UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2012
¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 000-53223
GBS ENTERPRISES INCORPORATED
(Exact name of registrant as specified in its charter)
Nevada | 27-3755055 | |
(State or other jurisdiction of incorporation or | (I.R.S. Employer Identification No.) | |
organization) |
585 Molly Lane
Woodstock, GA 30189
(Address of principal executive offices)
(404) 891-1711
Issuer’s telephone number
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
Securities registered under Section 12(b) of the Act:
Title of each class | Name of each exchange on which registered | |
None | N/A |
Securities registered under Section 12(g) of the Act:
Common Stock, $0.001 par value
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ¨ No x
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 (§ 232.405 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
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 Act. (Check one):
Large accelerated filer ¨ | Accelerated filer ¨ |
Non-accelerated filer ¨ | Smaller reporting company x |
(Do not check if a smaller reporting company)
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ¨ No x
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. At June 30, 2012, the aggregate market value of the voting and non-voting common equity held by non-affiliates was approximately $10,284,666 based on $0.40 (the closing sales price of the Company’s common stock on June 29, 2012).
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 14, 2013, there were 30,812,624 shares of common stock issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
EXPLANATORY NOTE
GBS Enterprises Incorporated, a Nevada corporation (the “Company”), is filing this Amendment No. 1 (this “Amendment No. 1”) to its Annual Report on Form 10-K for the fiscal year ended December 31, 2012 (the “Form 10-K”), originally filed with the Securities and Exchange Commission on May 17, 2013 (the “Original Filing”), for the following purpose:
1. | To file revised audited financial statements under Item 8 of Form 10-K. |
The Original Filing inadvertently contained an incorrect version of the financial statements which contained several typographical errors due to data processing and ministerial difficulties. The Company intends to file an amended Form 10-K to furnish the corrected financial statements in XBRL format as soon as possible.
Other than the foregoing, no changes have been made to the Company’s Form 10-K. This Amendment No. 1 speaks as of the date of the Original Filing and does not reflect events that may have occurred subsequent to the Original Filing date. The omitted Form 10-K Items contained in the Original Filing have not been amended and are incorporated by reference herein.
The certifications pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002, filed as Exhibits 31 and 32, respectively, to the Original Filing, have been re-executed and re-filed as of the date of this Amendment No. 1.
PART II
Item 8. Financial Statements and Supplementary Data.
The Company’s Audited Financial Statements, including the Company’s independent accountant’s audit report and the Company’s notes to the financial statements, follow the Signature Page to this Amendment No. 1 and are incorporated by reference herein.
PART IV
Item 15. Exhibits, Financial Statement Schedules
Exhibit No.: |
Description: | Filed as an Exhibit to the following Company SEC Filing and Incorporated by Reference herein: | ||
3.1 | Articles of Incorporation | Form SB-2 (File No: 333-146748) filed January 14, 2008 | ||
3.1.1 | Certificate of Amendment to Articles of Incorporation, effective September 6, 2010 | Form 10-K filed July 16, 2012 | ||
3.1.2 | Certificate of Amendment to Articles of Incorporation, effective November 22, 2010 | Form 10-K/A filed November 7, 2011 | ||
3.1.3 | Certificate of Incorporation, dated June 5, 2012, of GBS India Private Limited | Form 10-Q filed September 13, 2012 | ||
3.2 | Bylaws | Form SB-2 (File No: 333-146748) filed January 14, 2008 | ||
4.1 | Form of Private Placement Warrant | Form S-1(File No.: 333-180626) filed April 9, 2012 | ||
4.2 | Form of Investor Warrant | Form 8-K filed March 30, 2012 | ||
4.3 | Warrant, dated April 16, 2012, issued to Joerg Ott | Form 10-K filed April 16, 2012 | ||
7.1 | Letter from Grant Thornton GmbH, addressed to the Securities and Exchange Commission, dated August 27, 2012 | Form 8-K/A filed August 28, 2012 | ||
10.1 | Subsidiary Stock Purchase Agreement, dated September 21, 2009, between SWAV Enterprises Ltd. and Pui Shan Lam | Form 8-K filed September 21, 2009 | ||
10.2 | Asset Purchase Agreement, dated April 26, 2010, between SWAV Enterprises Ltd. and Lotus Holdings Limited | Form 8-K filed April 26, 2010 | ||
10.3 | Non-Affiliate Stock Purchase Agreement, dated April 26, 2010, between the Selling Stockholders and Joerg Ott | Form 8-K filed April 26, 2010 | ||
10.4 | Affiliate Stock Purchase Agreement, dated April 26, 2010, between the Selling Stockholders and Joerg Ott | Form 8-K filed April 26, 2010 | ||
10.5 | Subsidiary Stock Purchase Agreement, dated April 26, 2010, between SWAV Enterprises Ltd. and Pui Shan Lam | Form 8-K filed April 26, 2010 | ||
10.6 | Stock Purchase Agreement, dated November 5, 2010, between GBS Enterprises Incorporated and LVM Landwirtschaftlicher Versicherungsverein AG | Form 10-Q/A filed May 20, 2011 | ||
10.7 | Stock Purchase Agreement, dated November 3, 2010, between GBS Enterprises Incorporated and MPire Capital City | Form 10-Q/A filed May 20, 2011 | ||
10.8 | Stock Purchase Agreement, dated November 5, 2010, between GBS Enterprises Incorporated and Stone Mountain Ltd. | Form 10-Q/A filed May 20, 2011 | ||
10.9 | Stock Purchase Agreement, dated November 3, 2010, between GBS Enterprises Incorporated and Tuomo Tilman | Form 10-Q/A filed May 20, 2011 | ||
10.10 | Stock Purchase Agreement, dated November 5, 2010, between GBS Enterprises Incorporated and vbv Vitamin B Venture | Form 10-Q/A filed May 20, 2011 | ||
10.11 | Stock Purchase Agreement, dated November 5, 2010, between GBS Enterprises Incorporated and Jyrki Salminen | Form 10-Q/A filed May 20, 2011 | ||
10.12 | Stock Purchase Agreement, dated January 5, 2011, between GBS Enterprises Incorporated and Delta Consult LP | Form 10-Q/A filed May 20, 2011 |
10.13 | Stock Purchase Agreement, dated January 5, 2011, between GBS Enterprises Incorporated and GAVF LLC | Form 10-Q/A filed May 20, 2011 | ||
10.14 | Stock Purchase Agreement, dated January 5, 2011, between GBS Enterprises Incorporated and K Group | Form 10-Q/A filed May 20, 2011 | ||
10.15 | Acquisition Agreement, dated September 27, 2011, by and between GBS Enterprises Incorporated, SD Holdings, Ltd. and the Shareholders of SD Holdings Ltd. | Form 8-K filed October 4, 2011 | ||
10.16 | Amendment, dated October 31, 2011, to that certain Acquisition Agreement, dated September 27, 2011, by and between GBS Enterprises Incorporated, SD Holdings, Ltd. and the Shareholders of SD Holdings Ltd. | Form S-1(File No.: 333-180626) filed April 9, 2012 | ||
10.17 | Amendment, dated November 30, 2011, to that certain Acquisition Agreement, dated September 27, 2011, by and between GBS Enterprises Incorporated, SD Holdings, Ltd. and the Shareholders of SD Holdings Ltd. | Form S-1(File No.: 333-180626) filed April 9, 2012 | ||
10.18 | Amendment, dated December 16, 2011, to that certain Acquisition Agreement, dated September 27, 2011, by and between GBS Enterprises Incorporated, SD Holdings, Ltd. and the Shareholders of SD Holdings Ltd. | Form S-1(File No.: 333-180626) filed April 9, 2012 | ||
10.19 | Acquisition Agreement, dated June 1, 2011, by and among GBS Enterprises Incorporated, GroupWare AG and the Selling Stockholder of GroupWare AG | Form 8-K filed June 27, 2011 | ||
10.20 | Acquisition Agreement, dated July 15, 2011, by and among GBS Enterprises Incorporated, IDC Global, Inc., the IDC Shareholders’ Representative and Management Shareholders’ Representative | Form 8-K filed July 28, 2011 | ||
10.21* | Consultant Services Agreement, dated February 24, 2012, between GBS Enterprises Incorporated and Green Minds Venture GmbH | Form 8-K filed February 28, 2012 | ||
10.22* | Offer Letter, dated January 26, 2012, between the Company and David M. Darsch, as amended | Form 8-K filed March 6, 2012 | ||
10.23* | Offer Letter, dated January 26, 2012, between the Company and John A. Moore, Jr., as amended | Form 8-K filed March 6, 2012 | ||
10.24* | Offer Letter, dated January 26, 2012, between the Company and Mohammad Shihadah, as amended | Form 8-K filed March 6, 2012 | ||
10.25* | Offer Letter, dated February 24, 2012, between the Company and Stephen D. Baksa, as amended | Form 8-K filed March 6, 2012 | ||
10.26* | Offer Letter, dated January 23, 2012, between the Company and Woody A. Allen, as amended | Form 8-K filed March 6, 2012 | ||
10.27 | Securities Purchase Agreement, dated April 16, 2012, between GBS Enterprises Incorporated and Joerg Ott | Form 10-K filed April 16, 2012 | ||
10.28 | Note Purchase and Security Agreement, dated August 13, 2012, by and between GBS Enterprises Incorporated and John A. Moore, Jr. and Annedenise M. Moore | Form 8-K filed August 16, 2012 | ||
10.29 | Purchase Agreement, dated June 6, 2012, between GBS Enterprises Incorporated (as Purchaser) and SD Holdings, Ltd. (as Seller) | Form 10-Q filed September 13, 2012 | ||
10.30 | Purchase Agreement, dated April 2, 2012, between GBS Enterprises Incorporated (as Seller) and Lotus Holdings, Ltd. (as Purchaser) | Form 10-Q filed September 13, 2012 | ||
10.31 | Transfer Agreement, dated May 21, 2012 (effective as of July 1, 2012), between Synaptris Decisions Private Limited and GBS India Private Limited | Form 10-Q filed September 13, 2012 | ||
10.32 | Note Purchase and Security Agreement, dated October 26, 2012, by and between GBS Enterprises Incorporated and Stephen D. Baksa | Form 8-K filed November 2, 2012 | ||
10.33 | Secured Promissory Note, dated October 26,2012, by and between GBS Enterprises Incorporated and Stephen D. Baksa | Form 8-K filed November 2, 2012 |
10.34 | Common Stock Purchase Warrant, issued October 26, 2012, by GBS Enterprises Incorporated to Stephen D. Baksa | Form 8-K filed November 2, 2012 | ||
10.35 | Note Purchase Agreement, dated October 29, 2012, by and between Group Business Software AG and GBS Enterprises Incorporated | Form 8-K filed November 2, 2012 | ||
10.36 | Promissory Note, dated October 29, 2012, by and between GROUP Business Software AG and GBS Enterprises Incorporated | Form 8-K filed November 2, 2012 | ||
10.37 | Note Purchase Agreement, dated November 14, 2012, by and between Group Business Software AG and GBS Enterprises Incorporated | Form 8-K filed November 20, 2012 | ||
10.38 | Promissory Note, dated November 14, 2012, by and between GROUP Business Software AG and GBS Enterprises Incorporated | Form 8-K filed November 20, 2012 | ||
10.39 | Note Purchase and Security Agreement, dated November 30, 2012, by and between GBS Enterprises Incorporated and Pike H. Sullivan | Form 8-K filed December 12, 2012 | ||
10.40 | Secured Promissory Note, dated November 30, 2012, by and between GBS Enterprises Incorporated and Pike H. Sullivan | Form 8-K filed December 12, 2012 | ||
10.41 | Common Stock Purchase Warrant, issued November 30, 2012, by GBS Enterprises Incorporated to Pike H. Sullivan | Form 8-K filed December 12, 2012 | ||
10.42 | Secured Promissory Note, dated April 29, 2013, by and between GBS Enterprises Incorporated and Stephen D. Baksa | Form 8-K filed May 2, 2012 | ||
10.43 | Common Stock Purchase Warrant, issued April 29, 2013, by GBS Enterprises Incorporated to Stephen D. Baksa | Form 8-K filed May 2, 2012 | ||
10.44 | Common Stock Purchase Warrant, issued April 29, 2013, by GBS Enterprises Incorporated to Stephen D. Baksa | Form 8-K filed May 2, 2012 | ||
10.45 | Secured Promissory Note, dated April 29, 2013, by and between GBS Enterprises Incorporated and Vitamin B Venture GmbH | Form 8-K filed May 2, 2012 | ||
10.46 | Common Stock Purchase Warrant, issued April 29, 2013, by GBS Enterprises Incorporated to Vitamin B Venture GmbH | Form 8-K filed May 2, 2012 | ||
10.47 | Common Stock Purchase Warrant, issued April 29, 2013, by GBS Enterprises Incorporated to Vitamin B Venture GmbH | Form 8-K filed May 2, 2012 | ||
21.1 | List of Subsidiaries | Form 10-K filed May 17, 2013 | ||
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 Schema Document | - | ||
101.CAL(2) | XBRL Calculation Linkbase Document | - | ||
101.DEF(2) | XBRL Definition Linkbase Document | - | ||
101.LAB(2) | XBRL Label Linkbase Document | - | ||
101.PRE(2) | XBRL Presentation Linkbase Document | - |
* Management Contracts and Compensatory Plans, Contracts or Arrangements.
