10-Q

UNITED STATES

 SECURITIES AND EXCHANGE COMMISSION

 Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended: March 31, 2013

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

Commission File Number: 000-53223

GBS ENTERPRISES INCORPORATED

 (Exact name of registrant as specified in its charter)

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

 (404) 891-1711

(Registrant’s telephone number, including area code)

With a copy to:

Philip Magri, Esq.

The Magri Law Firm, PLLC

11 Broadway, Suite 615

New York, NY 10004

T: (646) 502-5900

F: (646) 826-9200

pmagri@magrilaw.com

www.MagriLaw.com

N/A

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

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

Yes¨ No x

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

Yes ¨ Nox

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

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

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

Yes¨No x

APPLICABLE ONLY TO CORPORATE REGISTRANTS

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

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

2

PART I - FINANCIAL INFORMATION

Item 1.          Financial Statements 

GBS Enterprises Incorporated

Interim Consolidated Financial Statements

March 31, 2013

(Unaudited)

3

GBS Enterprises Incorporated

Interim Consolidated Balance Sheets

March 31, 2013 and December 31, 2012 

(Unaudited)

	March 31, 2013			December 31, 2012
	$			$
Assets
Current Assets
Cash and cash equivalents - Note 6		738,369			1,154,602
Accounts Receivable - Note 7		3,205,807			4,143,448
Inventories - Note 3		0			0
Prepaid expenses - Note 8		214,435			84,304
Other current receivables - Note 9		1,019,080			676,976
Assets held for sale		0			384,862
Total current assets		5,177,691			6,444,192
Non-Current Assets
Assets held for sale		0			1,846,645
Property, plant and equipment - Note  10		317,771			332,839
Other non-current receivables - Note 11		1,154			428,422
Deferred tax assets		1,104,222			1,132,103
Goodwill - Note 12		31,260,500			34,254,881
Software - Note 13		10,947,781			12,207,031
Other assets - Note 14		160,340			156,379
Total non-current assets		43,791,768			50,358,300
Total assets		48,969,459			56,802,492
Liabilities and stockholders' equity
Current liabilities
Notes payable - Note 15		260,421			2,313,572
Liabilities to banks - Note 16		9,293			6,774
Accounts payables and accrued liabilities - Note 17		3,662,133			6,241,733
Deferred income - Note 18		8,852,860			6,099,570
Other short term liabilities - Note 19		800,740			860,032
Due to related parties - Note 20		276,542			2,115,869
Liabilities held for sale - current		0			589,634
Total current liabilities		13,861,989			18,227,184
Non-Current liabilities
Liabilities to banks - Note 21		2,563,260			3,716,102
Retirement benefit obligation		160,874			165,876
Liabilities held for sale - non current		0			159,898
Deferred Tax Liabilities		0			0
Total non-current liabilities		2,724,134			4,041,875
		0
Total liabilities		16,586,123			22,269,059
Stockholders' equity
Capital stock - Note 22
Authorized:
75,000,000 common shares of $.001 par value each
25,000,000 peferred shares of $.001 par value each
Issued and outstanding:
30,812,624   shares of common stock
(29,461,664  shares of common stock at December 31, 2012)		30,813			29,462
Additional paid in capital		50,055,132			49,691,195
Subscription Receivable		50,000			0
Accumulated deficit		(20,308,707	)		(18,974,582	)
Other comprehensive income		112,249			442,841
		29,939,487			31,188,916
Noncontrolling interest in subsidiaries		2,443,849			3,344,516
Total stockholders' equity		32,383,336			34,533,432
Total stockholders' equity and liabilities		48,969,459			56,802,491

Subsequent events - Note 26

4

GBS Enterprises Incorporated

Interim Consolidated Statements of Operations

For the three months ended March 31, 2013 and March 31, 2012 (Restated)

(Unaudited)

				(Restated)
	March 31, 2013			March 31, 2012
	$			$
Revenues - Note 23
Products		4,373,010			5,593,365
Services		851,369			1,358,684
		5,224,379			6,952,049
Cost of goods sold
Products		857,275			1,916,624
Services		2,244,423			2,256,550
		3,101,698			4,173,174
Gross profit		2,122,681			2,778,875
Operating expenses
Selling expenses		2,371,530			4,178,185
Administrative expenses		1,500,042			1,473,647
General expenses		229,147			227,372
		4,100,719			5,879,204
Operating income (loss)		(1,978,038	)		(3,100,329
Other Income (expense) - Note 24
Other Income (expense)		173,479			14,501
Interest income		341			1,299
Interest expense		(177,036	)		(49,409
		(3,216	)		(33,609
Income (loss) before income taxes		(1,981,254	)		(3,133,938
Income tax (income) expense		(72,960	)		(659,341
Income before extraordinary items,
discontinued operations		(1,908,294	)		(2,474,597
Discontinued operations = IDC					110,653
Discontinued operations = SD Holdings					67,005
Net income (loss) before extraordinary items		(1,908,294	)		(2,296,939
Extraordinary items (value adjustment on goodwill)		0			0
Net income (loss)		(1,908,294	)		(2,296,939
Net Loss Attributable to noncontrolling Interest		(574,169	)		(719,778
Net income (loss) attributable to stockholders		(1,334,125	)		(1,577,161
Other comprehensive income (loss)		(659,864	)		(255,818
Other comprehensive income  (loss)
attributable to noncontrolling interest		(329,272	)		(127,653
Other comprehensive income (loss)
attributable to stockholders		(330,592	)		(128,165
Net income (loss) and comprehensive income (loss) attributed to stockholders		(1,664,717	)		(1,705,326
Net earnings (loss) per share, basic and diluted	$	(0.509	)
Weighted average number of common stock
outstanding, basic and diluted		24,847,525

5

GBS Enterprises Incorporated

Interim Consolidated Statements of Operations

For the three months ended March 31, 2013 and March 31, 2012 (Restated)

(Unaudited)

				(Restated)
	March 31, 2013			March 31, 2012
	$			$
Cash flow from operating activties
Net loss / net income		(1,908,294	)		(2,296,939	)
Adjustments
Deferred income taxes		27,881			(670,268	)
Depreciation and amortization		1,561,952			1,654,957
Consulting expense		70,000			-
Interest Expense		195,288			-
Losses from equity investment		-			(17,701	)
Loss on Sale of Assets		-
Minority interest losses		(900,667	)		(719,778	)
Changes in operating assets and liabilities
Accounts receivable and other assets		2,692,952			(2,622,458	)
Retirement benefit obligation		(5,002	)		(91,545	)
Inventories		-			(114,832	)
Accounts payable and other liabilities		(635,135	)		2,586,263
Net cash provided (used) by operating activities		1,098,975			(2,292,301	)
Net cash provided (used) by discontinued		-			177,658
Cash flow from investing activties
Sale of intangible assets		(2,756,007	)		(931,427	)
Purchase of property, plant and equipment		(31,639	)		(358,704	)
Write-down goodwill and intangibles		2,994,381			-
Proceeds from Sale of Subsidiaries		3,577,195			-
Increase in Financial assets		(427,267	)		1,548,234
Net cash provided (used) in investing activities		3,356,663			258,103
Cash flow from financing activties
Net borrowings - banks		(1,150,322	)		414,915
Other borrowings		(2,053,151	)		(1,381,821	)
Forgiveness of Debt		10,659			-
Capital paid-in		150,000			576,942
Loans from related party		(1,839,327	)		379,968
Net cash provided (used) in financing activities		(4,882,141	)		(9,996	)
Effect of exchange rate changes on cash		10,270			(34,414	)
Net increase (decrease) in cash		(416,233	)		(1,900,950	)
Cash and cash equivalents - Beginning of the quarter		1,154,602			3,142,308
Cash and cash equivalents - End of Quarter		738,369			1,241,358

6

GBS Enterprises Incorporated

Interim Consolidated Statements of Equity

March 31, 2013 

(Unaudited)

													Equity
							Accumulated						Attributable
	Common Stock				Additional Paid in		Other Comprehensive			Accumulated			to Noncontrolling
	Shares		Amount		Capital		Income (Loss)			Deficit			Interest			Equity
	#		$		$		$			$			$			$
Balance, December 31, 2010		16,500,000		16,500		27,221,755		557,207			17,632			19,567,222			47,380,316
March 28, 2011, issued with  sale of units at $1.25 /unit		6,044,000		6,044		6,672,906											6,678,950
April 1, 2011, issued on purchase  of Pavone AG		999,790		1,000		4,899,000											4,900,000
April 1, 2011, Warrants issued   for services		-		-		34,000											34,000
June 1, 2011, issued on purchase   of GroupWare, Inc.		250,000		250		1,084,750											1,085,000
July 1, 2011, issued on purchase  of IDC Global, Inc.		880,000		880		3,255,120											3,256,000
September 27, 2011, issued on  purchase of SD Holdings Ltd.		612,874		613		1,255,837											1,256,450
December 13, 2011, warrants exercised at $1.50 /sh		2,020,000		2,020		3,022,950											3,024,970
Net comprehensive loss for the year								(63,001	)		(12,165,298	)		(11,630,239	)		(23,858,538	)
Balance, December 31, 2011		27,306,664		27,307		47,446,318		494,206			(12,147,666	)		7,936,983			43,757,148
March 27, 2012, warrants exercised    at $1.50 /sh		5,000		5		7,495											7,500
March 27, 2012, warrants excercised    at $.50 /sh		400,000		400		199,600											200,000
March 30, 2012, warrants exercised    at $.50 /sh		500,000		500		249,500											250,000
March 31, 2012, warrants issued    for services		-		-		270,208											270,208
April 16, 2012, issued on sale of  units at $1.50 /unit		120,000		120		179,880											180,000
April 28, 2012, issued on conversion  of note into shares at $1.15 /sh		550,000		550		631,950											632,500
April 30, 2012, issued on conversion  of note into shares at $1.15 /sh		400,000		400		459,600											460,000
April 30, 2012, issued on conversion  of note and debt into shares at   $1.15 /sh		150,000		150		172,350											172,500
May 15, 2012, issued on sale of  units at $1.50 /unit		30,000		30		44,970											45,000
July 5, 2012, fair value of conversion on issuance of convertible debt		-		-		26,700											26,700
December 21, 2012, warrants  issued for services		-		-		2,624											2,624
Net comprehensive loss for the year								(51,365	)		(6,826,916	)		(4,592,467	)		(11,470,748	)
Balance, December 31, 2012		29,461,664		29,462		49,691,195		442,841			(18,974,582	)		3,344,516			34,533,432
February 12, 2013, warrants exercised    at $.20 /sh		500,000		500		99,500											100,000
February 12, 2013, Subscription Receivable																	50,000
March 20, 2013, issued on conversion of   debt at $.30 /unit		450,960		451		134,837											135,288
March 27, 2013, issued on conversion of   debt at $.30 /unit		200,000		200		59,800											60,000
March 27, 2013, shares   issued for service		200,000		200		69,800											70,000
Net comprehensive loss for the quarter								(330,592	)		(1,334,125	)		(900,667	)		(2,565,384	)
Balance, March 31, 2013		30,812,624		30,813		50,055,132		112,249			(20,308,707	)		2,443,849			32,383,336

7

Notes to the Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated

Note 1             COMPANY AND BACKROUND

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

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

n Automating business processes;

n Optimizing system and application performance;

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

n Migrating and integrating systems, applications and processes.

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

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

8

Notes to the Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated

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

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

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

General Corporate History

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

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

9

Notes to the Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated

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

About Lotus Holdings, Ltd.

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

SPPEFs

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

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

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

10

Notes to the Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated

Transactions following the acquisition

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

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

Reverse Merger

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

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

11

Notes to the Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated

Additional Acquisition

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

Acquisition/Dissolution of Subsidiary Companies

Pavone AG

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

GroupWare, Inc.

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

12

Notes to the Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated

IDC Global, Inc.

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

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

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

SD Holdings, Ltd.

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

13

Notes to the Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated

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

GBS India Private Limited

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

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

Pavone AG/Groupware AG

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

Pavone, Ltd.

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

EbVokus, GmbH.

