Trunkbow Announces First Quarter 2013 Financial Results

BEIJING, May 15, 2013 /PRNewswire/ -- Trunkbow International Holdings Limited (NASDAQ: TBOW) ("Trunkbow" or the "Company"), a leading provider of Mobile Payment Solutions ("MPS") and Mobile Value Added Services ("MVAS") in the PRC, today announced financial results for the first quarter ended March 31, 2013.

First Quarter 2013 Financial Highlights

• Gross revenues were $1.1 million, compared with $6.8 million in the first quarter of 2012.
  • MPS gross revenues for the quarter were $0.9 million, compared with $4.4 million in the first quarter of 2012.
  • MVAS gross revenues declined to $0.2 million, compared with $2.4 million a year ago.
• Gross profit for the quarter was $0.2 million, compared with $5.3 million in the first quarter of 2012.
• First quarter 2013 gross margin was 22.6%.

First Quarter 2013 and Recent Business Highlights

• Signed approximately ten new merchants for implementation of the Trunkbow-UnionPay mobile applet system in the first quarter, increasing the total merchant base to 150.
• The Company estimates nearly 20 mobile apps incorporating the technology are currently available to iOS and Android smartphone users.
• Began marketing of cloud-based MPS services to small- and medium-sized businesses.
• Continued the construction and began management and operation a cloud data center in Guangzhou. The Company expects to begin offering hosted services through this data center in the second quarter of 2013.
• Continued the construction of a cloud data center in Shanghai. The Company expects to begin offering hosted services through this data center in late 2013.

To date, no decisions have been made with respect to the Company's response to the going-private proposal previously announced on November 2, 2012. There can be no assurance that any definitive offer will be made, that any agreement will be executed or that this or any other transaction will be approved or consummated. The Company will provide relevant updates with respect to the going private transaction or any other transaction as appropriate.

First Quarter 2013 Results

Gross revenue in the first quarter of 2013 was $1.1 million, compared with gross revenue of $6.8 million in the same period a year ago. The decline in gross revenue was primarily attributable to reduced demand for the Company's platform solutions in the first quarter of 2013. Revenue from MVAS declined to $0.2 million, from $2.4 million for the first quarter of 2012, primarily as a result of a reduction in sales of the Company's mobile newspaper, business operator and SMS/phone-call management offerings. Revenue from the Company's MPS offerings totaled $0.9 million, compared with $4.4 million for the first quarter of 2012. The decline in MPS revenue was attributable to reduction of the MPS software sales.

Cost of revenue in the fourth quarter of 2012 was $0.8 million, compared with $1.3 million in the same period of 2012. The decrease in cost of revenue was primarily attributed to the decline in revenue compared to the first quarter of 2012.

Gross profit in the first quarter of 2013 totaled $0.2 million, compared with $5.3 million in the first quarter of 2012. As a percentage of net revenue, gross margin was 22.6% in the first quarter of 2013, compared with 80.0% in the year-ago period. The year-over-year decline in gross margin was attributable to a significant increase in the proportion of revenue from system integration, which involves significantly higher hardware costs.

Operating expenses in the first quarter of 2013 were $2.4 million, compared with $2.7 million in the first quarter of 2012. The decrease in operating expenses was primarily attributable to a reduction in selling and distribution expenses related to lower marketing and advertising activity.

Operating loss in the first quarter of 2013 was $(2.2) million, compared with operating income of $2.6 million reported in the same period last year.

Net loss attributable to Trunkbow was $(1.5) million in the first quarter of 2013, compared with net income of $2.2 million in the first quarter of 2012. Earnings (loss) per basic and diluted share in the first quarter of 2013 were $(0.04) each, based on basic and diluted shares outstanding of 36.8 million. This compares with $0.06 per basic and diluted share, based on basic and diluted shares outstanding of 36.8 million in the year-ago period.

Balance Sheet and Cash Flow

As of March 31, 2013, the Company had $0.3 million in cash and cash equivalents, compared with $0.8 million as of December 31, 2012. As of March 31, 2013, the Company had working capital of $49.1 million and total shareholders' equity of $94.4 million.Accounts receivable on March 31, 2013 totaled approximately $43.1 million. As of May 14, 2013, the Company had collected approximately $0.6 million of these outstanding receivables.