(1) Filed herewith.
(2) To be filed by amendment.
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 | ||
By: /s/ Gary D. MacDonald | ||
Gary D. MacDonald | ||
Interim Chief Executive Officer | ||
(Principal Executive Officer) | ||
Date: June 14, 2013 |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
Signature: | Title: | Date: | ||
/s/ Joerg Ott | Chairman of the Board of Directors | June 14, 2013 | ||
Joerg Ott | ||||
/s/ Gary D. MacDonald | Interim Chief Executive Officer, Managing Director of | June 14, 2013 | ||
Gary D. MacDonald | Worldwide Operations, Exec. VP and Chief Corp. Dev. Officer and Director | |||
(Principal Executive Officer) | ||||
/s/ Markus R. Ernst | Chief Financial Officer | June 14, 2013 | ||
Markus R. Ernst | (Principal Financial and Accounting Officer) | |||
Director | ||||
Woody A. Allen | ||||
/s/ Stephen D. Baksa | Director | June 14, 2013 | ||
Stephen D. Baksa | ||||
Director | ||||
David M. Darsch | ||||
/s/ John A. Moore, Jr. | Director | June 14, 2013 | ||
John A. Moore, Jr. | ||||
/s/ Mohammad A. Shihadah | Director | June 14, 2013 | ||
Mohammad A. Shihadah |
REPORT OF INDEPENDENT REGISTERED ACCOUNTING FIRM
To the Stockholders of
GBS Enterprises Incorporated:
We have audited the consolidated balance sheets of GBS Enterprises Incorporated as of December 31, 2012 and 2011 and the related consolidated statements of operations, equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express and opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial . An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluation the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits these consolidated financial statements referred to above, present fairly, in all material respects, the consolidated financial position of GBS Enterprises Incorporated as of December 31, 2012 and 2011 and the results of its consolidated operations, changes in equity and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Without qualifying our report, and because of the relative significance of the assets, we note that the reported values of goodwill and other intangibles is contingent upon the Company attaining projected revenues from new product lines. Accordingly, failure to attain those projections would negatively affect those reported values.
Vancouver, Canada | /s/ K. R. Margetson Ltd. |
May 17, 2013 | Chartered Accountants |
GBS Enterprises Incorporated
Annual Consolidated Balance Sheets
December 31, 2012 and December 31, 2011
(2011 Restated, Note 3)
(Audited) | Restated | |||||||
December 31,2012 | December 31,2011 | |||||||
$ | $ | |||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and cash equivalents - Note 4 | 1,154,602 | 3,250,821 | ||||||
Accounts Receivable - Note 5 | 4,143,448 | 5,007,194 | ||||||
Inventories - Note 2 | - | 236,712 | ||||||
Prepaid expenses - Note 6 | 84,304 | 444,147 | ||||||
Other receivables - Note 7 | 676,976 | 1,020,010 | ||||||
Assets held for sale - Note 8 | 384,862 | 24,107 | ||||||
Total current assets | 6,444,192 | 9,982,991 | ||||||
Assets held for sale - Note 8 | 1,846,645 | - | ||||||
Property, plant and equipment - Note 9 | 332,839 | 1,604,994 | ||||||
Non - Operating receivables - Note 10 | 428,422 | 548,909 | ||||||
Investment in related company, at equity | - | 244,219 | ||||||
Deferred tax assets - Note 26 | 1,132,103 | 2,748,800 | ||||||
Goodwill - Note 11 | 34,254,881 | 39,221,603 | ||||||
Software - Note 12 | 12,207,031 | 14,258,610 | ||||||
Other assets - Note 13 | 156,379 | 93,268 | ||||||
Total non-current assets | 50,358,300 | 58,720,403 | ||||||
Total assets | 56,802,492 | 68,703,394 | ||||||
Liabilities and stockholders' equity | ||||||||
Current liabilities | ||||||||
Notes payable - Note 14 | 2,313,572 | 1,381,821 | ||||||
Liabilities to banks - Note 15 | 6,774 | 19,595 | ||||||
Accounts payables and accrued liabilities - Note 16 | 6,241,733 | 6,491,565 | ||||||
Deferred income - Note 17 | 6,099,570 | 6,476,582 | ||||||
Other liabilities - Note 18 | 860,032 | 4,256,410 | ||||||
Due to related parties | 2,115,869 | 432,421 | ||||||
Liability held for sale | 589,634 | - | ||||||
Total current liabilities | 18,227,184 | 19,058,394 | ||||||
Liabilities to banks - Note 19 | 3,716,102 | 3,463,483 | ||||||
Retirement benefit obligation - Note 21 | 165,876 | 150,632 | ||||||
Other liabilities - Note 20 | 0 | 2,273,737 | ||||||
Liability held for sale | 159,898 | |||||||
Total non-current liabilities | 4,041,876 | 5,887,852 | ||||||
Total liabilities | 22,269,060 | 24,946,246 | ||||||
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: | ||||||||
29,461,664 shares of common stock | ||||||||
( 27,306,664 shares at December 31, 2011) | 29,462 | 27,307 | ||||||
Additional paid in capital | 49,691,195 | 47,446,318 | ||||||
Accumulated deficit | (18,974,582 | ) | (12,147,666 | ) | ||||
Other comprehensive income | 442,841 | 494,206 | ||||||
31,188,916 | 35,820,165 | |||||||
Noncontrolling interest in subsidiaries | 3,344,516 | 7,936,983 | ||||||
Total stockholders' equity | 34,533,432 | 43,757,148 | ||||||
Total stockholders' equity and liabilities | 56,802,492 | 68,703,394 |
Subsequent events - Note 26
GBS Enterprises Incorporated
Annual Consolidated Statements of Operations
For the year ended December 31, 2012 and December 31, 2011
(2011 Restated, Note 3)
(Audited) | Restated | |||||||
2012 | 2011 | |||||||
$ | $ | |||||||
Revenues - Note 23 | ||||||||
Products | 21,195,435 | 21,787,910 | ||||||
Services | 4,540,349 | 6,485,182 | ||||||
25,735,784 | 28,273,092 | |||||||
Cost of goods sold | ||||||||
Products | 5,638,228 | 5,575,747 | ||||||
Services | 8,976,846 | 10,322,435 | ||||||
14,615,074 | 15,898,182 | |||||||
Gross profit | 11,120,710 | 12,374,910 | ||||||
Operating expenses | ||||||||
Selling expenses | 12,102,534 | 15,426,600 | ||||||
Administrative expenses | 5,962,875 | 6,160,961 | ||||||
General expenses | 1,500,086 | 926,129 | ||||||
19,565,495 | 22,513,690 | |||||||
Operating income (loss) | (8,444,785 | ) | (10,138,779 | ) | ||||
Other Income (expense) - Note 24 | ||||||||
Other Income (expense) | (1,054,734 | ) | (15,894,738 | ) | ||||
Interest income | 3,027 | 33,948 | ||||||
Interest expense | (480,086 | ) | (406,407 | ) | ||||
(1,531,793 | ) | (16,267,197 | ) | |||||
Income (loss) before income taxes | (9,976,578 | ) | (26,405,976 | ) | ||||
Income tax (income) expense | 1,432,252 | (2,151,211 | ) | |||||
Income before extraordinary items, discontinued operations | (11,408,830 | ) | (24,254,766 | ) | ||||
Discontinued operations (net of tax) - Note 27 | 40,607 | 521,979 | ||||||
Extraordinary items (value adjustment on good will) | 0 | 0 | ||||||
Cumulative effect at beginning of year of changes in accounting principles | 0 | 0 | ||||||
Net income (loss) before extraordinary items | (11,368,223 | ) | (23,732,787 | ) | ||||
Extraordinary items (value adjustment on goodwill) | 0 | 0 | ||||||
Net income (loss) | (11,368,223 | ) | (23,732,787 | ) | ||||
Net income (loss) attributable to non controlling interest | (4,541,307 | ) | (11,567,489 | ) | ||||
Net income (loss) attributable to stockholders | (6,826,916 | ) | (12,165,298 | ) | ||||
Other comprehensive income (loss) | (102,525 | ) | (125,751 | ) | ||||
Other comprehensive income (loss) attributable to non noncontrolling interest | (51,160 | ) | (62,750 | ) | ||||
Other comprehensive income (loss) attributable to stockholders | (51,365 | ) | (63,001 | ) | ||||
Net income (loss) and comprehensive income (loss) attributed to stockholders | (6,878,281 | ) | (12,228,299 | ) | ||||
Net earnings (loss) per share, basic and diluted | $ | (0.233 | ) | $ | (0.449 | ) | ||
Weighted average number of common stock outstanding, basic and diluted | 29,461,664 | 27,247,958 |
GBS Enterprises Incorporated
Annual Consolidated Statements of Cash Flows
For the year ended December 31, 2012 and 2011
(2011 Restated, Note 3)
(Audited) | Restated | |||||||
December 31, 2012 | December 31, 2011 | |||||||
$ | $ | |||||||
Cash flow from operating activties | ||||||||
Net loss / net income | (11,368,223 | ) | (23,732,787 | ) | ||||
Adjustments | ||||||||
Deferred income taxes | 1,319,697 | 6,796,982 | ||||||
Depreciation and amortization | 4,816,098 | 5,035,732 | ||||||
Write-down of Goodwill and Intangibles | 0 | 0 | ||||||
Loss on Sale of Assets | 266,269 | |||||||
Losses from equity investment | 244,219 | 85,599 | ||||||
Minority interest losses | (4,541,307 | ) | (143,736 | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable and other assets | 953,133 | (2,139,084 | ) | |||||
Retirement benefit obligation | 15,244 | 3,686 | ||||||
Inventories | 236,712 | 114,172 | ||||||
Accounts payable and other liabilities | 2,539,440 | 5,755,795 | ||||||
Net cash provided (used) by operating activities | (5,784,987 | ) | (7,957,372 | ) | ||||
Net cash provided (used) by discontinued | 0 | 388,396 | ||||||
Cash flow from investing activties | ||||||||
Purchase (Sale) of intangible assets | (3,516,593 | ) | (2,141,612 | ) | ||||
Purchase of property, plant and equipment | (189,137 | ) | (161,037 | ) | ||||
Purchase of Subsidiaries | 0 | 0 | ||||||
Proceeds from Sale of Subsidiaries | 2,498,257 | 3,715,077 | ||||||
Increase (Decrease) in Financial assets | (416,357 | ) | 321,515 | |||||
Net cash provided (used) in investing activities | (1,623,830 | ) | 1,733,943 | |||||
Cash flow from financing activties | ||||||||
Net borrowings - banks | (239,798 | ) | (2,484,597 | ) | ||||
Other borrowings | 3,392,208 | 2,460,438 | ||||||
Losses from related party | 0 | 830,156 | ||||||