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

14

Notes to the Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated

B.E.R.S. AD

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

Note 2               INTERIM REPORTING

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

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

Note 3               ACCOUNTING POLICIES

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

Critical Accounting Policies and Estimates

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

15

Notes to the Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated

Segment Reporting

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

Comprehensive Income (Loss)

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

Net Income per Common Share

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

16

Notes to the Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated

Financial Instruments

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

Currency Risk

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

Fair Value Measurements

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

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

17

Notes to the Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated

Cash and cash equivalents

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

Inventories

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

Goodwill and other Intangible Assets

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

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

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

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

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

18

Notes to the Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated

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

Property, Plant and Equipment

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

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

Impairment or Disposal of Long-Lived Assets

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

Revenue Recognition

Sources of Revenues:

License revenues

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

19

Notes to the Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated

Software maintenance revenues

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

Professional services revenues

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

Foreign Currency Translation

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

Other Provisions

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

20

Notes to the Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated

Deferred Taxes

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

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

Recent Accounting Pronouncements

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

Off - Balance Sheet Arrangements

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

21

Notes to the Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated

Principles of Consolidation and Reverse Acquisition

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

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

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

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

Note 4               CHANGE IN ACCOUNTING POLICIES

Fiscal reporting

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

22

Notes to the Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated

Note 5          SUBSIDIARY COMPANIES

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

		Stockholders'							Profit
		Equity							of the			Date
		as of 03/31/13		Percentage of Subscribed Capital					Consolidated quarter			of the First
	Headquarters	KUSD		KUSD		in %			KUSD		Ownership	Consolidation
GROUP Business Software (UK) Ltd.	Manchester		-1,330		23		50.1	%		-77	I	12/31/2005
GROUP Business Software Corp.	Woodstock		-12,962		1		50.1	%		-634	I	12/31/2005
Permessa Corporation	Waltham		-5		0		50.1	%		0	I	9/22/2010
Relavis Corporation	Woodstock		-819		2		50.1	%		-10	I	1/8/2007
GROUP Business Software AG	Eisenach		12,516		36,107		50,1	%		-102	I	6/1/2011
Pavone GmbH	Boeblingen		-1,165		47		100	%		22	D	1/4/2011
Groupware Inc.	Woodstock		-482		1		100	%		0	D	1/6/2011
GBS India	Chennai		93		14		100	%		-9	D	9/30/2012

D - Direct Subsidiary

I -   Indirect Subsidiary

Indirect Subsidiaries are owned 50.1% through GROUP Business Software AG

Note 6          CASH AND CASH EQUIVALENTS

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

Note 7          ACCOUNTS RECEIVABLE

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

23

Notes to the Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated

Note 8          PREPAID EXPENSES

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

Note 9          OTHER RECEIVABLES - CURRENT

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

Note 10          PROPERTY, PLANT AND EQUIPMENT

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

Property, Plant and Equipment  kUSD	Development of the cost			Development of accumulated depreciation			Balance
Updated 12/31/2012		7,206.5			6,873.7			332.8
Additions		23			14
Disposals		(36	)		(6	)
Currency differences		9			3
Reclassifications		0			0
Updated 03/31/2013		7,202.5			6,884.7			317.8

24

Notes to the Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated

Note 11          OTHER RECEIVABLES NON-CURRENT

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

OTHER RECEIVABLES NON-CURRENT	KUSD		KUSD
	3/31/2013		12/31/2012
Cooperative shares		1		1
Intercompany Loan Values during the quarter		0		0
Other long term receivables		0		427
Balance		1		428

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

Note 12          GOODWILL

Goodwill derives from the following business acquisitions:

	Date of	Opening		Addtions		Adjustments			Written off		Closing
March 31, 2013	first	1/1/2013							as impaired		3/31/2013
	Consolidation
GROUP Business Software AG	01/06/11		18,425.6		-		-			-		18,425.6
GROUP Business Software (UK) Ltd.	12/31/05		2,765.1		-		-			-		2,765.1
Permessa Corporation	09/22/11		2,387.4		-		-			-		2,387.4
Pavone GmbH	01/04/11		5,950.5		-		-			-		5,950.5
IDC Global Inc.	07/25/10		2,994.4		-		(2,994	)		-		-
GBS India	8/1/2012		1,731.9		-		-			-		1,731.9
			34,254.9		-		(2,994.4	)		-		31,260.5

	Date of	Opening		Addtions		Adjustments			Written off		Closing
December 31, 2012	first	1/1/2012							as impaired		12/31/2012
	Consolidation
GROUP Business Software AG	1/6/2011		20,194.4		618.6		(2,387.4	)		-		18,425.6
GROUP Business Software Corp	12/31/2005		2,177.5		-		-			2,177.5		-
GROUP Business Software (UK) Ltd.	12/31/2005		2,765.1		-		-			-		2,765.1
evVokus Software GmbH	10/1/2005		443.6		-		(443.60	)		-		-
Permessa Corporation	20110-09-22		2,387.4		-		-			-		2,387.4
Pavone GmbH	1/4/2011		5,950.5		-		-			-		5,950.5
IDC Global Inc.	7/25/2010		2,994.4		-		-			-		2,994.4
SD Holdings	2011-09.27		2,213.1		-		(2,213.1	)		-		-
GBS India	8/1/2012		-		1,731.9		-			-		1,731.9
			39,126.0		2,350.5		(5,044.1	)		2,177.5		34,254.9

Note 13          SOFTWARE

Development costs

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

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

25

Notes to the Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated

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

Concessions, Industrial Property Rights, Licenses

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

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

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

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

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

Concessions and licenses kUSD	Development  of the cost			Development  of  accumulated  depreciation		Balance
Updated 12/31/2012		33038.7			20,831.7		12,207.0
Additions		120			98		22
Disposals		(1,420	)		122		(1,298	)
Currency differences		143			126		17
Reclassifications		0			0		0
Updated 03/31/2013		31,881.7			21,177.7		10,948.0

Note 14          OTHER ASSETS

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

26

Notes to the Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated

Note 15           NOTES PAYABLE

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

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

Note 16           LIABILITIES  TO BANKS – CURRENT

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

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

27

Notes to the Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated

Note 17           ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Trade payables

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

Other Accrual

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

	Status									Currency		Status
USD	12/31/2012		Utilization			Dissolution		Increase		Differences		3/31/2013
Tax provision		57		(57	)		0		55		0		55
Salary		861		(861	)		24		434		16		426
Vacation		315		(303	)		30		258		12		253
Workers Compensation Insurance Association		25		(21	)		0		25		1		30
Compensation Levy for Non-Employment of Severely Handicapped Persons		19		(16	)		0		17		0		21
Outstanding Invoices		1,059		(1,056	)		60		489		22		454
Annual Financial Statement Costs		128		(186	)		0		180		4		126
Other Provisions		446		(221	)		0		118		6		349
Warranties		96		(16	)		0		6		41		127
Gesture of Goodwill		0		0			0		0		0		0
Provision for Legal Costs		73		(4	)		0				5		74
Severance		70		(70	)		0		70		0		70
Total		3149		(2,811	)		114		1654		107		1,985

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

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

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

28

Notes to the Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated

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

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

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

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

Note 18          DEFERRED INCOME

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

Note 19          OTHER SHORT TERM  LIABILITIES

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

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

Note 20           DUE TO RELATED PARTIES

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

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

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

29

Notes to the Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated

	3/31/2013		12/31/2012
	KUSD		KUSD
Accounts payable and accruals
Green Mind Ventures		0		72.0
Vitamin-B Venture Gmbh		0		493.6
Board of Directors fees and expenses		224.5		110.4
Notes payable – see below		52.0		1,391.8
Due to associated company		0		48.1
		276.5		2,115.9

	Date of Loan	Principal		Interest Accrued		Total		Due Date
		$		$		$
Total	7/5/2012		50,000		2,084		52,084	1/5/2013

Note 21           LIABILITIES – NON-CURRENT

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

30

Notes to the Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated

Note 22 COMMON STOCK

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

Transactions occurring in 2011

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

· In December, 2011, certain investors exercised their private purchase warrants at $1.50 per share and bought 2,020,000 shares of common stock for net proceeds of $3,024,970 after legal fees.

Transactions occurring in 2012

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

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

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

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

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

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

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

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

31

Notes to the Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated

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

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

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

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

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

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

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

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

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

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

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

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

32

Notes to the Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated

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

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

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

Transactions occurring in 2013

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

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

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

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

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

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

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

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

33

Notes to the Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated

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

Options

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

Warrants

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

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

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

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

34

Notes to the Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated

Black Scholes assumptions for warrants issued were as follows:

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

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

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

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

35

Notes to the Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated

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

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

	# of shares									Fair value							Balance
	allowed to							Strike		at							End of
	purchase			Issue		Expiry		Price		Issuance			Issued		Exercised		Period
	#			Date		Date		$		$			#		#		#
Opening - Jan 1, 2011		2,000,000			10/1/2010		6/1/2013		4.00		-			-		-		2,000,000
Issued for financing services					3/14/2011		3/14/2014		1.50		-			707,280		-		707,280
Issued for financing services					3/24/2011		3/24/2014		1.50		-			15,000		-		15,000
Sold with share units					3/31/2011		3/31/2014		1.50		-			6,044,000		2,020,000		4,024,000
Issued for consulting services					4/1/2011		4/1/2014		1.50		34,000	(1)		100,000		-		100,000
Closing - Dec 31, 2011														6,866,280		2,020,000		6,846,280
Opening - Jan 1, 2012		6,846,280														5,000		6,846,280
Amended		(2,000,000	)		10/1/2010		6/1/2013		4.00		-			-		-		-
Reissued		2,000,000			6/1/2012		6/1/2015		1.00		556,785			-		-		-
Issued for legal services					3/31/2012		3/31/2012		1.10		270,208	(2)		250,000		-		250,000
Issued for nominal value					3/28/2012		3/28/2015		0.50		2,457,662			2,020,000		900,000		1,120,000
Sold with share units					4/16/2012		4/16/2015		1.50		90,000			120,000		-		120,000
Issued with debt conversion					4/28/2012		4/28/2015		1.75		-			550,000		-		550,000
Issued with debt conversion					4/30/2012		4/30/2015		1.75		-			500,000		-		500,000
Sold with share units					5/10/2012		5/10/2015		1.50		25,800			30,000		-		30,000
Issued with debt					7/5/2012		7/5/2012		0.50		26,500			550,000		-		550,000
Issued with debt					8/13/2012		8/13/2015		0.35		-			100,000		-		100,000
Issued with debt					10/26/2012		10/29/2015		0.20		-			500,000		-		500,000
Issued with debt					11/30/2012		11/30/2015		0.20		-			500,000		-		500,000
Issued for consulting services					12/21/2012		12/21/2015		0.21		2,624	(1)		16,875		-		16,875
Closing - March 31, 2013														5,136,875		905,000		11,083,155

(1) recorded as consulting expense

(2) recorded as legal expense

36

Notes to the Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated

Note 23 REVENUE ALLOCATION

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

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

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

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

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

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

37

Notes to the Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated

Note 24 OTHER INCOME/EXPENSE

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

Note 25 SUPPLEMENTAL CASH FLOW DISCLOSURES

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

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

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

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

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

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

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

· On April 28, 2012, $ 632,500 in notes payable to RealRisk Ventures, LL were converted into 550,000 shares of common stock and into 550,000 warrants with each warrant allowing the holder to purchase one common share at $1.75 for a period of 3 years. On April 30, 2012, $ 460,000 in notes payable to Lotus Holdings Ltd. were converted into 400,000 shares of common stock and 400,000 warrants, with each warrant allowing the holder to purchase one common share at $1.75 for a period of 3 years.

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

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

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

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

· On March 20, 2013, 450,960 shares were issued at a rate of .30/share on conversion of accrued interest due on a Note Payable to John Moore.

· On March 27, 2013, 200,000 shares were issued at a rate of .30/share on conversion of accrued interest due on a Note Payable to Stephen Baksa.

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

38

Notes to the Interim Financial Statements

March 31, 2013

GBS Enterprises Incorporated

Note 26 SUBSEQUENT EVENTS

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

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

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

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

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

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

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

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

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

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

Note 27 COMPARATIVE STATEMENTS

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

39

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

Note Regarding Forward-Looking Statements

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

OVERVIEW

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

Products and Services

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

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

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

Messaging and Business Applications Software & Solutions

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

40

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

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

Consulting Services

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

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

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

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

Market Trends

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

GBS Lotus Application Modernization and Migration

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

Revenue Model

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

Strategy and Focus Areas

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

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

41

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

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

Sale of IDC Global, Inc.

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

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

General Corporate History

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

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

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

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

About Lotus Holdings, Ltd.

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

42

SPPEFs

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

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

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

Transactions following the April 26, 2010 Transaction

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

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

Reverse Merger

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

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

Additional GROUP Acquisition

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

Executive Offices

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

43

Results of Operations

Assets:

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

Total Current Assets

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

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

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

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

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

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

Total Non-Current Assets

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

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

Liabilities

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

Total Current Liabilities

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

44

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

Total Non-Current Liabilities

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

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

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

Revenues

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

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

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

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

45

Cost of Goods Sold

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

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

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

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

Operating Expenses

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

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

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

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

Other Income (Expense)

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

Liquidity & Capital Resources

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

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

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

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

46

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

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

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

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

 Cash Flows

	Three Months Ended March 31, 2013			Three Months Ended March 31, 2012
Net cash provided (used in) Operating Activities	$	1,098,975		$	(2,292,301	)
Net cash provided (used) by Discontinued Operations	$	-		$	177,658
Net cash provided (used in) Investing Activities	$	3,356,663		$	258,103
Net cash provided (used in) Financing Activities	$	(4,882,141	)	$	(9,996	)
Effect of exchange rate changes on cash	$	10,270		$	(34,414	)
Net increase (decrease) in cash and cash equivalents during the period	$	(416,233	)	$	(1,900,950	)
Cash and cash equivalents, beginning of period	$	1,154,602		$	3,142,308
Cash and cash equivalents, end of period	$	738,369		$	1,241,358

47

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

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

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

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Critical Accounting Policies and Estimates

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

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

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

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

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

Comprehensive Income (Loss)

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

48

Net Income per Common Share

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

Financial Instruments

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

Currency Risk

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

Fair Value Measurements

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

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

Cash and Cash Equivalents

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

Inventories

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

49

Goodwill and other Intangible Assets

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

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

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

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

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

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

Property, Plant and Equipment

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

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

Impairment or Disposal of Long-Lived Assets

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

Revenue Recognition

License Revenues

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

Software Maintenance Revenues

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

50

Professional Services Revenues

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

Foreign Currency Translation

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

Other Provisions

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

Deferred Taxes

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

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

Recent Accounting Pronouncements

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

Principles of Consolidation and Reverse Acquisition

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

51

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

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

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

OFF-BALANCE SHEET ARRANGEMENTS

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

Item 3.  Quantitative and Qualitative Disclosures about Market Risk.

N/A

Item 4.  Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Control Over Financial Reporting

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

52

PART II-OTHER INFORMATION

Item 1. Legal Proceedings.

None

Item 1A. Risk Factors.

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

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

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

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

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

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

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

Item 3. Defaults Upon Senior Securities.

None

Item 4. Mine Safety Disclosures.  

N/A

53

Item 5. Other Information.

Subsequent Events

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

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

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

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

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

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

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

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

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

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

54

Item 6. Exhibits.

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

(1) Filed herewith.

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

* To be filed by amendment.

55

SIGNATURES

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

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

56

EX-10.1

Exhibit 10.1

STOCK PURCHASE AGREEMENT

This STOCK PURCHASE AGREEMENT (this “Agreement”) is made as of February 1, 2013, by and among IDC Global, Inc., a Delaware corporation (the “Company”), GBS Enterprises Incorporated, a Nevada corporation (the “Seller”), Global Telecom & Technology Americas, Inc., a Virginia corporation (the “Purchaser” or “Purchasers”). The Company, Seller, and Purchaser are sometimes referred to in this Agreement individually as a “Party” and collectively as the “Parties.”