Conference Call

The Company will host a conference call to discuss financial results for the first quarter ended March 31, 2013 on May 16, 2013 at 8:00 a.m. EDT. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: [phone]. International callers should dial [phone]. The passcode required is 72743753.

If you are unable to participate in the call at this time, a replay will be available for 14 days starting on May 16, 2013. To access the replay, please dial [phone], international callers dial [phone], and enter the passcode 72743753.

About Trunkbow

Trunkbow International Holdings (NASDAQ: TBOW) is a leading provider of Mobile Payment Solutions ("MPS") and Mobile Value Added Solutions ("MVAS") in PRC. Trunkbow's solutions enable the telecom operators to offer their subscribers access to unique mobile applications, innovative tools, value-added services that create a superior mobile experience, and as a result generate higher average revenue per user and reduce subscriber churn. Since its inception in 2001, Trunkbow has established a proven track record of innovation, and has developed a significant market presence in both the Mobile Value Added and Mobile Payment solutions markets. Trunkbow supplies its mobile payment solutions to all three Chinese mobile telecom operators, as well as re-sellers, in several provinces of China. For more information, please visit www.trunkbow.com.

Safe Harbor Statement

This press release contains forward-looking statements that reflect the Company's current expectations and views of future events that involve known and unknown risks, uncertainties and other factors that may cause its actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such forward looking statements involve known and unknown risks and uncertainties, including but not limited to uncertainties relating to the Company's relationship with China's major telecom carriers and its resellers, status of its pending "go-private" transaction, competition from domestic and international companies, changes in technology, contributions from revenue sharing plans and general economic conditions. The Company has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy and financial needs. The results the Company is providing today are preliminary and unaudited and are subject to the conclusion of the audit of our financial statements, and could differ materially from the results disclosed today. Information regarding these risks, uncertainties and other factors is included in the Company's annual report on Form 10-K and other filings with the SEC.

Contact Information
In China:	In the U.S.
Trunkbow International Holdings Limited	The Piacente Group
Ms Alice Ye, Chief Financial Officer	Brandi Floberg / Lee Roth
Phone: [phone] (Beijing)	Phone: + (1) 212-481-2050 (New York)
Email: [e-mail]	E-mail: [e-mail]

- FINANCIAL TABLES FOLLOW -

TRUNKBOW INTERNATIONAL HOLDINGS LIMITED AND SUBSIDIARIES UNAUDITEDCONSOLIDATED BALANCE SHEETS
	March 31,			December31,
	2013			2012
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents*	$	331,337		$	783,074
Accounts receivable, net*		43,109,334			46,896,214
Advances to suppliers, net		16,615,308			12,478,788
Prepayments		448,246			496,372
Other current assets*		9,249,560			7,996,644
Due from directors*		34,513			9,350
Inventories*		6,067,664			5,673,179
Deferred tax asset		1,116,320			942,028
Total current assets		76,972,282			75,275,649
Property and equipment, net*		40,388,353			39,929,472
Land use right, net		5,833,378			5,831,641
Intangible assets, net		268,848			271,894
Long-term prepayment*		332,936			368,985
TOTAL ASSETS	$	123,795,797		$	121,677,641
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable*	$	2,707,052		$	2,655,395
Accrued expenses and other current liabilities*		3,886,217			3,983,227
Short-term loan		15,938,541			11,175,196
Due to directors*		6,409			106,141
Taxes payable*		5,318,102			6,857,978
Total current liabilities		27,856,321			24,777,937
Deferred revenue		1,514,161			1,505,881
Total liabilities		29,370,482			26,283,818
COMMITMENTS AND CONTINGENCIES
Stockholders' equity
Preferred Stock: par value $0.001, authorized 10,000,000 shares, none issued and outstanding at March 31, 2013 and December 31, 2012, respectively		0			0
Common Stock: par value $0.001, authorized 190,000,000 shares, 36,807,075 shares issued and outstanding at March 31, 2013 and December 31, 2012, respectively		36,807			36,807
Additional paid-in capital		39,671,966			39,671,966
Appropriated retained earnings		6,461,938			6,461,938
Unappropriated retained earnings		44,260,746			45,713,187
Accumulated other comprehensive income		3,993,858			3,509,925
Total stockholders' equity		94,425,315			95,393,823
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	123,795,797		$	121,677,641

