UNITED STATES

SECURITIES
AND EXCHANGE COMMISSION

Washington,
D.C. 20549



FORM
10-Q/A

(Amendment No. 2)



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



For the quarterly period ended:September
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 16, 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 | 29      
|Item 3.    | Quantitative and Qualitative Disclosures About Market Risk                            | 41      
|Item 4.    | Controls and Procedures                                                               | 41      
|           |                                                                                       |         
|           | PART II - OTHER INFORMATION                                                           |         
|Item 1.    | Legal Proceedings                                                                     | 41      
|Item 1A.   | Risk Factors                                                                          | 41      
|Item 2.    | Unregistered Sales of Equity Securities and Use of Proceeds                           | 41      
|Item 3.    | Defaults Upon Senior Securities                                                       | 41      
|Item 5.    | Other Information                                                                     | 41      
|Item 6.    | Exhibits                                                                              | 42      
|Signatures |                                                                                       | 43      



2







EXPLANATORY NOTE



GBS Enterprises Incorporated, a
Nevada company (the “Company”), is filing this Amendment No. 2 to its Form 10Q for the fiscal quarter ended
September 30, 2011 originally filed with the Securities and Exchange Commission on November 16, 2011 (the “Original
Filing”) and subsequently amended on 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. 2 in the Form 10-Q for the fiscal quarter
ended September 30, 2011 to include the accounts of all consolidated companies for the same three and nine 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
Amendment No. 2 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



September 30, 2011



(Restated)



4









GBS Enterprises Incorporated

Interim Consolidated Balance Sheets

September 30, 2011 and December 31, 2010

Restated and Unaudited



|                                                    |  | Restated      |            |   | Restated     | 
|--------------------------------------------------- |  | ------------- | ---------- | - | ------------ | 
|                                                    |  | September 30, |            |   | December 31, | 
|                                                    |  | 2011          |            |   | 2010         | 
|                                                    |  | $             |            |   | $            | 
|Assets                                              |  |               |            |   |              | 
|                                                    |  |               |            |   |              | 
|Current Assets                                      |  |               |            |   |              | 
|Cash and cash equivalents - Note 7                  |  |               | 3,062,890  |   |              | 
|Accounts Receivable - Note 8                        |  |               | 4,544,023  |   |              | 
|Inventories - Note 3                                |  |               | 264,611    |   |              | 
|Prepaid expenses - Note 9                           |  |               | 1,823,547  |   |              | 
|Other current receivables - Note 10                 |  |               | 798,759    |   |              | 
|Total current assets                                |  |               | 10,493,830 |   |              | 
|                                                    |  |               |            |   |              | 
|Non-Current Assets                                  |  |               |            |   |              | 
|Property, plant and equipment - Note  11            |  |               | 2,136,401  |   |              | 
|Other non-current receivables - Note 12             |  |               | 923,520    |   |              | 
|Deferred tax assets                                 |  |               | 2,936,954  |   |              | 
|Goodwill - Note 13                                  |  |               | 48,154,456 |   |              | 
|Software - Note 14                                  |  |               | 16,927,292 |   |              | 
|Other assets - Note 15                              |  |               | 319,139    |   |              | 
|Total non-current assets                            |  |               | 71,397,762 |   |              | 
|                                                    |  |               |            |   |              | 
|Total assets                                        |  |               | 81,891,592 |   |              | 
|                                                    |  |               |            |   |              | 
|                                                    |  |               |            |   |              | 
|Liabilities and stockholders' equity                |  |               |            |   |              | 
|                                                    |  |               |            |   |              | 
|Current liabilities                                 |  |               |            |   |              | 
|Notes payable - Note 16                             |  |               | 1,462,560  |   |              | 
|Liabilities to banks - Note 17                      |  |               | 39,040     |   |              | 
|Accounts payables and accrued liabilities - Note 18 |  |               | 5,316,468  |   |              | 
|Deferred income - Note 19                           |  |               | 7,200,058  |   |              | 
|Other short term liabilities - Note 20              |  |               | 4,092,065  |   |              | 
|Due to related parties - Note 21                    |  |               | 0          |   |              | 
|Total current liabilities                           |  |               | 18,110,191 |   |              | 
|                                                    |  |               |            |   |              | 
|Non - Current liabilities                           |  |               |            |   |              | 
|Liabilities to banks - Note 22                      |  |               | 3,606,461  |   |              | 
|Retirement benefit obligation                       |  |               | 163,648    |   |              | 
|Deferred Tax Liabilities                            |  |               | 611,849    |   |              | 
|Other long term liabilities                         |  |               | 2,786,781  |   |              | 
|Total non-current liabilities                       |  |               | 7,168,739  |   |              | 
|                                                    |  |               |            |   |              | 
|Total liabilities                                   |  |               | 25,278,930 |   |              | 
|                                                    |  |               |            |   |              | 
|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:                             |  |               |            |   |              | 
|24,673,790 shares of common stock                   |  |               | 24,674     |   |              | 
|Additional paid in capital                          |  |               | 43,167,531 |   |              | 
|Accumulated deficit                                 |  |               | (3,227,566 | ) |              | 
|Other comprehensive income                          |  |               | 64,536     |   |              | 
|                                                    |  |               | 40,029,175 |   |              | 
|Noncontrolling interest in subsidiaries             |  |               | 16,583,487 |   |              | 
|                                                    |  |               |            |   |              | 
|Total stockholders' equity                          |  |               | 56,612,662 |   |              | 
|                                                    |  |               |            |   |              | 
|Total stockholders' equity and liabilities          |  |               | 81,891,592 |   |              | 
|                                                    |  |               |            |   |              | 
|Subsequent events - Note 27                         |  |               |            |   |              | 