PRELIMINARY STATEMENTS

A.           Seller is the one hundred (100) percent controlling shareholder of Company. The Seller, beneficially and of record, owns all of the issued and outstanding shares of the Company (the “Shares”).

B.           The Company is engaged in the business of providing data center facilities, connectivity and management to users in Chicago (the “Business”).

C.           Purchaser desires to purchase all of the Shares from the Seller, and Seller desires to sell the Shares owned by Seller to Purchaser, on the terms and subject to the conditions herein contained (the “Purchase”).

AGREEMENT

In consideration of the mutual agreements and covenants contained in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

ARTICLE I

PURCHASE AND SALE OF SHARES; CLOSING

Section 1.1           Purchase and Sale of Shares. Upon the terms and subject to the conditions set forth in this Agreement, Seller hereby sells, assigns, transfers and conveys to Purchaser, and Purchaser hereby purchases and acquires from Seller, all right, title and interest in and to the Shares set forth across from the name of Seller on Exhibit A in exchange for the payment by Purchaser of the amounts provided in Section 1.2 (the “Purchase Price”), which amount shall be subject to adjustment pursuant to Section 1.5. Exhibit B lists assets and Liabilities that are excluded from the Purchase. To the extent not completed prior the date hereof, Purchaser, the Company and Seller shall take all actions reasonably necessary to transfer any and all such excluded assets and excluded Liabilities to Seller so as to ensure Purchaser shall not assume or be obligated to satisfy any excluded asset or Liability and Seller shall have the benefit of all such excluded assets.

Section 1.2           Purchase Price. The Purchase Price consists of an aggregate amount equal to Four Million Six Hundred Thousand Dollars ($4,600,000) that will be paid by Purchaser as follows:

(a)  at Closing, Purchaser shall pay to Seller by a wire transfer of immediately available funds an amount (the “Closing Date Payment”) equal to (i) the Purchase Price (subject to any adjustment to be made pursuant to Section 1.5(a) hereof) less (ii) the sum of the AR Holdback Amount, the Equipment Holdback Amount and the Dispute Holdback Amount;

(b)  within one (1) business day of the Company receiving payment in the amount of Two Hundred Seventeen Thousand Four Hundred Seventy Seven Dollars and Eighty Six Cents ($217,477.86) (the “AR Holdback Amount”) for the accounts receivable owed to the Company by Affiliates of Seller, Purchaser shall pay to Seller by wire transfer of immediately available funds the AR Holdback Amount;

(c)  within three (3) business days of the date that reasonably satisfactory evidence is provided to Purchaser that the Company has been released from the GroupLive Liabilities and all Liens on the assets of the Company related to such GroupLive Liabilities have been removed, Purchaser shall pay to Seller by wire transfer of immediately available funds the amount of (i) Three Hundred Thirty Four Thousand Dollars ($334,000) (the “Equipment Holdback Amount”) less (ii)the sum of (x) any amounts that, notwithstanding Section 5.5 hereof, Purchaser or the Company was required to pay in respect of the GroupLive Liabilities, and (y) the amount that the Company is required to spend (and provides reasonably satisfactory evidence thereof to Seller) in order to purchase equipment to replace the GroupLive Assets so as to be able to provide the same service that is being provided today to customers of the Company whose services are provided in part by the GroupLive Assets; provided, however, that in no event shall the amount deducted from the Equipment Holdback Amount pursuant to this Section 1.2(c)(ii)(y) exceed One Hundred Twenty Five Thousand Dollars ($125,000); and

(d)  within three (3) business days of Seller providing Purchaser with evidence reasonably satisfactory to Purchaser that the Identified Dispute has been resolved (or that the counter-party to such dispute has agreed that the Company shall have no further liability with respect to such matter) (“Dispute Resolution Evidence”), Purchaser shall pay to Seller by a wire transfer of immediately available funds an amount equal to the Dispute Holdback Amount less any amount paid by Purchaser or the Company to a third party in connection with the Identified Dispute in accordance with Section 7.5 hereof; provided, however, that if Purchaser shall have not been provided with reasonably satisfactory Dispute Resolution Evidence on or before the date that is eighteen (18) months after the date hereof (the “Dispute Holdback Expiration Date”) then Purchaser shall have no obligation to make any further payment of the Dispute Holdback Amount to Seller and, in that case, the Dispute Holdback Amount shall be deemed an offset against any amounts that Seller may be deemed pursuant to Article VII hereof to owe any Purchaser Indemnitee in respect of the Identified Dispute. As used herein, the “Dispute Holdback Amount” shall mean an amount equal to Five Hundred Twenty Eight Thousand Seven Hundred Seventy Seven Dollars and Ninety Three Cents ($528,777.93).

2

Section 1.3           The Closing. The closing of the Purchase and the other transactions contemplated by this Agreement (the “Closing”) is taking place concurrently with the execution and delivery of this Agreement (the date of this Agreement being referred to herein as the “Closing Date”).

Section 1.4           Closing Deliveries.

(a)          Seller Deliveries to Purchaser. At the Closing:

(i)          the Seller is assigning and transferring to Purchaser all of his or its right, title and interest in and to the Shares by delivering to Purchaser the certificates representing the Shares, duly endorsed in blank or accompanied by duly executed stock powers endorsed in blank;

(ii)         the Seller is delivering to Purchaser such evidence as Purchaser shall have reasonably requested with respect to the Indebtedness of the Company for borrowed money and capital lease obligations, if any, outstanding immediately prior to the Closing;

(iii)        the Seller is delivering to Purchaser the seal, minute book and equity interest transfer records of the Company, all original corporate records and documents of the Company and all tangible and intangible assets of the Company not currently in the possession of the Company but in the possession of the Seller; and

(iv)        the Seller shall deliver to the Purchaser such other documents or instruments, in form and substance reasonably acceptable to the Purchaser, as the Purchaser may deem reasonably necessary or as may be required to consummate the transactions contemplated hereby.

(b)          Purchaser Deliveries to the Seller. At the Closing, Purchaser shall deliver or cause to be delivered to the Seller the Closing Date Payment.

Section 1.5           Purchase Price Adjustment.

(a)          Purchase Price Adjustment at Closing. The Seller has prepared in consultation with the Purchaser a statement (the “Preliminary NWC Statement”) setting forth their good faith estimated calculation of the Net Working Capital (the “Preliminary Net Working Capital”) as of the Closing, which has been prepared in accordance with GAAP, using the past practices of the Company, and includes reasonable support for the calculations made therein. The Purchase Price paid at the Closing pursuant to Section 1.1 shall be increased or decreased, as the case may be, on a dollar for dollar basis (the “Closing NWC Adjustment”), to the extent (if any) that the Preliminary Net Working Capital is greater or less than, as the case may be, zero dollars ($0.00).

3

(b)          Post-Closing Determination of any Purchase Price Adjustment. Within ninety (90) days after the Closing Date, Purchaser shall prepare and deliver to the Seller a statement (the “Post-Closing NWC Statement”) setting forth Purchaser’s calculation of the Net Working Capital of the Company as of immediately prior to the Closing (the “Closing Net Working Capital”), with reasonable support for such calculation. During the twenty (20) business day period after the Post-Closing NWC Statement has been provided to the Seller by Purchaser (the “NWC Review Period”) the Seller may, but shall not be obligated to, dispute any of the items in the Post-Closing NWC Statement by delivery of a written notice (the “NWC Dispute Notice”) to Purchaser, which shall provide reasonable detail concerning each item that the Seller disputes in the Post- Closing NWC Statement, include reasonable support for each such position, and set forth the Seller’s determination of the Closing Net Working Capital. During the NWC Review Period and any subsequent time period during which the Post-Closing NWC Statement is being disputed as provided in this Section 1.5(b), Purchaser shall provide (and cause the Company to provide) the Seller and its representatives with reasonable access, upon reasonable notice and during times mutually and reasonably agreeable to Purchaser and the Seller, to the books, records and working papers of Purchaser and the Company that are reasonably related to the Post-Closing NWC Statement. If the Seller does not deliver to Purchaser a NWC Dispute Notice prior to the expiration of the NWC Review Period, the Seller shall be conclusively deemed to have waived any right to object to the Post- Closing NWC Statement delivered by Purchaser and the Post-Closing NWC Statement delivered by Purchaser shall be final and binding upon Purchaser, the Company and the Seller. If the Seller delivers a NWC Dispute Notice to Purchaser prior to the expiration of the NWC Review Period, then for a period of thirty (30) days after receipt by Purchaser of such NWC Dispute Notice, Purchaser and the Seller shall negotiate in good faith to resolve the items disputed by the Seller in such NWC Dispute Notice. If Purchaser and the Seller resolve all of the disputed items in such NWC Dispute Notice during such thirty (30) day period, the Post-Closing NWC Statement shall be revised to reflect such resolution, and as so revised shall be final and binding upon Purchaser, the Company and the Seller. If the Seller delivers an NWC Dispute Notice to Purchaser prior to the expiration of the NWC Review Period and Purchaser and the Seller do not resolve all of the disputed items in such NWC Dispute Notice within the period of thirty (30) days after receipt by Purchaser of such NWC Dispute Notice, Purchaser and the Seller shall jointly engage a nationally-recognized independent accounting firm reasonably acceptable to both Purchaser and the Seller (the “Independent Accountants”) (it being acknowledged that an objection to proposed Independent Accountants shall be reasonable if such accounting firm has previously provided services to Purchaser, the Company, the Seller or their respective Affiliates) and submit the disputed items to the Independent Accountants for resolution. The Independent Accountants shall act as experts and not arbiters and shall determine only those items on the Post-Closing NWC Statement that continue to be disputed by Purchaser and the Seller as of the time of engagement of the Independent Accountants. Each of Purchaser and the Seller shall furnish to the Independent Accountants such work papers, schedules and other documents and information relating to the unresolved disputed items as the Independent Accountants may reasonably request. The Independent Accountants shall establish the procedures it shall follow (including procedures regarding the presentation of materials supporting each such Party's position) giving due regard to the mutual intention of Purchaser and the Seller to resolve each of the disputed items and amounts as accurately, quickly, efficiently and inexpensively as possible. The Independent Accountants shall not assign a dollar amount to any item in dispute greater than the greatest dollar amount for such item assigned by Purchaser, on the one hand, or the Seller, on the other hand (as applicable), or lower than the lowest dollar amount for such item assigned by Purchaser, on the one hand, or the Seller, on the other hand (as applicable). Promptly, but no later than thirty (30) days after engagement, the Independent Accountants shall deliver a written report to Purchaser and the Seller as to the treatment of the disputed items, and the Independent Accountants’ determinations shall be conclusive and binding upon Purchaser, the Company and the Seller and the Post-Closing NWC Statement shall be revised to reflect such resolution. The Post-Closing NWC Statement, as finally determined in accordance with this Section 1.5(b), shall be conclusively deemed the “Final Post-Closing NWC Statement” and shall be final and binding upon Purchaser, the Company and the Seller. The Closing Net Working Capital set forth on the Final Post- Closing NWC Statement is referred to herein as the “Final Closing Net Working Capital.” The fees, costs and expenses of the Independent Accountants incurred in connection with the resolution of disputes pursuant to this Section 1.5(b) shall be paid by Purchaser, on the one hand, and by the Seller, on the other hand, based upon the percentage that the amount not awarded to such Party bears to the amount actually contested by such Party.

4

(c)          Payment of Purchase Price Adjustment. Upon the Final Closing Net Working Capital being determined pursuant to Section 1.5(b), the Purchase Price shall be adjusted upwards or downwards, as the case may be, by the Final Adjustment Amount. The “Final Adjustment Amount” shall equal the amount, if any, that the Final Closing Net Working Capital is either greater than or less than the Preliminary Net Working Capital. If the Final Adjustment Amount is a positive number, the Final Adjustment Amount shall be paid by Purchaser to the Seller by wire transfer of immediately available funds to an account or accounts designated in writing by Seller and, if the Final Adjustment Amount is a negative number, Seller shall pay to Purchaser an amount equal to the absolute value of the Final Adjustment Amount. Any payment under this Section 1.5(c) shall be made within five (5) business days after the determination of the Final Closing Net Working Capital pursuant to Section 1.5(b). If any Party fails to pay any amount when due under this Section 1.5(c), such unpaid amount shall thereafter bear simple interest at a rate equal to the prime rate in effect from time to time (as published in The Wall Street Journal) plus two (2) percentage points, from the required date of payment until the date on which such amount is paid in full. Any payment made pursuant to this Section 1.5 shall be an adjustment to the Purchase Price for Tax purposes.

(d)          Clarification. For the avoidance of doubt, the Parties hereby agree and acknowledge that any Net Working Capital adjustment pursuant to this Section 1.5 will not preclude Purchaser Indemnified Parties from recovering any indemnifiable Losses in accordance with Article VII arising out of any breach of Seller’s representations and warranties set forth in this Agreement; provided, that, notwithstanding the foregoing, no Party shall have any right to bring any claims, whether pursuant to Article VII or otherwise, with respect to any matter resolved or otherwise deemed final in the Final Closing Net Working Capital and the Final Post-Closing NWC Statement.

5

(e)          “Net Working Capital” means Current Assets minus Current Liabilities; with: (a) the “Current Assets” consisting of cash and cash equivalents, short-term investments, accounts receivable net of allowance for doubtful accounts, inventory, deposits (including lease deposits), retainers, work in process, prepaid expenses, and other current assets of the Company, in each case as determined in accordance with U.S. GAAP (excluding any effects from purchase accounting); and (b) “Current Liabilities” consisting of accounts payable, accrued expenses, committed but unaccrued capital expenditures, deferred revenue, and other current liabilities of the Company, in each case as determined in accordance with U.S. GAAP.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF PURCHASER

As a material inducement to the Seller and the Company entering into this Agreement and consummating the transactions contemplated by this Agreement and the Transaction Documents, Purchaser represents and warrants to the Seller as follows:

Section 2.1           Organization and Standing. Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Virginia, and Purchaser is qualified to do business and in good standing in each other jurisdiction in which the failure to so qualify and be in good standing would materially and adversely affect Purchaser’s ability to perform its obligations under this Agreement and the Transaction Documents to which it is or will become a party or to consummate the transactions contemplated hereby and thereby. Purchaser each has all the requisite corporate power and authority to own, lease and operate its properties and assets and to carry on its business as now being conducted.