TRUNKBOW INTERNATIONAL HOLDINGS LIMITED AND SUBSIDIARIES UNAUDITEDCONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
	Three Months Ended March 31,
	2013			2012
	(Unaudited)			(Unaudited)
Revenues	$	1,083,000		$	6,798,213
Less: Business tax and surcharges		39,850			116,551
Net revenues		1,043,150			6,681,662
Cost of revenues		807,297			1,339,336
Gross profit		235,853			5,342,326
Operating expenses
Selling and distribution expenses		656,060			1,025,022
General and administrative expenses		1,328,315			1,160,671
Research and development expenses		408,255			550,862
		2,392,630			2,736,555
(Loss) income from operations		(2,156,777)			2,605,771
Other income (expenses)
Interest income		1,701			55,632
Interest expense		(223,681)			(179,009)
Refund of value-added tax		717,217			0
Government grants		79,632			39,627
Other income		0			15,851
Other expenses		(39,449)			(10,811)
		535,420			(78,710)
(Loss) income before income tax		(1,621,357)			2,527,061
Income tax (benefit) expense		(168,916)			320,572
Net (loss) income		(1,452,441)			2,206,489
Foreign currency translation fluctuation		483,933			459,452
Comprehensive (loss) income	$	(968,508)		$	2,665,941
Weighted average number of common shares outstanding
Basic		36,807,075			36,807,075
Diluted		36,807,075			36,827,585
Net (loss) income per share
Basic	$	(0.04)		$	0.06
Diluted	$	(0.04)		$	0.06

TRUNKBOW INTERNATIONAL HOLDINGS LIMITED AND SUBSIDIARIES UNAUDITEDCONSOLIDATED STATEMENTS OF CASH FLOWS
	Three Months Ended March 31,
	2013			2012
	(Unaudited)			(Unaudited)
Cashflowsfromoperatingactivities
Net (loss) income	$	(1,452,441)		$	2,206,489
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization		225,500			112,853
Changes in operating assets and liabilities:
Accounts receivable		4,040,052			(855,358)
Advances to suppliers		(4,063,174)			1,429,898
Prepayments		50,796			(1,832,754)
Other current assets		18,304			(1,774,648)
Due from directors		(25,083)			185,315
Inventories		(362,867)			(925,047)
Long-term prepayment		38,033			1,960,778
Deferred tax assets		(168,916)			0
Accounts payable		37,012			(1,059,130)
Accrued expenses and other current liabilities		380,643			68,388
Amounts due to directors		(100,199)			(12,054)
Taxes payable		(1,575,752)			(998,076)
Net cash flows used in operating activities		(2,958,092)			(1,493,346)
Cash flows from investing activities
Acquisition of property and equipment and intangible assets		(431,384)			(1,048,584)
Collection on loans to third parties		557,201			0
Payment on loans to third parties		(1,783,042)			(1,109,561)
Net cash flows used in investing activities		(1,657,225)			(2,158,145)
Cash flows from financing activities
Proceeds from bank loans		8,190,875			3,601,015
Repayment of bank loans		(3,494,444)			0
Repayment of loans from third parties		(499,419)			0
Net cash flows provided by financing activities		4,197,012			3,601,015
Effect of exchange rate fluctuation on cash and cash equivalents		(33,432)			(17,742)
Net decrease in cash and cash equivalents		(451,737)			(68,218)
Cash and cash equivalents-beginning of the year		783,074			6,139,589
Cash and cash equivalents-end of the period	$	331,337		$	6,071,371
Supplemental disclosure of cash flow information
Cash paid for interest	$	99,374		$	179,009
Cash paid for income taxes	$	138,923		$	320,572

SOURCE Trunkbow International Holdings Limited