5









GBS Enterprises Incorporated

Interim Consolidated Statements of Operations

Restated and Unaudited



|                                                                             |  | For the Three Months Ended |            |   | For the Nine Months Ended | 
|---------------------------------------------------------------------------- |  | -------------------------- | ---------- | - | ------------------------- | 
|                                                                             |  | Restated                   |            |   | Restated                  | 
|                                                                             |  | September 30,              |            |   | September 30,             | 
|                                                                             |  | 2011                       |            |   | 2010                      | 
|                                                                             |  | $                          |            |   | $                         | 
|                                                                             |  |                            |            |   |                           | 
|Revenues - Note 24                                                           |  |                            |            |   |                           | 
|Products                                                                     |  |                            | 5,521,989  |   |                           | 
|Services                                                                     |  |                            | 2,707,330  |   |                           | 
|                                                                             |  |                            | 8,229,318  |   |                           | 
|Cost of goods sold                                                           |  |                            |            |   |                           | 
|Products                                                                     |  |                            | 1,876,285  |   |                           | 
|Services                                                                     |  |                            | 3,000,140  |   |                           | 
|                                                                             |  |                            | 4,876,425  |   |                           | 
|Gross profit                                                                 |  |                            | 3,352,893  |   |                           | 
|                                                                             |  |                            |            |   |                           | 
|Operating expenses                                                           |  |                            |            |   |                           | 
|Selling expenses                                                             |  |                            | 4,308,647  |   |                           | 
|Administrative expenses                                                      |  |                            | 1,980,558  |   |                           | 
|General expenses                                                             |  |                            | 150,873    |   |                           | 
|                                                                             |  |                            | 6,440,079  |   |                           | 
|                                                                             |  |                            |            |   |                           | 
|Operating income (loss)                                                      |  |                            | (3,087,185 | ) |                           | 
|                                                                             |  |                            |            |   |                           | 
|Other Income (expense) - Note 25                                             |  |                            |            |   |                           | 
|Other Income (expense)                                                       |  |                            | (245,631   | ) |                           | 
|Interest income                                                              |  |                            | 5,079      |   |                           | 
|Interest expense                                                             |  |                            | (60,314    | ) |                           | 
|                                                                             |  |                            | (300,865   | ) |                           | 
|                                                                             |  |                            |            |   |                           | 
|Income (loss) before income taxes                                            |  |                            | (3,388,051 | ) |                           | 
|                                                                             |  |                            |            |   |                           | 
|Income tax (income) expense                                                  |  |                            | (522,667   | ) |                           | 
|                                                                             |  |                            |            |   |                           | 
|Income before extraordinary items,                                           |  |                            |            |   |                           | 
|discontinued operations                                                      |  |                            | (2,865,384 | ) |                           | 
|                                                                             |  |                            |            |   |                           | 
|Discontinued operations                                                      |  |                            | 0          |   |                           | 
|                                                                             |  |                            |            |   |                           | 
|Net income (loss) before extraordinary items                                 |  |                            | (2,865,384 | ) |                           | 
|                                                                             |  |                            |            |   |                           | 
|Extraordinary items                                                          |  |                            | 0          |   |                           | 
|                                                                             |  |                            |            |   |                           | 
|Net income (loss)                                                            |  |                            | (2,865,384 | ) |                           | 
|                                                                             |  |                            |            |   |                           | 
|Net Loss attributable to noncontrolling Interest                             |  |                            | (868,769   | ) |                           | 
|Net income (loss) attributable to stockholders                               |  |                            | (1,996,615 | ) |                           | 
|                                                                             |  |                            |            |   |                           | 
|Other comprehensive income (loss)                                            |  |                            | 440,471    |   |                           | 
|Other comprehensive income  (loss)                                           |  |                            |            |   |                           | 
|attributable to noncontrolling interest                                      |  |                            | 219,795    |   |                           | 
|Other comprehensive income (loss)                                            |  |                            |            |   |                           | 
|attributable to stockholders                                                 |  |                            | 220,676    |   |                           | 
|Net income (loss) and comprehensive income (loss) attributed to stockholders |  |                            | (1,775,939 | ) |                           | 
|                                                                             |  |                            |            |   |                           | 
|                                                                             |  |                            |            |   |                           | 
|Net earnings (loss) per share, basic and diluted                             |  |                            | (0.073     | ) |                           | 
|                                                                             |  |                            |            |   |                           | 
|Weighted average number of common stock                                      |  |                            |            |   |                           | 
|outstanding, basic and diluted                                               |  |                            | 24,176,032 |   |                           | 





(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 nine months ended September 30, 2011 and September 30, 2010

Restated and Unaudited



|                                                 |  | Restated           |            |   | Restated           | 
|------------------------------------------------ |  | ------------------ | ---------- | - | ------------------ | 
|                                                 |  | September 30, 2011 |            |   | September 30, 2010 | 
|                                                 |  | $                  |            |   | $                  | 
|                                                 |  |                    |            |   |                    | 
|Cash flow from operating activities              |  |                    |            |   |                    | 
|Net loss / net income                            |  |                    | (3,245,198 | ) |                    | 
|Adjustments:                                     |  |                    |            |   |                    | 
|Deferred income taxes                            |  |                    | (2,067,246 | ) |                    | 
|Depreciation and amortization                    |  |                    | 3,433,734  |   |                    | 
|Consulting expense                               |  |                    | 34,000     |   |                    | 
|Income (Losses) from equity investment           |  |                    | 5,065      |   |                    | 
|Loss on Sale of Assets                           |  |                    |            |   |                    | 
|Minority interest losses                         |  |                    | (2,492,331 | ) |                    | 
|Changes in operating assets and liabilities:     |  |                    |            |   |                    | 
|Accounts receivable and other assets             |  |                    | 2,301,204  |   |                    | 
|Retirement benefit obligation                    |  |                    | 9,583      |   |                    | 
|Inventories                                      |  |                    | (264,611   | ) |                    | 
|Accounts payable and other liabilities           |  |                    | (575,082   | ) |                    | 
|                                                 |  |                    |            |   |                    | 
|Net cash provided (used) by operating activities |  |                    | (2,860,882 | ) |                    | 
|Net cash provided (used) by discontinued         |  |                    | -          |   |                    | 
|                                                 |  |                    |            |   |                    | 
|Cash flow from investing activities              |  |                    |            |   |                    | 
|Sale (Purchase) of intangible assets             |  |                    | (1,857,435 | ) |                    | 
|Purchase of property, plant and equipment        |  |                    | (3,982,098 | ) |                    | 
|Write-down goodwill and intangibles              |  |                    |            |   |                    | 
|Sale (Purchase) of Subsidiaries                  |  |                    | (1,385,000 | ) |                    | 
|Increase in Financial assets                     |  |                    | 17,150,194 |   |                    | 
|                                                 |  |                    |            |   |                    | 
|Net cash provided (used) in investing activities |  |                    | 9,925,662  |   |                    | 
|                                                 |  |                    |            |   |                    | 
|Cash flow from financing activities              |  |                    |            |   |                    | 
|Net borrowings - banks                           |  |                    | 2,814,342  |   |                    | 
|Other borrowings                                 |  |                    | 21,297     |   |                    | 
|Forgiveness of Debt                              |  |                    | -          |   |                    | 
|Capital paid-in                                  |  |                    | -          |   |                    | 
|Loans from related party                         |  |                    | -          |   |                    | 
|                                                 |  |                    |            |   |                    | 
|Net cash provided (used) in financing activities |  |                    | 2,835,639  |   |                    | 
|                                                 |  |                    |            |   |                    | 
|Effect of exchange rate changes on cash          |  |                    | (8,709,597 | ) |                    | 
|                                                 |  |                    |            |   |                    | 
|Net increase (decrease) in cash                  |  |                    | 1,190,822  |   |                    | 
|Cash and cash equivalents - Beginning of year    |  |                    | 1,872,068  |   |                    | 
|                                                 |  |                    |            |   |                    | 
|Cash and cash equivalents - End of Quarter       |  |                    | 3,062,890  |   |                    | 



7


Notes to the Unaudited Interim Consolidated Financial Statements  September 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“)



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.







8


Notes to the Unaudited Interim Consolidated Financial Statements  September 30, 2011 – Restated and Unaudited GBS Enterprises Incorporated




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.



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.



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.





9


Notes to the Unaudited Interim Consolidated Financial Statements  September 30, 2011 – Restated and Unaudited GBS Enterprises Incorporated




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.



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.



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.



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.





10


Notes to the Unaudited Interim Consolidated Financial Statements  September 30, 2011 – Restated and Unaudited GBS Enterprises Incorporated




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



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.



11


Notes to the Unaudited Interim Consolidated Financial Statements  September 30, 2011 – Restated and Unaudited GBS Enterprises Incorporated




Financial Instruments



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



Currency Risk



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



Fair Value Measurements



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



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



Cash and cash equivalents



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



Inventories



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



Goodwill and other Intangible Assets



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



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



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



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



12


Notes to the Unaudited Interim Consolidated Financial Statements  September 30, 2011 – Restated and Unaudited GBS Enterprises Incorporated




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.



