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Trunkbow Announces Fourth Quarter and Full Year 2011 Financial Results

BEIJING, March 30, 2012 /PRNewswire-Asia/ -- 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 People's Republic of China, today announced financial results for its fourth quarter and full year ended December 31, 2011.

Full Year 2011 Financial Highlights

    --  Gross revenue increased 19.6% year-over-year to $29.7 million, compared
        with $24.8 million in 2010.
        --  MVAS gross revenue grew 37.7% to $17.4 million
        --  MPS gross revenue grew 0.8% to $12.3 million
    --  Gross profit increased 17.9% year-over-year to $22.9 million, compared
        with $19.5 million in 2010.
    --  Net income increased 25.1% year-over-year to $16.9 million, or $0.47 per
        diluted share. This compared with net income of $13.5 million, or $0.44
        per diluted share, in 2010.
    --  As of December 31, 2011, cash and cash equivalents totaled $6.1 million,
        compared with $10.3 million as of December 31, 2010.
    --  Introduced full-year 2012 guidance of approximately $23 million in net
        income, representing 36% growth compared with 2011.

Fourth Quarter 2011 Financial Highlights

    --  Gross revenue was $9.7 million, compared with $13.9 million in the
        fourth quarter of 2010.
        --  MPS gross revenue increased to $8.2 million, compared with $7.0
            million in the fourth quarter of 2010.
        --  MVAS gross revenue totaled $1.5 million, compared with $6.9 million
            a year ago.
    --  While gross profit decreased 17.5% year-over-year to $8.3 million, from
        $10.1 million in the fourth quarter of 2010, gross margin improved to
        86.7%, compared with 73.6% in the fourth quarter of 2010.

2011 and Recent Business Highlights

    --  Partnered with China UnionPay, China's leading bankcard association, to
        launch the Trunkbow UnionPay mobile payment applet, enabling simple,
        secure M-commerce transactions through China's largest financial
        clearing house.
    --  Extended partnership with China UnionPay to develop and deploy new
        online-to-offline payment system.
    --  Launched first MPS platform with China Mobile in Hebei Province.
    --  Expanded presence with China Unicom through installation of an MPS
        platform in Hubei Province, increasing total penetration through this
        carrier to ten provinces.
    --  Entered strategic partnership with China Telecom for nationwide rollout
        of Bestpay MPS application to the carrier's 28 million 3G subscribers.
    --  Signed agreement with group of online retailers to enable the purchase
        of movie tickets at over 270 theaters using the Bestpay application.

"2011 began with our initial public offering on the Nasdaq, and throughout the year we made progress against our key strategic growth objectives while generating record full-year revenue, gross profit and net income. We significantly expanded our geographic presence with wireless carriers, finishing the year with 27 platform installations in 19 provinces nationwide and signed two important software partnerships, with China Telecom and China UnionPay, which will greatly increase our subscriber penetration and position us well to ramp our merchant acquisition efforts in the new year," said Mr. Qiang Li, Chief Executive Officer of Trunkbow." Through the end of 2011, approximately 1 million mobile users had made a purchase using our physical Point-of-Sale or software-based MPS technology, a number that we expect to increase dramatically in 2012 as we continue to grow our merchant network through new POS terminal installations and application partnerships.

"We believe that MPS adoption presents a compelling value proposition for merchants both online and off-line, and is an important tool that can be used for customer engagement and to improve the overall purchasing experience. By integrating features such as loyalty and rewards programs, location-based services, mobile couponing and handset-based alerts, we believe that MPS can simplify consumers' lives while helping merchants attract new shoppers and retain existing customers. We expect that the recurring revenue generated by the shift in our MPS business will provide a solid foundation for our expected 20% top-line growth in 2012. We are well positioned to build upon our leadership position in the world's largest mobile phone market, not only growing our business, but helping drive the growth of this emerging industry."