Section 2.2           Authority; Enforceability. Purchaser has the full legal right, power and authority to execute and deliver this Agreement and each Transaction Document to which it is or will become a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance by Purchaser of this Agreement and each Transaction Document to which it is or will become a party and the consummation by Purchaser of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on the part of Purchaser. This Agreement has been duly executed and delivered by Purchaser, and each Transaction Document to which Purchaser is or will become a party has been, or when executed shall be, duly executed and delivered by Purchaser. This Agreement, assuming that this Agreement is a valid and binding obligation of the Company and the Seller, constitutes a valid and binding obligation of Purchaser enforceable against it in accordance with its terms, and each Transaction Document to which Purchaser is or will become a party, assuming that such Transaction Document is a valid and binding obligation of the other parties thereto, is, or when executed shall constitute, a valid and binding obligation of Purchaser enforceable against Purchaser in accordance with its terms, in each case except as enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity affecting the availability of specific performance and other equitable remedies.

6

Section 2.3           Consents. No consent, approval, waiver, order, permit or authorization of, or registration, application, qualification, designation, declaration, filing or notification with or to, any Governmental Body or any other Person is required in connection with the execution, delivery and performance by Purchaser of this Agreement or any of the Transaction Documents to which Purchaser is or will become a party or the consummation by Purchaser of the transactions contemplated hereby or thereby.

Section 2.4           Legal Matters. There are no Proceedings or Claims pending or, to the knowledge of Purchaser, threatened against Purchaser or any of their respective assets or properties, or any Orders outstanding against Purchaser, in each case that would adversely affect Purchaser’s ability to perform its obligations under this Agreement and the Transaction Documents to which it is or will become a party or to consummate the transactions contemplated hereby or thereby.

Section 2.5           No Violation. The execution and delivery by Purchaser of this Agreement and each Transaction Document to which Purchaser is or will become a party and the consummation by Purchaser of the transactions contemplated hereby and thereby, including Purchaser’s compliance and performance of the terms, conditions and provisions thereof, do not and will not: (a) violate or conflict with any provision of the Organizational Documents of Purchaser, as applicable, (b) violate or conflict with any Law applicable to Purchaser or by which any of their respective assets or properties are bound or affected, (c) with or without the passage of time or the giving of notice, or both, violate, conflict with or result in a breach of the terms or conditions or provisions of, or constitute a default (or an event which might, with the passage of time or the giving of notice or both, constitute a default) under, or result in or give rise to a right of termination, modification, acceleration or cancellation of any obligation under, any Contract to which Purchaser is a party or by which Purchaser or any of their respective assets or properties are bound or affected, or (d) result in the creation or imposition of a Lien on any of Purchaser’s assets or properties.

Section 2.6           Brokers’ and Finders’ Fees. No agent, broker, finder, or investment or commercial banker, or other Person engaged by or acting on behalf of Purchaser or any of its representatives or Affiliates (prior to the Closing) in connection with the negotiation, execution or performance of this Agreement or the Transaction Documents or the consummation of the transactions contemplated hereby or thereby, is or will be entitled to any brokerage or finder’s or similar fee or other commission from Purchaser or its Affiliates, the Company or the Seller as a result of this Agreement, the Transaction Documents or the transactions contemplated hereby or thereby.

7

Section 2.7           Investment Intent. Purchaser is acquiring the Shares for its own account and not with a view to distribution within the meaning of Section 2(11) of the Securities Act of 1933, as amended, and the rules and regulations issued pursuant thereto.

Section 2.8           Independent Investigation; Seller and Company Representations. In entering into this Agreement, Purchaser acknowledges that it has conducted its own investigation, review and analysis. Purchaser hereby acknowledges and agrees that other than the representations and warranties made in Articles III and IV hereof, none of the Company, Seller or any of their respective officers, directors, employees or representatives make or have made any representation or warranty, express or implied, at Law or in equity, with respect to the Company, the Business or the Shares or any of the assets, liabilities or obligations of the Company. The existence or reliance by Purchaser on any such other representation or warranty is hereby expressly disclaimed.

ARTICLE III

REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY

As a material inducement to Purchaser entering into this Agreement and consummating the transactions contemplated by this Agreement and the Transaction Documents, the Seller, represents and warrants to Purchaser that, except as set forth on the Disclosure Schedule attached hereto as Exhibit C, which exceptions shall be deemed to be part of the representations and warranties made hereunder to the extent provided in the following sentence, the following representations are true and complete as of the date hereof. The Disclosure Schedule shall be arranged in sections corresponding to the numbered and lettered sections contained in this Article III, and no disclosure contained in the Disclosure Schedule shall create an implication that such matter meets any standard of materiality nor shall the inclusion of any item be construed as implying that any such item is “material” for any purpose. The disclosures in any section of the Disclosure Schedule shall qualify only (a) the Sections and subsections of this Agreement corresponding to such numbered and lettered sections, (b) other Sections and subsections in this Article III to the extent incorporated by cross-reference in appropriately numbered and lettered sections of the Disclosure Schedule, and (c) other Sections and subsections in this Article III to the extent it is reasonably apparent based on the substance of the disclosure that such disclosure is applicable to such other sections:

Section 3.1           Organization, Existence and Good Standing. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and the Company has all the requisite power and authority to own, lease and operate its properties and assets and to carry on its business as being conducted as of the date of this Agreement. The Company has qualified to do business as a foreign corporation, and is in good standing, in each jurisdiction where the nature of its business or the nature or location of its assets requires such qualification, except where the failure to be so qualified or in good standing would not reasonably be expected to have a Material Adverse Effect. The Company has delivered to Purchaser a correct and complete copy of: (i) the certificate of incorporation of the Company and each amendment thereto and (ii) the by-laws of the Company and each amendment thereto.

8

Section 3.2           Authority; Enforceability. The Company has the full legal right, power and authority to execute and deliver this Agreement and each Transaction Document to which the Company is or will become a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance by the Company of this Agreement and each Transaction Document to which the Company is or will become a party and the consummation by the Company of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on the part of the Company. This Agreement has been duly executed and delivered by the Company, and each Transaction Document to which the Company is or will become a party has been, or when executed shall be, duly executed and delivered by the Company. This Agreement, assuming that this Agreement is a valid and binding obligation of Purchaser and the Seller, constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, and each Transaction Document to which the Company is or will become a party, assuming that such Transaction Document is a valid and binding obligation of the other parties thereto, is, or when executed shall constitute, a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, in each case except as enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity affecting the availability of specific performance and other equitable remedies.

Section 3.3           Capitalization.

(a)          The Seller is the sole equity holder of the Company. Exhibit A sets forth a correct and complete list of the name of Seller and the number of Shares held, beneficially and of record, by Seller immediately prior to the Closing. The Shares are duly authorized and validly issued, fully paid and non-assessable, and none of the Shares were issued in violation of any applicable federal or state securities Laws or any other applicable Law or in violation of any preemptive rights, rights of first offer, rights of first refusal or similar rights.

(b)          There are no outstanding: (i) subscriptions, options, warrants, purchase rights, subscription rights, preemptive rights, conversion rights, exchange rights, calls, puts, rights of first refusal or other Contracts that required or obligated the Company, on a contingent basis or otherwise, to issue, sell or otherwise cause to become outstanding, or to acquire, repurchase, retire or redeem, any equity interests in the Company or any interest therein or (ii) restricted stock, stock appreciation, phantom stock, profit participation or similar rights with respect to the Company.

(c)          There are no Contracts to which the Company or, to the Company’s Knowledge, any other Person, is a party with respect to: (i) the voting of any equity securities of the Company (including any proxy or director nomination rights); or (ii) the transfer of any equity interests in the Company (including any preemptive right, right of first offer, right of first refusal, participation right, “take along” right or similar right).

9

(d)          Neither the Company nor, to the Company’s Knowledge, the Seller has any obligation, absolute or contingent, to any other Person to sell any equity interests in the Company, or any of the Company’s business or assets, or to effect any merger, consolidation, recapitalization or other reorganization of the Company, or to enter into any Contract with respect thereto.

Section 3.4           Consents. No consent, waiver, approval, order, permit or authorization of, or registration, application, qualification, designation, declaration, filing or notification with or to, any Governmental Body or any other Person, including a party to a Contract to which the Company is a party or by which any of its assets or properties are bound or affected, is required in connection with the execution, delivery and performance by the Company of this Agreement or any of the Transaction Documents to which the Company is or will become a party or the consummation by the Company of the transactions contemplated hereby or thereby.

Section 3.5           No Violation. The execution and delivery by the Company of this Agreement and each Transaction Document to which the Company is or will become a party and the consummation by the Company of the transactions contemplated hereby and thereby, including the Company’s compliance and performance of the terms and conditions thereof, do not and will not (i) violate or conflict with any provision of the Organizational Documents of the Company or any Law applicable to the Company or by which the Company or any of its assets or properties are bound or affected, (ii) with or without the passage of time or the giving of notice, or both, violate, conflict with or result in a breach of the terms or conditions or provisions of, or constitute a default (or an event which might, with the passage of time or the giving of notice or both, constitute a default) under, or result in or give rise to a right of termination, modification, acceleration or cancellation of any obligation under, any Contract to which the Company is a party or by which the Company or any of its assets or properties are bound or affected, (iii) result in the creation or imposition of a Lien on any of the Company’s assets or properties, (iv) result in the termination, suspension, revocation, impairment, forfeiture, nonrenewal or other adverse modification of any Company Permit or (v) result in the vesting of, the payment of, or the creation of any obligation, whether absolute or contingent, to vest or pay, on behalf of the Company, any equity or equity-related grant, bonus, severance, termination, “golden parachute” or similar payment (including any “double-trigger” rights), whether pursuant to Contract or under applicable Law, with respect to any current or former employee, officer or director of the Company, other than, in the case of clause(ii), any such violations, conflicts, breaches, defaults or rights under Contracts that (i) are not Material Contracts and (ii) would not, individually or in the aggregate, have a Material Adverse Effect.

Section 3.6           Financial Statements.

(a)          Attached in Section 3.6(a) of the Disclosure Schedule are the balance sheets of the Company at December 31, 2010, 2011 and 2012 and the related statements of operating results and retained earnings and statements of cash flows for the years then ended (collectively, the “Financial Statements”). The Financial Statements (A) fairly present, in all material respects, the financial condition, results of operations, cash flows and stockholders’ equity of the Company as of the respective dates thereof and for the respective periods covered thereby and (B) have been prepared from, and are in accordance with, the books and records of the Company.

10

(b)          The Company maintains books and records that fairly reflect, in all material respects, its assets and liabilities, and the transactions of the Company reflected therein. To the Company’s Knowledge, the Company’s transactions are recorded in the Company’s books and records as necessary to permit preparation of the financial statements of the Company, which transactions reflected in the Company’s books and records have, to the Company’s Knowledge, been executed in accordance with management’s authorization.

Section 3.7           Absence of Undisclosed Liabilities. The Company has no Liabilities, except (a) Liabilities reflected on the Financial Statements, (b) Liabilities or obligations incurred after January 1, 2013 in the ordinary course of business, none of which ordinary course liabilities or obligations involves any breach of Contract, breach of warranty, tort, infringement or violation of Law by the Company and none of which, either individually or in the aggregate, is material to the Company and (c) Liabilities under the executory portion of any Material Contract (or non-material Liabilities under other Contracts) by which the Company is bound (in each case, none of which is a Liability resulting from breach of such Contract). The Company has not guaranteed, and it is not otherwise primarily or secondarily liable in respect of, any obligation or liability of any other Person, except to the extent disclosed in the Financial Statements.

Section 3.8           Personal Property; All Assets.

(a)          The Company has good and marketable title, or holds valid and enforceable leases, to all the Personal Property held or used by it, free and clear of all Liens other than Permitted Liens. Each item of Personal Property is in good operating condition and repair (reasonable wear and tear excepted) and free of any material structural or engineering defects, is suitable for the purposes for which it is currently used, and has been operated in compliance, in all material respects, with applicable Law. There are no pending or, to the Company’s Knowledge, threatened, condemnation or similar proceedings against the Company or any of the Personal Property. The Personal Property, as a whole, is sufficient for the conduct of the business of the Company as conducted by the Company as of the date of this Agreement. The Company has delivered to Purchaser a correct and complete copy of each lease for any leased Personal Property, and all amendments, supplements or modifications thereto.

(b)          The assets, property, rights and privileges owned, leased or licensed by the Company (the “Personal Property”), constitute all of the assets, property, rights and privileges that are necessary to operate the business of the Company as conducted as of the date of this Agreement. The Personal Property material to the operation of the Company’s business is located at the locations as set forth in Section 3.8(b) of the Disclosure Schedule.

11

Section 3.9           Real Estate. The Company does not own, and has never owned, any real property. The Company is not a party to any leases or subleases under which the Company uses or occupies or has the right to use or occupy any real property, other than leases and licenses entered into in the ordinary course of business as disclosed in Section3.13(a) of the Disclosure Schedule.

Section 3.10         Insurance. Section 3.10 of the Disclosure Schedule sets forth a list of all insurance policies, including self-insurance programs, maintained by the Company or which name the Company as an insured or loss payee (collectively, the “Insurance Policies”). There is no claim by the Company pending under any of such Insurance Policies as to which the Company has received written notice that coverage has been denied or disputed by the underwriters of such Insurance Policies. All premiums due and payable under all the Insurance Policies have been paid and are not subject to renegotiation or retroactive adjustment, and the Company is in compliance, in all material respects, with all other terms and conditions of the Insurance Policies. All of the Insurance Policies are in full force and effect through the Closing. To the Company’s Knowledge, there is no threatened termination of, or premium increase with respect to, any Insurance Policies. The Company has not received any notice of cancellation, termination, non-renewal or reduction in coverage under any of the Insurance Policies. Correct and complete copies of all Insurance Policies have been made available to Purchaser.