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.



13


Notes to the Unaudited Interim Consolidated Financial Statements  September 30, 2011 – Restated and Unaudited GBS Enterprises Incorporated




Professional services revenues



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



Foreign Currency Translation



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



Other Provisions



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



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.



14


Notes to the Unaudited Interim Consolidated Financial Statements  September 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.



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 September 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 September 30, 2011 and September 30, 2010 have also been adjusted
to include the accounts of all consolidated companies as of those dates.



15


Notes to the Unaudited Interim Consolidated Financial Statements  September 30, 2011 – Restated and Unaudited GBS Enterprises Incorporated




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



|                                         |  |                    |            |   |                    |  |            |            | 
|---------------------------------------- |  | ------------------ | ---------- | - | ------------------ |  | ---------- | ---------- | 
|                                         |  | Restated Unaudited |            |   | Unaudited          |  |            |            | 
|For the nine months ended                |  | September 30, 2011 |            |   | September 30, 2011 |  |            | Difference | 
|                                         |  | $                  |            |   | $                  |  |            | $          | 
|Assets                                   |  |                    |            |   |                    |  |            |            | 
|Current Assets                           |  |                    |            |   |                    |  |            |            | 
|Cash and cash equivalents                |  |                    | 3,062,890  |   |                    |  | 3,537,517  |            | 
|Accounts receivable                      |  |                    | 4,544,023  |   |                    |  | 4,544,023  |            | 
|Inventories                              |  |                    | 264,611    |   |                    |  | 264,611    |            | 
|Prepaid expenses                         |  |                    | 1,823,547  |   |                    |  | 1,097,370  |            | 
|Other receivables                        |  |                    | 798,759    |   |                    |  | 796,454    |            | 
|Total current assets                     |  |                    | 10,493,830 |   |                    |  | 10,239,975 |            | 
|                                         |  |                    |            |   |                    |  |            |            | 
|Equity investments in related parties    |  |                    |            |   |                    |  | 285,908    |            | 
|Property, plant and equipment            |  |                    | 2,136,401  |   |                    |  | 2,133,969  |            | 
|other non-current receivables            |  |                    | 923,520    |   |                    |  | 2,818,310  |            | 
|Prepaid expenses                         |  |                    |            |   |                    |  | 725,178    |            | 
|Deferred tax assets                      |  |                    | 2,936,954  |   |                    |  | 3,385,350  |            | 
|Goodwill                                 |  |                    | 48,154,456 |   |                    |  | 49,693,027 |            | 
|Software                                 |  |                    | 16,927,292 |   |                    |  | 17,110,114 |            | 
|Other assets                             |  |                    | 319,139    |   |                    |  | 319,139    |            | 
|Total non-current assets                 |  |                    | 71,397,762 |   |                    |  | 76,470,995 |            | 
|                                         |  |                    |            |   |                    |  |            |            | 
|Total assets                             |  |                    | 81,891,592 |   |                    |  | 86,710,970 |            | 
|                                         |  |                    |            |   |                    |  |            |            | 
|Liabilities and shareholders' equity     |  |                    |            |   |                    |  |            |            | 
|Current liabilities                      |  |                    |            |   |                    |  |            |            | 
|Notes payable                            |  |                    | 1,462,560  |   |                    |  | 1,462,560  |            | 
|Liabilities to banks                     |  |                    | 39,040     |   |                    |  | 39,073     |            | 
|Accounts payable and accrued liabilities |  |                    | 5,316,468  |   |                    |  | 5,489,528  |            | 
|Other liabilities                        |  |                    | 4,092,065  |   |                    |  | 3,507,192  |            | 
|Deferred income                          |  |                    | 7,200,058  |   |                    |  | 7,200,058  |            | 
|Due to related parties                   |  |                    |            |   |                    |  | 475,579    |            | 
|Shares payable                           |  |                    |            |   |                    |  | 298,956    |            | 
|Total current liabilities                |  |                    | 18,110,191 |   |                    |  | 18,472,946 |            | 
|                                         |  |                    |            |   |                    |  |            |            | 
|Liabilities to banks                     |  |                    | 3,606,461  |   |                    |  | 3,606,461  |            | 
|Deferred tax liabilities                 |  |                    | 611,849    |   |                    |  | 611,849    |            | 
|Retirement benefit obligation            |  |                    | 163,648    |   |                    |  | 163,648    |            | 
|Other liabilities                        |  |                    | 2,786,781  |   |                    |  | 2,786,781  |            | 
|Total non-current liabilities            |  |                    | 7,168,739  |   |                    |  | 7,168,739  |            | 
|                                         |  |                    |            |   |                    |  |            |            | 
|Total liabilities                        |  |                    | 25,278,930 |   |                    |  | 25,641,685 |            | 
|                                         |  |                    |            |   |                    |  |            |            | 
|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                   |  |                    |            |   |                    |  |            |            | 
|                                         |  |                    |            |   |                    |  |            |            | 
|                                         |  |                    | 24,674     |   |                    |  | 27,248     |            | 
|Additional paid in capital               |  |                    | 43,167,531 |   |                    |  | 47,325,970 |            | 
|Accumulated deficit                      |  |                    | (3,227,566 | ) |                    |  | (2,888,488 | )          | 
|Other comprehensive income               |  |                    | 64,536     |   |                    |  | 73,951     |            | 
|Total shareholders' equity               |  |                    | 40,029,175 |   |                    |  | 44,538,681 |            | 
|                                         |  |                    |            |   |                    |  |            |            | 
|Noncontrolling interest in subsidiaries  |  |                    | 16,583,487 |   |                    |  | 16,530,604 |            | 
|                                         |  |                    |            |   |                    |  |            |            | 
|Total equity and liabilities             |  |                    | 81,891,592 |   |                    |  | 86,710,970 |            | 





16


Notes to the Unaudited Interim Consolidated Financial Statements  September 30, 2011 – Restated and Unaudited GBS Enterprises Incorporated








|                                                                             |  |                    |           
|---------------------------------------------------------------------------- |  | ------------------ | ----------
|                                                                             |  | Restated Unaudited |           
|For the nine months ended                                                    |  | September 30, 2011 |           
|                                                                             |  | $                  |           
|Net sales                                                                    |  |                    | 21,320,351
|Cost of goods sold                                                           |  |                    | 11,026,379
|Gross profit                                                                 |  |                    | 10,293,972
|                                                                             |  |                    |           
|Operating expenses                                                           |  |                    |           
|Selling expenses                                                             |  |                    | 12,277,502
|Administrative expenses                                                      |  |                    | 4,839,237 
|General expenses                                                             |  |                    | 842,917   
|                                                                             |  |                    | 17,959,655
|                                                                             |  |                    |           
|Operating income                                                             |  |                    | (7,665,684
|                                                                             |  |                    |           
|Other Income (expense)                                                       |  |                    |           
|Other Income (expense)                                                       |  |                    | 64,916    
|Interest income                                                              |  |                    | 19,254    
|Interest expense                                                             |  |                    | (261,753  
|                                                                             |  |                    | (177,584  
|                                                                             |  |                    |           
|Income (loss) before income taxes                                            |  |                    | (7,843,268
|                                                                             |  |                    |           
|Income tax (income) expense                                                  |  |                    | (2,105,739
|                                                                             |  |                    |           
|Net income (loss)                                                            |  |                    | (5,737,529
|                                                                             |  |                    |           
|Net income (loss) attributable to non-controlling interest                   |  |                    | (2,492,331
|                                                                             |  |                    |           
|Net income (loss) attributable to shareholders                               |  |                    | (3,245,198
|                                                                             |  |                    |           
|Other comprehensive income (loss)                                            |  |                    | 77,203    
|                                                                             |  |                    |           
|Net income (loss) and comprehensive income (loss) attributed to shareholders |  |                    | (3,206,519
|                                                                             |  |                    |           
|Basic and diluted income (loss) per share                                    |  |                    | (0.149    
|                                                                             |  |                    |           
|Weighted average number of shares outstanding                                |  |                    | 21,550,753