Fourth Quarter 2011 Results

Gross revenue in the fourth quarter of 2011 was $9.7 million, compared with gross revenue of $13.9 million in the same period a year ago. Revenue from MPS increased to $8.2 million in the fourth quarter of 2011, compared with $7.0 million in the year-ago period. The increase in MPS revenue was primarily related to the continued rollout of mobile payment platforms in new provinces. Revenue from the Company's MVAS offering totaled $1.5 million, compared with $6.9 million in the fourth quarter of 2010. The year-over-year decline in revenue was primarily attributable to reduced customer demand in the fourth quarter of 2011.

Cost of revenue in the fourth quarter of 2011 was $1.3 million, compared with $3.6 million in the same period of 2010. The decrease in cost of revenue was primarily attributed to the decrease in MVAS gross sales.

Gross profit in the fourth quarter of 2011 totaled $8.3 million, compared with $10.1 million in the fourth quarter of 2010. As a percentage of gross revenue, gross margin was 86.7% in the fourth quarter of 2011, compared with 73.6% in the year-ago period. The increase in gross margin was primarily attributable to increased profitability associated with the Company's MPS software sales.

Operating expenses in the fourth quarter of 2011 were $4.4 million, compared with $1.9 million in the fourth quarter of 2010, with the increase driven primarily by increased selling expenses to support the Company's direct sales and merchant acquisition efforts, as well as increased general and administrative expenses related to being a US public company. Operating expenses in the fourth quarter of 2011 also included $0.9 million of general and administrative expenses related to a provision for doubtful debts.

Operating income in the fourth quarter of 2011 was $3.9 million, compared with $8.2 million reported in the year-ago period. The decrease in operating income for the quarter was primarily related to the decrease in revenue associated with MVAS and the increased operating expenses including the abovementioned provision for doubtful debts, partially offset by gross margin improvement.

Net income attributable to Trunkbow was $4.8 million in the fourth quarter of 2011, a decrease of 41.5% from the comparable period in 2010. Net margin was 50.1% in the fourth quarter of 2011, compared with 60.0% in the fourth quarter of 2010. Earnings per diluted share in the fourth quarter of 2011 were $0.13 compared to $0.25 per diluted share in the year-ago period.

Balance Sheet and Cash Flow

As of December 31, 2011, the Company had $6.1 million in cash and cash equivalents, compared with $10.3 million as of December 31, 2010. The decrease in cash and cash equivalents was primarily due to increases in inventories, accounts receivable, advances to suppliers, property and equipment, and land use rights, partially offset by the proceeds from the Company's initial public offering completed in February 2011. As of December 31, 2011, the Company had working capital of $62.0 million and total shareholders' equity of $82.2 million. Accounts receivable on December 31, 2011 totaled approximately $41.1 million. As of March 30, 2012, the Company had collected approximately $5.7 million of these outstanding receivables.

Business Outlook

Trunkbow introduced 2012 financial guidance, which calls for approximately $23 million in net income, representing 36% growth over 2011. The Company expects that this growth will be largely the result of the continued expansion of the MPS and MVAS markets, as it develops its merchant network, broadens its presence in new provinces, increases its penetration within China's leading mobile carriers and launches its technology in strategically targeted international markets.

Mr. Li concluded, "Our accomplishments in 2011 included strong double-digit growth across each of our key operating metrics. Looking ahead, as we execute on our merchant acquisition strategy and shift the mix of MPS sales form one-time system installations toward a recurring revenue model driven by function fees and transaction-based revenue, we expect to see greater top-line stability and a steadier revenue ramp. Mobile phones are already an integral part of consumers' lives, and their importance is increasing every day through enhancements and the addition of new functionalities. One such functionality is the use of the handset as a payment method, something that Chinese consumers are just beginning to adopt. We expect to see rapid growth in end-user uptake as more merchants implement MPS to give their customers a new, simple and secure payment alternative. Through our partnerships with China's three mobile carriers and its dominant financial clearing house, our technological leadership and concentrated growth strategy, Trunkbow is poised to lead the MPS revolution in China, and we look forward to the opportunities that lie ahead."