Section 3.11         Permits and Licenses. The Company is in possession of all franchises, authorizations, licenses, permits, certificates, approvals, clearances, consents, registrations, certificates of authority, Orders or similar rights issued, granted or obtained by or from any Governmental Body (collectively, “Permits”) that are necessary for the Company to own, lease and operate its assets and properties or to carry on its business as it is now conducted in compliance with applicable Law and any Orders applicable to it or any of its assets or properties (collectively, “Company Permits”), other than such Permits the failure to have obtained of which would not reasonably be expected to have a Material Adverse Effect.

Section 3.12         Compliance with Laws. The Company is in compliance in all material respects with all applicable Laws and has in the past complied in all material respects with all applicable Laws, and no Proceeding or Claim has been filed or commenced against it or, to the Company’s Knowledge is threatened, alleging any failure or alleged failure so to comply. The Company has not received any notice in writing from any Governmental Body to the effect that: (a) the Company is not in compliance with, or has in the past not been in compliance with, in each case in any material respect, any applicable Laws; or (b) any Governmental Body intends to initiate any Proceeding or Claim against the Company or any of its assets or properties. None of the Company, its assets or properties, or, to the Company’s Knowledge, its directors, officers, employees or stockholders in their capacities as such, is a party to or bound or affected by any Order or similar restriction that materially restricts the conduct by the Company of its business or which would otherwise reasonably be expected to have a material adverse impact on the ability of the Company to conduct its business as presently conducted. This Section 3.12 shall not apply to Taxes, which shall be governed solely by Section 3.15.

12

Section 3.13         Contracts.

(a)          Section 3.13(a) of the Disclosure Schedule sets forth a correct and complete list of (i) the Contracts of the Company with its largest ten (10) customers by revenues, (ii) all Contracts of the Company with vendors for amounts in excess of $100,000 and (iii) all Contracts with counter-parties other than customers or vendors that are material to the Company’s Business, as it is presently conducted as of the date hereof (collectively, the “Material Contracts”).

(b)          Each Material Contract represents the valid, legal and binding obligation of the Company, in full force and effect and, to the Company’s Knowledge, each Material Contract is enforceable against the other parties thereto, in accordance with its respective terms, except as enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity affecting the availability of specific performance and other equitable remedies. The Company is not currently renegotiating any of the Material Contracts or paying liquidated damages in lieu of performance thereunder. The Company is not in material breach or default under, or in receipt of any claim of material default or breach under, any Material Contract and, to the Company’s Knowledge, none of the counterparties to any Material Contract is in material breach of or default thereunder; no event has occurred which, with the passage of time or the giving of notice, or both, would result in a material default, breach or event of noncompliance by the Company or, to the Company’s Knowledge, any other party thereto, under any Material Contract; and the Company has no Knowledge of any event or circumstance that would reasonably be expected to result in a material breach by any of the other parties to any Material Contract. The Company has not received any written notice of any termination, material modification, acceleration, cancellation, nonrenewal or material adverse price adjustment of any Material Contract.

(c)          The Company has provided to Purchaser correct and complete copies of all written Material Contracts, including all amendments, waivers, supplements or other changes thereto, along with summaries of each of the material terms of each of the oral Material Contracts.

Section 3.14         Intellectual Property. Section 3.14 of the Disclosure Schedule lists all of the material Intellectual Property Rights owned, leased or licensed by, or otherwise used by, the Company, and indicates, for each item, whether it is owned, leased or licensed. To the Knowledge of the Company, (i) no Person, including any current or former employee, independent contractor, consultant, freelancer or other service provider of the Company, is infringing, misappropriating or otherwise violating the Intellectual Property Rights of the Company, (ii) the operations, products and processes of the Company do not infringe on, misappropriate or violate, and have not infringed on, misappropriated or violated, any of the rights of any third party with respect to any Intellectual Property Rights, (iii) there are no Claims pending or, to the Company’s Knowledge, threatened, against the Company with respect to any Intellectual Property Rights, and (iv) there is no Claim, pending or, to the Company’s Knowledge, threatened, that challenges the Company’s ownership rights or rights to use, or the validity, enforceability or effectiveness of, any Intellectual Property Rights used, owned, or licensed by, the Company.

13

Section 3.15         Taxes.

(a)          All material Tax Returns required to be filed with any Governmental Body by the Company or the Seller (in relation to the Company or its interest therein) have been timely filed and were correct and complete in all material respects. All material Taxes due and payable by the Company, whether or not shown on any Tax Return, have been timely paid in full. The Company is not currently the beneficiary of, or and has not applied for, any extension of time within which to file any Tax Return.

(b)          The Company has complied with all material requirements of Law in relation to the withholding and deposit of Taxes and has duly and timely withheld and paid over to the appropriate Governmental Body all material amounts required to be so withheld and paid under applicable Law, including any Taxes in connection with any amount paid or owing, or any income or gain allocated, to any current or former stockholder, employee, independent contractor, creditor or any other Person. The Company has timely and properly completed and filed the Schedules K-1 (and comparable schedules under applicable state, local or foreign Tax Law), Forms W-2 and 1099, and other Tax Returns required with respect to such withholding and deposit of Taxes.

(c)          Charges, accruals and reserves for Taxes with respect to the Company for any pre-Closing Tax period or for any tax period beginning before the Closing but ending after the Closing (a “Straddle Period”) (including any pre-Closing Tax period or Straddle Period for which no Tax Return has yet been filed) have been estimated and reflected on the Financial Statements (in addition to any accruals and reserves for deferred Taxes established to reflect timing differences between book and Tax income) and are adequate in all material respects to cover such Taxes (without taking into account any accrual or reserve for deferred Taxes) as of the date of such Financial Statements, whether or not shown as due on any Tax Return. Except for Taxes incurred in the ordinary course of business, the Company has no liability for unpaid Taxes accruing after the date of the Financial Statements.

(d)          No claim, audit, examination, action, suit, proceeding or investigation in respect of any Tax matters (including by any Governmental Body or under any indemnification or Tax sharing agreement) is now being conducted, pending or, to the Knowledge of the Company, threatened against the Company or the Seller (in relation to the Company or Seller’s interest therein). Neither the Company nor the Seller (in relation to the Company or Seller’s interest therein) has received from any Governmental Body (i) any written notice indicating an intent to open a Tax audit or other review, (ii) any request for information related to Tax matters, or (iii) any notice of deficiency or proposed adjustment for any amount of Tax proposed, asserted or assessed against the Company or the Seller (in relation to the Company or Seller’s interest therein), and neither the Company nor the Seller expect any such notice or request to be issued. Neither the Company nor the Seller has filed any document or entered into any agreement with a Governmental Body waiving or extending the statute of limitations or the period of assessment or collection of any Taxes. Any deficiency or assessment relating to any amount of Taxes resulting from any completed audit or examination of the Company or of the Seller (in relation to the Company or Seller’s interest therein) by any Governmental Body or any concluded litigation has been timely paid in full.

14

(e)          No claim has ever been made in writing with respect to the Company or the Seller (in relation to the Company or Seller’s interest therein) by any Governmental Body in a jurisdiction: (i) in which the Company or the Seller does not file or has not filed Tax Returns that the Company or the Seller is, was or may be subject to taxation by that jurisdiction, or (ii) where the Company or the Seller files or filed Tax Returns but does not or did not compute his or its Tax on the basis of his or its net income attributable to such jurisdiction, that it is, was or may be subject to Tax on the basis of his or its net income attributable to such jurisdiction. The Company does not conduct business in, or derive income from, within or allocable to, any state, local or foreign Taxing jurisdiction (x) other than those for which all Tax Returns have been provided to Purchaser or (y) that could reasonably result in a requirement to file a Tax Return in that jurisdiction of a type that the Company, or the Seller (in relation to the Company or its interest therein), have not filed previously, or to pay Taxes to that jurisdiction on a basis different from the basis, if any, on which the Company or the Seller (in relation to the Company or its interest therein), previously paid Taxes to that jurisdiction.

Section 3.16         Employment Matters. Section 3.16 of the Disclosure Schedule sets out (i) the obligations or liabilities, fixed or contingent, arising out of or with respect to any the employment by the Company of any individual and (ii) the benefit plans or programs, currently in effect, with respect to any current or former director, officer, employee (as applicable) or contractor of the Company or their dependents or beneficiaries.

Section 3.17         Legal Matters. There are no Proceedings or Claims pending or, to the Company's Knowledge, threatened (i) against the Company or any of its assets or properties or (ii) to the Company’s Knowledge, against any of its directors, officers, employees or Affiliates, which, with respect to this clause (ii) are related to or affect the Company’s operations, the Business or the Company’s assets or the consummation of the transactions contemplated hereby. The Company is not currently a plaintiff in any Proceeding. There are no Proceedings or Claims pending or, to the Company’s Knowledge, threatened, that question the validity of this Agreement or any of the Transaction Documents, or the right of the Company or the Seller, to enter into this Agreement or any of the Transaction Documents to which such Person is a party (as applicable) or to consummate the transactions contemplated hereby and thereby. The Company is not subject to any Order in which it is named, and its assets are not subject to any Order in which such assets are specifically identified.

15

Section 3.18         Customers, Sales Agents and Suppliers. Section 3.18 of the Disclosure Schedule lists the customers and sales agents of the Company and, measured by expense, the twenty (20) largest suppliers (other than professional advisors such as attorneys and accountants) of the Company, in each case, for the one (1) year period prior to the date of this Agreement. The Company has not, during the two (2) year period prior to the date of this Agreement, been involved in any material dispute with any of its customers, sales agents or suppliers. During the one (1) year period prior to the date of this Agreement, none of the customers, sales agents or suppliers of the Company has canceled or otherwise terminated, or, to the Company’s Knowledge, expressly threatened in writing to cancel or otherwise terminate or not renew, its relationship with the Company. The Company has not received any notice or other communication from any customer, sales agent or supplier of the Company stating that the transactions contemplated by this Agreement will materially and adversely affect the relations of the Company with any customer, sales agent or supplier.

Section 3.19         Warranties. The Company has made no express oral or written warranties with respect to the quality or absence of defects of the products or services which it has sold or performed which are in force as of the date hereof.

Section 3.20         Bank Accounts; Powers of Attorney. Section 3.20 of the Disclosure Schedule sets forth (a) the name of each bank, safe deposit company or other financial institution in which the Company has an account, lock box or safe deposit box and (b) the name of each Person authorized to draw thereon or to have access thereto and the names of each Person, if any, holding powers of attorney from the Company.

Section 3.21         Brokers’ and Finders’ Fees. No agent, broker, finder, or investment or commercial banker, or other Person engaged by or acting on behalf of the Company or any of its representatives or Affiliates in connection with the negotiation, execution or performance of this Agreement or the Transaction Documents or the consummation of the transactions contemplated hereby or thereby, is or will be entitled to any brokerage or finder’s or similar fee or other commission that is payable by the Company after the Closing as a result of this Agreement, the Transaction Documents or the transactions contemplated hereby or thereby.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE SELLER

As a material inducement to Purchaser entering into this Agreement and consummating the transactions contemplated by this Agreement and the Transaction Documents, Seller hereby represents and warrants to Purchaser as follows:

Section 4.1           Organization and Standing. Seller is duly organized, validly existing and in good standing under the laws of the state of its formation, and Seller is qualified to do business and in good standing in each other jurisdiction in which the failure to so qualify and be in good standing would materially and adversely affect Seller’s ability to perform its obligations under this Agreement and the Transaction Documents to which it is or will become a party or to consummate the transactions contemplated hereby and thereby. Seller has all the requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted.

16

Section 4.2           Authority; Enforceability. Seller has the full legal right, power and authority to execute and deliver this Agreement and each Transaction Document to which he or it is or will become a party, to perform his and its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance by Seller of this Agreement and each Transaction Document to which it is or will become a party and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of Seller. This Agreement has been duly executed and delivered by Seller, and each Transaction Document to which Seller is or will become a party has been, or when executed shall be, duly executed and delivered by Seller. This Agreement, assuming that this Agreement is a valid and binding obligation of Purchaser and the Company, constitutes a valid and binding obligation of Seller enforceable against Seller in accordance with its terms, and each Transaction Document to which Seller is or will become a party, assuming that such Transaction Document is a valid and binding obligation of the other parties thereto, is, or when executed shall constitute, a valid and binding obligation of Seller enforceable against Seller in accordance with its terms, in each case except as enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity affecting the availability of specific performance and other equitable remedies.

Section 4.3           No Violation. The execution and delivery by Seller of this Agreement and each Transaction Document to which Seller is or will become a party and the consummation by Seller of the transactions contemplated hereby and thereby, including the compliance and performance by Seller of the terms, conditions and provisions thereof, do not and will not: (a) violate or conflict with any provision of the Organization Documents of Seller, (b) violate or conflict with any Law applicable to Seller or by which Seller or any of his or its assets or properties are bound or affected, (c) with or without the passage of time or the giving of notice, or both, violate, conflict with or result in a breach of the terms or conditions or provisions of, or constitute a default (or an event which might, with the passage of time or the giving of notice or both, constitute a default) under, or result in or give rise to a right of termination, modification, acceleration or cancellation of any obligation under, any Contract to which Seller is a party or by which Seller or any of his or its assets or properties are bound or affected or (d) result in the creation or imposition of a Lien on any of Seller’s Shares or other assets or properties.

Section 4.4           Consents. No consent, approval, waiver, order, permit or authorization of, or registration, application, qualification, designation, declaration, filing or notification with or to, any Governmental Body or any other Person, including a party to a Contract to which Seller is a party or by which any of his or its assets or properties are bound or affected, is required in connection with the execution, delivery and performance by Seller of this Agreement or any of the Transaction Documents to which Seller is or will become a party or the consummation by Seller of the transactions contemplated hereby or thereby.

17

Section 4.5           Ownership. Immediately prior to the Closing, Seller was the sole record and beneficial owner of the Shares set forth opposite Seller’s name on Exhibit A and Seller owned such Shares free and clear of any and all Liens. At the Closing, assuming Purchaser has the requisite authority to be the lawful owner of the Shares, Seller is transferring to Purchaser good, valid and enforceable title in and to Seller’s Shares set forth across from Seller’s name on Exhibit A, free and clear of any and all Liens, other than Liens created or incurred by Purchaser or its Affiliates and other than restrictions on transfer under applicable federal and state securities law. Seller was not a party to any Contract with respect to: (a) the voting of any Shares; or (b) the transfer of any Shares (including any preemptive right, right of first offer, right of first refusal, participation right, “take along” right or similar right).