Capital paid-in | 2,244,877 | 6,678,950 | ||||||
Net cash provided (used) in financing activities | 5,397,287 | 7,484,947 | ||||||
Effect of exchange rate changes on cash | (84,689 | ) | (144,058 | ) | ||||
Net increase (decrease) in cash | (2,096,219 | ) | 1,505,856 | |||||
Cash and cash equivalents - Beginning of the year | 3,250,821 | 1,744,965 | ||||||
Cash and cash equivalents - End of year | 1,154,602 | 3,250,821 |
GBS Enterprises Incorporated
Annual Consolidated Statements of Equity
For the year ended December 31, 2012 and December 31, 2011
(2011 Restated, Note 3)
(Audited)
Accumulated | Equity | |||||||||||||||||||||||||||
Additional | Other | Attributable | ||||||||||||||||||||||||||
Common Stock | Paid in | Comprehensive | Accumulated | to Noncontrolling | ||||||||||||||||||||||||
Shares | Amount | Capital | Income (Loss) | Deficit | Interest | Equity | ||||||||||||||||||||||
# | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
Balance, December 31, 2010 | 16,500,000 | 16,500 | 27,221,755 | 12,722,505 | (12,147,666 | ) | 7,936,983 | 35,750,077 | ||||||||||||||||||||
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 | (12,228,299 | ) | - | - | (12,228,299 | ) | ||||||||||||||||||||||
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 | (6,878,281 | ) | - | - | (6,878,281 | ) | ||||||||||||||||||||||
Balance, December 31, 2012 | 29,461,664 | 29,462 | 49,691,195 | (6,384,075 | ) | (12,147,666 | ) | 7,936,983 | 39,125,899 |
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
Note 1 | COMPANY AND BACKROUND |
GBS Enterprises Incorporated, a Nevada corporation, through its subsidiaries, is a global provider of technology solutions for businesses and government agencies. We focus on developing and delivering solutions that help our customers to gain value and reduce cost in the development, deployment and management of the applications used in the course of conducting their business (“business applications”). We do this by building software and providing services that aid in:
¨ Information Technology (“IT”) systems analysis, planning and management;
¨ Automating business processes;
¨ Optimizing system and application performance;
¨ Ensuring the security and compliance of systems, applications and processes; and
¨ Migrating and integrating systems, applications and processes.
Our customers include corporate and government IT departments, solutions integrators (“SIs”) and independent software vendors (“ISVs”). Our corporate customers are from a variety of industries, including insurance, financial services, pharmaceuticals, healthcare, manufacturing, logistics, and education. The install-base of our software products spans more than 5,000,000 users in 38 countries on four continents. We principally market and sell our products and services directly in the United States, Canada, United Kingdom, Germany, Austria, Switzerland, the Nordics and India; and indirectly through local distributors and resellers representing Australia, South America and regionally in Europe.
Our software and services are designed to mainly serve organizations that have investments in IBM’s Lotus® Notes and Domino platform. The IBM Lotus® Notes and Domino platform is both a system for enterprise email as well as an application platform, meaning that it can be used as both an email system and an environment in which business applications can be deployed and used. This platform was originally brought to market by Lotus Development Corp. in 1989, and was subsequently acquired by IBM in 1995. According to Radicati, in 2011, IBM Lotus Domino will have a worldwide installed base of 189 million mailboxes. Currently, the installed base for On-Premises IBM Lotus Domino mailboxes represents the majority of worldwide IBM Lotus Domino mailboxes, accounting for 87% of worldwide IBM Lotus Domino mailboxes. By 2015, this percentage is expected to decrease to 80%, as hosted email grows in popularity. (The Radicati Group Inc., April 2011, “IBM Lotus Notes/Domino Market Analysis, 2011-2015“)
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
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”) 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.
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
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.
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
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 (“the Reverse Merger”).
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
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.
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
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.
IDC Global, Inc.
On July 25, 2011, the Company acquired 100% of the issued and outstanding shares of common stock of IDC Global, Inc., a Delaware corporation. Pursuant to the acquisition agreement, dated July 15, 2011, the Company agreed to issue the shareholders an aggregate of 800,000 shares of common stock and made a cash payment of $750,000. The agreement required an additional payment to the management shareholders of 80,000 shares of common stock and signing bonuses to personnel of $35,000. The Company also agreed to reimburse IDC up to $25,000 for incurred accounting and legal fees related to the transaction. The fair value of the common stock was determined to be $3.70 per share, representing the market value at the end of trading on the date of the agreement. The total value of the investment, including $883,005 of debt assumption, was $4,066,000. IDC was a privately held company that provides nationwide network and data center services. IDC delivers customized, high availability technology solutions for WAN, Wireless Services, Co-location & Hosting, Managed Services, and Network Security. IDC Global includes two Data Center facilities located in the downtown Chicago area and Colocation facilities in three other Data Centers in New York, London, England and Frankfurt, Germany. IDC provides internet infrastructure Services (IaaS) to the business community helping customers make the transition from large, static and expensive on-premise computing to dynamic, flexible and cost-effective off-premise computing. IDC is helping customers make the transition from large, static and expensive on-premise computing to dynamic, flexible and cost-effective off-premise computing.
SD Holdings, Ltd.
On September 27, 2011, the Company entered into an acquisition agreement with SD Holdings, Ltd. (“SYN”), a Mauritius corporation, and the shareholders of SYN owning 100% of issued and outstanding shares of SYN. SYN owns 100% of all issued and outstanding shares of Synaptris, Inc., a California corporation (“Synaptris”), and 100% of all issued and outstanding shares of Synaptris Decisions Private Limited, a company formed in India (“Synaptris India”). Pursuant to the acquisition agreement, the Company purchased one hundred percent (100%) of the issued and outstanding shares of SYN (“SYN Shares”) effective November 1, 2011 in consideration for $525,529 and agreed to issue 700,000 shares of common stock, subject to adjustment. Actual shares issued were 612,874. The fair value of the common stock was determined to be $2.05 per share, representing the market value at the end of trading on the date of the agreement.
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
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.
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
EbVokus, GmbH.
On October 1, 2012, GROUP sold all of the software and operational assets (constituting substantially all of the assets) of its wholly-owned subsidiary, ebVokus GmbH, along with the associated maintenance and project agreements to a non-affiliated third party for a purchase price of approximately $459,000, approximately $258,000 (200,000 Euros: 1 EUR = $1.29 USD on October 1, 2012) was paid at closing and the remaining $201,000 was paid on February 15, 2013 (150,000 Euro: 1EUR = $1.35 USD on February 15, 2013).
B.E.R.S. AD.
On November 23, 2012, GBS AG sold its entire participation (50%) in B.E.R.S AD for a total of 25,000 BGN.
Note 2 | ACCOUNTING POLICIES |
The financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America, the more significant of which are as follows:
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Segment Reporting
The Financial Accounting Standards Board (“FASB”) authoritative guidance regarding segment reporting establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. It also establishes standards for related disclosures about products and services, geographic areas and major customers. The Company has determined that it operates in only one segment - the development and maintenance of computer software programs and support products.
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
Comprehensive Income (Loss)
The Company adopted the FASB Codification topic (“ASC”) 220, “Reporting Comprehensive Income”, which establishes standards for the reporting and display of comprehensive income and its components in the financial statements. Comprehensive income consists of net income and other gains and losses affecting stockholder's equity that are excluded from net income, such as unrealized gains and losses on investments available for sale, foreign currency translation gains and losses and minimum pension liability. Since inception, the Company’s other comprehensive income represents foreign currency translation adjustments and small net actuarial losses on pension plans.