17


Notes to the Unaudited Interim Consolidated Financial Statements  September 30, 2011 – Restated and Unaudited GBS Enterprises Incorporated






|                                                    |  | Restated           |            |   | Unaudited          |  |            |            | 
|--------------------------------------------------- |  | ------------------ | ---------- | - | ------------------ |  | ---------- | ---------- | 
|For the nine months ended                           |  | September 30, 2011 |            |   | September 30, 2011 |  |            | Difference | 
|                                                    |  | $                  |            |   | $                  |  |            | $          | 
|Cash flow from operating activities                 |  |                    |            |   |                    |  |            |            | 
|Net loss / net income                               |  |                    | (3,245,198 | ) |                    |  | (2,565,969 | )          | 
|Adjustments                                         |  |                    |            |   |                    |  |            |            | 
|Deferred income taxes                               |  |                    | (2,067,246 | ) |                    |  | (2,515,815 | )          | 
|Depreciation and amortization                       |  |                    | 3,433,734  |   |                    |  | 3,462,047  |            | 
|Loss from equity investment                         |  |                    | 5,065      |   |                    |  | 5,065      |            | 
|Consulting Expense                                  |  |                    | 34,000     |   |                    |  |            |            | 
|Minority interest losses                            |  |                    | (2,492,331 | ) |                    |  | (2,555,725 | )          | 
|Stock based compensation                            |  |                    |            |   |                    |  | 34,000     |            | 
|Foreign exchange                                    |  |                    |            |   |                    |  | 140,831    |            | 
|Changes in operating assets and liabilities         |  |                    |            |   |                    |  |            |            | 
|Accounts receivable and other assets                |  |                    | 2,301,204  |   |                    |  | 2,181,463  |            | 
|Retirement benefit obligation                       |  |                    | 9,583      |   |                    |  | (95,510    | )          | 
|Inventories                                         |  |                    | (264,611   | ) |                    |  | (264,611   | )          | 
|Accounts payable and other liabilities              |  |                    | (575,082   | ) |                    |  | 2,227,834  |            | 
|Net cash provided by operating activities           |  |                    | (2,860,882 | ) |                    |  | 53,610     |            | 
|                                                    |  |                    |            |   |                    |  |            |            | 
|Cash flow from investing activities                 |  |                    |            |   |                    |  |            |            | 
|Sale (Purchase) of intangible assets                |  |                    | (1,857,435 | ) |                    |  | (3,035,533 | )          | 
|Sale (Purchase) of property, plant and equipment    |  |                    | (3,982,098 | ) |                    |  | (2,186,029 | )          | 
|Sale (Purchase) of subsidiaries                     |  |                    | (1,385,000 | ) |                    |  |            |            | 
|Currency differences                                |  |                    |            |   |                    |  |            |            | 
|Increase (Decrease) of financial assets             |  |                    | 17,150,194 |   |                    |  | (1,980,066 | )          | 
|Net cash used in investing activities               |  |                    | 9,925,661  |   |                    |  | (7,201,628 | )          | 
|                                                    |  |                    |            |   |                    |  |            |            | 
|Cash flow from financing activties                  |  |                    |            |   |                    |  |            |            | 
|Net borrowings - banks                              |  |                    | 2,814,342  |   |                    |  | 2,815,184  |            | 
|other borrowings                                    |  |                    | 21,297     |   |                    |  | (3,330,906 | )          | 
|Net proceeds from exercise of warrants              |  |                    |            |   |                    |  | 3,024,970  |            | 
|Loans from related party                            |  |                    |            |   |                    |  | (354,577   | )          | 
|Net cash used in financing activities               |  |                    | 2,835,639  |   |                    |  | 2,154,671  |            | 
|                                                    |  |                    |            |   |                    |  |            |            | 
|Effect of exchange rate changes on cash             |  |                    | (8,709,597 | ) |                    |  |            |            | 
|                                                    |  |                    |            |   |                    |  |            |            | 
|Net increase in cash                                |  |                    | 1,190,821  |   |                    |  | (4,993,347 | )          | 
|Cash and cash equivalents - Beginning of the period |  |                    | 1,872,068  |   |                    |  | 8,530,864  |            | 
|                                                    |  |                    |            |   |                    |  |            |            | 
|Cash and cash equivalents - End of period           |  |                    | 3,062,889  |   |                    |  | 3,537,517  |            | 



18


Notes to the Unaudited Interim Consolidated Financial Statements  September 30, 2011 – Restated and Unaudited GBS Enterprises Incorporated




Note 5	SUBSIDIARY COMPANIES



As of September 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):







|                                      |  |                          |  | Stockholders' Equity  |   |                                     |        | Profit                   |  |                   |   | Date                   
|------------------------------------- |  | ------------------------ |  | --------------------- | - | ----------------------------------- | ------ | ------------------------ |  | ----------------- | - | -----------------------
|                                      |  |                          |  | as of                 |   |                                     |        | of the                   |  |                   |   | of the                 
|                                      |  | Headquarters             |  | Restated
    09/30/11 |   | Percentage ofSubscribed
    Capital |        | consolidated
    quarter |  | Ownership         |   | First
    Consolidation
|                                      |  |                          |  | KUSD                  |   |                                     | KUSD   |                          |  | in %              |   |                        
|ebVokus
Software GmbH                 |  | Dresden
    (GER)        |  | 438                   |   |                                     | 54     |                          |  | 50.1              | % |                        
|GROUP
    Business Software (UK) Ltd. |  | Manchester
    (UK)      |  | (1,233                | ) |                                     | 23     |                          |  | 50.1              | % |                        
|GROUP
    Business Software Corp.     |  | Woodstock,
    GA (USA)  |  | (4,636                | ) |                                     | 1      |                          |  | 50.1              | % |                        
|Permessa
    Corporation              |  | Waltham,
    MA (USA)    |  | (554                  | ) |                                     | 0      |                          |  | 50.1              | % |                        
|Relavis
    Corporation               |  | Woodstock,
    GA (USA)  |  | (599                  | ) |                                     | 2      |                          |  | 50.1              | % |                        
|GROUP
    LIVE N.V.                   |  | Den
    Haag (NL)        |  | (2,722                | ) |                                     | 134    |                          |  | 50.1              | % |                        
|Pavone
    AG                         |  | Paderborn
    (GER)      |  | (1,242                | ) |                                     | 47     |                          |  | 100               | % |                        
|Pavone
    Ltd.                       |  | North
    Yorkshire (UK) |  | (63                   | ) |                                     | 584    |                          |  | 100               | % |                        
|GROUP
    Business Software AG        |  | Karlsruhe
    (GER)      |  | 37,521                |   |                                     | 33,788 |                          |  | Reverse
    