Section 4.6           Legal Matters. There are no Proceedings or Claims pending or, to the knowledge of Seller, threatened against Seller or any of his or its assets or properties, or any Orders outstanding against Seller, in each case that would adversely affect Seller’s ability to perform Seller’s obligations under this Agreement and the Transaction Documents to which Seller is or will become a party or to consummate the transactions contemplated hereby or thereby.

Section 4.7           Brokers’ and Finders’ Fees. No agent, broker, finder, or investment or commercial banker, or other Person engaged by or acting on behalf of Seller or any of Seller’s representatives or Affiliates in connection with the negotiation, execution or performance of this Agreement or the Transaction Documents or the consummation of the transactions contemplated hereby or thereby, is or will be entitled to any brokerage or finder’s or similar fee or other commission as a result of this Agreement, the Transaction Documents or the transactions contemplated hereby or thereby for which, in any such case, the Company shall have any obligation.

ARTICLE V

OTHER COVENANTS AND AGREEMENTS

Section 5.1           Further Assurances. From time to time, as and when requested by any Party, any other Party shall execute and deliver, or cause to be executed and delivered, all such documents and instruments and shall take, or cause to be taken, all such further or other actions as the requesting Party may reasonably deem necessary or desirable to evidence and effectuate the transactions contemplated by this Agreement and the Transaction Documents.

Section 5.2           Payments of Accounts Receivable. In the event that the Seller shall receive any instruments of payment of any of the accounts receivable of the Company, Seller shall forthwith deliver such instruments to Purchaser, endorsed where necessary, without recourse, in favor of Purchaser. In the event Purchaser, the Company or any of their respective Affiliates shall receive any instruments of payment properly payable to the Seller, Purchaser shall deliver, or shall cause the Company or Purchaser’s or the Company’s respective Affiliates, as applicable, to deliver, such instruments to the Seller or its Affiliate, as applicable, endorsed where necessary, without recourse, in favor of such Person.

18

Section 5.3           Non-Solicitation of Business Relations for the Benefit ofPurchaser. In consideration of the benefits of this Agreement to the Seller and in order to induce Purchaser to enter into this Agreement, Seller hereby covenants and agrees that, during the Restrictive Covenant Period, Seller shall not, and Seller shall cause his or its Affiliates not to, directly or indirectly, except on behalf of or for the benefit of the Company, (a) solicit, sell to, provide services to, or assist the solicitation of, sale to, or providing to, or encourage, induce or entice any other Person to solicit, sell to or provide services to, any Person who is a customer of the Company at the time of such solicitation or other action or was a customer of the Company (or whom the Company is or was soliciting to become a customer of the Company) within the one (1) year period immediately preceding the Closing Date, for the purpose of (i) providing such Person with any product or service which directly or indirectly competes with the products or services provided by the Company to such Person or is in substitution for or in replacement of such products or services; (ii) altering, modifying or precluding the development of such customer’s business relationship with the Company; or (iii) reducing the volume of business that such customer transacts with the Company or (b) take any action that is intended, or could reasonably be expected, to discourage any Person who is presently (or was at any time during the one (1) year period immediately preceding the Closing Date) a lessor, licensor, supplier, licensee or other business associate or relation of the Company from entering into or maintaining, or to terminate, cease or otherwise adversely change, its relationship with the Company or in any other way deliberately interfere with the relationship between the Company and any such lessor, licensor, supplier, licensee or other business associate or relation.

Section 5.4           Non-Solicitation for Employment for the Benefit of Purchaser. In consideration of the benefits of this Agreement to the Seller and in order to induce Purchaser to enter into this Agreement, Seller hereby covenants and agrees that, during the Restrictive Covenant Period, Seller shall not, and Seller shall cause his or its Affiliates not to, directly or indirectly, (a) solicit or attempt to solicit for employment, hire or attempt to hire, engage or attempt to engage or in any other way induce or attempt to induce to leave the employ of or engagement by the Company, any Person who is, on the date of such solicitation or attempted solicitation, hiring or attempted hiring, or engagement or attempted engagement, or who was, during the twelve (12) month period preceding such solicitation or attempted solicitation, hiring or attempted hiring, or engagement or attempted engagement, a director, officer, employee or consultant to the Company or (b) induce or attempt to induce any Person who is a director, officer, employee or consultant of the Company to leave the employ of or terminate or breach their respective agreements with the Company, or in any other way deliberately interfere with the relationship between the Company and any such Person; provided, however, that general solicitations of employment published in a journal, newspaper or other publication of general circulation or listed on any internet job site and not targeted towards the Company’s directors, officers, employees or consultants shall not be deemed to be a solicitation of such individuals in violation of this Section 5.4.

19

Section 5.5           GroupLive Assets and Liabilities.

(a)          Section 5.5(a) of the Disclosure Schedule sets forth all of the assets of the Company related to the GroupLive platform (the “GroupLive Assets”) and Section 5.5(b) of the Disclosure Schedule sets forth all of the Liabilities (the “GroupLive Liabilities”) related to the GroupLive Assets.

(b)          Purchaser and Seller agree that, from the date hereof until the earliest time that Seller shall have established an alternative platform for its business related to the GroupLive Assets but not to exceed four (4) months from the date hereof (the “Transition Period”), (i) Purchaser shall cause the Company to continue to operate the GroupLive Assets for the benefit of Seller and its customers to the same extent such assets have been operated prior to the Closing Date, and (ii) Seller shall be solely responsible for the GroupLive Liabilities and shall reimburse the Company in full for any payments made by the Company in respect of the GroupLive Liabilities.

(c)          Seller agrees to take all actions necessary to assume fully the GroupLive Liabilities and to cause any Liens on the assets of the Company to be released on or before the end of the Transition Period. Upon Seller’s confirmation to Purchaser that Seller has assumed fully the GroupLive Liabilities and caused any such Liens to be released and Purchaser’s reasonable satisfaction therewith, Purchaser agrees to provide Seller, or its representatives, with access to the Company’s property during normal business hours to remove the GroupLive Assets and to allow Seller to so remove, and cause the Company to assist with such removal to the extent necessary, the GroupLive Assets.

(d)          Purchaser and Seller agree to cooperate and take all actions reasonably necessary to effectuate the provisions of this Section 5.5. Notwithstanding anything in this Section 5.5 to the contrary, Purchaser and Seller acknowledge that the GroupLive Assets and GroupLive Liabilities are to be considered excluded assets and liabilities of the Company as if identified on Exhibit B and any Indebtedness included in the GroupLive Liabilities shall be considered Excluded Indebtedness hereunder.

Section 5.6           Dispute Resolution Support. In the event and for so long as any Party actively is contesting or defending against any Proceeding, complaint or demand after the Closing in connection with any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction on or prior to the Closing involving the Company, each of the other Parties shall cooperate with the other Parties and their counsel in the contest or defense, make available their personnel at reasonable times and places, and provide such testimony and access to their books and records as shall be reasonably necessary in connection with the contest or defense, all at the sole cost and expense of the contesting or defending Party (unless the contesting or defending Party is entitled to indemnification therefor under ArticleVII); provided that no Party shall be obligated to provide such cooperation in connection with a Proceeding in connection with this Agreement

20

Section 5.7           Release of Intercompany Loan. Seller hereby releases, without any further action on behalf of Seller or the Company, the Company from its obligations under the intercompany loan from Seller to the Company with an unpaid balance as of the date hereof of Five Hundred Seventy Seven Thousand Two Hundred Fifty Six Dollars and Fifty Nine Cents ($577,256.59).

Section 5.8           Reimbursed Rent Overpayment. Purchaser acknowledges that the Company is seeking repayment of an overpayment of rent to a landlord for a period of time prior to the Closing . Purchaser agrees to cause the Company to use commercially reasonable efforts to recover the overpayment amount and, upon any recovery thereof, to make payment of any recovered amount relating to any time period prior to the Closing to Seller by immediately available funds within five (5) business days of receipt.

ARTICLE VI

TAX MATTERS

Section 6.1           Payment of Taxes; Preparation and Filing of Tax Returns.

(a)          The Seller shall be responsible for payment of the following Taxes (or the non-payment thereof):

(i)          All Taxes of the Company, or for which the Company is liable, for all Taxable periods ending on or before the Closing Date and the portion through the end of the Closing Date of any Straddle Period except that, if the Purchaser does not elect to have a 338(h)(10) Election pursuant to Section 6.2, Seller will not be liable for (i) any Tax due to a transaction occurring after the Closing which is not within the ordinary course of business or (ii) any Tax incurred as a result of an election by the Purchaser with respect to the Company pursuant to Section 338(g) of the Code; and

(ii)         all Taxes of the Seller (in relation to the Company or the Seller’s interest therein) for all Taxable periods;

in each case including all Taxes of the Company or of the Seller resulting from the transactions contemplated by this Agreement.

Section 6.2           Tax Election

(a)          At Purchaser’s election, the Seller shall join with Purchaser in making, and shall take any and all action necessary to effect, a timely election under Code Section 338(h)(10) (and any corresponding election under applicable state, local or foreign Tax Law) with respect to the purchase by the Purchaser of the Shares (the “338(h)(10) Election”). The Seller shall include any income, gain, loss, deduction or other Tax item resulting from the 338(h)(10) Election on Seller’s Tax Returns to the extent and in the manner required by applicable Law, and shall timely file such Tax Returns and pay the Taxes reported on such Tax Returns. The Seller shall also be responsible for and shall pay any Tax imposed on the Company attributable to the making of the 338(h)(10) Election.

21

(b)          Promptly after making the Section 338(h)(10) Election, Purchaser and Seller shall work in good faith to allocate the portion of the Purchase Price allocated to the Shares, the liabilities of the Company and any other relevant items (the “338(h)(10) Consideration”) among the assets of the Company.

(c)          Notwithstanding anything in this Agreement to the contrary, as a condition to making the 338(h)(10) Election, Purchaser will make a payment to the Seller in an amount sufficient to pay the sum of (i) the amount, if any, by which (A) the sum of the federal, state and local Taxes paid by the Company and the Seller as a result of the 338(h)(10) Election, including any administrative or other charges or expenses, exceeds or will exceed (B) the sum of the federal, state and local Taxes that would have been paid by the Company and the Seller had the sale of the Shares to Purchaser occurred pursuant to the terms of this Agreement but no 338(h)(10) Election had been made.

ARTICLE VII

INDEMNIFICATION

Section 7.1           Indemnification of Purchaser.

(a)          From and after the Closing (but subject to the terms and conditions of this Article VII), the Seller shall indemnify, defend and hold harmless Purchaser, each of Purchaser’s Affiliates (including the Company) and each of its and their respective officers, directors, managers, members, partners, stockholders, equity holders, employees, representatives, agents, successors and assigns (collectively, the “Purchaser Indemnitees”) from and against any and all Losses suffered or incurred by any Purchaser Indemnitee arising out of, resulting from or relating to: (i) any breach of or inaccuracy in any representation and warranty made by the Seller in Article III or Article IV, (ii) any non-fulfillment or breach of any covenant or agreement made by or to be performed by the Seller set forth in this Agreement; (iii) any Claim or Proceeding instituted, on or after the Closing Date, related to the matter identified on Schedule 7.1 (the “Identified Dispute”); (iv) any Company Transaction Expenses that are outstanding after the Closing and not reflected in the Final Net Working Capital; (v) any Excluded Indebtedness outstanding immediately prior to the Closing that is not satisfied in full at the Closing; or

(vi)        any Taxes for a pre-Closing Tax Period or a Straddle Period for which Seller is responsible pursuant to Article VI. Notwithstanding the foregoing, and for the avoidance of doubt, no Seller Indemnitee will be a Purchaser Indemnitee by reason of such Seller Indemnitee’s position with the Company or otherwise.

Section 7.2           Indemnification of the Seller. From and after the Closing (but subject to the terms and conditions of this Article VII), Purchaser shall indemnify, defend and hold harmless the Seller, its Affiliates and each of their respective trustees, beneficiaries, representatives, agents, successors and assigns (collectively, the “Seller Indemnitees”) from and against any and all Losses suffered or incurred by any Seller Indemnitee arising out of, resulting from or relating to: (a) any breach of or inaccuracy in any representation and warranty made by Purchaser in Article II or (b) any non- fulfillment or breach of any covenant or agreement made by or to be performed by Purchaser set forth in this Agreement.

22

Section 7.3           Limitation of Indemnification Obligations.

(a)          Purchaser Threshold. The Purchaser Indemnitees shall be entitled to indemnification under Section 7.1(a)(i) only if the aggregate amount of all Losses incurred by the Purchaser Indemnitees with respect to any and all breaches of or inaccuracies in the representations and warranties of the Seller contained in Article III or Article IV exceeds Thirty Five Thousand Dollars ($35,000) (the “Aggregate Threshold”); provided, however, that if the aggregate amount of all such Losses exceeds the Aggregate Threshold, the Purchaser Indemnitees shall be entitled to indemnification only for the amount of such Losses in excess of the Aggregate Threshold; provided, further, however, that notwithstanding the foregoing, the Aggregate Threshold shall not apply to the Fundamental Representations of the Seller and, accordingly, any claims by a Purchaser Indemnitee in respect of a Fundamental Representation of the Seller shall be indemnified hereunder from the first dollar of any applicable Losses.

(b)          Seller Threshold. The Seller Indemnitees shall be entitled to indemnification under Section 7.2(a) only if the aggregate amount of all Losses incurred by the Seller Indemnitees with respect to any and all breaches of or inaccuracies in the representations and warranties of Purchaser contained in Article II exceeds the Aggregate Threshold; provided, however, that if the aggregate amount of all such Losses exceeds the Aggregate Threshold, the Seller Indemnitees shall be entitled to indemnification only for the amount of such Losses in excess of the Aggregate Threshold; provided, however, that notwithstanding the foregoing, the Aggregate Threshold shall not apply to the Fundamental Representations of Purchaser and, accordingly, any claims by a Seller Indemnitee in respect of a Fundamental Representation of Purchaser will be indemnified hereunder from the first dollar of any applicable Losses.