Net Income per Common Share
ASC 260, “Earnings per share”, requires dual presentation of basic and diluted earnings per share (EPS) with a reconciliation of the numerator and denominator of the EPS computations. Basic earnings per share amounts are based on the weighted average shares of common stock outstanding. If applicable, diluted earnings per share would assume the conversion, exercise or issuance of all potential common stock instruments such as options, warrants and convertible securities, unless the effect is to reduce a loss or increase earnings per share. Diluted net income (loss) per share on the potential exercise of the equity-based financial instruments is not presented where anti-dilutive. Accordingly, although the diluted weighted average number of common stock outstanding is disclosed on the statements of operation, the calculated net loss per share is the same for both the basic and diluted as both are based on the basic weighted average of common stock outstanding. There were no adjustments required to net income for the period presented in the computation of diluted earnings per share.
Financial Instruments
Financial instruments consist of cash and cash equivalents, accounts and other receivable, financial assets, notes payable, liabilities to banks, accounts payable, accrued liabilities and other liabilities, due to related parties and retirement benefit obligations. Financial assets and liabilities are measured upon first recognition and reviewed at the financial statement date. Changes in fair value are recognized through profit and loss. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments.
Currency Risk
We use the US dollar as our reporting currency. The functional currencies of our significant foreign subsidiaries are the local currency, which includes the Euro, the British pound and the Bulgarian Lev. Accordingly, some assets and liabilities are incurred in those currencies and we are subject to foreign currency risks.
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
Fair Value Measurements
The Company follows ASC 820, “Fair Value Measurements and Disclosures”, for all financial instruments and non-financial instruments accounted for at fair value on a recurring basis. This new accounting standard establishes a single definition of fair value and a framework for measuring fair value, sets out a fair value hierarchy to be used to classify the source of information used in fair value measurement and expands disclosures about fair value measurements required under other accounting pronouncements. It does not change existing guidance as to whether or not an instrument is carried at fair value. The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions and credit risk.
The Company has adopted ASC 825, Financial Instruments, which allows companies to choose to measure eligible financial instruments and certain other items at fair value that are not required to be measured at fair value. The Company has not elected the fair value option for any eligible financial instruments.
Cash and cash equivalents
The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.
Inventories
Pursuant to ASC 330 (Inventories), inventories held for sale are recognized under inventories. Inventories were measured at the lower of cost or market. Cost is determined on a first-in-first out basis, without any overhead component.
Goodwill and other Intangible Assets
Intangible assets predominately comprise goodwill, acquired software and capitalized software development services. Intangible assets acquired in exchange for payment are reflected at acquisition costs. If the development costs can be capitalized per ASC 985-20-25, these are reflected as ascribable personnel and overhead costs.
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
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.
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.
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
Impairment or Disposal of Long-Lived Assets
The Company evaluates the recoverability of its fixed assets and other assets in accordance with ASC topic, 360.10. This guidance requires recognition of impairment of long-lived assets in the event the net book value of such assets exceeds its’ expected cash flows or appraised value In this instance, the asset is considered to be impaired and is written down to fair value.
Revenue Recognition
Sources of Revenues:
License revenues
Our license revenues consist of revenues earned from the licensing of our software products. These products are generally licensed on a perpetual basis. Pricing models have generally been based either upon the physical infrastructure, such as the number of physical desktop computers or servers, on which our software runs or on a per user basis. License revenues are recognized when the elements of revenue recognition for the licensed software are complete, generally upon electronic shipment of the software and the software key to provide full access to all functionalities for our customers. In general, our invoices reflect license, service and maintenance components. In the case of multi element contracts, the revenues allocated to the software license in most cases represent the residual amount of the contract after the fair value of the other elements has been determined. Certain products of our software offering are licensed on a subscription basis.
Software maintenance revenues
Software maintenance revenues are recognized ratably on a pro-rata basis over the range of the contract period. Our contract periods typically range from one to five years. Vendor-specific objective evidence (“VSOE”) of fair value for software maintenance services is established by the rates charged in stand-alone sales of software maintenance contracts or the stated renewal rate for software maintenance. Customers who are party to software maintenance agreements with us are entitled to receive support, product updates and upgrades on a when-and-if-available basis.
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.
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
Foreign Currency Translation
The functional currency of the Company is US dollars. For financial reporting purposes, the financial statements of the subsidiary companies whose functional currency is other than US dollars were translated into US dollars using the current rate method. Assets and liabilities were translated at the exchange rates at the balance sheet dates, revenue and expenses were translated at the average exchange rates and stockholders’ equity was translated at historical exchange rates. Any translation adjustments resulting are not included in determining net income but are included in foreign exchange adjustment to other comprehensive income, a component of stockholders’ equity .
Other Provisions
According to FASB ASC 450 “Contingencies”, provisions are made whenever there is a current obligation to third parties resulting from a past event which is likely in the future to lead to an outflow of resources and of which the amount can be reliably estimated. Provisions not already resulting in an outflow of resources in the following year are recognized at their discounted settlement amount on the financial statement date. The discount taken is based on market interest rates. The settlement amount also includes the expected cost increases. Provisions are not set off against contribution claims. If the amended estimate leads to a reduction of the obligatory amount, the provision is proportionally reversed and the earnings are recognized in other operating earnings.
Deferred Taxes
Income taxes are provided in accordance with FASB Codification topic 740, “Accounting for Income Taxes”. A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss-carry forwards.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that, that some portion or all of the deferred tax asset will not be realized. Deferred tax assets and liabilities are adjusted for the effect of changes in tax laws and rates on the date of enactment.
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
Recent Accounting Pronouncements
In July 2012, the FASB issued ASU 2011-08, Intangibles - Goodwill and Other (Topic 350): Testing Goodwill for Impairment. With the objective of reducing the cost and complexity of performing an impairment test for indefinite-lived intangible assets by simplifying how an entity tests those assets for impairment and to improve consistency in impairment testing guidance among long-loved asset categories. The amendments permit an entity first to assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance with Subtopic 350-30, Intangibles - Goodwill and Other - General Intangibles Other than Goodwill. The more-likely-than-not threshold is defined as having the likelihood of more than 50 percent. The amendments are effective for annual and interim impairment tests performed beginning April 1, 2013. Adoption of this new standard is not expected to have significant impact to the Company’s financial statement.
Off - Balance Sheet Arrangements
We have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.
Principles of Consolidation and Reverse Merger
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 became the accounting acquirer and is deemed to have retroactively adopted the capital structure of the Company. 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.
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
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.
3. | CHANGEIN 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.
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
Note 3 | SUBSIDIARY COMPANIES |
The subsidiaries listed below were included in the basis of consolidation (KUSD = 1,000’s of US Dollars):
Stockholders' | Profit | |||||||||||||||||||||||||
Equity | Percentage of | of the | Date | |||||||||||||||||||||||
as of 12.31.12 | Subscribed Capital | consolidated quarter | of the First | |||||||||||||||||||||||
Subsidiary | Headquarters | KUSD | KUSD | in % | Ownership | KUSD | Consolidation | |||||||||||||||||||
ebVOKUS Software GmbH | Dresden | 574 | 53 | 50.1 | % | I | 163 | 01/11/2005 | ||||||||||||||||||
GROUP Business Software (UK) Ltd. | Manchester | (1,334 | ) | 24 | 50.1 | % | I | (66 | ) | 12/31/2005 | ||||||||||||||||
GROUP Business Software Corp. | Woodstock | (12,328 | ) | 1 | 50.1 | % | I | (4,367 | ) | 12/31/2005 | ||||||||||||||||
GROUP LIVE N.V. | Den Haag | (1 | ) | 132 | 50.1 | % | I | 4,632 | 12/31/2005 | |||||||||||||||||
Permessa Corporation | Waltham | 10 | 0 | 50.1 | % | I | 682 | 09/22/2010 | ||||||||||||||||||
Relavis Corporation | Woodstock | (819 | ) | 2 | 50.1 | % | I | (10 | ) | 01/08/2007 | ||||||||||||||||
GROUP Business Software AG | Eisenach | 23,897 | 35,658 | 50,1 | % | I | (655 | ) | 06/01/2011 | |||||||||||||||||
Pavone GmbH | Boeblingen | (1,223 | ) | 44 | 100.0 | % | D | (503 | ) | 01/04/2011 | ||||||||||||||||
Pavone Ltd. | North Yorkshire | (79 | ) | 586 | 100.0 | % | D | (4 | ) | 01/04/2011 | ||||||||||||||||
Groupware Inc. | Woodstock | (482 | ) | 1 | 100.0 | % | D | 0 | 01/06/2011 | |||||||||||||||||
IDC Global, Inc. | Chicago | 2,442 | 0 | 100.0 | % | D | 128 | 07/25/2011 | ||||||||||||||||||
Synaptris, Inc. | San Jose | (777 | ) | 3,382 | 100.0 | % | D | 89 | 09/27/2011 | |||||||||||||||||
GBS India | Chennai | 101 | 14 | 100.0 | % | D | 89 | 09/30/2012 |
D - Direct Subsidiary |
I - Indirect Subsidiary |
The above table reflects the individual companies. On a consolidated level, the following transactions have taken place as reported:
n | On April 1, 2012, the Company sold SD Holdings Ltd. (“SYN”), Synaptris and Synaptris India to Lotus Holding, Ltd. for a purchase price of $1,877,232 in an effort to restructure the Company’s multilevel subsidiary-structure derived from historical mergers and acquisitions, and to reduce overhead and administrative costs. |
n | 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. |
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
n | 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. |
n | On August 1, 2012, the Company acquired 100% of the outstanding shares of capital stock of GBS India. |
On October 1, 2012, GROUP sold all of the software and operational assets (constituting substantially all of the assets) of its wholly-owned subsidiary, ebVokus GmbH.
Note 4 | CASH AND CASH EQUIVALENTS |
As of the financial statement date, the Company’s cash and cash equivalents totaled 1,155 KUSD (December 31, 2011 restated year end: 3,251 KUSD). Included in that amount are cash equivalents of 3 KUSD (December 31, 2011 restated year end: 12 KUSD).