Conference Call

The Company will host a conference call to discuss financial results for the fourth quarter and full year 2011 on March 30, 2012, at 10:00 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: +1 (718) 354-1231. International callers should dial +65 6723-9381. The pass code required is 22600413. A live webcast of the conference call will be available on the investor relations section of Trunkbow's website at http://www.trunkbow.com, and will be archived for a period of one year.

If you are unable to participate in the call, a replay will be available for 14 days beginning approximately two hours after the conclusion of the live call. To access the replay, please dial +1 (718) 354-1232, international callers dial +61 (2) 8235-5000, and enter the passcode 62605401.

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 to all three Chinese mobile telecom operators, as well as re-sellers, in several provinces of China. For additional information please visit http://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, 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. You should understand that the Company's actual future results may be materially different from and worse than what the Company expects. 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.

Contacts:

    In China:                               In the U.S.
    Trunkbow International Holdings Limited The Piacente Group
    Ms. Alice Ye, Chief Financial Officer   Brandi Floberg/Lee Roth
    Phone: +86 (10) 8571-2518 (Beijing)     Phone: + (1) 212-481-2050 (New York)
    Email: ir@trunkbow.com                  E-mail: trunkbow@tpg-ir.com

    The Piacente Group
    Wendy Sun
    Phone: +86 (10) 6590-7991 (Beijing)
    E-mail: trunkbow@tpg-ir.com

-Financial Tables Follow-

                           TRUNKBOW INTERNATIONAL HOLDINGS LIMITED AND SUBSIDIARIES
                                         CONSOLIDATED BALANCE SHEETS



                                                                      December 31,
                                                                      ------------
                                                           2011                     2010
                                                           ----                     ----
    ASSETS
    Current assets
    Cash and cash
     equivalents                                                  $6,139,589             $10,259,750
    Restricted deposit                                                     0                 362,987
    Accounts receivable                                           41,147,767              25,658,184
    Advances to suppliers                                         13,270,125               6,881,368
    Prepaid expenses                                                 316,258                 694,774
    Other current assets,
     net                                                           4,040,152               3,205,394
    Due from directors                                               758,033                  79,256
    Inventories                                                   11,297,513               3,681,450
    Deferred tax asset                                               117,952                       0
                                                                     -------                     ---
    Total current assets                                          77,087,389              50,823,163
    Property and
     equipment, net                                               11,561,034                 483,376
    Land use right, net                                            5,905,583                       0
    Intangible assets, net                                            33,958                   1,385
    Long-term prepayment                                           2,733,363                 358,397
                                                                   ---------                 -------
    TOTAL ASSETS                                                 $97,321,327             $51,666,321
                                                                 ===========             ===========
    LIABILITIES AND
     STOCKHOLDERS' EQUITY
    Current liabilities
    Accounts payable                                              $2,238,179                $853,762
    Accrued expenses and
     other current
     liabilities                                                   2,216,128                 593,846
    Short-term loan                                                6,460,945               1,814,937
    Due to directors                                                  11,959                       0
    Taxes payable                                                  4,209,907               3,718,963
                                                                   ---------               ---------
    Total current
     liabilities                                                  15,137,118               6,981,508
    Other non-current
     liabilities                                                           0                 138,767
                                                                         ---                 -------
    Total liabilities                                             15,137,118               7,120,275
                                                                  ----------               ---------
    COMMITMENTS AND
     CONTINGENCIES
    STOCKHOLDERS' EQUITY
    Preferred Stock: par
     value USD0.001,
     authorized 10,000,000                                                 0                       0
    shares, none issued
     and outstanding at
     December 31, 2011 and
     2010
    Common Stock: par
     value USD0.001,
     authorized
     190,000,000                                                      36,807                  32,472
    shares, issued and
     outstanding
     36,807,075 shares at
     December 31,
    2011 and 32,472,075 at
     December 31, 2010
    Additional paid-in
     capital                                                      39,671,966              21,384,050
    Appropriated retained
     earnings                                                      4,504,667               2,428,847
    Unappropriated
     retained earnings                                            34,989,429              20,125,001
    Accumulated other
     comprehensive income                                          2,981,340                 575,676
                                                                   ---------                 -------
    Total stockholders'
     equity                                                       82,184,209              44,546,046
                                                                  ----------              ----------
    TOTAL LIABILITIES AND
     STOCKHOLDERS' EQUITY                                        $97,321,327             $51,666,321
                                                                 ===========             ===========

