decreases
in Net Income of $986,534, Deferred Tax Assets of $1,950,574, Minority Interest Losses of $1,613,991, Inventories of $258,009,
and a decrease in Accounts Receivable and Other Assets of $1,642,660.



Net cash used in Investing Activities during
the six month period ended June 30, 2011 was $710,231, compared to net cash used in Investing Activities in the comparative six
month period ended June 30, 2010 of $1,377,633. The additional $667,402 provided by Investing Activities for the six month period
ended June 30, 2011 was primarily due to decreases from the purchase of subsidiaries, intangible assets, property plant and equipment
totaling $3,959,960 being offset by an increase in Financial Assets of $4,627,362.



Net cash provided by Financing Activities during the six month period ended June 30, 2011 was $2,580,230,
compared to net cash provided by Financing Activities in the comparative period ended June 30, 2010 of $307,159. An increase of
$2,273,071 was primarily due to a $2,166,482 increase in borrowings from banks, coupled with a $106,589 increase in other borrowings
for the six month period ended June 30, 2011.



CRITICAL ACCOUNTING POLICIES AND ESTIMATES



Critical Accounting Policies and Estimates



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



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



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



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



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



Comprehensive Income (Loss)



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



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.





51







Financial Instruments



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



Currency Risk



We use the US dollar as our reporting currency.  The
functional currencies of our significant foreign subsidiaries are the local currency, which includes the Euro, the British pound,
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.





52







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



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





Property, Plant and Equipment



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



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



Impairment or Disposal of Long-Lived
Assets



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



Revenue Recognition



License Revenues



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



Software Maintenance Revenues



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



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.





53







Foreign Currency Translation



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



Other Provisions



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



Deferred Taxes



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



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



Recent Accounting Pronouncements



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



Principles of Consolidation and Reverse
Acquisition



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



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.





54









OFF-BALANCE SHEET ARRANGEMENTS



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





Item 3.  Quantitative and
Qualitative Disclosures about Market Risk.



N/A





Item 4.  Controls and Procedures.



Evaluation of Disclosure Controls and
Procedures





Our management, with the participation
of our Chief Executive Officer (principal executive officer) and our Chief Financial Officer (principal financial and accounting
officer), evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(b) promulgated under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on that evaluation, our Chief Executive Officer
and Chief Financial Officer concluded that, as of June 30, 2011, our disclosure controls
and procedures were not effective in ensuring that the information required to be disclosed in the reports that we file or submit
under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and
Exchange Commission’s rules and forms, including ensuring that such material information is accumulated and communicated
to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions
regarding required disclosure.





Changes in Internal Control Over Financial Reporting



During the quarter ended June
30, 2011, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.





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





Item 3. Defaults Upon Senior Securities.



None





55







Item 5. Other Information.



Subsequent Events



Key Acquisitions in 2011



In 2011, we made the following key strategic acquisitions:



IDC Global, Inc.On July
25, 2011, we acquired 100% of the outstanding common stock of IDC Global, Inc., a Delaware corporation (“IDC”), for
880,000 shares of GBS common stock and $785,000. The fair value of the GBS common stock was determined to be $3.50 per share, representing
the market value at the end of trading on the date of the agreement. The total value of the investment, including $883,005 of debt
assumption, was $4,066,000.



SD Holdings,
Ltd. On November 1, 2011, we acquired 100% of the outstanding common
stock of SD Holdings Ltd., a Mauritius corporation (“SYN”), for $525,529 and 612,874 shares of GBS common stock. The
fair value of the GBS 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. SYN owns 100% of Synaptris, Inc., a California corporation (“Synaptris”), and Synaptris
Decisions Private Limited, an India company.





2012 Highlights



Subsidiary Restructurings in 2012



In 2012,
in order to reduce overhead and administrative costs, we decided to restructure the Company’s multilevel subsidiary-structure.
During the year ended December 31, 2012, we restructured the following subsidiaries:



SD Holdings,
Ltd./GBS India Private Limited. On April 1, 2012, we sold SYN and its wholly-owned subsidiaries,
Synaptris and Synaptris India, to Lotus for $1,877,232.On July 1, 2012, the Company entered into a purchase agreement with
SYN for $1,877,232, which transferred all SYN’s 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 Indian company (“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 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
and consolidated into one wholly-owned subsidiary, Pavone GmbH. The mergers were consummated solely for administrative purposes.