Note 5 | ACCOUNTS RECEIVABLE |
As of the financial statement date, Accounts Receivable was 4,143 KUSD (December 31, 2011 restated year end: 5,007 KUSD). Receivables are generally measured at their nominal value and taking into account all foreseeable risks. Probable default risks are handled with specific allowances for bad debts. With regard to the trade receivables which are neither impaired nor delinquent, there are no indications as of the financial statement date that the debtors will not meet their payment obligations .
Note 6 | PREPAID EXPENSES |
Prepaid expenses in the amount of 84 KUSD were primarily recorded for prepaid rent and advance on technological collaboration events (December 31, 2011 restated year end: 444 KUSD).
Note 7 | OTHER RECEIVABLES - CURRENT |
Other Receivables as of the financial statement date were 676 KUSD (December 31, 2011 year end: 1,020 KUSD). The largest individual item under other receivables represents a receivable from a previous insolvency (469 KUSD). Also included are tax assets (177 KUSD) and other prepaid costs (30 KUSD).
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
Note 8 | ASSETS HELD FOR RESALE |
On February 1, 2013, IDC Global Inc. ("IDC“), entered into a Stock Purchase Agreement, with Global Telecom & Technology Americas, Inc., a Virginia corporation (“GTT”). GTT is a publicly traded (GTLT:OTC US) cloud network provider. Pursuant to the Agreement, the Company sold 100% of the issued and outstanding shares of capital stock of IDC (the “IDC Shares”) to GTT for an aggregate purchase price of $4,600,000 in cash.
KUSD | ||||
Asset | ||||
Cash | ||||
Other receivables | 0.0 | |||
Intangible assets | 0.0 | |||
Accruals | 0.0 |
Note 9 | 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 12/31/2011 | 8,459.5 | 6,854.5 | 1,605.0 | |||||||||
Additions | 280 | 339 | ||||||||||
Disposals | (1411 | ) | (208 | ) | ||||||||
Currency differences | 118 | 110 | ||||||||||
Reclassifications | (240 | ) | (222 | ) | ||||||||
Updated 12/31/2012 | 7,206.5 | 6,873.7 | 332.8 |
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
Note 10 | NON-OPERATING RECEIVABLES |
The major components of the Non-Operating Receivables include the following:
KUSD | KUSD | |||||||
12/31/2012 | 12/31/2011 | |||||||
Receivable from sale of GEDYS IntraWare GmbH | ||||||||
Balance outstanding, payable in monthly installments of $20,006, bearing interest at prime plus .25%, not be greater than 2% per annum | 0 | 777 | ||||||
Current portion, included in other current receivables | 0 | 233 | ||||||
0 | 544 | |||||||
Cooperative shares | 1 | 0 | ||||||
Intercompany Loan Values during the quarter | 0 | 0 | ||||||
Other long term receivables | 427 | 5 | ||||||
Balance | 428 | 549 |
Note 11 | GOODWILL |
Goodwill derives from the following business acquisitions:
Affiliated Company | Date of the First Consolidation | Goodwill YE 2010 in kUSD | Goodwill YE 2011 in kUSD | Goodwill Q2 in kUSD | Goodwill YE 2011 in kUSD | Goodwill Q4 2012 in kUSD | ||||||||||||||||
GROUP Business Software AG | 01/06/11 | 22,519.6 | 23,302.8 | 23,302.8 | 20,194.4 | 18,492.2 | ||||||||||||||||
GROUP Business Software Corp. | 12/31/05 | 2,060.7 | 2,177.5 | 2,177.5 | 2,177.5 | 2,177.5 | ||||||||||||||||
GROUP LIVE N.V. | 12/31/05 | 1,253.2 | 1,324.2 | 1,324.2 | 0.0 | 0.0 | ||||||||||||||||
GROUP Business Software Ltd | 12/31/05 | 2,616.7 | 2,765.1 | 2,765.1 | 2,765.1 | 2,765.1 | ||||||||||||||||
ebVOKUS Software GmbH | 01/10/05 | 419.8 | 443.6 | 443.6 | 443.6 | 443.6 | ||||||||||||||||
Relavis Corporation | 01/08/07 | 6,897.2 | 7,288.3 | 7,308.0 | 0.0 | 0.0 | ||||||||||||||||
Permessa | 09/22/10 | 0.0 | 2,387.4 | 2,387.4 | 2,387.4 | 2,387.4 | ||||||||||||||||
Pavone GmbH | 01/04/11 | -319.7 | 4,956.4 | 5,892.5 | ||||||||||||||||||
Groupware Inc. | 01/06/11 | -95.9 | 994.1 | 0.0 | ||||||||||||||||||
IDC | 07/25/11 | 1,155.1 | 2,994.4 | 2,994.4 | ||||||||||||||||||
SD Holding | 09/27/11 | 1,538.6 | 2,308.7 | 0.0 | ||||||||||||||||||
GBS India | 09/30/11 | 1,053.7 | ||||||||||||||||||||
35,767.3 | 39,689.0 | 41,986.8 | 39,221.6 | 36,206.5 |
During the year ended December 31, 2012, the Company sold SD Holdings, Ltd., ebVokus GmbH. and dissolved Pavone Ltd., the effect of which was to reduce the goodwill associated with these subsidiaries. The reduction in goodwill attributed to GROUP Business Software AG (“GROUP”) resulted when the Company purchased additional shares of GROUP as disclosed in Note 1.
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
Also in early 2012, the Company focused on the then emerging modernization and migration market in general but with a specific concentration towards the IBM Lotus Notes/Domino portion of the market. Also, there was a particular geographic orientation on addressing the needs of the North America segment of that market. Strategically the Company utilized the Transformer technology and a variety of associated analytic tools to position itself in the market. This technology represents the major portion of the Company’s total development expenses of $10.2 million in 2012. In order to align the intangible assets of the company with the fast changing market, management decided to write off the Goodwill in GBS Corp., which is associated to the classical core business entirely in the amount of $2.8 million, to write off the capitalized development until 1/1/12 on the former Transformer technology in the amount of $0.9 million.
Note 12 | SOFTWARE |
Development costs
The costs of developing new software products and updating products already marketed by the Company are generally recognized as expenses in the period in which they arise. Provided they meet the conditions for capitalization as per FASB ASC 985-20-25, they are capitalized. Capitalized development costs can be attributed to the defined products. These products are technically realizable and there is a target market for them.
The development costs arising in the reporting period result from the personnel costs attributed to the development work as well as overhead costs, provided that these are related to the development work and do not represent general administrative costs. The ascribable overhead costs are directly recognized.
Capitalized development costs are generally amortized over a period of three years starting with the date of marketability of the new products or major releases.
Concessions, Industrial Property Rights, Licenses
The intangible financial assets carried in this item are licenses acquired in exchange for payment.
These financial assets are measured at acquisition cost less scheduled straight-line amortization. The assets added in the scope of the cost price allocation of the business divisions acquired this year.
The useful life spans were based uniformly throughout the Company according to those used by the parent company. Scheduled amortization is performed over a period from three to ten years.
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
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 12/31/2011 | 33,093.8 | 18,835.2 | 14,258.6 | |||||||||
Additions | 1269 | 1266 | ||||||||||
Disposals | (244 | ) | (5 | ) | ||||||||
Currency differences | 895 | 736 | ||||||||||
Reclassifications | (458 | ) | 0 | |||||||||
Updated 12/31/2012 | 34,555.9 | 20,831.7 | 13,724.2 |
Note 13 | OTHER ASSETS |
This includes of 156 KUSD primarily from rent and other security deposits (December 31, 2011 year end: 93 KUSD).
Note 14 | NOTES PAYABLE |
A breakdown of the Notes Payable of $ 2,313,572 as at December 31, 2012 (December 31, 2011 restated : $1,381,821) is as follows:
Date of | Interest | |||||||||||||||||
Loan | Principal | Accrued | Total | Due Date | ||||||||||||||
$ | $ | $ | ||||||||||||||||
7/5/2012 | 50,000 | 2,084 | 52,084 | 1/5/2013 | ||||||||||||||
7/5/2012 | 250,000 | 10,421 | 260,421 | 1/5/2013 | ||||||||||||||
7/5/2012 | 252,500 | 10,526 | 263,026 | 1/5/2013 | ||||||||||||||
8/13/2012 | 1,000,000 | 76,712 | 1,076,712 | 8/13/2013 | ||||||||||||||
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 | ||||||||||||||
Total | 3,552,500 | 152,894 | 3,705,394 | |||||||||||||||
Amounts due to related parties | 1,302,500 | 89,322 | 1,391,822 | |||||||||||||||
Unrelated | 2,250,000 | 63,572 | 2,313,572 |
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
On July 5, 2012, the Company entered into a 3 separate unsecured convertible promissory notes, for a total of $552,500 bearing interest at 8.5% and due January 5, 2013. The conversion options were not exercised. Two of the investor whose investments totaled $302,500 were directors
The Company also issued common stock purchase warrants, entitling the holders to purchase 550,000 shares of common stock at $0.50 for a period of 3 years from issuance. The discounted value of the loans, using a rate of 20% was determined to be $526,000 and the discount of $26,800 was charge to debt discount and credited to additional paid in capital. The discount was amortized and charged to operations in 2012 .
On August 13, 2012, the Company entered into a Note Purchase and Security Agreement with John A. Moore, a member of the Board of Directors of the Company, and his spouse (collectively, the “Lender”) pursuant to which the Company sold a secured promissory note (the “Note”) to the Lender in the aggregate principal amount of $1,000,000 bearing interest at a rate of 20% per year and maturing on the first anniversary date of the issuance with a 2% prepayment penalty. To secure the obligations of the Company under the Note, the Company granted the Lender a first priority security interest in the accounts receivable of the Company and its subsidiaries located in the United States of America on a one-for-one (1:1) basis.
In connection with the execution of the Loan Agreement, on August 13, 2012, the Company issued the Lender a common stock purchase warrant (the “Warrant”), pursuant to which the Lender is entitled to purchase 100,000 shares of common stock at an exercise price of $0.35 until the third anniversary date of the date of issuance. The Warrant was issued in a private transaction between the Company and the Lender and was exempt from registration under the Securities and Exchange Act of 1933, as amended, pursuant to Section 4(2) thereof.