50.1 | % |                        
|Groupware
    Inc.                    |  | Woodstock,
    GA (USA)  |  | (482                  | ) |                                     | 1      |                          |  | 100               | % |                        
|IDC
    Global Inc.                   |  | Chicago,
    IL (USA)    |  | 2,424                 |   |                                     | 0      |                          |  | 100               | % |                        







D - Direct Subsidiary



I - Indirect Subsidiary 
Indirect Subsidiaries are owned 50.1% 
through GROUP Business Software AG





19


Notes to the Unaudited Interim Consolidated Financial Statements  September 30, 2011 – Restated and Unaudited GBS Enterprises Incorporated




Note 6	ASSOCIATED COMPANY



Due
to the absence of domination/control, B.E.R.S. AD, Varna, Bulgaria is treated an associated company in the consolidated financial
statements. GROUP Business Software AG's interest in B.E.R.S AD, is 50%. It was first consolidated on December 31, 2006 for an
acquisition cost of 265,000.00 Euros.



|                     |  |              |  |                         |     |       |     |          |     |             |   
|-------------------- |  | ------------ |  | ----------------------- | --- | ----- | --- | -------- | --- | ----------- | --
|                     |  |              |  | Assets
        Restated |     |       |     | Sales    |     | Annual      |   
|                     |  |              |  | 9.30.11                 |     | Debts |     | Revenues |     | Profit/Loss |   
|Associated Companies |  | Headquarters |  | KUSD                    |     | KUSD  |     | KUSD     |     | KUSD        |   
|                     |  |              |  |                         |     |       |     |          |     |             |   
|B.E.R.S. AD          |  | Varna (BUL)  |  |                         | 271 |       | 103 |          | 382 |             | 37





Note 7	CASH AND
CASH EQUIVALENTS





As of the financial statement
date, the Company’s cash and cash equivalents totaled 3,063 KUSD restated (December 31, 2010 year end restated: 1,872 KUSD).





Note 8	ACCOUNTS RECEIVABLE





As of the financial statement date,
Accounts Receivable was 4,544 KUSD (December 31, 2010 year 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 1,824 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 799 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 EquipmentkUSD |  | Development 
of the cost |  | Development of
 accumulated
 depreciation |         | Balance
|--------------------------------- |  | ------------------------ |  | ----------------------------------------- | ------- | -------
|                                  |  |                          |  |                                           |         |        
|Restated 12/31/2010               |  | 5,114.1                  |  |                                           | 4,817.1 |        
|Additions                         |  | 436.7                    |  |                                           | 333.9   |        
|Disposals                         |  | 5.9                      |  |                                           | 5.9     |        
|Currency differences              |  | 0                        |  |                                           | 0       |        
|Reclassifications                 |  | 3,062.1                  |  |                                           | 1,325.5 |        
|Restated 09/30/2011               |  | 8,607.0                  |  |                                           | 6,470.6 |        





20


Notes to the Unaudited Interim Consolidated Financial Statements  September 30, 2011 – Restated and Unaudited GBS Enterprises Incorporated




Note 12	OTHER RECEIVABLES NON-CURRENT







Non-current Receivables as of the financial
statement date were 924 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 |  | Restated Goodwill as of 
09/30/2011 in kUSD
|----------------------------------------- |  | ------------------------------- |  | -------------------------------------------
|Global words AG                           |  | 10/01/2002                      |  | 5,095.3                                    
|GROUP Technologies AG                     |  | 09/01/2005                      |  | 4,479.7                                    
|GROUP Business Software Inc.              |  | 12/31/2005                      |  | 2,177.5                                    
|GROUP LIVE N.V.                           |  | 12/31/2005                      |  | 1,324.2                                    
|zurückbehaltener GoF CRM                  |  | 12/31/2005                      |  | 3,108.4                                    
|GROUP Business Software Ltd               |  | 12/31/2005                      |  | 2,765.1                                    
|ebVOKUS Software GmbH                     |  | 10/01/2005                      |  | 443.6                                      
|GAP AG für GSM Applikationen und Produkte |  | 12/31/2007                      |  | 1,913.9                                    
|Relavis Corporation                       |  | 08/01/2007                      |  | 7,308.1                                    
|Permessa                                  |  | 09/22/2010                      |  | 2,387.4                                    
|GROUP Business Software AG                |  | 01/06/2001                      |  | 8,705.5                                    
|Pavone AG                                 |  | 04/01/2011                      |  | 4,956.7                                    
|Groupware Inc.                            |  | 06/01/2011                      |  | 992.8                                      
|IDC Global Inc.                           |  | 07/01/2011                      |  | 2,496.2                                    
|                                          |  | TOTAL                           |  | 48,154.4                                   





Note 14 	SOFTWARE



Development costs



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



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



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



Concessions, Industrial Property Rights,
Licenses



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



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



21


Notes to the Unaudited Interim Consolidated Financial Statements  September 30, 2011 – Restated and Unaudited GBS Enterprises Incorporated




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                     |  |                          |          |  |                                           |  |          |         | 
|Restated 12/31/2010      |  |                          | 29,497.4 |  |                                           |  | 13,136.6 |         | 
|Additions                |  |                          | 2,561.3  |  |                                           |  | 2,312.5  |         | 
|Disposals                |  |                          | 335.5    |  |                                           |  | 324.7    |         | 
|Currency differences     |  |                          | 0        |  |                                           |  | 0        |         | 
|Reclassifications        |  |                          | 328.5    |  |                                           |  | 0        |         | 
|Restated 09/30/2011      |  |                          | 32,051.7 |  |                                           |  | 15,124.4 |         | 





Note 15	OTHER ASSETS





The balance of this account
of 319 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 $1,463 KUSD at September 30, 2011 (December 31, 2010 year endrestated:
$1,441 KUSD).







Note 17	LIABILITIES TO BANKS –
CURRENT





Included in this account is
an operating line of credit of 39 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 2,345 KUSD (December 31, 2010 year end restated: 1,130 KUSD). Trade payables are carried
at their repayment amount and all have a residual term of up to one year.





22


Notes to the Unaudited Interim Consolidated Financial Statements  September 30, 2011 – Restated and Unaudited GBS Enterprises Incorporated




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  |      
|-------------------------------------------------------------------- |  | --------- | -----
|                                                                     |  | 9/30/2011 |      
|                                                                     |  |           |      
|Tax provision                                                        |  |           | 0    
|Salary                                                               |  |           | 1,241
|Vacation                                                             |  |           | 307  
|Workers Compensation Insurance Association                           |  |           | 17   
|Compensation Levy for Non-Employment of Severely Handicapped Persons |  |           | 13   
|Outstanding Invoices                                                 |  |           | 575  
|Annual Financial Statement Costs                                     |  |           | 343  
|Other Provisions                                                     |  |           | 397  
|Warranties                                                           |  |           | 63   
|Gesture of Goodwill                                                  |  |           | 0    
|Provision for Legal Costs                                            |  |           | 15   
|Severance                                                            |  |           | 0    
|Total                                                                |  |           | 2,971





Provisions for salaries of 1,241 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 307 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 575 KUSD was created.



Other Provisions of 397 KUSD include miscellaneous provisions.



Expenses for the audit of the Company and
preparation of the annual consolidated financial statements were recognized at 343 KUSD.



A provision for anticipated legal consulting
of 15 KUSD was recorded.



For warranty claims, a provision of 63
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 7,200 KUSD (December 31, 2010 year end restated 6,213 KUSD) primarily
include maintenance income collected in advance for the period after the end of the financial statement date. They are amortized
on a straight-line basis over their respective contract terms.