Pavone, Ltd.
On July 8, 2012, Pavone, Ltd., a subsidiary of Pavone AG and a shell company, was dissolved. The Company serves the United Kingdom
market through GROUP’s subsidiary GBS, Ltd.



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



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



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



Changes in Corporate Governance in 2012



|n |  | On February 24, 2012, Markus R. Ernst was appointed as the Company’s Chief Financial Officer.
|- |  | ---------------------------------------------------------------------------------------------



|n | n | On March 1, 2012, the size of the Board was increased to seven members and the Board appointed David M. Darsch, John A. Moore, Jr., Mohammad Shihadah, Stephen D. Baksa and Woody A. Allen (each, a “New Director” or “Independent Director” and collectively, the “New Directors” or “Independent Directors”) as members of the Board until the next annual meeting of stockholders of the Company or until his respective successor is elected and qualified. On March 1, 2012, the Board formed the following committees and appointed the following directors to serve on such committees:
|- | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





56







| | o | Audit Committee: John A. Moore, Jr. (Chairman), Woody A, Allen and Gary D. MacDonald
| | - | ------------------------------------------------------------------------------------





| | o | Compensation Committee:Woody A. Allen (Chairman), David M. Darsch, John A. Moore, Jr., Mohammad Shihadah and Stephen D. Baksa
| | - | -----------------------------------------------------------------------------------------------------------------------------



| | o | Corporate Governance, Regulatory and Nominating Committee: Woody A. Allen (Chairman), David M. Darsch, John A. Moore, Jr., Mohammad Shihadah and Stephen D. Baksa
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



|n | n | On July 11, 2012, Joerg Ott resigned as the Chief Executive Officer of the Company. His resignation was not due to a dispute or any disagreements with the Company. He retained his membership on the Company’s Board of Directors (the “Board”), and since July 11, 2012, Mr. Ott has been serving as the Board’s Chairman. Mr. Ott also serves as the Chief Executive Officer of GROUP.
|- | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|n | n | On July 11, 2012, the Board appointed Gary D. MacDonald as the Company’s Interim Chief Executive Officer and Managing Director of Worldwide Operations.
|- | - | -------------------------------------------------------------------------------------------------------------------------------------------------------



Related Party Transactions



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



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



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





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



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



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





57









Other Information



On May 29, 2013, the Company’s Common Stock
was moved from the OTC Bulletin Board to the Pink Sheets due to the Company’s Common Stock not being quoted by a broker/dealer
for more than four consecutive days and not meeting the requirements of 15c2-11 under the Exchange Act. The Company’s common
stock is currently quoted on the OTC Markets’ OTCQB under the symbol, “GBSX.”



Item 6. Exhibits.



|Exhibit     |  |                                                                                         
|----------- |  | ----------------------------------------------------------------------------------------
|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 (2) |  | XBRL Instance Document                                                                  
|            |  |                                                                                         
|101.SCH (2) |  | XBRL Taxonomy Extension Schema Document                                                 
|            |  |                                                                                         
|101.CAL (2) |  | XBRL Taxonomy Extension Calculation Linkbase Document                                   
|            |  |                                                                                         
|101.LAB (2) |  | XBRL Taxonomy Extension Labels Linkbase Document                                        
|            |  |                                                                                         
|101.DEF (2) |  | XBRL Taxonomy Extension Definition Linkbase Document                                    
|            |  |                                                                                         
|101.PRE (2) |  | XBRL Taxonomy Extension Presentation Linkbase Document                                  



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



|(2) | To be filed by Amendment.
|--- | -------------------------



58







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: July 15,  2013 | By: /s/Gary D. MacDonald                    
|                     | Gary D. MacDonald                           
|                     | Chief Executive Officer                     
|                     | (Principal Executive Officer)               
|                     |                                             
|Date: July 15, 2013  | By: /s/Markus R. Ernst                      
|                     | Markus R. Ernst                             
|                     | Chief Financial Officer                     
|                     | (Principal Financial and Accounting Officer)



59