In connection with the Loan Agreement on February 22, 2013, the Company and Mr. Moore amended the Note pursuant to which Mr. Moore agreed to convert the interest due under the Note into shares of GBSX common stock at a rate of $0.30 per share. Pursuant to the amendment, the Company issued 450,960 shares of common stock to Mr. Moore. The Company issued the shares in reliance on Section 4(2) of the Securities Act due to the fact that the issuance was isolated and did not involve a public offering of securities.=
On October 26, 2012, the Company entered into a Note Purchase and Security Agreement pursuant to which the Company sold a secured promissory note to the Lender in the aggregate principal amount of $1,000,000 bearing interest at a rate of 20% per year and maturing on the first anniversary date of the issuance with no prepayment penalty. To secure the obligations of the Company under the Note, the Company granted the Lender all the Company’s right, title and interest in and to its shares of one of its subsidiaries, namely IDC Global, Inc.
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
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.
In connection with the Loan Agreement on February 22, 2013, the Company and the Lender amended the Note pursuant to which the Lender 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 the Lender. 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 November 30, 2012, the Company entered into a two Note Purchase and Security Agreement pursuant to which the Company sold two secured promissory notes to two separate lenders in the aggregate principal amount of $1,000,000 bearing interest at a rate of 20% per year and maturing on the first anniversary date of the issuance with no prepayment penalty. To secure the obligations of the Company under the Note, the Company granted the Lenders all the Company’s right, title and interest in and to its shares of one of its subsidiaries, namely IDC Global, Inc.
In connection with the execution of the Loan Agreement, on November 30, 2012, the Company issued the lendes a common stock purchase warrant, pursuant to which the lender are entitled to purchase 500,000 shares of common stock at an exercise price of $0.20 until the third anniversary date of the date of issuance. The Warrant was issued in a private transaction between the Company and the Lender and was exempt from registration under the Securities and Exchange Act of 1933, as amended, pursuant to Section 4(2) thereof.
On February 12, 2013, the Lenders exercised the right to purchase 500,000 share of common stock at the exercise price of $0.20 per share.
Note 15 | LIABILITIES TO BANKS - CURRENT |
Short term liabilities to banks of 7 KUSD (December 31, 2011 year end: 20 KUSD) represent an operating line of credit (6 KUSD), bearing interest at a 3.25% daily periodic rate with a credit limit of 100 KUSD and checks in transit (15 KUSD) at the financial statement date.
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
Note 16 | ACCOUNTS PAYABLE AND ACCRUED LIABILITIES |
Trade payables
As of the financial statement date, trade accounts payable amounted to 3,426 KUSD (December 31, 2011 restated year end: 2,783 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.
KUSD | Status | Currency | Status | |||||||||||||||||||||
12/31/2011 | Utilization | Dissolution | Increase | Differences | 12/31/2012 | |||||||||||||||||||
Tax provision | 32 | 32 | 0 | 57 | 0 | 57 | ||||||||||||||||||
Salary | 859 | 489 | 24 | 451 | 16 | 861 | ||||||||||||||||||
Vacation | 439 | 303 | 30 | 137 | 12 | 315 | ||||||||||||||||||
Workers Compensation Insurance Association | 27 | 21 | 0 | 17 | 1 | 25 | ||||||||||||||||||
Compensation Levy for Non-Employment of Severely Handicapped Persons | 17 | 16 | 0 | 18 | 0 | 19 | ||||||||||||||||||
Outstanding Invoices | 882 | 626 | 60 | 722 | 22 | 1,059 | ||||||||||||||||||
Annual Financial Statement Costs | 401 | 206 | 0 | 0 | 4 | 198 | ||||||||||||||||||
Other Provisions | 367 | 221 | 0 | 294 | 6 | 446 | ||||||||||||||||||
Warranties | 60 | 4 | 0 | 41 | 96 | |||||||||||||||||||
Gesture of Goodwill | 160 | 160 | 0 | |||||||||||||||||||||
Provision for Legal Costs | 71 | 4 | 0 | 5 | 73 | |||||||||||||||||||
Severance | 0 | 0 | 0 | 70 | 0 | 70 | ||||||||||||||||||
Total | 3,314 | 2,082 | 114 | 1,766 | 107 | 3,221 |
Provisions for salaries of 861 KUSD (December 31, 2011 year end: 859 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 315 KUSD (December 31, 2011 year end: 439 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.
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
For liabilities not yet settled, a provision totaling 1,059 KUSD (December 31, 2011 year end: 882 KUSD) was created.
Other Provisions of 446 KUSD (December 31, 2011 year end: 367 KUSD) include accruals for Board of Director compensation (46 KUSD) and miscellaneous provisions.
Expenses for the audit of the Company and preparation of the annual consolidated financial statements were recognized at 198 KUSD (December 31, 2011 year end: 401 KUSD).
A provision for anticipated legal consulting of 73 KUSD was recorded (December 31, 2011 year end: 71 KUSD).
For warranty claims, a provision of 96 KUSD (December 31, 2011 year end: 60 KUSD) was created determined by service income.
Note 17 | 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 6,099 KUSD (December 31, 2011 year end: 6,477 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 18 | OTHER LIABILITIES |
On July 5, 2012, the Company entered into a 3 separate unsecured convertible promissory notes, for a total of $552,500 bearing interest at 8.5% and due January 5, 2013. The conversion options were not exercised. Two of the investor whose investments totaled $302,500 were directors
The Company also issued common stock purchase warrants, entitling the holders to purchase 550,000 shares of common stock at $0.50 for a period of 3 years from issuance. The discounted value of the loans, using a rate of 20% was determined to be $526,000 and the discount of $26,800 was charge to debt discount and credited to additional paid in capital. The discount was amortized and charged to operations in 2012 .
On August 13 , 2012, the Company entered into a Note Purchase and Security Agreement with John A. Moore, a member of the Board of Directors of the Company, and his spouse (collectively, the “Lender”) pursuant to which the Company sold a secured promissory note (the “Note”) to the Lender in the aggregate principal amount of $1,000,000 bearing interest at a rate of 20% per year and maturing on the first anniversary date of the issuance with a 2% prepayment penalty. To secure the obligations of the Company under the Note, the Company granted the Lender a first priority security interest in the accounts receivable of the Company and its subsidiaries located in the United States of America on a one-for-one (1:1) basis.
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
In connection with the execution of the Loan Agreement, on August 13, 2012, the Company issued the Lender a common stock purchase warrant (the “Warrant”), pursuant to which the Lender is entitled to purchase 100,000 shares of common stock at an exercise price of $0.35 until the third anniversary date of the date of issuance. The Warrant was issued in a private transaction between the Company and the Lender and was exempt from registration under the Securities and Exchange Act of 1933, as amended, pursuant to Section 4(2) thereof.
On October 26, 2012, the Company entered into a Note Purchase and Security Agreement pursuant to which the Company sold a secured promissory note to the Lender in the aggregate principal amount of $1,000,000 bearing interest at a rate of 20% per year and maturing on the first anniversary date of the issuance with no prepayment penalty. To secure the obligations of the Company under the Note, the Company granted the Lender all the Company’s right, title and interest in and to its shares of one of its subsidiaries, namely IDC Global, Inc.
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 November 30, 2012, the Company entered into a two Note Purchase and Security Agreement pursuant to which the Company sold two secured promissory notes to two separate lenders in the aggregate principal amount of $1,000,000 bearing interest at a rate of 20% per year and maturing on the first anniversary date of the issuance with no prepayment penalty. To secure the obligations of the Company under the Note, the Company granted the lenders all the Company’s right, title and interest in and to its shares of one of its subsidiaries, namely IDC Global, Inc.
In connection with the execution of the Loan Agreement, on November 30, 2012, the Company issued the lendesr a common stock purchase warrant, pursuant to which the lender are 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.
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
A breakdown of the Notes Payable as at December 31, 2012 is as follows:
Date of | Interest | |||||||||||||||||
Loan | Principal | Accrued | Total | Due Date | ||||||||||||||
$ | $ | $ | ||||||||||||||||
2012-07-05 | 50,000 | 2,084 | 52,084 | 2013-01-05 | ||||||||||||||
2012-07-05 | 250,000 | 10,421 | 260,421 | 2013-01-05 | ||||||||||||||
2012-07-05 | 252,500 | 10,526 | 263,026 | 2013-01-05 | ||||||||||||||
2012-08-13 | 1,000,000 | 76,712 | 1,076,712 | 2013-08-13 | ||||||||||||||
2012-10-26 | 1,000,000 | 36,165 | 1,036,165 | 2013-10-26 | ||||||||||||||
2012-11-30 | 500,000 | 8,493 | 508,493 | 2013-11-30 | ||||||||||||||
2012-11-30 | 500,000 | 8,493 | 508,493 | 2013-11-30 | ||||||||||||||
Total | 3,552,500 | 152,894 | 3,705,394 | |||||||||||||||
Amounts due to related parties | 1,302,500 | 89,322 | 1,391,822 | |||||||||||||||
Unrelated | 2,250,000 | 63,572 | 2,313,572 |
In addition to short term loans of $ 3,705,394, also included are the following items:
Other Short-Term Liabilities | 12/31/2012 | 12/31/2011 | ||||||
KUSD | KUSD | |||||||
Purchase Assets L911 | 0 | 1,094 | ||||||
Purchase Assets Fastworks | 0 | 0 | ||||||
Purchase Assets Permessa | 750 | 1,900 | ||||||
Purchase Assets Salesplace | 0 | 0 | ||||||
Tax Liabilities | 169 | 724 | ||||||
Purchase Archiving Software | 330 | 324 | ||||||
Other Liabilities | 320 | 215 | ||||||
1,569 | 4,256 |
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
Note 19 | DISCOUNTED DEBT |
On July 5th, 2012 promissory notes for $552,500 were issued at 8.5% and had a conversion feature. Similar notes without the conversion feature were issued subsequently at 20%. Therefore, the conversion feature has a value which has been determined by discounting the note at the cost of capital of 20%. The note value, discounted for 6 months year (corresponding with the due date), was determined to be $525,800. The difference has been classified as discounted debt and is being amortized over the life of the debt (6 months) and a recognition of additional paid-in capital and interest expense has been made.
Note 21 | LIABILITIES TO BANKS - LONG TERM |
Liabilities to banks as of the financial statement date was 3,716 KUSD (December 31, 2011 year end: 3,463 KUSD) represent bank obligations of GROUP AG with Baden-Württembergische Bank with a credit line totaling 4,000 KUSD (3,000 KEUR) and are collateralized by a silent blanket agreement for GROUP AG’s trade receivables. The term of the loan runs until June 30, 2014. The Company has curtailed the risk of changing interest rates existing with regard to liabilities to banks due to variable interest rate agreements by obtaining a fixed interest rate for half of its credit line. Accordingly, 2,000 KUSD (1,500 KEUR) is bearing interest at prime plus 1.5% and 2,000 KUSD (1,500 KEUR) is fixed at 3.5%.