(c)          Purchaser Cap. Subject to Section 7.3(g), the maximum aggregate amount of Losses for which indemnification is required to be made by the Seller individually with respect to the matters referred to in Section 7.1(a)(i) is an amount equal to One Million Dollars ($1,000,000) (the “General Indemnity Cap”).

(d)          Seller Cap. Subject to Section 7.3(g), the maximum aggregate amount of Losses for which indemnification is required to be made by Purchaser with respect to the matters referred to in Section 7.2(a) is the General Indemnity Cap

(e)          Survival of Representations. The representations and warranties made in this Agreement shall survive the Closing through and including the first anniversary of the date of this Agreement; provided, however, that (a) the representation set forth in Section 3.15 (Taxes) shall survive the Closing until thirty (30) days following the expiration of the applicable statute of limitations (including extensions thereof) with respect to such matters; and (b) the Fundamental Representations shall survive indefinitely; provided, however, that any claims of a breach of any such surviving representation or warranty made in good faith in writing and received by an Indemnifying Party prior to such termination date will survive such date to the extent of the facts alleged in such claim. The parties hereto specifically intend that the statutory statutes of limitations applicable to the respective representations and warranties be superseded and replaced by the survival periods contained herein. The covenants and agreements contained in this Agreement and the other Transaction Documents to be performed or complied with on or after the Closing (other than the covenant and agreement to indemnify against breaches of certain representations and warranties, which will survive only until the expiration of the underlying representation and warranty) will survive indefinitely the execution and delivery of this Agreement and the other Transaction Documents, the Closing and the consummation of the transactions contemplated hereby and thereby.

23

(f)          No Consequential Damages. Other than with respect of any Third Party Claims, no Party shall have any liability to a Purchaser Indemnitee or a Seller Indemnitee hereunder for punitive, indirect, consequential, special, incidental or exemplary damages, or damages measured based on loss of future revenue, income or profits, diminution in value or loss of business opportunity or reputation, of such Person.

(g)          Fraud. Notwithstanding anything in this Agreement to the contrary, the Parties acknowledge and agree that, in the event of fraud in connection with the representations and warranties, nothing in this Agreement shall limit (i) any Party’s rights or (ii) the amount of Losses recoverable by a Party against the Party committing such fraud.

(h)          Exclusive Remedy. Subject to Section 7.3(g) and Section 8.12 hereof, the indemnification provided for in this Article VII will constitute the sole remedy of any party to this Agreement with respect to breaches by any other party to this Agreement of any of the representations, warranties, agreements or covenants contained in this Agreement.

Section 7.4           Indemnification Claim Procedure.

(a)          If any Purchaser Indemnified Party or Seller Indemnified Party, as applicable (in the capacity as a Person seeking indemnification under this Article VII, the “Indemnified Party”), obtains actual knowledge of any matter that the Indemnified Party believes will entitle the Indemnified Party to indemnification from another Party under this Article VII (in the capacity as a Person against whom indemnification is sought under this Article VII, the “Indemnifying Party”), the Indemnified Party shall promptly thereafter deliver to the Indemnifying Party a notice thereof (a “Notice of Claim”) describing such matter in reasonable detail, the basis for the indemnification obligation and, to the extent reasonably estimable, the estimated Losses resulting therefrom; provided, however, that any failure to give such notification on a timely basis or to provide any particular details therein shall not relieve the Indemnifying Party of its obligation to indemnify any Indemnified Party hereunder except to the extent that such failure to provide, delay in providing or omission of any particular detail actually and materially prejudices the ability of the Indemnifying Party to defend against such matter.

24

(b)          The Indemnifying Party shall respond to the Indemnified Party (a “Claim Response”) within thirty (30) days following the date that the Notice of Claim is delivered to the Indemnifying Party (the “Response Period”). Any Claim Response must specify whether or not the Indemnifying Party disputes the claim(s) described in the Notice of Claim and, if known, describe in reasonable detail the basis for each such dispute and include supporting materials. If the Indemnifying Party fails to give a Claim Response within the Response Period, the Indemnifying Party shall be deemed not to dispute the claim(s) described in the related Notice of Claim. If the Indemnifying Party gives a Claim Response with the Response Period but does not in such Claim Response dispute all of the claim(s) made in the related Notice of Claim, the Indemnifying Party shall be deemed not to dispute the undisputed claim(s) described in the related Notice of Claim. If the Indemnifying Party delivers a Claim Response within the Response Period indicating that it disputes one or more of the matters identified in the Notice of Claim, Purchaser and the Seller shall promptly meet in good faith to resolve the dispute. If Purchaser and the Seller do not resolve a dispute regarding a claim within thirty (30) days following the date that the Notice of Claim is delivered to the Indemnifying Party, either the Indemnifying Party or the Indemnified Party may submit the dispute to a court of competent jurisdiction for resolution. Upon final resolution of such dispute, whether by agreement among Purchaser and the Seller or by a final, non-appealable determination by a court of competent jurisdiction, if it is determined that any indemnification payment is required pursuant to this Article VII shall be paid to the Indemnified Party.

(c)          Any Indemnifying Party will have the right to defend the Indemnified Party against a Third Party Claim with counsel of the Indemnifying Party’s choice, reasonably satisfactory to the Indemnified Party, so long as (i) the settlement or an adverse judgment of the Third Party Claim is not, in the good faith judgment of the Indemnified Party, likely to establish a pattern or practice adverse to the continuing business interests of the Indemnified Party, (ii) the Indemnifying Party conducts the defense of the Third Party Claim actively, competently and diligently and at its own costs and expense, and (iii) the Third Party Claim does not involve injunctive relief, specific performance or other similar equitable relief, or any criminal allegations, or a proceeding in which Purchaser or any of its Affiliates is named as a party and where the underlying claims in the proceeding are of a nature that would, if a judgment was entered against Purchaser or such Affiliates, reasonably be anticipated to substantially and adversely affect the goodwill or reputation of Purchaser or such Affiliates. So long as the conditions set forth in this Section 7.4(c) are and remain satisfied, then (i) the Indemnifying Party may conduct the defense of the Third Party Claim in accordance with this Section 7.4(c), (ii) the Indemnified Party may retain separate co-counsel at its sole cost and expense, (iii) the Indemnified Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnifying Party (not to be unreasonably withheld, conditioned or delayed), (iv) the Indemnifying Party will not consent to the entry of any judgment with respect to the matter, or enter into any settlement which (A) imposes an injunction or other equitable relief upon the Indemnified Party, (B) involves any finding or admission of any violation of Law or any violation of the rights of any Person and would have any adverse effect on any other claims that may be made against the Indemnified Party, or (C) does not include a provision whereby the plaintiff or claimant in the matter completely, finally and unconditionally releases the Indemnified Party from all Liability with respect thereto, and (v) the Indemnified Party shall, at the Indemnifying Party’s request and at the Indemnifying Party’s expense, reasonably cooperate in the defense of the matter including making available to the Indemnifying Party all witnesses, pertinent records, materials and information in the Indemnified Party's possession or under the Indemnified Party's control relating therefore as is reasonably required by the Indemnifying Party, subject to such reasonable confidentiality requirements as the Indemnified Party may request and any applicable privilege protections. In the event that the conditions in this Section 7.4(c) are not satisfied or become unsatisfied in the case of any Third Party Claim, then the Indemnified Party may assume control of the defense of such claim to the entire exclusion (including with respect to settlement or entry of judgment) and at the expense of the Indemnifying Party. The failure of the Indemnified Party to participate in, conduct or control such defense shall not relieve the Indemnifying Party of any obligation it may have hereunder.

25

Section 7.5           Resolution of the Identified Dispute. The Parties acknowledge that the Seller has indemnified the Purchaser Idemnitees for the Identified Dispute pursuant to Section 7.1(a)(iii) hereof and that any settlement of such dispute shall be subject to the provision of Section 7.4 hereof. Prior to the Dispute Holdback Expiration Date, Purchaser agrees not to make any payment to a third party or any settlement of the Identified Dispute without the consent of the Seller, which shall not be unreasonably withheld. Notwithstanding the foregoing, if any Purchaser Idemnitee shall make any payment to a third party with respect to the Identified Dispute, either with the consent of Seller or pursuant to any Order, then Purchaser shall be entitled to offset such amount (up to the Dispute Holdback Amount) against any payment to be made by Purchaser pursuant to Section 1.2(b) hereof as partial (or, if in a sufficient amount, full) satisfaction of Seller’s indemnification obligations with respect to such Identified Dispute.

ARTICLE VIII

MISCELLANEOUS

Section 8.1           Expenses. Except as otherwise expressly set forth in this Agreement, each Party shall pay its own expenses (including investment banking, brokerage, legal, accounting and other professional fees and expenses) incurred in connection with the negotiation of this Agreement, the performance by such Party of its obligations hereunder and the consummation of the transactions contemplated by this Agreement.

Section 8.2           Notices. All notices, requests, demands, waivers and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if: (a) delivered personally; (b) mailed using certified or registered United States mail with postage prepaid; or (c) sent by next-day or overnight mail or delivery using a nationally recognized overnight courier service, as follows:

26

Notices to the Seller:

GBS Enterprises Incorporated

585 Molly Lane Woodstock, GA 30189

Attention: Corporate Counsel

Notices to Purchaser or the Company:

Global Telecom & Technology, Inc.

8484 Westpark Drive

Suite 720

McLean, VA 22101

Attention: General Counsel

A Party may designate a new address to which notices, requests, demands, waivers and other communications shall thereafter be transmitted by providing written notice to that effect to the other Parties. Each notice, request, demand, waiver or other communication transmitted in the manner described in this Section 8.2 shall be deemed to have been provided, received and become effective for all purposes hereunder (i) when delivered personally to the recipient, if delivered personally, (ii) four (4) business days after being mailed by certified or registered United States mail, postage prepaid, (iii) one business day after being sent by next-day or overnight mail or delivery using a nationally recognized overnight courier service, or (iv) when presented for delivery to the addressee as so addressed during normal business hours, if such delivery shall have been rejected, denied or refused for any reason.

Section 8.3           Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder may be assigned or delegated (whether in whole or part, voluntarily or involuntarily, by operation of law, merger, consolidation, dissolution or otherwise) by any Party without the prior written consent of (a) in the case of Seller, Purchaser, and (b) in the case of Purchaser, the Seller. No assignment or delegation shall relieve any Party of its responsibility for the performance of any obligation.         Subject to the foregoing, this Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the Parties and their respective heirs, executors, administrators, legal representatives, successors and permitted assigns.

Section 8.4           Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable Law, but if any provision of this Agreement shall hereafter be held to be invalid, unenforceable or illegal, in whole or in part, in any jurisdiction under any circumstances for any reason: (a) such provision shall be reformed to the minimum extent necessary to cause such provision to be valid, enforceable and legal while preserving the intent of the Parties as expressed in, and the benefits to such Parties provided by, such provision; or (b) if such provision cannot be so reformed, such provision shall be severed from this Agreement and an equitable adjustment shall be made to this Agreement (including addition of necessary further provisions to this Agreement) so as to give effect to the intent as so expressed and the benefits so provided to the maximum extent permitted by applicable Law. Such holding shall not affect or impair the validity, enforceability or legality of such provision in any other jurisdiction or under any other circumstances. Neither such holding nor such reformation or severance shall affect or impair the legality, validity or enforceability of any other provision of this Agreement.

27

Section 8.5           Interpretation. All references in this Agreement to annexes, exhibits, schedules, articles, sections, subsections and other subdivisions refer to the corresponding annexes, exhibits, schedules, articles, sections, subsections and other subdivisions of or to this Agreement unless expressly provided otherwise. Titles appearing at the beginning of any articles, sections, subsections or other subdivisions of this Agreement (including the Disclosure Schedule) are for convenience only and shall be disregarded in construing the language hereof. Annexes, exhibits and schedules to this Agreement are attached hereto and by this reference incorporated herein for all purposes. Whenever the term “include,” “includes,” or “including,” is used in this Agreement in connection with the listing of items, that listing is illustrative only and is not a limitation on the general scope of the classification, or as an exclusive listing of the items within the general scope. Each defined term used in this Agreement has a comparable meaning when use in its plural or singular form.

Section 8.6           Construction. The language used in this Agreement shall be deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Person.

Section 8.7           Amendment and Waiver. This Agreement may not be amended except by an instrument in writing executed by the Company (with the prior approval of the Company’s board of directors), Purchaser and the Seller, which states that it constitutes an amendment to this Agreement and specifies the provision(s) that are being amended. Any provision of this Agreement may be waived at any time by (a) Purchaser, by delivery by Purchaser of a written instrument executed by Purchaser, which states that it constitutes a waiver of this Agreement and specifies the provision(s) that are being waived; (b) by the Seller, by delivery by Seller of a written instrument executed by Seller, which states that it constitutes a waiver of this Agreement and specifies the provision(s) that are being waived and (c) by the Company, by delivery by the Company of a written instrument executed by the Company (with the prior approval of the Company’s board of directors), which states that it constitutes a waiver of this Agreement and specifies the provision(s) that are being waived. No waiver by any Party of any provision of this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other provision of this Agreement on any future occasion. No failure or delay by any Party in exercising any right, power, privilege or remedy hereunder shall operate as a waiver thereof.

Section 8.8           Entire Agreement. This Agreement, including the annex, exhibits and schedules hereto, along with the Transaction Documents, constitute the entire agreement of the Parties with respect to the subject matter hereof, and supersedes all other prior and contemporaneous agreements and understandings, both written and oral, by or among the Parties with respect to the subject matter hereof, including any letter of intent, term sheet or memorandum of terms entered into or exchanged by the Parties or any of their respective Affiliates.