                                              TRUNKBOW INTERNATIONAL HOLDINGS LIMITED AND SUBSIDIARIES
                                             CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

                                                                  Three Months Ended December 31,          Years Ended December 31,
                                                                  -------------------------------          ------------------------
                                                                      2011                       2010          2011                  2010
                                                                      ----                       ----          ----                  ----
                                                               (Unaudited)                (Unaudited)    (Audited)             (Audited)
    Revenues                                                                  $9,731,237                $13,944,715                       $29,715,407  $24,843,836
    Less: Business tax and surcharges                                            165,733                    285,479                           638,377      455,919
                                                                                 -------                    -------                           -------      -------
    Net revenues                                                               9,565,504                 13,659,236                        29,077,030   24,387,917
    Cost of revenues                                                           1,271,549                  3,603,620                         6,130,071    4,929,974
                                                                               ---------                  ---------                         ---------    ---------
    Gross profit                                                               8,293,955                 10,055,616                        22,946,959   19,457,943
                                                                               ---------                 ----------                        ----------   ----------
    Operating expenses
    Selling and distribution expenses                                            676,610                    543,336                         2,344,993    1,412,499
    General and administrative expenses                                        3,326,555                    837,393                         7,944,055    3,075,833
    Research and development expenses                                            407,612                    470,673                         1,434,525    1,203,264
                                                                                 -------                    -------                         ---------    ---------
                                                                               4,410,777                  1,851,402                        11,723,573    5,691,596
                                                                               ---------                  ---------                        ----------    ---------
    Income from operations                                                     3,883,178                  8,204,214                        11,223,386   13,766,347
                                                                               ---------                  ---------                        ----------   ----------
    Other income (expenses)
    Interest income                                                                5,193                     19,998                           107,467       37,204
    Interest expense                                                             (35,775)                   (30,741)                          (87,005)    (220,668)
    Refund of value-added tax                                                    804,627                          -                         2,112,463            -
    Government grants                                                            911,552                          -                         5,651,686            -
    Other Income                                                                 (71,947)                    77,736                             7,890       78,176
    Other expenses                                                                13,935                    (81,252)                         (117,024)    (120,174)
                                                                                  ------                    -------                          --------     --------
                                                                               1,627,585                    (14,259)                        7,675,477     (225,462)
                                                                               ---------                    -------                         ---------     --------
    Income before income tax expense                                           5,510,763                  8,189,955                        18,898,863   13,540,885
    Income tax expense                                                           717,043                     (2,276)                        1,958,615            -
                                                                                 -------                     ------                         ---------          ---
    Net income                                                                 4,793,720                  8,192,231                        16,940,248   13,540,885
    Foreign currency translation fluctuation                                     620,769                    751,424                         2,405,664    1,170,811
                                                                                 -------                    -------                         ---------    ---------
    Comprehensive income                                                      $5,414,489                 $8,943,655                       $19,345,912  $14,711,696
                                                                              ==========                 ==========                       ===========  ===========
    Weighted average number of common
    shares outstanding
    Basic                                                                     36,807,075                 32,472,075                        36,263,911   31,022,002
                                                                              ==========                 ==========                        ==========   ==========
    Diluted                                                                   36,974,086                 32,472,075                        37,163,690   31,022,002
                                                                              ==========                 ==========                        ==========   ==========
    Earnings per share
    Basic                                                                          $0.13                      $0.25                             $0.47        $0.44
                                                                                   =====                      =====                             =====        =====
    Diluted                                                                        $0.13                      $0.25                             $0.46        $0.44
                                                                                   =====                      =====                             =====        =====