Note 22 | OTHER LIABILITIES - LONG TERM |
Other long-term liabilities as of the financial statement date of nil KUSD (December 31, 2011 year end: 2,274 KUSD) includes the following:
Other Long-Term Liabilities | 12.31.12 | 12.31.11 | ||||||
KUSD | KUSD | |||||||
Purchase Assets L911 | 0 | 2,266 | ||||||
Purchase Shares GBS AG | 0 | 0 | ||||||
Real Risk Ventures LLC | 0 | 0 | ||||||
Related parties | 0 | 0 | ||||||
Capital lease | 0 | 8 | ||||||
0 | 2,274 |
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
Note 23 | COMMON STOCK |
Common stock belongs to the legally purchasing company according to the principles of a Reverse Merger and therefore, the common stock is that of GBS Enterprises Incorporated . 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 December 31, 2012, there were 29,431,664 shares 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 2011 , another investor exercised their private purchase warrant and bought 5,000 shares of common stock for net proceeds of $7,500.
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
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.
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
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.
Other changes in common stock are disclosed in Note 32, Supplementary Cash Flow Disclosures.
Options
The Company has not issued any options, so that none are outstanding as at December 31, 2012 and 2011.
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.
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
Lastly, the Company has issued warrants to outside consultants in payments for services. The warrants are issued as “cashless” warrants and have been valued using a Black-Scholes option pricing model with volatility, equity value and interest rate inputs noted below.. The fair value of warrants issued for financing are determined for disclosure purposes as there is no impact to the financial statements. The fair value for other services, namely legal, and consulting have been recorded in the financial statements with a charge to the corresponding expense account and a credit to additional paid in capital.
Black Scholes assumptions for warrants issued were as follows:
For the period 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.
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
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 | Issue | Expiry | Strike | at | Exercised | End of | ||||||||||||||||||||||||||
purchase | Date | Date | Price | Issuance | Issued | Period | ||||||||||||||||||||||||||
# | $ | $ | # | # | # | |||||||||||||||||||||||||||
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 - Dec 31, 2012 | 5,136,875 | 905,000 | 11,083,155 |
(1) recorded as consulting expense
(2) recorded as legal expense
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
The weighted average exercise price at December 31, 2012 was $0.33
The weighted average exercise price at December 31, 2011 was $ 2.32
Note 24 | REVENUE ALLOCATION |
Gross revenue may be broken down by the following products for the twelve months ended December 31, 2012 are as follows:
Sales Revenues | 12/31/2012 | 12/31/2011 | ||||||
KUSD | KUSD | |||||||
Licenses | 4,244 | 5,174 | ||||||
Maintenance | 10,802 | 11,565 | ||||||
Partner Contribution | 0 | 0 | ||||||
Service | -754 | 6,503 | ||||||
Third-Party Products | 2,905 | 2,302 | ||||||
LND Third-Party Products | 3,185 | 3,607 | ||||||
Others | 131 | 179 | ||||||
discontinued operations | 5,294 | 2,170 | ||||||
25,807 | 31,500 |
Revenues by geographical area for the twelve months ended December 31, 2012 are as follows:
Sales Revenues | 12/31/2012 | 12/31/2011 | ||||||
by geographic area | KUSD | KUSD | ||||||
US | 5,465 | 7,189 | ||||||
Germany | 14,211 | 20,622 | ||||||
United Kingdom | 836 | 1,110 | ||||||
Others | 0 | 410 | ||||||
discontinued operations | 5,294 | 2,170 | ||||||
25,807 | 31,500 |
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
Long-lived assets by geographical area, which primarily include property plant and equipment, are as follows:
Long-lived assets | 12/31/2012 | 12/31/2011 | ||||||
by geographic area | KUSD | KUSD | ||||||
US | 124 | 204 | ||||||
Germany | 206 | 292 | ||||||
United Kingdom | 3 | 3 | ||||||
Others | 0 | 24 | ||||||
discontinued operations | 1,334 | 1,083 | ||||||
333 | 1,605 |
Note 25 | OTHER INCOME/EXPENSE |
At the financial statement date, Other income was 5,806 KUSD (December 31, 2011 Other expense: 15,894 KUSD).
Note 26 | DEFERRED INCOME TAXES |
The following schedule details the reconciliation of the Consolidated Earnings Before Taxes to the Income Tax Expense per the Consolidated Profit and Loss Statement:
12.31.2012 | 12.31.2011 | |||||||||||||||
kUSD | kUSD | |||||||||||||||
Assets | Liabilities | Assets | Liabilities | |||||||||||||
Deferred | Deferred | Deferred | Deferred | |||||||||||||
Taxes | Taxes | Taxes | Taxes | |||||||||||||
Non-current Assets | 0 | 875 | 0 | 1,196 | ||||||||||||
Financial Assets | 331 | (7 | ) | |||||||||||||
Stockholders' Equity | 4,790 | 3,953 | ||||||||||||||
TOTAL | 5,121 | 875 | 3,945 | 1,196 |
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
The following schedule reflects a summary of the basic components of the Deferred Tax Liability as presented in the Company’s Consolidated Balance Sheet.
kUSD | kUSD | |||||||
December 31 | 12.31.12 | 12.31.11 | ||||||
Intangible assets | (475 | ) | (732 | ) | ||||
Non-capital losses available for future periods | 4,790 | 4,197 | ||||||
Price allocation from consolidation | (68 | ) | (154 | ) | ||||
4,246 | 3,310 | |||||||
Valuation allowance | 0 | (561 | ) | |||||
4,246 | 2,749 |
kUSD | USD | |||||||
December 31 | 12.31.12 | 12.31.11 | ||||||
Short term assets | 0 | 0 | ||||||
Long term assets | 5,121 | 3,945 | ||||||
Long term liability | (875 | ) | (1,196 | ) | ||||
4,246 | 2,749 |
The Company also has incurred losses for income tax purposes of approximately 16,362 KUSD which may be applied in future years to reduce taxable income. The ability to apply this loss expires starting in 2015.
Note 27 | RELATED PARTY TRANSACTIONS AND BALANCES |
Related parties basically refer to the Board of Directors, Supervisory Board, stockholders and associated companies.
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
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. With regard to their remuneration, please see Section VIII.
In addition, the following transactions took place in the fiscal year:
n | On April 16, 2012, the Company sold 120,000 Units to Joerg Ott, the Chairman of the Board of Directors and then Chief Executive Officer 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. |
n | 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. |
n | 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 is convertible in full at $0.50 per share into common stock of the Company, if this conversion if not exercised on or before September 30, 2012. If not exercised Mr. Shihadah will receive a 3-year warrant to purchase shares at 50,000 shares of common stock at $0.50 per share. |
n | 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 is convertible in full at $0.50 per share into common stock of the Company, if this conversion if not exercised on or before September 30, 2012. If not exercised K Group Ltd. will receive a 3-year warrant to purchase shares at 250,000 shares of common stock at $1.00 per share. |
n | 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 $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 is convertible in full at $0.50 per share into common stock of the Company, if this conversion if not exercised on or before September 30, 2012. If not exercised K Group Ltd. will receive a 3-year warrant to purchase shares at 250,000 shares of common stock at $1.00 per share. |
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
n | 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. |
o | 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. |
o | 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. |
n | 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. |
o | 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 250,000 shares of common stock at the exercise price of $0.20. |
o | 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. |
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
n | On November 30, 2012, the Company entered into a note purchase and security agreement (the “Loan Agreement”) with an accredited investor (the “Lender”). Pursuant to the Loan Agreement, the Company issued a secured promissory note, dated November 30, 2012 (the “Note”), to the Lender in the aggregate principal amount of $500,000, bearing an annual interest rate of 20% and maturing on the earlier of the first anniversary date of the date of issuance or such other time as described in more detail in the Note, without any penalty for prepayment. To secure the obligations of the Company under the Note, the Company granted the Lender a first priority security interest in all of the Company’s right, title and interest in and to the shares of IDC Global, Inc. owned by the Company. The Note contains customary provisions upon an Event of Default, as more fully described in the full text of the document. |
o | In connection with the execution of the Loan Agreement, on November 30, 2012, the Company issued the Lender a common stock purchase warrant (the “Warrant”), pursuant to which the Lender is entitled to purchase 250,000 shares of common stock at an exercise price of $0.20 until the third anniversary date of the date of issuance. The Warrant was issued in a private transaction between the Company and the Lender and was exempt from registration under the Securities and Exchange Act of 1933, as amended, pursuant to Section 4(2) thereof. |
o | On February 12, 2013, the Lender exercised the right to purchase 250,000 shares of common stock at the exercise price of $0.20. |
n | On November 30, 2012, the Company entered into a note purchase and security agreement (the “Loan Agreement”) with an accredited investor (the “Lender”). Pursuant to the Loan Agreement, the Company issued a secured promissory note, dated November 30, 2012 (the “Note”), to the Lender in the aggregate principal amount of $500,000, bearing an annual interest rate of 20% and maturing on the earlier of the first anniversary date of the date of issuance or such other time as described in more detail in the Note, without any penalty for prepayment. To secure the obligations of the Company under the Note, the Company granted the Lender a first priority security interest in all of the Company’s right, title and interest in and to the shares of IDC Global, Inc. owned by the Company. The Note contains customary provisions upon an Event of Default, as more fully described in the full text of the document. |
o | In connection with the execution of the Loan Agreement, on November 30, 2012, the Company issued the Lender a common stock purchase warrant (the “Warrant”), pursuant to which the Lender is entitled to purchase 250,000 shares of common stock at an exercise price of $0.20 until the third anniversary date of the date of issuance. The Warrant was issued in a private transaction between the Company and the Lender and was exempt from registration under the Securities and Exchange Act of 1933, as amended, pursuant to Section 4(2) thereof. |
o | On February 12, 2013 the Lender exercised the right to purchase 250,000 shares of common stock at the exercise price of $0.20. |
NOTE 28 | PENSION PLAN OBLIGATIONS |
The Company maintains three retirement plans described as follows:
1. GROUP Business Software AG - A non-contributory defined benefit pension plan (“Qualified Plans”) is maintained by GROUP Business Software AG. The Qualified Plans provide retirement benefits for certain employees meeting certain age and service requirements. Benefits for the Qualified Plans are funded from assets held in the plans’ trusts.
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
Benefit Obligations and Funded Status
The following table presents the status of GROUP AG’s pension plan. The benefit obligation for pension plans represents the projected benefit obligation. GROUP AG’s benefit obligations and plan assets are measured each year as of December 31.