28

Section 8.9           Counterparts. This Agreement may be executed in one or more counterparts, all of which (when executed and delivered) shall be considered one and the same Agreement and shall become effective when one or more counterpart signature pages have been signed by each Party and delivered by each Party to the other Parties, it being understood that each of the Parties need not sign the same counterpart. Counterparts may be delivered by facsimile or other electronic transmission method (including pdf), and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

Section 8.10         Governing Law. THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY, ALL RELATIONSHIPS AMONG THE PARTIES HEREUNDER AND ALL DISPUTES AND PROCEEDINGS (IN CONTRACT, IN TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE FOREGOING SHALL BE CONSTRUED AND GOVERNED BY, AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION (WHETHER OF THE STATE OF DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE. ANY ACTION SHALL BE COMMENCED AND PROSECUTED EXCLUSIVELY IN THE STATE OR FEDERAL COURTS OF THE UNITED STATES LOCATED IN THE STATE OF DELAWARE, TO WHICH JURISDICTION AND VENUE EACH OF THE PARTIES CONSENTS.

Section 8.11         No Third Party Beneficiaries. No Person other than Purchaser, the Company and the Seller has, is intended to have, or shall have any rights, remedies, obligations or benefits under any provision of this Agreement, other than (a) any heirs, executors, administrators, legal representatives, successors and permitted assigns of the Parties under Section 8.3 (who are intended third party beneficiaries of this Agreement) and (b) the Purchaser Indemnitees and the Seller Indemnitees (who are intended third party beneficiaries of Article VII).

Section 8.12         Remedies. Each of the Parties shall have and retain all rights and remedies, at law or in equity, including rights to specific performance and injunctive or other equitable relief, arising out of or relating to a breach or threatened breach of this Agreement. Without limiting the generality of the foregoing, each of the Parties acknowledges that money damages would not be a sufficient remedy for any breach or threatened breach of this Agreement and that irreparable harm would result if this Agreement were not specifically enforced. Therefore, the rights and obligations of the Parties shall be enforceable by a decree of specific performance issued by any court of competent jurisdiction, and appropriate injunctive relief may be applied for and granted in connection therewith, without the necessity of posting a bond or other security or proving actual damages and without regard to the adequacy of any remedy at law. A Party’s right to specific performance or injunctive relief shall be in addition to all other legal or equitable remedies available to such Party.

[Signature Page Follows]

29

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first written above.

SELLER:
GBS ENTERPRISES INCORPORATED
By :	/s/ Gary D. MacDonald
Name:	Gary D. MacDonald
Title:	Interim Chief Executive Officer
COMPANY:
IDC GLOBAL, INC.
By:	/s/ Jan Daiker
Name:	Jan Daiker
Title:	Chief Operating Officer
PURCHASER:
GLOBAL TELECOM & TECHNOLOGY AMERICAS, INC.
By:	/s/ Chris McKee
Name:	Chris McKee
Title:	General Counsel and Corporate Secretary

30

EXHIBIT A

Stockholders List

Stockholder	Common Shares		Percentage Interests
GBS Enterprises Incorporated		100		100	%
TOTALS:		100		100	%

31

ANNEX A

DEFINITIONS

PART I - DEFINITIONS:

As used in the Agreement, each of the following terms has the meaning given in this Annex A:

“Affiliate” of any particular Person means any other Person controlling, controlled by or under common control with such particular Person. For the purposes of this definition, “controlling,” “controlled” and “control” means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities, by Contract or otherwise.

“business day” means any day of the year other than: (a) any Saturday or Sunday; or (b) any other day on which the banks located in the State of Illinois are closed for business.

“Claim” means any complaint, allegation, charge, petition, appeal, demand, notice, filing or claim of any kind that commences, alleges a basis to commence or threatens to commence any Proceeding by or before any Governmental Body, or that asserts, alleges a basis to assert or threatens to assert any right, breach, default, violation, noncompliance, termination, cancellation or other action or omission that would reasonably be expected to result in a Loss.

“Company Transaction Expenses” means all expenses incurred by or on behalf of the Seller or, prior to the date hereof, the Company in connection with the Transaction Documents and the transactions contemplated.

“Contract” means any contract, agreement, instrument, lease, sublease, loan agreement, indenture, bond, note, mortgage, license, sublicense, purchase or sale order, quotation or other arrangement, commitment, plan, understanding, undertaking or other obligation, whether written or oral, that is binding or enforceable on at least one of the parties thereto.

“Code” means the Internal Revenue Code of 1986, as amended.

“Disclosure Schedule” means the disclosure schedule setting forth exceptions to the representations and warranties made by the Seller in Article III, which is incorporated by reference into this Agreement and thereby made a part hereof.

“Excluded Indebtedness” shall mean any and all Indebtedness identified on Exhibit B.

“Fundamental Representations” means those representations and warranties contained in Sections 2.1, 2.2, 3.1, 3.2, 4.1 and 4.2.

32

“GAAP” means United States generally accepted accounting principles.

“Governmental Body” means any federal, state, regional, county, city, local, municipal, foreign or other government or quasi-governmental entity or authority or any department, branch, agency, commission, board, subdivision, bureau, agency, official, political subdivision or other instrumentality of any of the foregoing, any administrative or regulatory body obtaining authority from any of the foregoing, and any court, tribunal, judicial or arbitral body, mediation or conciliation or self-regulatory authority.

“Identified Dispute” has the meaning assigned to it in Section 7.1.

“Indebtedness” means, with respect to any Person, without duplication, (a) any obligation of such Person (i) constituting the principal amount, plus any related accrued and unpaid interest, fees, expenses and prepayment premiums or penalties, of indebtedness for borrowed money; (ii) evidenced by any note, bond, debenture, bankers acceptance, letter of credit or other instrument, facility or debt security (including a purchase money obligation); (iii) upon which interest charges (other than late payment charges) are customarily paid or owed; (iv) issued or assumed as the deferred purchase price of property or services, conditional sale obligations and obligations under any title retention agreement; or (v) under any lease or similar arrangement that would be required to be accounted for by the lessee as a capital lease in accordance with GAAP; (b) any synthetic lease obligations, sale-leaseback obligations and other similar indebtedness obligations, whether secured or unsecured; (c) any direct or indirect guarantee (or keepwell agreement) by such Person of any indebtedness of any other Person described in the preceding clause (a); (d) any obligation to reimburse any bank or other Person for amounts paid under a letter of credit or similar instrument (other than those issued in respect of performance obligations in the ordinary course); (e) any obligations under interest rate, currency and other derivative Contracts; and (f) any preferred stock or similar security or equity interest having a preference over the common equity of such Person in a liquidation, dissolution, or winding-up of such Person or otherwise.

“Intellectual Property Rights” means all of the following in any jurisdiction throughout the world: (a) copyrights, mask works, and other works of authorship; (b) inventions (whether or not patentable or reduced to practice), patents, patent applications and patent disclosures, together with all divisions, continuations, continuations-in-part, reissues, revisions, additions, extensions, and reexaminations thereof and all industrial designs, industrial models and utility models; (c) trade marks, service marks, trade dress, logos, slogans, trade names, Internet domain names, corporate names, and all other designations of origin, and all goodwill associated with the foregoing; (d) software, computer hardware and information technology systems; (e) rights or interests protected by non-statutory or common law evidenced by or embodied in any idea, design, concept, process, technology, invention, discovery, enhancement, improvement or information and data (including formulae, procedures, protocols, techniques and results of experimentation and testing), regardless of patentability, including trade secrets and know-how; (f) moral and economic rights of authors and inventors, however denominated; (g) all other proprietary and intellectual property rights; (h) all appurtenances related to, and derivative works and improvements of, any of the foregoing; (i) all Contracts, applications, registrations, extensions and renewals related to any of the foregoing, regardless of whether any of such rights arise under the laws of the United States or any other state, country or jurisdiction; and (j) copies and tangible embodiments of any of the foregoing in whatever form or medium.

33

“Knowledge of the Company” or variations thereof as used herein will be limited to the actual knowledge after reasonable due inquiry of each of Gary MacDonald, Jan Daiker and Markus Ernst.

“Law” means any constitutional provision, statute, ordinance, law (including common law), rule, regulation, code, plan, decree, injunction, judgment, Order, ruling, assessment or writ of any Governmental Body, or any legally binding regulatory policy statement, binding guidance, binding directive or decree of any Governmental Body, in each case as any of the foregoing may be in effect from time to time.

“Liability” with respect to any Person, means any liability or obligation of such Person of any kind, character or description, whether known or unknown, absolute or contingent, accrued or unaccrued, disputed or undisputed, liquidated or unliquidated, secured or unsecured, joint or several, due or to become due, vested or unvested, executory, determined, determinable or otherwise, and whether or not the same is required to be accrued on the financial statements of such Person, including any liability for payment, Indebtedness, payment obligation or other sum that is or may become due.

“Lien” means any lien (including any Tax lien), mortgage, security interest, pledge, deposit, option, infringement, charge, claim, deed of trust, hypothecation, mortgage, contingent sale, title retention, lease or sublease, building or use restriction, adverse claim, right or intent, covenant, easement, encroachment, defect or other matter affecting title, conditional sales agreement, or other encumbrance or restriction (including a restriction on transfer such as a right of first refusal) of any nature or kind, whether voluntarily or involuntarily incurred, arising by operation of Law, by Contract or otherwise, and including any Contract to give any of the foregoing in the future.

“Losses” means any and all Liabilities, Proceedings, Claims, losses, demands, assessments, adjustments, costs, awards, judgments, settlement payments, fines, penalties, Taxes, interest, damages, costs, deficiencies and expenses, including any and all reasonable expenses incurred in connection with investigating, defending or asserting any of the foregoing (including court filing fees, court costs, arbitration fees or costs, witness fees, and reasonable fees and disbursements of legal counsel, investigators, consultants, expert witnesses, accountants and other professionals).

“Material Adverse Effect” means any change, effect, matter, event, fact, condition, circumstance, occurrence or development that, individually or in the aggregate, is or would reasonably be expected to (a) be materially adverse to the business, assets or properties (including intangible assets or properties), liabilities, condition (financial or otherwise), operations or operating results or prospects of the Company, or (b) materially impair the ability of the Company to perform its obligations under this Agreement or to consummate the transactions contemplated hereby.

34

“Order” means any judgment, writ, decree, directive, decision, injunction, ruling, stipulation, award, order (including any consent decree or cease and desist order) or determination of any kind issued, promulgated or entered by or with any Governmental Body.

“Organizational Documents” of a Person means: (a) the certificate of incorporation, certificate of trust or similar document(s) filed with a Governmental Body, which filing forms or organizes such Person; and (b) the bylaws, trust agreement or similar document(s), whether or not filed with a Governmental Body, which organize and/or govern the internal affairs of such Person, in the case of each of the foregoing clauses (a) and (b), as in effect at the time in question.

“Permitted Liens” means (a) statutory Liens for current Taxes or other governmental charges not yet due and payable or the amount or validity of which is being contested in good faith by the Company and are accrued in full on the Financial Statements, (b) mechanic’s, carriers’, workers’, repairers’ and similar statutory Liens arising or incurred in the ordinary course of business, and (c) Liens arising under worker’s compensation, unemployment insurance, social security, retirement and similar legislation arising or incurred in the ordinary course of business (and without any violation of applicable Law).

“Person” means a natural person, a partnership, a corporation, a company, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or other form of business enterprise or a Governmental Body.

“Proceeding” means any suit, action, cause of action (whether at law or in equity), arbitration, audit, hearing, investigation, litigation, claim, complaint, administrative or similar proceeding (whether civil, criminal, administrative, judicial or investigative, whether formal or informal, whether public or private) commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Body.

“Restrictive Covenant Period” means from the date hereof through and including the first anniversary of the date hereof.

“Tax” or “Taxes” means any and all income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, customs duties, capital stock, franchise, profits, withholding, social security, unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, service, recording, import, export, estimated or other tax, assessment, fee, levy, duty, tariff or similar charge of any kind of any Governmental Body, whether computed on a separate, consolidated, unitary, combined or any other basis, including any interest, penalty or addition thereto, whether disputed or not, and including any Liability in respect of any of the foregoing payable by reason of Contract, assumption, transferee liability or operation of law or as an indemnitor or in a similar capacity.

35

“Tax Return” means any return, report, declaration, information return, claim for refund or other document furnished or required to be furnished to a Governmental Body or other Person with respect to any Tax, including any information return or report or statement with respect to payments to any Person or backup withholding, and including any schedule or attachment thereto and any amendment thereof.

“Third Party Claim” means the obligations of an Indemnifying Party under this with respect to Losses arising from any claims of any third party which are subject to the indemnification provided for in Article VII.

“Transaction Documents” means any other document or instrument (other than this Agreement) to be entered into by or among the Parties in connection with the transactions contemplated by this Agreement.

36

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO 18 U.S.C. SS 1350, AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Gary D. MacDonald, certify that:

1. I have reviewed this Form 10-Q for the fiscal quarter ended March 31, 2013 of GBS Enterprises Incorporated, a Nevada corporation (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a- 15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: June 13, 2013

/s/ Gary D. MacDonald

Gary D. MacDonald

Interim Chief Executive Officer

(Principal Executive Officer)

EX-32.2

Exhibit 31.2

CERTIFICATION PURSUANT TO 18 U.S.C. SS 1350, AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Markus R. Ernst, certify that:

1. I have reviewed this Form 10-Q for the fiscal quarter ended March 31, 2013 of GBS Enterprises Incorporated, a Nevada corporation (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a- 15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: June 13, 2013

/s/ Markus R. Ernst

Markus R. Ernst

Chief Financial Officer

(Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

I, Gary D. MacDonald, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)  the quarterly report on Form 10-Q of GBS Enterprises Incorporated for the fiscal quarter ended March 31, 2013 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)  the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of GBS Enterprises Incorporated.

Date: June 13, 2013	/s/ Gary D. MacDonald
	Gary D. MacDonald
	Interim Chief Executive Officer
	(Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

I, Markus R. Ernst, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 , that:

(1)  the quarterly report on Form 10-Q of GBS Enterprises Incorporated for the fiscal quarter ended March 31, 2013 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)  the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of GBS Enterprises Incorporated.

Date: June 13, 2013	/s/ Markus R. Ernst
	Markus R. Ernst
	Chief Financial Officer
	(Principal Financial and Accounting Officer)