Note 20	OTHER SHORT TERM LIABILITIES





Other short-term liabilities
of 4,092 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.



23


Notes to the Unaudited Interim Consolidated Financial Statements  September 30, 2011 – Restated and Unaudited GBS Enterprises Incorporated






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 TO BANK –
NON CURRENT





Liabilities to banks as of the
financial statement date was 3,606 KUSD (December 31, 2010 year end restated: 781 KUSD) represent bank obligations of GROUP AG
with Baden-Württembergische Bank.





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 September 30, 2011, there were 24,673,790 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:



The following are changes to the Company’s
capital stock from April 1, 2010:



On April 26, 2010, the Company issued 2,265,240
shares in aggregate for goodwill, inventory, licenses, customer lists and computer software valued at $165,000.



On November 5, 2010, the Company purchased
3,043,985 shares from an existing shareholder for $300,000.  Thereupon it exchanged those shares for 7,115,500 common
shares of GROUP Business Software AG, a German Company, the fair value of which was determined to be $3,898,000.



On January 6, 2011, the Company acquired
an additional aggregate of 5,525,735 shares of common stock of GROUP in exchange for 2,361,426 shares of common stock of the Company.  The
fair value was determined to be $2,796,000.  This brought the total ownership of the issued and outstanding shares
of GROUP owned by the Company to be 50.1%



The acquisition of GROUP was accounted
for as a reverse acquisition whereby GROUP is treated as the accounting acquirer and the Company is treated as the accounting acquiree.  As
the transaction is accounted for as a recapitalization applied retroactively, the balance of 16,500,000 issued and outstanding
at that time has been recorded as outstanding since inception.



On March 31, 2011, the Company completed
a private placement offering whereby it raised $7,555,000 gross proceeds through the sale of 6,044,000 units at $1.25 per unit.  Each
unit represents one share of common stock and one warrant.  The warrant allows the holder to purchase one share of common
stock of the Company from the date of the grant until the third anniversary of the date of the grant for a purchase price of $1.50
per share.



24


Notes to the Unaudited Interim Consolidated Financial Statements  September 30, 2011 – Restated and Unaudited GBS Enterprises Incorporated




On April 1, 2011, the Company issued 1,000,000
shares of common stock as partial payment for 100% of the issued and outstanding shares of Pavone AG.  The fair value
of the shares issued was determined to be $4,900,000.



On June 1, 2011, the Company issued 250,000
shares of common stock as partial payment for 100% of the issued and outstanding shares of GroupWare, Inc.  The fair
value of the shares issued was determined to be $1,085,000.



On July 25, 2011 the Company issued 880,000
shares of common stock as a partial payment for 100% of the issued and outstanding shares of IDC Global, Inc.  The fair
value of the shares issued was determined to be $3,080,000



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 warrant issued
on October 10, 2010, 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 as noted below. 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.



|Common Stock Warrants Issued
    to Outside Consultants |  | Common
    Shares |           |  | Exercise
    Price |   |      | Valuation
    Date |  | Fair Value per 
    Warrant Share |  |   | Warrants'
    
    Fair Value | 
|------------------------------------------------------- |  | ----------------- | --------- |  | ------------------ | - | ---- | ------------------ |  | --------------------------------- |  | - | ----------------------------- | 
|Issued on October 1, 2010                               |  |                   | 2,000,000 |  |                    | $ | 4.00 |                    |  | 10/1/2010                         |  | $ | -                             | 
|Issued on March 14, 2011                                |  |                   | 707,280   |  |                    | $ | 1.50 |                    |  | 3/14/2011                         |  | $ | 0.34                          | 
|Issued on March 24, 2011                                |  |                   | 15,000    |  |                    | $ | 1.50 |                    |  | 3/24/2011                         |  | $ | 0.34                          | 
|Total Warrant Value                                     |  |                   |           |  |                    |   |      |                    |  |                                   |  |   |                               | 



The
fair value of the warrant as at the grant date of October 1, 2010 was based on the Black-Scholes option pricing model, using the
following assumptions:



|Expected dividend yield         |  | 0%       
|------------------------------- |  | ---------
|Average risk-free interest rate |  | 0.74%    
|Expected life                   |  | 2.5 years
|Expected volatility             |  | 65.0%    



The
fair value of the warrant as at the grant date of March 14, 2011 and March 24, 2011 were based on the Black-Scholes option pricing
model, using the following assumptions:



|Expected dividend yield         |  | 0%          
|------------------------------- |  | ------------
|Average risk-free interest rate |  | 1.07 – 1.19%
|Expected life                   |  | 3 years     
|Expected volatility             |  | 77.2%       



As
at September 30, 2011, the number of shares the warrants outstanding could purchase if exercised was as follows:



|Warrants                         |  | Common
    
    Shares |           |  | Weighted
    
    Average 
    Price/sh |  
|-------------------------------- |  | ---------------------- | --------- |  | --------------------------------------- | -
|Outstanding, beginning of period |  |                        | 8,766,280 |  |                                         | $
|Issued                           |  |                        | 100,000   |  |                                         | $
|Expired                          |  |                        | -         |  |                                         | $
|Outstanding, end of period       |  |                        | 8,866,280 |  |                                         | $



Other changes in common stock are disclosed
in Note 26, Supplemental Cash Flow Disclosures.





Note 24	REVENUE ALLOCATION



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



|Sales Revenues           |  | Restated 09/30/2011 |       
|------------------------ |  | ------------------- | ------
|                         |  | KUSD                |       
|Licenses                 |  |                     | 3,170 
|Maintenance              |  |                     | 8,516 
|Partner Contribution     |  |                     | 0     
|Service                  |  |                     | 5,824 
|Third-Party Products     |  |                     | 1,264 
|LND Third-Party Products |  |                     | 2,397 
|Others                   |  |                     | 149   
|Discontinued Operations  |  |                     | -0-   
|                         |  |                     | 21,320





Revenues by geographical area
for the nine months ended September 30, 2011 are as follows:



|Sales Revenues          |  | Restated 09/30/2011 |       
|----------------------- |  | ------------------- | ------
|by geographic area      |  | KUSD                |       
|US                      |  |                     | 6,442 
|Germany                 |  |                     | 14,035
|United Kingdom          |  |                     | 843   
|Others                  |  |                     | 0     
|Discontinued Operations |  |                     | 0     
|                        |  |                     | 21,320



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



|Long-lived assets       |  | Restated 09/30/2011 |        
|----------------------- |  | ------------------- | -------
|by geographic area      |  | KUSD                |        
|US                      |  |                     | 1,803  
|Germany                 |  |                     | 329    
|United Kingdom          |  |                     | 4      
|Others                  |  |                     | 0      
|Discontinued Operations |  |                     | 0      
|                        |  |                     | 2,136.4

25


Notes to the Unaudited Interim Consolidated Financial Statements  September 30, 2011 – Restated and Unaudited GBS Enterprises Incorporated




Note 25 	OTHER INCOME/EXPENSE





At the financial statement date,
Other expense was 178 KUSD (December 31, 2010 year end restated: Other Income 578 KUSD).





Note 26	SUPPLEMENTAL CASH FLOW DISCLOSURES



The significant non-cash transactions through
September 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.
| | - | --------------------------------------------------------------------------------------------------------------





Note 27	SUBSEQUENT
EVENTS



Key Acquisitions in 2011



In 2011, we made the
following key strategic acquisitions:



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.