Pension Benefits in KUSD | ||||||||
12/31/12 | 12/31/2011 | |||||||
Change in benefit obligation: | ||||||||
Benefit Obligation at beginning of year | 150 | 154 | ||||||
Service cost | 0 | 0 | ||||||
Interest cost | 9 | 8 | ||||||
Actuarial loss (gain) | 102 | (7 | ) | |||||
Curtailment (gain) loss | 0 | 0 | ||||||
Plan amendments | 0 | 0 | ||||||
Foreign exchange rate changes | 4 | (6 | ) | |||||
Benefits paid | 0 | 0 | ||||||
Benefit Obligation at end of year | 265 | 150 | ||||||
Change in plan assets: | ||||||||
Fair value of plan assets at beginning of year | 93 | 93 | ||||||
Actual return on plan assets | 4 | 4 | ||||||
Employer contributions | 0 | 0 | ||||||
Participant contributions | 0 | 0 | ||||||
Benefits paid | 0 | 0 | ||||||
Foreign exchange rate changes | 2 | (4 | ) | |||||
Fair value of plan assets at end of year | 99 | 93 | ||||||
Benefit Obligation at end of year | 166 | 57 |
Pension Benefits in KUSD | ||||||||
12/31/12 | 12/31/2011 | |||||||
Amounts recognized in the Balance Sheet | ||||||||
Current Liabilities | (166 | ) | (57 | ) | ||||
Amounts recognized in other accumulated comprehensive earnings | ||||||||
Net actuarial loss (gain) | 107 | (2 | ) | |||||
Prior service cost (credit) | 0 | |||||||
Total net periodic benefit cost | 107 | (2 | ) |
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
The following table presents the components of net periodic benefit cost and other comprehensive earnings for Group AG’s pension plan.
Pension Benefits in KUSD | ||||||||
12/31/12 | 12/31/2011 | |||||||
Net periodic benefit cost: | ||||||||
Service cost | 0 | 0 | ||||||
Interest cost | 9 | 8 | ||||||
Recognition of net actuarial loss (gain) | 102 | (4 | ) | |||||
Recognition of prior service cost | ||||||||
Total net periodic benefit cost | 111 | 4 | ||||||
Other comprehensive earnings: | ||||||||
Actuarial (gain) loss arising in current year | (4 | ) | (6 | ) | ||||
Prior service costs (credit) arising in current year | 0 | 0 | ||||||
Recognition of net actuarial loss (gain) | 0 | 0 | ||||||
Recognition of prior service cost | 0 | 0 | ||||||
Benefit Obligation at end of year | (4 | ) | (6 | ) | ||||
Total recognized | 107 | (2 | ) |
Assumptions:
The following table presents the weighted average actuarial assumptions that were used to determine benefit obligations and net periodic benefit costs for both pension plans.
Pension Benefits | ||||||||||||
12/31/12 | 2012 | 2011 | ||||||||||
Assumption to determine benefit obligations: | ||||||||||||
Discount rate | 3.4 | % | 5.9 | % | 5.7 | % | ||||||
Rate of compensation increase | 1 | % | 1 | % | N/A | |||||||
Assumptions to determine net periodic benefit cost: | ||||||||||||
Discount rate | 6.0 | % | 6.0 | % | 6.0 | % | ||||||
Expected return on plan assets | N/A | N/A | N/A | |||||||||
Rate of compensation increase | N/A | N/A | N/A |
Discount rate - Future pension obligations are discounted at the end of each year based on the rate at which obligations could be effectively settled, considering the timing of estimated future cash flows related to the plans. This rate is based on high-quality bond yields, after allowing for call and default risk. High quality corporate bond yield indices are considered when selecting the discount rate.
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
Rate of compensation increase - the expected DBO for end of 2012/ 2013 is estimated to increase from $150 KUSD in 2011/ 2012 to $172 KUSD. The expected increase of the assets is estimated end of 2012/ 2013 by $5 KUSD
Expected return on plan assets - the expected rate of return on plan assets was determined by evaluating input from external consultants and economists as well as long-term inflation assumptions. The Company expects the long-term asset allocation to approximate the targeted allocation. Therefore, the expected long-term rate of return on plan assets is based on the target allocation of investment types in such assets. See plan assets discussion below for more information on GROUP AG’s target allocations.
Pension Plan Assets
GROUP AG’s overall investment objective for its pension plans’ is to eliminate further risks. Therefore, all permitted benefits are reinsurance. In total, the benefits from the permitted pension correspond to the benefits of the reinsurances which have been signed for these pension promises.
2. GBS India includes gratuity obligations representing a government mandated obligation to provide employees with 15 days of wages for every year worked. Obligations are paid when the employee retires or resigns from the company and payable only if employees serve at least five years of employment with the Company.
Details of the provision for gratuity which is included within Accrued Liabilities:
Description | 2012 | |||
Defined benefit obligation | ||||
Fair value of plan assets | - | |||
Less: Unrecognized past service cost | - | |||
Plan Liability (adjusted from operating revenue/retained earnings) |
Changes in present value of the defined benefit obligation are as follows:
Description | 2012 | |||
Defined benefit obligation as at April 1 | ||||
Interest cost | ||||
Current service cost | ||||
Benefits paid | ||||
Actuarial (gain) loss on obligation | ||||
Defined benefit obligation as at December 31 |
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
No fund is created for payment of gratuity and leave wages and the Company would pay the same amount out of its own funds as and when the same becomes payable.
Employee benefits towards compensated absences recognized in the profit and loss accounts are as follows:
Description | 2012 | |||
Current service cost | ||||
Interest cost |
3. GBS Corporation maintains a defined contribution 401(k) plan (“Qualified Plans”) for the benefit of the employees of GBS Corporation and Permessa Corporation. Contributions are made at the discretion of the participating employees. No obligation exists for employer contributions ..
Note 29 | Discontinued Operations |
Discontinued operations and their results of operations, financial position and cash flows are shown separately for all periods presented. Summarized financial information for discontinued operations is set forth below:
Revenues $300,632 $1,470,357 $3,052,716
Cost of Sales $453,157, $1,269,440 $2,076,599
Expenses $60,931 $1,314,358 $1,275,896
Net loss $(213,456) $(1,113,441) $(299,779)
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
Note 30 | COMMITMENTS |
The Company has the following commitments as at December 31, 2012:
Financial Obligations | Amount for Next 12 Months | Amount Exceeding 12 Months | Total | |||||||||
1/1/2013 to 12/31/2013 | 1/1/2014 & On | Commitments | ||||||||||
($) | ($) | ($) | ||||||||||
Total Liabilities from Rental Agreements | 926,947.15 | 994,845.02 | 1,921,792.17 | |||||||||
Obligations from Vehicle Lease Agreements | 167,437.69 | 66,568.23 | 234,005.92 | |||||||||
Obligations from Other Lease Agreements | 163,694.67 | 154,231.11 | 317,925.79 | |||||||||
Obligations started after 12/31/12 | - | - | - | |||||||||
Total Financial Obligations | 1,258,079.51 | 1,215,644.37 | 2,473,723.88 |
Cash Outlay | ||||
For the fiscal year: | Total | |||
1/1/2012 - 12/31/2012 | ($) | |||
Interest Expense: | 157,719.13 | |||
Corporate Income Taxes: | 30,598.58 | |||
Corporate Taxes Recovered (Refunds): | 12,156.22 | |||
Total Cash Outlay | 176,161.49 |
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
Note 31 | SUPPLEMENTAL CASH FLOW DISCLOSURES |
The significant non-cash transactions for the year ended December 31, 2012 and 2011 were as follows:
a. | 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. |
b. | 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. |
c. | 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. |
d. | On September 27, 2011, the Company acquired SD Holdings Ltd for $525,529 and issued 612,874 shares of Common Stock. |
e. | 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. |
f. | 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. |
g. | 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. |
Note 32 | SUBSEQUENT EVENTS |
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 Agreement, we sold 100% of the issued and outstanding capital stock of IDC to GTT for a purchase price of $4,600,000 (the “Purchase Price”), subject to certain holdback provisions, including a holdback of $217,477.86 for accounts receivable and which is to be paid by GTT to GBS within one business day of IDC receiving such payment, $334,000 for GroupLive liabilities and liens on IDC which is to be paid by GTT to GBS within three business days that GTT is reasonably satisfied that such liabilities and liens have been removed, less any amounts up to $125,000 which GTT or IDC is required to pay to either satisfy the obligations or purchase replacement equipment; and $528,777.93 for an outstanding dispute which is to be paid by GTT to GBS within three days that GTT is reasonably satisfied has been resolved, subject however to a term of 18 months from the closing date or, if after 18 months, the holdback is used to offset any indemnifications by GBS under the 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.
Notes to the Consolidated Annual Financial Statements
December 31, 2012
GBS Enterprises Incorporated
(Audited)
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.
Note 33 | COMPARATIVE STATEMENTS |
In certain circumstances, the classification of accounts previously presented in 2011 has been changed to conform to the presentation used in 2012.
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 Annual Report on Form 10-K/A (Amendment No. 1) for the fiscal year ended December 31, 2012 of GBS Enterprises Incorporated (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 14, 2013
/s/ Gary D. MacDonald | |
Gary D. MacDonald | |
Interim Chief Executive Officer (Principal Executive Officer) |
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 Annual Report on Form 10-K/A (Amendment No. 1) for the fiscal year ended December 31, 2012 of GBS Enterprises Incorporated (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 14, 2013
/s/ Markus R. Ernst | |
Markus R. Ernst | |
Chief Financial Officer | |
(Principal Financial and Accounting Officer) |
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 Annual Report on Form 10-K/A (Amendment No. 1) of GBS Enterprises Incorporated for the fiscal year ended December 31, 2012 (the “Report”) 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 Report fairly presents, in all material respects, the financial condition and results of operations of GBS Enterprises Incorporated. |
Date: June 14, 2013 | /s/ Gary D. MacDonald | |
Gary D. MacDonald | ||
Interim Chief Executive Officer | ||
(Principal Executive Officer) |
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 Annual Report on Form 10-K/A (Amendment No. 1) of GBS Enterprises Incorporated for the fiscal year ended December 31, 2012 (the “Report”) 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 Report fairly presents, in all material respects, the financial condition and results of operations of GBS Enterprises Incorporated. |
Date: June 14, 2013 | /s/ Markus R. Ernst | |
Markus R. Ernst | ||
Chief Financial Officer | ||
(Principal Financial and Accounting Officer) |