      TRUNKBOW INTERNATIONAL HOLDINGS LIMITED AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS
                                                           Years Ended December 31,
                                                           ------------------------
                                                           2011                    2010
                                                           ----                    ----
    Cash flows from
     operating activities
    Net income                                                    $16,940,248                        $13,540,885
    Adjustments to
     reconcile net income
     to net cash used in
     operating activities:
    Depreciation and
     amortization                                                     323,671                             93,135
    Provision for doubtful
     debt                                                             928,218                                  0
    Share-based
     compensation expenses                                            350,000                                  0
    Changes in operating
     assets and
     liabilities:
    Accounts receivable                                          (15,159,545)                       (14,480,828)
    Advance to suppliers                                           (6,014,830)                        (6,704,245)
    Prepaid expenses                                                  399,563                           (433,865)
    Other current assets,
     net                                                             (795,636)                           768,351
    Due from directors                                               (664,592)                                 0
    Inventories                                                    (7,347,497)                        (3,280,951)
    Deferred tax asset                                               (116,027)                                 0
    Long-term prepayment                                           (2,322,161)                          (784,576)
    Accounts payable                                                1,328,366                            498,222
    Accrued expenses and
     other current
     liabilities                                                    1,572,534                            118,273
    Other non-current
     liabilities                                                     (141,940)                                 0
    Amount due to
     directors                                                         11,764                            (24,641)
    Taxes payable                                                     337,200                          2,052,307
                                                                      -------                          ---------
    Net cash flows used in
     operating activities                                        (10,370,664)                         (8,637,933)
                                                                  -----------                         ----------
    Cash flows from
     investing activities
    Acquisition of
     property and
     equipment                                                   (11,124,679)                           (449,169)
    Acquisition of land
     use right                                                     (5,877,870)                                 0
    Collection on loans to
     third parties                                                  2,884,763                         (2,579,165)
    Payment on loans to
     third parties                                                 (2,784,653)                                 0
    Collection on amount
     due from directors                                                     0                          2,028,869
    Acquisition of
     Delixunda Company
     (net of cash
     acquired)                                                        (40,223)                                 0
                                                                      -------                                ---
    Net cash flows used in
     investing activities                                        (16,942,662)                           (999,465)
                                                                  -----------                           --------
    Cash flows from
     financing activities
    Collection (payment)
     on restricted deposit                                            371,287                           (362,987)
    Proceeds from issuance
     of common stock (net
     of finance costs)                                             17,332,251                         17,073,720
    Repayment of loans
     from third parties                                                     0                           (147,520)
    Repayment of
     contingently
     convertible notes                                                      0                         (2,000,000)
    Proceeds from exercise
     of warrants                                                      610,000                                  0
    Repayment of short-
     term loan                                                     (1,856,436)                                 0
    Proceeds from short-
     term loan                                                      6,355,495                          1,770,238
                                                                    ---------                          ---------
    Net cash flows
     provided by financing
     activities                                                    22,812,597                         16,333,451
                                                                   ----------                         ----------
    Effect of exchange
     rate fluctuation on
     cash and cash
     equivalents                                                      380,568                            258,224
                                                                      -------                            -------
    Net increase
     (decrease) in cash
     and cash equivalents                                          (4,120,161)                         6,954,277
    Cash and cash
     equivalents -
     beginning of the year                                         10,259,750                          3,305,473
                                                                   ----------                          ---------
    Cash and cash
     equivalents - end of
     the year                                                      $6,139,589                        $10,259,750
                                                                   ==========                        ===========
    Supplemental
     disclosure of cash
     flow information
    Cash paid for interest                                            $74,332                           $220,668
                                                                      =======                           ========
    Cash paid for income
     taxes                                                           $390,586                                 $0
                                                                     ========                                ===
    Supplemental
     disclosure of noncash
     financing activities
    Conversion of
     contingently
     convertible notes to
     common stock                                                          $0                         $3,000,000
                                                                          ===                         ==========
    Issuance of 30,000
     common shares to
     settle the lawyer's
     fee relating to this                                            $150,000                                 $0
    IPO at issuing price
     of $5.00

SOURCE Trunkbow International Holdings Limited

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