26


Notes to the Unaudited Interim Consolidated Financial Statements  September 30, 2011 – Restated and Unaudited GBS Enterprises Incorporated




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 | 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.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 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.

27


Notes to the Unaudited Interim Consolidated Financial Statements  September 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.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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.”





Note 28	COMPARATIVE STATEMENTS



In certain circumstances, the classification
of accounts previously presented in 2011 has been changed to conform to the presentation used in 2013.







28







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.





29







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.



30









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.



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.



31









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.



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.



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.







Financial Condition:



Assets:





Total Assets increased from $60,502,276 at December 31, 2010
to $81,891,592 at September 30, 2011.  Total Assets consists of Total Current Assets and Total Non-Current Assets.







32









Total Current Assets





At September 30, 2011, Total Current Assets
were $10,493,830 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 Current Receivables.





| | n | Cash and Cash Equivalents increased from $1,872,068 at December 31, 2010 to $3,062,890
at September 30, 2011, as a result of our investments in strategic technology areas such as application migration and modernization,
and cloud technology.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | n | Accounts Receivable decreased from $5,712.157 at December 31, 2010 to $4,533,023
at September 30, 2011, due to increased collections during the reporting period.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| | n | Inventoriesincreased from
                                                                                                           $nil at December 31,
                                                                                                           2010 to $264,611 at
                                                                                                           September 30, 2011.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | n | Prepaid
                                                                                                           Expenses increased
                                                                                                           from $1,420,662 at
                                                                                                           December 31, 2010 to
                                                                                                           $1,823,547 at September
                                                                                                           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 $798,759
at September 30, 2011.
| | - | -----------------------------------------------------------------------------------------------------------









Total Non-Current Assets





At September 30, 2011, Total Non-Current
Assets were $71,397,762 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
$2,136,401 at September 30, 2011, primarily due to the acquisition of IDC Global and their fixed assets.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | n | Other Receivables non-currentdecreased from $1,370,314 at December 31, 2010 to $923,520
at September 30, 2011 and consists of amounts due from the purchaser of GEDYS IntraWare GmbH, and the value of the 50% interest
in the associated company B.E.R.S. AD.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | n | Deferred Tax Assets increased from $257,859 at December 31, 2010 to $2,936,954 at
September 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 $48,154,456 at September
30, 2011 primarily as a result of the purchase of IDC, Pavone and Groupware.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| | n | Software increased from $16,360,884 at December 31, 2010 to $16,927,292 at September
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 $319,139 at September
30, 2011. This category includes rent and other security deposits.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------





Liabilities





Total Liabilities increased from $22,396,941 at December 31,
2010 to $25,278,930 at September 30, 2011.  Total Liabilities consists of Total Current Liabilities and Total Non-Current
Liabilities.





Total Current Liabilities





At September 30, 2011, Total Current Liabilities
were $18,110,191, 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.





33









| | n | Notes Payableincreased from $1,441,263 at December 31, 2010 to $1,462,560 at September
30, 2011 due to currency conversion.
| | - | ---------------------------------------------------------------------------------------------------------------------------



| | n | Liabilities to Banks decreased from $50,358 at December 31, 2010 to $39,040 at September
30, 2011, and included a line of credit and cash in transit.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------



| | n | Accounts Payable and Accrued Liabilitiesincreased from $4,804,434 at December 31,
2010 to $5,316,468 at September 30, 2011, from increases in trade payables and other accruals during the reporting period.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | n | Deferred
Income increased from $6,212,360 at December 31, 2010 to $7,200,058 at September 30, 2011and consists mainly of
maintenance income collected in advance of the contractual maintenance period.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | n | Other Liabilities increased from $2,821,898 at December 31, 2010 to $4,092,065 at
September 30, 2011, and comprised of obligations and payments currently due for the purchase of assets from Lotus 911, Permessa
and Salesplace.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





Total Non-Current Liabilities





At September 30, 2011, our Total Non-Current
Liabilities were $7,168,739, compared to $7,066,358 at December 31, 2010.  Total Non-Current Liabilities consist of Liabilities
to Banks, Deferred Tax Liabilities, Retirement Benefit Obligation, and Other Liabilities.





| | n | Liabilities to Banks increased from $780,801 at December 31, 2010 to $3,606,461 at
September 30, 2011, as a result of a long-term business loan/line of credit due to the Baden-Württembergische Bank, Stuttgart,
Germany.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | n | Retirement Benefit Obligation increased from $154,065
at December 31, 2010 to $163,648 at September 30, 2011 and consisted of additional accrued retirement benefit obligations.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | n | Deferred
                                                                                                                                           Tax
                                                                                                                                           Liabilitiesincreased
                                                                                                                                           from
                                                                                                                                           $nil
                                                                                                                                           at
                                                                                                                                           December
                                                                                                                                           31,
                                                                                                                                           2010
                                                                                                                                           to
                                                                                                                                           $611,849
                                                                                                                                           at
                                                                                                                                           September
                                                                                                                                           30,
                                                                                                                                           2011
                                                                                                                                           and
                                                                                                                                           consists
                                                                                                                                           of
                                                                                                                                           the
                                                                                                                                           Deferred
                                                                                                                                           Tax
                                                                                                                                           Liabilities
                                                                                                                                           from
                                                                                                                                           the
                                                                                                                                           capitalization
                                                                                                                                           of
                                                                                                                                           software
                                                                                                                                           expenses.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | n | Other
                                                                                                                                           Liabilitiesdecreased
                                                                                                                                           from
                                                                                                                                           $6,131,492
                                                                                                                                           at
                                                                                                                                           December
                                                                                                                                           31,
                                                                                                                                           2010
                                                                                                                                           to
                                                                                                                                           $2,786,781
                                                                                                                                           at
                                                                                                                                           September
                                                                                                                                           30,
                                                                                                                                           2011
                                                                                                                                           and
                                                                                                                                           consisted
                                                                                                                                           of
                                                                                                                                           a
                                                                                                                                           reduction
                                                                                                                                           of
                                                                                                                                           liabilities
                                                                                                                                           related
                                                                                                                                           to
                                                                                                                                           the
                                                                                                                                           purchase
                                                                                                                                           of
                                                                                                                                           assets
                                                                                                                                           in
                                                                                                                                           a
                                                                                                                                           prior
                                                                                                                                           period.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







Results of Operations:





Nine Months Ended September 30, 2011
Compared to the Nine Months Ended September 30, 2010



Revenues





For the nine months ended September 30, 2011, total revenue increased by $3,360,712, or 18.71%, to $21,320,351
from $17,959,639 for the nine months ended September 30, 2010. The increase was primarily due to
additional revenues from the three acquired companies during the the nine month period ended September 30, 2011: Pavone AG on April
1, 2011; GroupWare, Inc. on June 1, 2011; and IDC Global, Inc. on July 25, 2011.





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 of revenues includes revenue generated from services rendered.





Within the Product division, revenue increased by $1,376,511, or 9.75%, from $14,120,203 for the nine
months ended September 30, 2010, to $15,496,714 for the nine months ended September 30, 2011. The increase
was primarily due to additional revenues from the three acquired companies during the reporting period: Pavone AG, GroupWare, Inc.
and IDC Global, Inc.



Within the Service division, revenue increased by $1,984,201, or 51.68%, from $3,839,436 for the nine
months ended September 30, 2010, to $5,823,637 for the nine months ended September 30, 2011, as a result of the aforementioned
acquisitions consummated by the Company during the reporting period.



Cost of Goods Sold





For the nine months ended September 30, 2011, total Cost of Goods Sold increased by $2,338,463, or 26.92%,
to $11,026,379 from $8,687,916 for the nine months ended September 30, 2010. The increase was primarily
due to additional cost of goods relating to additional sales generated by acquired companies during the period.







34









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







Within the Costs of Goods Sold related
to the Product division, the Company was able to achieve a reduction in total cost of materials from $4,286,847 for the nine months
ended September 30, 2010, to $3,976,750 for to the nine months ended September 30, 2011. The primary factor contributing to the
Company’s reduction in Costs of Goods Sold related to the Product division of revenues was a $310,097, or 7.23%, reduction
in third party product material costs, due to lower third party product sales for the nine months ended September 30, 2011 compared
to the nine months ended September 30, 2010.



Within
the Costs of Goods Sold related to the Service division, the Company saw a $2,648,560, or 60.18%, increase in the total costs of
services, from $4,401,070 for the nine months ended September 30, 2010 to $7,049,630 for the nine months ended September 30, 2011.
The Company experienced elevated Service costs due to theincrease in salaries and related expenses to fulfill our business
objectives in our GROUP Live, our cloud application platform, and our Transformer portfolio.



Operating Expenses







The Company’s total Operating Expense
consist of three segments; Selling, Administrative and General Expenses. For the nine months ended September 30, 2011 total Operating
Expenses increased by $6,951,881, or 63.15%, to $17,959,655 from $11,007,774 for the nine months ended September 30, 2010.



For the
nine months ended September 30, 2011, Selling Expenses increased by $4,740,441, or 62.90%, to $12,277,502 from $7,537,061 for the
nine months ended September 30, 2010. Theincrease was due to additional recruiting of sales personnel and additional
selling expenses relating to the aforementioned acquisitions.



For the nine months ended September 30,
2011, administrative expense increased by $2,114,932, or 77.63%, to $4,839,237, from $2,724,305 for the nine months ended September
30, 2010. This was primarily due to increases in personnel expense and other Administrative Expenses related to the Company’s
acquisition of subsidiary companies and the increased compliance costs associated with restructuring.



For the
nine months ended September 30, 2011, General Expenses increased by $96,508, or 12.93%, to $842,917 from $746,409 for the nine
months ended September 30, 2010,due to additional expenses resulting from the acquisitions made by the company during the
nine month reporting period.



Other Income (Expense)







For the nine months ended September30, 2011, Other Expense of $177,574 decreased fromOther Income of $577,591 for the
nine months ended September30, 2010. This change is primarily due to decreases in Other
Income of $800,461, or 92.50%, 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 $45,286, or 15.74%,
from $287,786 for the nine months ended September30, 2010 to $242,500 for the nine months
ended September30, 2011.



Liquidity & Capital Resources





As September30, 2011, the Company had $3,062,890 in cash and cash equivalents, compared to $6,014,411 at December 31, 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.



35







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





|                                                                       |  | Nine Months Ended September 30, |           
|---------------------------------------------------------------------- |  | ------------------------------- | ----------
|                                                                       |  | 2011                            |           
|                                                                       |  |                                 |           
|Net cash provided (used in) Operating Activities                       |  | $                               | (2,860,882
|                                                                       |  |                                 |           
|Net cash provided (used in) Investing Activities                       |  | $                               | 9,925,662 
|Net cash provided (used in) Financing Activities                       |  | $                               | 2,835,639 
|Effect of exchange rate changes on cash                                |  | $                               | (8,709,597
|Net increase (decrease) in cash and cash equivalents during the period |  | $                               | 1,190,822 
|Cash and cash equivalents, beginning of period                         |  | $                               | 1,872,068 
|Cash and cash equivalents, end of period                               |  | $                               | 3,062,890 









Net Cash
used in Operating Activities for the nine month period ended September 30, 2011 was $2,860,882 compared to net cash provided in
Operating Activities of $3,734,827 for the nine month period ended September 30, 2010 decreasing by $6,595,709. This change is
primarily due toincreases inAccounts Payable,Depreciation, Income from Equity
Investment, Other Liabilities, Consulting Expense and Retirement Benefit Obligation totaling $2,390,116. Being offset by decreases
inNet Income/Loss, Deferred Tax Assets, Inventories, Minority Interest Losses, Accounts Receivable
and Other Assets totaling $8,985,825.





36











Net cash provided in investing activities
during the nine month period ended September 30, 2011 was $9,925,662, compared to cash used by investing activities in the comparative
period ended September 30, 2010 of $1,156,569. The additional $11,082,231 provided by Investing Activities for the nine month period
ended September 30, 2011 was primarily due to decreases from the Purchase of Intangible Assets, Property Plant and Equipment totaling
$7,603,328 being offset by increases in Financial Assets and Purchase of Subsidiaries totaling $18,685,558.





Net cash used in financing activities during the nine month
period ended September 30, 2011 was $2,835,639, compared to net cash provided in financing activities in the comparative period
ended September 30, 2010 of $420,421. The increase of $2,415,218 was primarily due to a $2,393,921 increase in borrowings from
banks, coupled with a $21,297 increase in other borrowings for the nine month period ended September 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.



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.



37







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.



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.



38









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





Property, Plant and Equipment



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



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



Impairment or Disposal of Long-Lived
Assets





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



Revenue Recognition



License Revenues



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



Software Maintenance Revenues



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



Professional Services Revenues



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



Foreign Currency Translation



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



39









Other Provisions



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



Deferred Taxes



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



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



Recent Accounting Pronouncements



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



Principles of Consolidation and Reverse
Acquisition



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



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



We have recorded the acquired assets and
liabilities of GBSX on the acquisition date of January 6, 2011, at their fair value and the operations of GBSX have been included
in the consolidated financial statements since the acquisition date. The assets and liabilities of GROUP, the acquirer for financial
reporting purposes, are measured and recognized in the consolidated financial statements at their precombination carrying amounts
in accordance with ASC 805-40-45-2(a). Therefore, in a reverse acquisition, the non-controlling interest reflects the non-controlling
shareholders’ proportionate interest in the pre-combination carrying amounts of GROUP’s net assets even though the
non-controlling interests in other acquisitions are measured at their fair values at the acquisition date.

.



OFF-BALANCE SHEET ARRANGEMENTS



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



40









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 Interim Chief Executive
Officer and Chief Financial Officer concluded that, as of September 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 September
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





On July 25, 2011, the Company issued 880,000
shares of common stock as a partial payment for 100% of the issued and outstanding shares of IDC Global, Inc. The fair value of
the shares issued was determined to be $3,080,000. The Company relied on the registration exemption provided under Section 4(2)
of the Securities Act of 1933, as amended, due to the fact that it was an isolated issuance and did not involve a public offering
of securities.





Item 3. Defaults Upon Senior Securities.



None



Item 5. Other Information.



None



41









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.
|--- | -------------------------





42







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 17,  2013 | By: /s/Joerg Ott                            
|                     | Joerg Ott                                   
|                     | Chief Executive Officer                     
|                     | (Principal Executive Officer)               
|                     |                                             
|Date: July 17, 2013  | By: /s/Markus R. Ernst                      
|                     | Markus R. Ernst                             
|                     | Chief Financial Officer                     
|                     | (Principal Financial and Accounting Officer)





43